Farmers Loan Waiver – Realities


(Brig (retd) GB Reddi)

Farmer’s loan waivers need pragmatic reconsideration on the basis of ground realities. All political leaders and parties claim to champion the farmers’ woes due to “vote bank” politics. No one is an exception. But, it is at great cost to economy.

As per pre poll BJPs election manifesto to write off farm loans of small and marginal farmers, UP Chief Minister, Yogi Aditynath’s, has announced of waiver of farm loans amounting to Rs. 36,359 crore at its first cabinet meeting.

2.15 crore small and marginal farmers in the State of UP are benefited by the waiver of farm loans. Of this, Rs 30,729 crore is loans of up to Rs 1 lakh and Rs 5,630 crore is write off of loans that are already bad or non-performing assets (NPAs), in banking parlance.

Not to be left behind, the Madras High Court has directed the Tamil Nadu State Government to waive farm loans to bear an additional burden of Rs.1,980 crore over the already committed Rs.5,780 crore.

Furthermore, the Madras High Court has asserted that there is no rationale behind the classification of farmers into three groups for the purpose of granting farm loan waiver, and directed the government to extend the waiver to all the farmers irrespective of their extent of landholding. It implies loan waiver benefit to 3,01,926 farmers in addition to 16,94,145 farmers, who have already benefitted.

Ironic but true, experts are on record that “farm loan waiver” is at the cost of good economics. It long term adverse effects both on the farmer and banking sector are real.

As a practicing farmer after I shed uniform in 1993, let me recount my experience about farm loans. Local Sarpanch and feudal land lord asked me as to why I am not taking a loan on my farm land.

When I enquired about loan benefits, they gave two reasons. One, loan will be written off whenever there is drought (once in three or five years). Two, legal ownership of farm will be upheld should there be any dispute. Yet I have not taken a loan on my farm until date despite droughts in Telangana region.

On further enquiry from driver and farm working hands, I found that Banks do not give loans to small farmers. Even Co-operative Banks give loans based on political party leanings mostly to well-to-do farmers.

Yet another realty – majority of farm lands are owned either by traditional rural landlords (migrated to cities), industrialists, real estate developers and businessmen around Hyderabad City (radii of 60 kms) cultivated by tenants on share cropping or lease basis or left as barren fenced lands.

Further, tenants are not eligible for loans. So, the loss, if any, is borne by the tenant who takes loans at an exorbitant interest from local village lenders. Ironic that the benefit of loan waiver mostly goes to the land owner; but not to the real tiller!

Quite paradoxical it is to onlooker like me watching the “Fat pot-bellied farmers Tamil Nadu” protesting on the streets of Delhi for farm loan waivers. None can deny the genuiness of demand by small and marginal farmers; but not the big land lord-cum-corporate farmers who generally spearhead political protests.

Never too late for the nation to stop the fraud committed in the name of real “small and marginal farmer” and tenants by farmers with political clout and patronage.

In hindsight, it is possible to collect data on rainfall from the “Met Department” and declare “Drought Affected Districts” by end July or so on ‘All India” basis. For example, the Met Department in the last season (after two consecutive droughts) recorded normal rainfall — 2 percent less than the 100-year average – recording 759.9 mm of rain against the average rainfall of 802 mm of rain from June 1 till September 13 in 2016. Out of 36 sub-divisions, 3 pockets recorded excess rainfall, 25 pockets had normal rains and only 8 were deficient. Even the districts where there were scanty rains received good rains in September. No floods ravaging fields.

Further, farm lands under canal irrigation enjoy ‘three-crops’ facility. How can farmers owning such lands demand “farm loan” waiver?

In fact, what farmers demand is renumerative MSP (Minimum Support Price). All State Governments fail to increase the MSP on annual basis to enable farmers to gain reasonable profits from the hard toil under “Sun and Rain”.

Like automatic DA increases for government employees even there should be a credible process of automatic increase in the MSP if political leaders are earnest.

Let me also highlight the concern of Bankers. Their NPAs will continue to escalate what with even honest borrowers (those who have been making regular repayments) stop paying their dues to banks.

If Banks are forced to stop all fresh funding to everyone who has ‘defaulted’ on payments, they cannot be blamed. After all, farm loan NPAs are a big headache for many banks already. According to senior bankers, the Rs 70,000 crore loan UPA-sponsored waiver in 2008. It takes years to clear the mess and reinstate the trust between the banker and the borrower.

In sum, what is urgently needed is a holistic review of “Agricultural” policies including agriculture credit and insurance policies. If the farm loan waiver politics are not stopped by appropriate policies and strategies, the scope of economic growth and development will stunted even in posterity.