Devendra Fadnais lost a brilliant opportunity to set a good example for everyone by bringing awareness to the farmer, though this might have cost him politically in the immediate future

Finally, Maharashtra’s BJP-government and its Chief Minister Devendra Fadnavis too have succumbed to the tremendous political pressure post the Uttar Pradesh farm loan waiver and the subsequent farmer agitations. The state has just announced a blanket farm loan waiver to the protesting farmers that, the government estimate, will cost the exchequer about Rs 35,000 crore while in reality this figure could go up since there are about 1.36 crore farmers in Maharashtra whose loans total to Rs 1.14 lakh crore.

Even by the official estimates, this exercise is likely to be the biggest loan waiver conducted by any state governments in India in recent past. It is surprising to see the U-turn by Fadnavis on the waiver issue. It wasn’t long ago, the chief minister batted against the loan waiver lobby listing its demerits in detail. This was in April this year during his interaction with farmers on the programme, Mee Mukhyamantri Boltoy (I am CM speaking), Fadnavis spoke against the waiver. “Any crop loan waiver is not a lasting solution. It helps farmers get rid of debt but doesn’t increase his repaying capacity when he goes for his next crop loan. Instead of a one-time crop loan waiver, which will certainly give us political mileage, our policies are to free farmers from the vicious cycle of debt,” the CM said.

Fadnavis’ discourse didn’t end there, then.

The chief minister further said. “Today, even if we were to give a Rs 30,000-crore loan waiver, it will surely give us political mileage. But does it make farmers self-reliant? It only helps them wipe off the current debt and seek a fresh loan. They land in the same debt trap. But what about their repaying capacity for the next term? My efforts are to infuse this Rs 30,000 crore regularly in agriculture to provide water, power and strong market linkages to farmers, which will minimise their debt burden with assured income provided through sustainable agriculture practices.” Fadnavis concluded his remarks during the programme saying “I reiterate a crop loan waiver can be one of the many solutions, provided it is adequately supported with other aspects to help farmers. We will consider it at the right time.”

So, what has changed in just two months in Maharashtra to announce a blanket farm loan waiver, Mr Fadnavis? Have the agriculture infrastructure woes that were cited as fundamental reason of farmers’ problems been addressed in this one month? Back then Fadnavis was bang on with his arguments against the perils of farm loan waivers on farmers and its lack of logic. But, certainly, the chief minister failed to walk his talk and has taken an epic U-turn on the issue.

Take a look at his latest statements:

Fadnavis is now describing the decision as historic. “The loan waiver is for all farmers and not confined to just small and marginal categories. There will be defined parameters to ensure genuine and needy farmers are not left out of the institutional credit bracket,” the chief minister has said, even boasting that by the volume, the proposed loan waiver will be the largest the state has ever offered and hinted that the farm loan model would be almost on the lines of Uttar Pradesh and Telangana.

Fadnavis has certainly scored political points here. The state’s farmers have called off their strike post the announcement. The state’s BJP government would have won praises and support from the poor farmers in the state hearing this announcements. But, in reality Fadnavis is harming the ‘kisaan’ by making way to irreparably damage his credit culture, set a bad precedent for future governments and, more importantly, reaffirming the impression within the farmer that loan waiver is the ultimate solution to any agriculture crisis. What is lost here is a brilliant opportunity for Fadnavis to walk his bold talk and set a good example for everyone by bringing awareness to the farmer, though this might have cost him politically in the immediate future.

Loan waivers neither bring long-term welfare to the farmer nor get votes for the sponsor. A good example is the UPA-sponsored 2008 farm loan waiver. Had it been enough to win votes, the Congress party would not have been reduced to a practically non-existent force in Uttar Pradesh, one of the biggest agrarian states in India. Sure, it does work wonders for the moment -- for the politician (who gets political mileage) and the farmer (who gets a temporary relief and false notion of being in the good books of his lenders). But, waivers instantly destroy the credit discipline in that particular geography as even honest borrowers will be then tempted to stop making repayments expecting a waiver on their loans. It also breaks the back of state finances for a long period. Even in the case of Maharashtra, the state has a constrained balance sheet, so was Uttar Pradesh and Telangana.

The biggest danger is the after effects of loan waiver announcements by UP and MP. This will force more states to follow the path. Fadnavis gave hopes of a change in loan waiver culture and the promise of the state setting a good example for others when he spoke against the loan waiver in April. But, in hindsight, this was all big talk, no action.