india

Updated: Oct 20, 2019 01:54 IST

Ten states that have announced a series of farm loan waivers since 2014-15, equivalent to 1.4% of the country’s gross domestic product (GDP), are yet to complete their promised write-offs, mainly because of their tight budgets.

These states have so far managed to make budgetary provisions for less than two-thirds of the total loans supposed to be waived, a review by the Reserve Bank of India (RBI) shows.

This means thousands of the around 17 million qualifying farmers in many of these states are yet to be covered, as they await their turn in what has proved to be a prolonged process.

Since 2014-15, 10 states had announced waiving off Rs 2.3 lakh crore in all, of which only Rs 1.4 lakh crore (63%) has been budgeted so far. These states are Andhra Pradesh, Telangana, Tamil Nadu, Maharashtra, Uttar Pradesh, Punjab, Karnataka, Rajasthan, Madhya Pradesh and Chhattisgarh.

All waivers, irrespective of whether they are being implemented in Congress- or Bharatiya Janata Party (BJP)-ruled states, are being implemented in a phased manner to mitigate their financial impact and due to budget constraints.

“The instances and scale of farm loan waivers have seen an unprecedented increase since 2014-15,” the RBI review states.

According to the RBI’s calculations, the total amount proposed to be waived accounts for 1.4% of the country’s GDP in 2016-17, calculated at current prices, or prices not adjusted for inflation.

Ahead of assembly polls in 2018, the Congress, which rules Madhya Pradesh, Rajasthan and Chhattisgarh, had promised to waive farm loans within 10 days of coming to power.

The Madhya Pradesh and Rajasthan governments, which together promised to waive Rs 54,500 crore, have been able to make budgetary provisions for slightly more than a third of the total. For instance, Madhya Pradesh has so far budgeted only 35% of the Rs 36,500 crore it has proposed to forgive, including an allocation of Rs 8,000 crore in its 2019-20 budget. At this rate, to complete the total waiver in the next budget cycle, the state will have to increase its budgetary allocations by more than three times. Rajasthan needs to waive Rs 18,000 crore in all and has so far budgeted for Rs 6,240 crore.

In 2017-18, the incumbent BJP-led government in Maharashtra had promised to waive Rs 34,000 crore worth of farm loans. Of this, it has been able to budget for Rs 25,480 crore, or 74.9% of the total amount.

Ahead of the Uttar Pradesh elections in February 2017, Prime Minister Narendra Modi had promised debt relief to the state’s farmers. The UP government had targeted to waive Rs 36,360 crore of farm loans. Of this, the state has been able to budget Rs 27,200 crore so far, or 74%.

In 2017, Congress-ruled Punjab announced a Rs 10,000 crore farm loan waiver and has so far penciled in Rs 7,620 crore, or 76%.

To be sure, these farm loans come with many conditions and riders. For instance, states have fixed cut-off dates and capped the total amount that can be waived per head.

In many states, only small farmers qualify for waivers.

“A loan waiver in itself isn’t a long-term solution, but in times of acute rural distress, it may be necessary. However, loan waivers have no meaning if they aren’t promptly implemented for quick relief,” said economist K Mani of the Tamil Nadu Agricultural University.