Commodity Analysis

Loans waived, but farm issues written off

Rajalakshmi Nirmal | Updated on December 23, 2018 Published on December 23, 2018

A staggering ₹2.1 lakh crore of agri loans have been waived since the UP government kicked off the trend last year. While there has been a strong lobby for farm-loan waivers, it may do no good for farmers. States in which farm loans are waived see a rise in NPAs (non-performing assets) and reluctance among banks to lend in the following year. RBI data show that agriculture-related NPAs of commercial banks rose after the 2008 debt-waiver programme (when over ₹50,000 crore of farm loans were written off). Between 2009-10 and 2012-13, NPAs of scheduled commercial banks (in agriculture) rose from ₹10,353 crore to ₹30,200 crore.

Loan waivers also curtail States’ spending on infrastructure and other development activities. The fiscal positions of many States are already bad. The debt-to-GDSP ratio is at an alarming rate in many States that have announced loan waivers — 41.5 per cent in Punjab, 33.6 per cent in Rajasthan, 26.2 per cent in Uttar Pradesh and 25.5 per cent in Madhya Pradesh.

Most importantly, these waivers by banks don’t help the needy — the small and marginal farmers who borrow from non-institutional sources. The All-India Debt and Investment Survey conducted by the National Sample Survey Office (NSSO) in its 70th survey observed that 30.3 per cent of agri-households borrowed money from non-institutional sources.

The purpose of farm loan waiver, thus, remains a big question.

Here are the voices of some farmers we spoke to:

The cut-off date given for the loan waiver is March 31. Most of our farmers have paid off the loan and are not set to draw any benefit. Loan waiver is not a solution to our problems. Can the government keep writing off loans every year? Rather, it should ensure that farmers get a good price for their produce by ensuring MSP (minimum support price). Buying farm produce in mandis at below MSP should be made illegal. And to ensure farmers do not produce excess crops, the government and NITI Aayog should provide information to each village panchayat on the demand for each crop in the region. Then, every farmer should sow accordingly. This way, mono-cropping will end, the risk for the farmer will reduce and supply will not exceed demand.

Ram Singh Thakur Agar Malwa, Madhya PradeshA farmer who also heads a producer company that is a collective of 6,500 farmers who grow soyabean, wheat and chickpea

I lost all my crops. Till October, it was fine; it even flowered. But then, as there were no rains, it dried up and I let animals grace it. Loan waiver is good. But last year, farmers who paid the loan were vexed because the waiver benefit went only to defaulting farmers. So, this year, many farmers I know from other villages didn’t pay the loan amount despite of having a good crop. That is not right. If the government wants to do good for us, it should try reducing the cost of inputs — seeds, fertiliser and pesticides. A lot of people in Sholapur have benefited from PMFBY (Pradhan Mantri Fasal Bima Yojana). If there is a crop failure, this scheme pays money. But then again, not all crops and districts are notified for the cover under the scheme. If this is rectified, it will also help.

Vishwa Barangule Solapur, Maharashtra

A tur farmer who has a one-acre land in a village 70 km off Solapur

Small farmers in my village take money only from money lenders. They have one or two bigha land and don’t get the required loan amount under KCC (Kisan Credit Card). So, they borrow at high rates from money lenders. The current loan waiver has not benefited them; problems of farmers can’t be solved by waivers. It will help if the government can give the promised MSP on time. Currently, the government procures the produce at MSP, but the money comes very late, say, after two months or so. The small farmer thus ends up selling to the local trader at a much lower rate.

Madhav GurjarBundi, RajasthanGrows wheat and black gram in his one-acre land

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