Policy blight

Fadnavis’s loan waiver cannot address farm distress. Solution lies in building rural infrastructure

Published: June 13, 2017 1:31:53 am
Maharashtra chief minister Devendra Fadnavis, Devendra Fadnavis, Farmer Agitation, Farmer Protest, Farmer Loan Waiver, India News, Indian Express, Indian Express News Fadnavis’s loan waiver cannot address farm distress

Maharashtra chief minister Devendra Fadnavis, it looks, has bought peace with agitating ryots by promising to waive off loans of all farmers in the state, irrespective of landholding size. But this is peace that would obviously come at a cost. Earlier this month, just when the unrest has started, Fadnavis had announced a Rs 30,000-crore waiver for 40 lakh-odd small and marginal farmers whose loans were overdue.

The latest peace deal, hammered out with striking farmer organisations on Sunday, is supposedly a blanket waiver. That would, at an extreme, cover loans totaling an estimated Rs 1.14 crore made to all 1.36 crore farmers in Maharashtra. Even assuming the write-offs would be limited to full-time farmers — excluding government employees, professionals and others not dependent on agriculture as a primary source of income — and an individual cap of, say, Rs 1 lakh, the cost could well exceed Rs 50,000 crore.

But Maharashtra, we know, is not alone. Three months ago, the Yogi Adityanath administration in Uttar Pradesh had announced a Rs 36,000-crore loan waiver for small and marginal farmers, not as a response to any agitation but to fulfill a promise by Prime Minister Narendra Modi himself during the recent state assembly elections. It’s a matter of time before other states — Madhya Pradesh, Karnataka, Punjab and Haryana seem most likely at the moment — would be forced to follow suit. There may be a host of conditions attached to such waivers, apart from a long time interval between the time of announcement, official notification and actual implementation on the ground. But either way, we are talking of states having to pick up a tab of Rs 2-3 lakh crore, over and above their combined annual fiscal deficit of Rs 4.5-5 lakh crore.

Now, there is no doubt that farmers in India are in a truly distressed state today. After successive droughts, this was a bumper crop year from which they should have benefited. Unfortunately, they were done in by low prices, for which demonetisation, it is now clear, was significantly to blame.

But that brings us to the essential point: If farm indebtedness is a result of bad harvests or unanticipated price crash, isn’t loan waiver, good or bad, only addressing the symptom rather than the disease? Assuming every deserving farmer would see his/her loan burden reduced by Rs one lakh — past experience with waivers point to tardy implementation, replete with faulty beneficiary selection — will it guarantee no repeat of the problem? We can be sure that Rs 2-3 lakh crore spent in rural roads, godowns, power supply, irrigation, agricultural research and crop insurance would generate farm incomes, which is the only sustainable antidote to indebtedness. If loan waiver was a solution, farmers shouldn’t have had any problems after 2008 — when the last big Rs 72,000-crore package came from the UPA.

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