A joint study conducted by the National Bank for Agriculture and Rural Development (NABARD) in collaboration with the Bharat Krishak Samaj has found that in the three States of Uttar Pradesh, Punjab and Maharashtra, which had loan waivers in place since April 2017, almost 40 per cent of 'highly distressed farmers' had not received any benefit from the waivers.
The study, ‘Farm loan waivers in India: assess the impact and looking ahead’, also found that an average farmer of Punjab borrows four times the amount than his counterparts in Uttar Pradesh (UP) and over five times his counterparts in Maharashtra. The study showed that a marginal farmer in Punjab borrows Rs 3.4 lakh annually, as compared to Rs 84,000 and Rs 62,000 in UP and Maharashtra, respectively.
The study found that only four out of the 21 political parties lost the election following the promise and implementation of farm loan waiver schemes. These parties were the Samajwadi party in Uttar Pradesh, Telugu Desam Party in Telangana, BJP in Maharashtra, and Janata Dal (Secular) in Karnataka. In the case of Maharashtra in 2019, Shiv Sena was a part of the alliance with the BJP when the loan waiver scheme was announced. Subsequently, in October 2019, the BJP did not form the Government but the Shiv Sena did as part of another alliance with the Congress and NCP.
The farm loan waiver scheme was expected to cost the state exchequer Rs. 36,000 crores in UP, making this the largest debt waiver to be declared in the country. About 0.86 crores beneficiaries were initially identified as beneficiaries under the scheme. According to the agricultural census 2015-16, there are 2.2 crores SMFs in the state
The study said that Punjab had the highest credit availability per operational landholding (Rs. 6.84 lakh/holding), followed by Haryana (Rs. 3.44 lakh/holding) and Tamil Nadu (Rs. 2.01 lakh/holding). The eastern Indian states seem to have suffered on this count. The bottom five states in terms of credit availability per landholding were from eastern India – Arunachal Pradesh (Rs.0.08 lakh), Nagaland (Rs.0.09 lakh), Meghalaya (Rs.0.13 lakh), Jharkhand (Rs.0.14 lakh) and Manipur (Rs.0.17 lakh).
On an average, 50 per cent of the agricultural credit disbursed in a year is accounted for by six states: Rajasthan (6.8 per cent), Kerala (6.9 per cent), Maharashtra (7 per cent), Uttar Pradesh (7.3 per cent), Andhra Pradesh (9.4 per cent) and Tamil Nadu (13.6 per cent).
On the much talked about electoral impact of farm loan waivers, the study found that since 2012, 13 states have implemented loan waiver schemes for farmers. The government must promote a healthy credit culture, invest in farming and address distortion in the agriculture sector instead of waiving farmers’ loans irrespective of their distress level, the study report said.
The study revealed that the waivers increased the chances of wilful defaults by farmers (between 68 to 80 per cent respondents in the three states agreed) and the waiver pushed honest farmers to default on agricultural loans (between 72 to 85 per cent of respondents in the three states agreed).
This report makes a case for a deeper analysis and the need to address the structural factors that consistently cause distress to farmers. Loan waivers are considered a one-time solution to farmer distress.” Farm loan waivers are expensive; some states fund their waivers by reducing allocations in their capital outlays while others increase their expenditures pushing up their fiscal deficit.
Growing number of political parties are finding it expedient to promise farm loan waivers particularly closer to election time,” it said.
