Wednesday, March 22, 2023
HomeOpinionFarm Loan waiver will hit more NPAs – Part II

Farm Loan waiver will hit more NPAs – Part II

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Loan waiving is a retrograde step in the development of the entire agricultural sector. Farmers are virtually on their death bed, so some booster dose will be helpful, but for how long will the farmers be kept alive? In India, where annual agriculture waste is about Rs 96,000 crore, farm loan waiver is just a poll sop. Loan waiver is a populist scheme which rather dents the public Exchequer. The real crisis for Indian farmer is that he or she is not in control of the produce, unlike other businesses, and is dependent on the cartel of traders to fetch a decent price. Indian agriculture needs to be diversified and alternative sources of income generation like animal husbandry, horticulture; floriculture etc. should also be made a part of the agricultural milieu. The loan amount is so humongous that it will drive away a huge share from the government’s budget. The government will either have to cut expenditure on other projects or will have to go for a huge fiscal deficit. The effect of increased public debt will play out over the long run, the increased interest burden due to higher debt will hit state finances immediately.

Here the point is not that the government should not help distressed farmers. Some recent government initiatives such as developing an open market for agricultural produce, increasing coverage of crop insurance, building rural roads, among others are likely to be useful to the farming community. We should encourage farmers in allied activities like fisheries, animal -rearing, sericulture, horticulture, harvesting cash crops, promoting mixed farming etc. We should promote contract and community farming and should ease its provisions of paperwork problems.

The farm loan waiver is one of India’s most popular, often-used political tools. In 2009, it helped to return to power Manmohan Singh’s Congress-led government, which offered borrowers a bailout program in which 37 million farmers benefited from waivers of Rs 52,200 crore. In 1990, the government under Prime Minister VP Singh also offered an agricultural debt relief program of up to Rs 10,000 for each borrower. In Andhra Pradesh and Telangana, two separate regional parties came to power in 2014 on the promise of a loan waiver. The waiver should, therefore, consider the agro-climatic factors and the farmers’ distress level. Crop losses caused by poor storage facilities, transport and assured market were among the reasons that drove farmers to borrow. Instead of waivers alone, it is important to provide overall relief to the most-affected farmers in distress in a targeted manner and pointed to the failure of past farm loan waivers in ameliorating farm distress. Farm waivers increase the budget deficits of federal and state governments and escalate inflation. Farmer’s distress will hurt farm economy till sops such as farm loan waiver is given and farmers are not empowered to make their produce remunerative. For that to happen, the government needs to be ‘technology enabler’ instead of waiving loans. Our farmers need to be counselled for cost reduction. Drip irrigation or micro-irrigation techniques are eco-friendly and also economical where they can save water and electricity both.


(The views expressed by the author in the article are his/her own.)Help Parallel Media, Support Journalism, Free Press, Afternoon Voice

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