Amid growing demands for farm loan waivers, NITI Aayog Member and agriculture policy expert Ramesh Chand said he is not in favour of debt waivers as this help only a small fraction of farmers.
The country recently witnessed agitations by farmers in key farm states in support of their demands ranging from farm loan waiver to clearing of dues by sugar mills and higher prices for crops.
“The biggest problem with loan waiver is that it will benefit only a small fraction of farmers…I am not at all in favour of loan waiver,” Chand, who has been involved in policy formulation for the last 15 years, told agencies in an interview.
He also observed that in poorer states only 10-15 per cent of farmers are benefited from loan waiver as few numbers of farmers get institutional loans in such states.
When asked about implementation of the Swaminathan Commission report, he said Narendra Modi-led NDA government has implemented most of the recommendations of the Commission.
Chand further said the minimum support price (MSP) on various farm produce cannot be raised beyond a point it is not supported by the demand side factors as it would become too distorted and unaffordable for a large section of the society.
While the Swaminathan committee has suggested the MSP should be fixed on C2 (production cost definition) plus 50 per cent, the government has adopted A2+FL (actual cost plus the value of family labour) and a 50 per cent increase over A2+FL to provide a reasonable margin to producers.
“…I am in favour of enhancing the income of farmers but to enhance the income by only giving them the price by government, which is not reflected in the demand of the society can have very adverse fiscal implications because many a consumer would not be able to buy such produce and it will end up in mounting public stocks,” the noted agriculture economist argued.
“Cost of such stock and interest thereon will rise, so it becomes so costly,” he added. Further, if MSP is too high compared to open market price, the export will suffer and the country will become attractive for import from many countries.