Monday, August 2, 2021
HomeOpinionDiaryWriting off farm loans: A real challenge for governments

Writing off farm loans: A real challenge for governments

In India where annual agriculture waste is about Rs. 96,000 crore, farm loan waiver is just a poll sop with no long term economic gain for farmers in distress. The money waived could be invested for creating infrastructure that makes farmers independent of cartel of traders and help them to reap maximum economic benefit of their produce.

Writing off farm loans is not a right decision by Government; though it might be fulfillment of pre-election promise and precedence are in large numbers. The whole gamut of lending to farmers and recovery of loans vis-a-vis agricultural economics in India should be studied in depth by RBI and the Government and action taken so that the legacy of writing off farm loans can be done away with. The RBI Governor Urjit Patel has expressed that the loan waiver by the Government is a bad idea. It undermines honest credit culture, it impacts credit discipline, and it plugs incentives for future borrowers to repay. A persistent dichotomy- the rich lobbying farmers pay no tax, enjoy subsidies pouring, but marginal voiceless farmers die before waiver really reach. It is time to judge each case by merit and a right approach needs to be followed and due diligence and a holistic approach are to be applied. There lies the real success of recovery.

Except some farmers in Maharashtra and Punjab, most of the cold stores built with the help of the government subsidy are owned by corporates. So, now these corporates are buying produce in farms at cheap rates, keep them in cold stores, repackage them and sell them in malls in cities at thrice the purchase price. Neither the farmer gains nor the consumer out of it. As a banker, I was advocating that the bankers should join hands and camp in areas where really farmers suffer and pass on the relief instantaneously. Instead of taking up a timely action, the relief reaches the farmers in a big way now and the loan waiver may pinch the pocket of the exchequer in the years to come if there is no centre relief in this connection. The question why loan waiver to everyone?

The pertinent question will be asked to all farmers, without proper scrutiny or verification why loans were sanctioned to the farmers. IT professionals may now claim that there was no tax waiver’s in 2008, when hundreds of IT sector people who committed suicide due to recession in IT sector. Why not waiver, subsidy, interest free loans or any schemes for middle class people, who actually pay taxes? Is that a curse if somebody is earning a bit more, no body stops anyone to earn their best, instead government should try to find alternates with better farming methods, technologies, less dependency of rain (and natural resources) otherwise taxpayer’s money will go in corruption or in loans waiver’s be it to farmers or to business class.

This 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. Writing off farm loans will be a real challenge for the government.

(The views expressed by the author in the article are his/her own.)

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