Yogi gives himself a long rope with ‘partial but huge’ loan waiver

Fingers were being pointed at the Yogi Adityanath Government in Uttar Pradesh, which announced on Tuesday a crop loan waiver to farmers worth ₹36,000 crore. While BJP supporters greeted the announcement for fulfilling the poll promise, the Opposition gleefully cited the Prime Minister’s poll speech in which he had promised complete waiver of all loan to small and marginal farmers.

Twenty-one of the 23 million farmers in Uttar Pradesh are described as ‘small and marginal’ and the state government’s announcement conceded that it would benefit only 8.6 million of them. Keeping 67% of the farmers out of the waiver, said critics, was not even close to what the Prime Minister had held out.

To put things in perspective, the UPA Government had waived farm loans worth ₹60,000 crore across the country before the 2009 general election.

There are two types of loans given to farmers – crop loan and term loan. Crop loan is given for seeds, fertiliser, pesticide and other inputs while term loan is given to buy tractors, trolleys and other equipment. Though farm loans mostly comprise crop loan (80%), farmers who took term loan were left out of the announcement.

BJP’s manifesto had promised fresh farm loans at zero percent interest. This too, received no mention in the announcement made after the first cabinet meeting presided over by Chief Minister Yogi Adityanath.

The new chief minister’s task is cut out because crop loans during the last four years in Uttar Pradesh amount to a whopping ₹2.5 lakh crore. While it was ₹319 billion in 2013, in 2016-17 it is estimated to have ballooned to ₹692 billion.

The Yogi government said that ₹36,359 crore would be generated through the sale of government bonds. But there is little clarity on who would be buying these bonds, how much interest would be paid and by when.

The waiver has been described as ‘good politics but poor economics’ since it rewards defaulters and disincentivises farmers who have been paying back the loan. What’s more, with yet another sowing season around the corner, there will be another round of pressure on the state government to announce fresh farm loans.

Out of the around ₹36,000-crore waiver, ₹6,000 crore would be given to farmers whose loan has been declared as ‘non-performing assets’ (NPA) by banks. “There are thousands of farmers who had not paid their loan deliberately. They will also get the benefit of the scheme. That will only cut into the share of those who are the real sufferers,” complained Sudhir Pawar, SP leader.

However, there is a caveat as well: crop loan secured before March 31, 2016 have been waived, says the announcement. The restriction means farmers who availed farm loans later, say in December-2016 would not get benefit of the waiver.