In favour of farm-loan waivers     

The defeat of the BJP in Rajasthan, Madhya Pradesh and Chhattisgarh Assembly elections by a resurgent Congress under the leadership of Rahul Gandhi has shaken the Union government out of its stupor and apathy towards the farmers and the marginal classes. The rattled PM is now compelled into hastily preparing an economic package for the farming community. The pity is that it will be yet another jumla or marketing gimmicks which promised doubling of farmers’ income, MSP delivery, crop insurance, Rs 15 lakh in each bank account, etc. at the fag end of his disappointing tenure. Rahul Gandhi’s announcement of farm loan waiver is a measure in response to the decimation of the farm economy due to government policies. After the ill-conceived Demonetisation and the botched GST, the informal and the rural economy of the country were adversely impacted. Former RBI Governor Raghuram Rajan is on record saying, “The two successive shocks of Demonetisation and the GST had a serious impact on growth in India. Growth has fallen in India interestingly at a time when growth in the global economy has been peaking up”. Dr Manmohan Singh had in the November of 2016 called the move “organised loot and legalised plunder” in a Parliament speech and had rightly predicted that India’s GDP would contract by a staggering 2.2% and Nobel Laureate Amartya Sen termed it as a “gigantic mistake”. Resultantly, jobs were lost and the Centre for Monitoring Indian Economy (CMIE) data clearly indicates that the job losses in November 2016 was around 12.7 million. Till date the job losses have spiralled to 3.5 million. This is in sharp contrast to the 20 million jobs that PM Modi had promised to generate every year during the 2014 general election. RBI had targeted an inflation of 4%, but it has been lower than projected at 3.6%. Despite the overall economy growing at 6.7%, agriculture grew at half the rate. The lower farm gate prices of agricultural produce have primarily contributed to contain the inflation at the cost of farmers’ livelihoods.

Despite good monsoons and record production of 279.5 million tonnes of food grains, the income of the farmers has gone down due to lower market prices and increased input costs on account of GST and high diesel costs. An insensitive government kept importing commodities, thereby supporting farmers in other nations while there were no takers for our farmers’ produce.

As farmer suicides increased, the government stopped collating data to escape explanation and accountability. We understand that loan waiver is not a permanent solution to farm crises, but it is a balm to ease the pain and anguish that has been deliberately inflicted on the masses by this government. The Finance Ministry is undertaking a recapitalisation of public sector banks. Unfortunately, they do not discuss the recapitalisation of cooperative banks. The best way for the government to recapitalise the banks is by giving money to the banks specifically for waiving farm loans as is being done by the Congress governments in different states. The total outstanding institutional crop and term loans as on March 31, 2018 was Rs 11.63 lakh crore which is only about 1.5% of the country’s gross domestic income. Further, out of this, less than half, i.e. Rs 5.80 lakh crore are due from small and marginal farmers. Of the total loan outstanding, crop loan amounts to Rs 3.76 lakh crore only. The planned crop loan waiver of up to Rs 2 lakh, targeted specifically towards small and marginal farmers, will amount to less than Rs 1.90 lakh crore.

This is being criticised by some economists as being a waste of money. Public sector banks have written off bad loans worth Rs 2.41 lakh crore between April 2014 and September 2017 and after the 7th pay commission’s recommendation for the annual pay increase of central government employees, government expenditure has increased by over Rs 1.30 lakh crore. But, these are explained as economic stimulus measures.

In view of such resource allocations to other stakeholders, farm loan waiver is doable without putting much burden on the exchequer. It will act as an economic stimulus too because these times are exceptionally challenging for farmers.

An assessment of the recent loan waiver data in Punjab irrefutably shows that the crop loan waiver amount of private banks is possibly close to three times that of cooperative and public banks. Is it possible that they have shown term loans as crop loans and availed of government waiver funds?

The question also arises whether banks should be held accountable? For example, in my home state of Punjab, the quantum of crop loans increased by eight times in 10 years of the last SAD-BJP regime while production increased by three times. Scrutiny of the data from banks reveals they have indiscriminately given loans to farmers based on their asset value rather than their economic viability.

To meet their own priority sector lending targets, loans were given beyond each farmer’s scale of finance or actual value of crop sold each year. In-house study conducted by Financial Inclusion and Development Department of RBI establishes that such loans couldn’t be repaid. Therefore, a forensic audit of agriculture credit lending portfolio of all banks must be ordered by the RBI and accountability fixed. Of the many steps required for mitigating farmer distress, first we need to set up a registry for all farmers, tenants and sharecroppers. We must set up a Debt Recovery Tribunal type authority, which farmers can approach to resolve loan disputes. If such an authority had been functional, the demand for farm loan waiver would not have gained such nationwide momentum and distress would not have reached such proportions.

A Farmers’ Relief Commission should be established to identify distressed crops and areas. The Commission will recommend measures and award compensation in various forms to provide relief for the distressed farmers. Punjab is also in the process of announcing a scheme to partially waive loans of those who don’t own land but whose livelihood are dependent on farming.

In a landmark decision, Punjab is in the process of operationalising the amended Punjab Settlement of Agricultural Indebtedness Act, so that when farmers pay double the principal loan amount, it would be deemed to have been fully repaid. Additionally, crop loan issued per acre will be capped. Such steps, if replicated across India, will be very helpful. There are many other steps required like making farm loans up to Rs 2 lakh cheaper to avail. There never is a final solution. It was never easy, but this government with its imprudent steps has made the task even more challenging.

(The author is a Congress Member of Parliament)