After establishing brand “Modi”, the time has come for Prime Minister Narendra Modi to wash away his pro-capitalist image by going for pro-poor and populist farm loan waiver, round the clock power and launching “Annpoorna Canteen” schemes in Uttar Pradesh to provide full meal for just Rs 5.00 and breakfast for Rs 3.00. Other BJP ruled or supported state governments could now come under pressure for a similar waiver. Similar demands are likely to come from the states like Maharashtra, Madhya Pradesh, Karnataka and Andhra Pradesh where farmers are worst affected by frequent droughts and natural calamities.
The cash-strapped UP government has decided to float “Farmer Relief Bonds” in coming budget session of state assembly, to generate funds to implement the loan waiver scheme as the limit for fiscal deficit cannot be higher than 3 per cent of the state’s GDP as set by the FRBM Act 2003. RBI governor Urjit Patel is of the opinion that farm loan waivers erode loan discipline and encourage willful default by farmers. Those who repay loans look like fools, and those that renege on loans are rewarded handsomely. This political encouragement of “don’t pay, and nothing will happen to you” is also affecting loans of non-bank financiers of autos, homes, durables and microfinance.
Modi promised rapid economic development and good governance, not farm loan waivers when NDA coalition won the general election in 2014. His coalition partner in Andhra Pradesh, Chandrababu Naidu, promised a farm loan waiver. After winning he sought financial help from Modi, who bluntly said “Sorry” to meet his demand and reportedly told him, “It’s your promise, not mine, so find the money yourself.” Modi won applauses for financial prudence over this issue. But now economists are confused over Modi’s changed approach. They wondered that a courageous person who took extreme risk of demonetisation just before the UP elections to strengthen Indian economy more strongly at world level, all of a sudden fell down with populist measures rather than continuing its harsh steps to cure fiscal indiscipline of the country.
The promise for a loan waiver was first made by Congress party during its “padyatra” in the run up to the state assembly elections and then picked up by almost all parties contesting the UP elections. The BJP, which opposed the previous loan waiver by the United Progressive Alliance (UPA) in 2009, was the last to join the race. A group of farmers from Tamil Nadu has been protesting in Delhi for weeks now with skulls of fellow farmers. Similar protests and agitations for farm loan waiver have been made in Karnataka, Madhya Pradesh and Rajasthan. State elections are due in Gujarat and Himachal Pradesh later this year, and in Rajasthan, Madhya Pradesh, Karnataka, Chhattisgarh and four northeastern states next year. It will be impossible for BJP to resist demands for loan waivers in these states too.
Under the farm loan waiver scheme wherein the government has decided to waive off Rs 36359 crores dues of small and marginal farmers till 31.03.2016 who have taken crop loan up to one lakh. “Our government has also decided to write off 5,630 crore in non-performing assets (NPAs) of 700,000 farmers to bring them back into mainstream. We have taken this historic decision in our first cabinet meeting. It would benefit about 93 lacs farmers who were in acute distress,” cheerfully said UP Cabinet Ministers Siddharth Nath Singh and Shrikant Sharma, briefing the media just after the first cabinet meeting of Yogi Government on 4th April,2017.
Justifying the need of loan waiver scheme, Singh told that BJP in its “Lok Kalyan Sankalp Patra” had given its vision that agriculture would be backbone of our development agenda and accordingly, cabinet has taken decision to achieve its objectives. “Modi and BJP president Amit Shah had made a commitment during campaigning for UP assembly elections, and the state government has fulfilled its commitment.”
There are around 2.30 crore farmers in UP, with the number of small and marginal farmers coming around 2.10 crore, but not all of them take loans. One indicator for this is the number of Kisan Credit Cards, a major instrument of taking loans by farmers. The KCCs issued till March, 2015 were around 41.32 lakh, covering only a small section of farmers. Further, there are different types of agricultural loans – crop loans, loans against warehouse receipts, produce marketing loans, KCC-based loans, investment loans, etc.
The UP cabinet has constituted eight-member committee under the chairmanship of chief secretary of the state. The committee has been mandated to workout detailed modalities after examining all relevant aspects. The government would finalise the financing arrangements based on the recommendations of the committee. It will also oversee the implementation and monitoring of the scheme.
Previous loan waivers like the “Agricultural Debt Waiver and Debt Relief Scheme” launched by UPA government in 2008 included both crop loans and investment loans under its purview. But since the present scheme is limited to crop loans alone, it is expected to cover a smaller number of farmers, estimated to be around 86 lakh. A crop loan is a loan given in connection with raising a crop, to be repaid in 18 months, while other loans such as investment loans are meant for direct agricultural and allied activities such as buying a tractor or deepening-boring of new wells etc.
In Maharashtra, ruled by a BJP-Shiv Sena coalition, Sena chief Uddhav Thackeray was quick to congratulate Adityanath for implementing the poll promise. He asked Maharashtra Chief Minister Devendra Fadnavis to also waive farm loans. “If farmers’ loans can be waived in India’s largest state of UP, why can’t a similar measure be announced in Maharashtra where agriculture dominates the economy and where the farmers are committing suicides in large numbers,” Thackeray asked.
The Madras High Court on April 5, 2017, directed the Tamil Nadu government to waive agricultural loans taken out by all farmers, irrespective of their land holding, and to ensure that no penal action or loan recovery is initiated against them. The ruling comes amid a protest in Delhi by Tamil Nadu farmers who were agitating for a drought relief package of 40,000 crore from the Centre, the setting up of a Cauvery Management Board and waiver of farm loans from all the nationalised and co-operative banks. A bench comprising justices S Nagamuthuand MV Muralidharan said the state government’s classification of farmers into small, marginal and others is arbitrary and without thought.
Reacting on the decision of farm loan waiver in Uttar Pradesh, noted economist Dr Arvind Mohan observed, “Such decision could cost heavy on the state exchequer and adversely hit capital investments in ongoing infrastructural development and social sector projects, if it was not handled sensibly after all it will be huge expenditure in coming budget as we perceive bigger size of budget this year than last year and it could be around 4 to 4.5 lakh crores as compare to 3.6 lakh crores.”
A panel of ministers would go to Tamil Nadu for studying the pattern of “Amma Canteens” to be implemented in the state as Adityanath’s vision with his most ambitious plan to become a public icon like J. Jayalalithaa, who was voted to power despite serious charges of corruption against her and her aides. Dr Mohan appreciated such a social security scheme and told, “We have weak social protection system and the need of the hour is to strengthen it. Much will depend on the financing model of both the schemes. If they go to finance it in one go, it would be disastrous but if they implement in a phase wise manner it could be possible. “We can’t say much unless we know actually how they go for its financing,” he asserted.
Highlighting other decision about farmers the State’s Energy Minister Shrikant Sharma said the government plans to procure 80 lakh metric tons of wheat in two equal phases from the farmers of the state on the declared minimum support price (MSP) of 1,625 a quintal and will pay them an additional 10 per quintal to cover transport and loading unloading expenses. A three-member committee of ministers has also been entrusted to find ways for potato growers to get them remunerative prices for their produce whose produce go waste because of shortage of cold storages.
Economists suggest that if India has to grow it has to increase its infrastructural spending but loan waiver, free food, electricity schemes put a stumbling blockage in its smooth drive, upsetting its national growth rate.