Farm Loan Waiver Ball In Naveen’s Court

Bhubaneswar: The issue of farm loan waiver seems to be weighing heavy on the Odisha government and if sources are to be believed the ruling party may make an announcement in this regard, along with hike in the minimum support price (MSP) of paddy, in the New Year.

Agriculture Minister Pradeep Mahrathy’s ‘wait and watch’ statement to the media also hinted at the government contemplating such a move, in the wake of farm loan waiver by Congress governments that came to power in Madhya Pradesh and the neighbouring Chhattisgarh.

The feasibility of such announcements, however, raises doubts with chief minister H D Kumaraswamy still struggling to put together a suitable package for farm loan waiver, a key pre-poll promise that helped him wrest power in Karnataka and form a coalition government with the Congress. Having exhausted all possible permutations and combinations to achieve it, he is now looking at the Centre to chip in with some help.

The Naveen Patnaik government has been resisting such a move since long amid the persistent cry of farmers of the state for ‘price, prestige and pension’.

In June this year, the Chief Minister had instead suggested the Centre for a national policy framework on farm loan waiver, an issue that has become a political hot potato in several Assembly elections, and extended support to any initiative in this direction.

The suggestion sought to address the rather discretionary and ad hoc nature of loan waiver announcements being made by political parties in election campaigns without any promises of back-up from the Centre on sharing of costs, and then trying to arrange funds for it.

However, with the farmer issue looming large over assembly elections and all parties using it as a poll plank, the ruling BJD, which will seek a fifth term in 2019, is now finding it hard to ignore as its chief having himself said that the recent results reflected the mood of the nation.

Congratulating the Congress, the TRS and MNF for their electoral victory, Naveen had attributed the BJP’s debacle in the five states that recently went to polls to the Centre’s failure to protect the interests of farmers with regards to MSP for paddy and implementation of the M.S. Swaminanthan Committee recommendations (on remunerative prices for agricultural produce).

With the Odisha units of BJP and Congress announcing that it would waive all farm loans if voted to power in 2019, the pressure is further mounting on the ruling party.

Now, it seems to have now become a ‘prestige’ issue for all political parties, competing with one another to come up with impressive farm loan waivers, and such promises are being made to avoid paying a ‘price’ in the upcoming elections.

On Tuesday, BJP state president Basanta Panda also said that his party would provide loans to farmer with zero interest. The state Congress followed suit the following day with OPCC president Niranjan Patnaik announcing that the party will waive off farm loans within five hours of being voted to power.

According to sources, the Odisha government is working out financial implications of these decisions on the state exchequer. “The government is evaluating the pros and cons of farm loan waiver. The Chief Minister may take a decision on the issue anytime after January 8 rally of BJD in New Delhi,” a senior BJD leader.

A rough estimate puts the cumulative loan outstanding on farmers till the end of 2017-18 fiscal at over Rs 26,000 crore. “Farm loan waiver up to Rs 50,000 per farmer will put a put a financial burden of over Rs 26,000 crore on the state coffers. The amount will be Rs 15,000 crore for cooperative banks only,” sources in the Cooperation Department said.

The farm loan wavier is likely to benefit more than 54.24 lakhs farmers in the state.

Eminent economists, however, are against farm loans waiver as it would put enormous pressure on country’s fiscal.

Speaking at an event in New Delhi, former RBI Governor Raghuram Rajan asked the political establishment not to resort to these populist tricks. He said waivers benefitted well-off farmers and put huge fiscal pressures on state finances. “A subset of farmers gets loans. So the best connected farmers often get the benefits than the most poorly off. It creates enormous problems for the fiscal of the state once the waivers are done. Unfortunately, it inhibits investment down the line,” he opined

He instead stressed on creating an environment in which they can be a vibrant force.

A group of economists, including Abhijit Banerjee, E Somanathan, Amartya Lahiri, Rohini Pande and Karthik Muralidharan, however, endorsed the Telangana model of upfront cash support at the time of sowing — the Rythu Bandhu scheme — to cure farm distress. Telangana is the first and only state to implement the investment support scheme, which hands out Rs 4,000 per acre to land-owning farmers, reported the Business Standard.

Niti Aayog Vice Chairman Rajiv Kumar on Wednesday said that such a move helps only a fraction of farmers and is no solution to mitigate agrarian distress. “Farm loan waiver is not a solution to farm sector distress but a palliative,” he said.

In many states, 25 per cent of farmers in many states avail institutional credit, said NITI Aayog Member and agriculture policy expert Ramesh Chand, seconding the argument, while adding that the demand for loan waiver arises because income of farmers is not increasing at a reasonable rate.

“In some states, more than 3/4th of farm loans are taken for consumption purpose and not for agriculture,” he pointed out citing a study.