Farm loan waiver: Rollout in Madhya Pradesh from February 22

New Delhi | Published: February 6, 2019 6:19:08 AM

“Provisional claims settlement has started and the loan waiver amount will be sanctioned at the district level between February 15-20,” said Rajesh Rajora, principal secretary (agriculture).

Farm loan waiver, Madhya Pradesh government, Rajasthan, Chhattisgarh, Kamal Nath, Jai Kisan Rin Mukti YojanaAccording to NITI Aayog member Ramesh Chand, there is no justification of spending huge amount on loan waivers as the benefit will be limited to about one-third of the farmers.

Come February 22, the Madhya Pradesh government will start putting amounts in the bank loan accounts of farmers in the state to extinguish their liabilities, outpacing Rajasthan and Chhattisgarh, the other two states where the new Congress-led governments have announced farm loan waivers.

According to sources in the state government, as many 50.4 lakh farmers have sought loan waiver in Madhya Pradesh as the cut-off date to apply for the benefit ended on Tuesday. “Provisional claims settlement has started and the loan waiver amount will be sanctioned at the district level between February 15-20,” said Rajesh Rajora, principal secretary (agriculture). Immediately after taking the oath of office on December 17, Madhya Pradesh chief minister Kamal Nath cleared a proposal for waiving farm loans of up to `2 lakh as promised by his party at the hustings.

Initially, the state had estimated the benefit to cover over 34 lakh small and marginal farmers. However, the targeted beneficiaries increased to 55 lakh after the state Cabinet extended the eligibility cut-off date to December 12 from
previously set March 31, 2018, following criticism by the Opposition BJP.

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The government has estimated that the farm debt-waiver scheme named ‘Jai Kisan Rin Mukti Yojana’ will cost the state exchequer about Rs 50,000 crore. Since April 2017, when Uttar Pradesh announced a loan waiver of over Rs 36,000 crore to the state’s farmers, such largesse worth Rs 2 lakh crore has been announced by a total of seven states. Rajasthan has promised loan waivers amounting to Rs 26,000 crore and Chhattisgarh’s scheme is for waiving farmers’ loans of Rs 6,100 crore.

According to NITI Aayog member Ramesh Chand, there is no justification of spending huge amount on loan waivers as the benefit will be limited to about one-third of the farmers. At the same time, such largesse hits credit discipline and constrain the government capex. BoFA Merril Lynch said in a report, “If the states cut back 1.5% of GDP of
capex to fund farmers while meeting their FRBM targets, then this will likely cost about 30 bps of growth.”

Citing a Nabard survey, Chand had told FE that only 36% of farmers take loans from institutional sources. As many as 48% farmers do not take loans due to various reasons and of the remaining 52%, 70% take loans from institutional sources while others get credit from private money lenders.

While the Congress has waived farm loans in MP, Rajasthan and Chhattisgarh after winning the state polls in December last year, the NDA government at the Centre has opted for an income support plan. Official data show that fresh agricultural loans in 2015-16 were much higher than the estimated value of crop output in that year in Punjab, Tamil Nadu and Kerala, implying that much of the funds don’t really go into agriculture.

Presenting the Interim Budget last week, finance minister Piyush Goyal announced the Pradhan Mantri Kisan Samman Nidhi — under which Rs 6,000 a year will be transferred to bank accounts of some 12 crore farmer families in three equal instalments. He made a provision of Rs 20,000 crore for the final four months of this fiscal and Rs 75,000 crore (0.36% of the gross domestic product or 2.7% of the Budget), for FY20. Telengana, Odisha and Jharkhand are implementing similar income support schemes for farmers at their own cost.

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