Loan waiver: Cong wants to revive scheme in which CAG punched many holes

While ADVVDRS was hailed as a key reason for UPA's return to power in 2009, the scheme itself later drew flak for its flaws, with CAG finding many of the accounts ineligible for waiver or relief

In order to help the country’s small and marginal farmers, the Congress party has promised to bring a nationwide loan waiver scheme on the lines of its 2009 programme, should the party be voted to power in the 2019 general elections. The programme being referred to is the one that was found to be riddled with a lot of discrepancies and irregularities

The Agriculture Debt Waiver and Debt Relief Scheme (ADVVDRS), announced by the Congress-led United Progressive Alliance (UPA) government of the day in 2008, was estimated to benefit around 38.8 million farmers with either debt relief or debt waivers to the tune of a combined Rs 650 billion (provisional figures).

The scheme was implemented by the Scheduled Commercial Banks, Regional Rural Banks, Cooperative Credit Institutions (including Urban Cooperative Banks) and Local Area Banks.  

Under this programme, the entire ‘eligible amount’ was waived for small and marginal farmers. In the case of other farmers, there was a one-time settlement (OTS) scheme that offered relief by way of a rebate of 25 per cent of the ‘eligible amount’, subject to the condition that the farmer would pay the remaining 75 per cent.

The scheme was hailed as one of the key reasons why the ruling coalition romped back to power after the 2009 Lok Sabha elections. However, the programme itself later faced criticisms for its flaws, with a Comptroller and Auditor General (CAG) report tabled in Parliament in 2013 finding that almost nine per cent out of the 80,299 accounts audited were not eligible for debt waiver or relief.

“Overall, the performance audit revealed that there were lapses or errors in 22.32 per cent of the 90,576 cases checked. This raised serious concern about the implementation of the scheme,” the CAG report said.

CAG also pulled up the department of financial services (DFS) in the finance ministry on finding instances of tampering of records. It recommended that DFS review such cases and take ‘stringent action’ against erring officials and banks.

In several instances, CAG found that farmers who had taken loans for non­agricultural purposes or whose loans did not meet the eligibility conditions were also given benefits under the scheme. The report pointed out that microfinance institutions were also given benefits under the programme, in violation of debt waiver guidelines, while banks claimed undue benefits like penal interest, legal charges and miscellaneous charges from the government under the scheme.  

The CAG team audited the records of 90,576 farmers at 715 branches of various banks in 25 states. The sample included 80,299 accounts of farmers who got the benefits and 9,334 accounts of those who were denied the benefits for various reasons.

When the report was tabled, the issue rocked Parliament, with the then Opposition labelling the entire scheme as a big scam. The then finance minister, P Chidambaram, had assured of action against banks found involved in irregularities, as well as ineligible recipients of the scheme.

Chidambaram had also directed the Reserve Bank and Nabard to identify errors in the execution of the farm debt waiver scheme and take action against erring banks and ineligible beneficiaries.

In an intervention in Rajya Sabha, the then prime minister Manmohan Singh had also promised ‘stringent’ action against wrongdoers if any irregularity was found.

“The reference is to the CAG report on loan waiver scheme. This is a matter, which should be entrusted to the public accounts committee as per normal practice. If there are any irregularities, which have been shown, I assure the House that we will take stringent possible action against the defaulters,” Singh had said.

But the agriculture minister of the time, Sharad Pawar, had said that there was no "misappropriation" of funds under the farm debt waiver scheme and sought a more comprehensive audit by CAG to get a better picture. He had also slammed the sample size taken by CAG as being too small.

"Government of India has taken the decision and money has been sent to banks. Accounts and a beneficiary list has been selected by banks under the supervision of RBI and Nabard. Money has directly been transferred to accounts. Where is the question of misappropriation?" Pawar had said.

Meanwhile, the Congress resolution also said that the party would review the methodology used by the Commission for Agriculture Costs and Prices (CACP) to the farmers, factoring all relevant input costs including warehousing and transportation. The all paid put costs (A2) do include costs incurred on warehousing and transportation.

The third main promise of the Congress in its resolution was to have a network of food-parks and special agricultural zones across the country to process agricultural and horticultural produce.

In 2008-09, a food park scheme launched by the then UPA government was as a cluster-based, privately driven 50-50-50 scheme. Under it, the ministry of food processing industries gave a grant of up to Rs 500 million to build a mega food park with a minimum land area of 50 acres with at least Rs 500 million investment from the park developer.

Around 42 food parks were allocated in 2008-09. Of those, the allotment of 17 was cancelled as work on them could not start due to various reasons. A study by Icrier on the scheme said it needed to be redesigned to suit the specific requirements of states.

It also said that the guidelines needed to be tweaked to allow more flexibility in operation. 

AT A GLANCE

What was the scheme?

Called the Agriculture Debt Waiver and Debt Relief Scheme—2008, the loan waiver was expected to benefit 38.8 million farmers. The beneficiaries included both small and marginal farmers and even those outside the ambit. The provisional amount was estimated to be Rs 650 billion, which escalated to Rs 710 billion.

What CAG said?

A CAG report of 2013 found several loopholes in the scheme’s implementation, including ineligible beneficiaries availing of the scheme; microfinance institutions milked the scheme in violation of the guidelines; banks claimed undue benefits.