No loan waivers for 40% eligible farmers in three key states: Nabard study

The study also found that waivers increased chances of willful default by farmers; 72-85% of respondents felt that they pushed honest farmers to default on farm loans

Do farm loan waivers actually help farmers?

A joint study by Nabard and producer group Bharat Krishak Samaj has found that in the three states of Uttar Pradesh, Punjab and Maharashtra, which had loan waivers in place since April 2017, almost 40 per cent of 'highly distressed farmers' had not received any benefit from the waivers.

On the much talked about electoral impact of farm loan waivers, the Nabard survey found that since 2012, thirteen Indian states have implemented loan waiver schemes for farmers.

“And only four of the 21 political parties lost the election following the electoral promise and implementation of a farm loan waiver scheme,” the study found. This meant, the loan waivers electorally did benefit political parties.

The study, which was formally released today, has also found that loan waivers increased the chances of willful default by farmers and that 72-85 per cent of respondents felt that it pushed honest farmers to default on agriculture loans.

A majority of the surveyed farmers (between 97-98 per cent) also said income and production related issues were bigger problems for them rather than indebtedness.

The survey interviewed 3,835 farmers across 126 villages in the three states. It was conducted between January and August 2020.

Almost 94 per cent of the respondents were small and marginal cultivators.

The findings of the Nabard survey are somewhat in contrast to another study sponsored by the Union Ministry of Agriculture and conducted by the Agro-Economic Research Centre (AERC) of the Punjab Agriculture University some time back, on the impact of the loan waiver schemes in Punjab and UP.

It had found that beneficiary incomes in fact increased after their debts were waived though it might not have entirely due to the debt waiver but there was a clear pattern of increase in investments in ancillary farming like in livestock rearing of cattle farming.

The study also found that there was no major change in the size of operational holding on the selected farms in Punjab and Uttar Pradesh after redemption of loan which showed no impact of the scheme on land holding status of beneficiaries.

Meanwhile, on the positive side, the NABARD survey further found that the beneficiaries of farm loan waivers in all the three states where it was implemented (UP, Punjab and Maharashtra) did not face any problem in accessing fresh credit from banks.

It also found that crop loss, indebtedness and sole dependence on agriculture for incomes were the prime causes of farmers committing suicide in all the three states.

“It was not indebtedness by itself that drove farmers to suicide, but a combination of crop loss and indebtedness,” the survey said.

On the financial implications of Farm Loan Waivers on state budgets, the Nabard survey found that in the year of maximum disbursals of waiver benefits, the state fiscal deficit fell in Maharashtra and Uttar Pradesh but increased in Punjab.

“Major budgetary reallocations were observed among the departments in the year of max disbursals, while capital outlays and development expenditure were also low in same year in Maharashtra and Uttar Pradesh, while in case of Punjab, it increased in the year of maximum disbursal of waiver benefits,” the study found. 

Items	Punjab	Maharashtra	UP
Scheme Name	Karz Maafi Yojana	Chhatrapati Sivaji Maharaj Shetkari Samman Yojana	Kisan Rin Mochan Yojana
Year of Launch	October 2017	June 2017	April 2017
Beneficiaries	Small & Marginal Farmers	All farmers	Small & Marginal Farmers
Estimated Cost to Exchequer	Rs 10,000 crore	Rs 34,020 crore	Rs 36,000 crore
Actual Amt Spent	Rs 6586 crore	Rs 20,020 crore	Rs 22,465 crore