Seeds of farm loan waiver take root again in political discourse

Uttar Pradesh govt announced Rs 36,000 crore farm loan waiver in April

Nearly two months after the Yogi Adityanath government in Uttar Pradesh announced Rs 36,000 crore worth of farm loan waiver in the state, several other state governments are under pressure from farmers’ groups to promise farm debt relief as a palliative for agrarian distress. With assembly polls due in many of the states in west and central India by 2018-end, political parties are looking at farm debt waivers as an electoral instrument.

Maharashtra, Madhya Pradesh and some other states have witnessed sustained farmer agitations over the past one week. In both Madhya Pradesh and Maharashtra, farmers have resorted to novel ways to protest, including pouring litres of milk and throwing vegetables on roads. The effort has been to bring the issue of agrarian distress at the centre of public consciousness and make state governments take remedial measures.

On Saturday, Maharashtra Chief Minister Devendra Fadnavis promised waiver of loans of small and marginal farmers with land holdings of five acres. He announced a waiver that would benefit 3.4 million farmers, especially those outside the ‘institutional credit system’, and is estimated to the cost the state exchequer Rs 30,000 crore.

Fadnavis said the loan waiver will come into force by October 31, 2017. “Of the state’s 13.6 million farmers, 3.1 million have not been able to access crop loans since 2012. Restructuring of loans for this segment was not permissible. Therefore, the only way forward was to write off loans,” media reports quoted him as having said. Fadnavis said nearly four million farmers would benefit from the waiver. Maharashtra currently has a public debt of nearly Rs 4 lakh crore.

In April, Fadnavis had ruled out farm debt waiver. He told the legislative assembly that his government had taken several steps to help farmers. He had said the state government’s finances were stretched and a loan waiver was not possible without Centre’s financial assistance. But unabated farmer protests, shortage of vegetables and subsequent increase in prices have led the chief minister to announce a waiver on Sunday. Farmers’ groups, however, decided to continue with their agitation.

If Fadnavis is under pressure from the Opposition in Maharashtra, neighbouring Karnataka’s Chief Minister K Siddaramaiah has been put in a spot on the issue by Bharatiya Janata Party (BJP) state unit chief B S Yeddyurappa. Late last week, Siddaramaiah, who leads the Congress government in the state, said in Mysuru that he is looking at farm loan waiver and would take the decision “at the right time”. Karnataka is scheduled to have assembly polls by May 2018.

Siddaramaiah, however, put the onus on the Centre. He said total loans of Karnataka farmers were to the tune of Rs 52,000 crore. Of these, Rs 42,000 crore were owed to nationalised banks and only Rs 10,000 crore were from cooperative institutions. Since, loans from nationalised banks can only be waived off by the Centre, Siddaramaiah said he has urged the Narendra Modi government to waive loans but the Centre was “indifferent”.

On Sunday, the Aam Aadmi Party (AAP) held the meeting of its national executive in Delhi. The AAP said it would start a movement from 10 June to support the demand for loan waiver by farmers of drought hit states. Senior party leader Sanjay Singh said the AAP will demand that the Centre waive farm loans of farmers just as it waived loans of “multi-millionaires”. Singh claimed 60 farmers have committed suicide in Punjab after the Amarinder Singh government took up the reins of the state in April.

Loan waiver was one of the key election promises of Amarinder Singh-led Congress in Punjab. His government is now under pressure to deliver on the promise. The announcement is likely later this month. According to data, the total outstanding farm loan in state is over Rs 72,700 crore. Of this, Rs 59,620 crore is crop loans and the rest are term loans. The state government is likely to write off short-term crop loans.

Apart from Maharashtra, BJP governments in Gujarat and Madhya Pradesh are also under pressure to announce farm loan waivers. Farmer agitation in Madhya Pradesh had turned violent in some places and fruit and vegetable markets have remained shut. Madhya Pradesh Chief Minister Shivraj Singh Chouhan held a meeting with farmer groups, but protests have continued. Elections are slated for end of 2018.

In Gujarat, Congress state unit chief Bharatsinh Solanki has announced a farm loan waiver if his party were to come to power. Gujarat goes to polls later this year. Solanki has said the total debt of farmers in the state is approximately Rs 24,000 crore.

While the farmer agitations are a cause of concern for the BJP as it prepares for sundry assembly polls and 2019 Lok Sabha elections, the Narendra Modi government at the Centre will find it difficult to adopt a piecemeal approach by helping only few states. 

Within the party, the BJP farmers cell chief Virendra Singh said he supports farm loan waiver. Congress spokesperson Randeep Singh Surjewala indicated that his party will continue to put pressure on the government on the issue, pointing to the example of United Progressive Alliance-I government’s nationwide farm loan write-off in 2008.

In April, Reserve Bank of India Governor Urjit Patel had termed such waivers a “moral hazard”. In March, State Bank of India Chairman Arundhati Bhattacharya had also disfavoured farm debt write-offs. Finance Minister Arun Jaitley had also ruled out helping state governments with farm loan waiver. It remains to be seen the Centre’s next move on the issue after unabated farmer protests. Farmers’ organisations are likely to bring their protests to New Delhi during the monsoon session of Parliament in July.