Letters: Cost-benefit analysis

Loan waiver policies vitiate credit culture and are detrimental to economic prosperity in long run

The editorial, “Avoid blanket loan waivers” (March 20), touches the right cord. Loan waiver policies vitiate the credit culture and are detrimental to economic prosperity in the long run. The bright side is that the number of prompt borrowers are more. Borrowers waiting for government largesse are few. 

Policymakers should work to divert such sops towards larger interest subventions or for increased subsidy to the farm sector after taking into consideration their past loan repayment record. 

Instances of natural calamities in the farm sector need to be tackled on a case-by-case basis. Rewarding prompt payers can improve credit culture.  

The malady lies in the policy of determining minimum support price. A low price defies the cost-benefit dimensions of farming activity. As a result, farmers migrate as labourers to urban areas and are forced to take up odd jobs for survival. The scions of farming families are rarely seen in the field. 

Long-term policy should be oriented towards reviewing the administered prices regime and linking it to the cost benefit. This will lead to attractive margins and make farming commercially robust. Extending technology support, better farmer education and providing technical guidance of agricultural experts can pull farmers out of distress. Then, loan waiver will lose relevance.

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