Beating populism: Rupala says govt not considering loan waiver

In a bold statement the Minister of State for Ministry of Agriculture & Farmers Welfare Parshottam Rupala said in the Parliament on Tuesday the Union Government is not considering any loan waiver scheme for farmers.

The Minister underlined that the waivers impact the credit culture of a State by incentivizing defaulters, even if they are in a position to repay loans. It also creates the moral hazard by discouraging those borrowers who have been regular in repaying their loans. Further, each waiver granted makes it even more difficult to reject any future similar demand, Rupala added.

Financial experts have always held the view that waiving off loans is detrimental to the interests of farmers in the long run. They have been critical of govts, resorting to this tactic in order to have quick electoral rewards.

Narendra Modi’s govt was appreciated for its tough line on loan waivers but it too could not resist the considerable temptation while fighting the Uttar Pradesh Assembly elections. The culture of freebies-part of the political strategy of regional satraps has been a throwback to the Congress culture, say experts.

The Government of Uttar Pradesh on April 4, 2017 announced a Rs. 30,729 crore scheme waiving crop loans up to Rs.1 lakh for Small and Marginal Farmers. In addition to this, Rs.5,630 crore was allocated for writing off bad loans of around seven lakh farmers, which had become NPAs for banks. This takes the total amount allocated for loan relief to Rs.36,359 crore for the poor state.

Several other State Governments including Tamil Nadu, Maharashtra, Karnataka, Jammu & Kashmir, Punjab, Chhattisgarh, Andhra Pradesh, Telangana and Union Territory (UT) of Puducherry have in the recent past announced their own farm loan waiver Schemes for the farmers.

The Government of Tamil Nadu waived off Rs.5318.75 crore by the Cooperative Banks in 2016. The Maharashtra Government announced Debt waiver for farmers of an amount of Rs. 30,500 crore.

The Karnataka government announced waiver of farm loans of up to ?50,000 taken from State-run Cooperative Institutions covering 22 lakh farmers with amount of Rs. 8,165 crore in 2017.

While the Punjab Government announced Debt waiver for farmers to the tune of Rs.10,000 crore in 2017, the Jammu & Kashmir Government waived off Rs.244 crore for 1.15 lakh farmers.

Similarly Union Territory of Puducherry, the govts of Andhra Pradesh, Telengana, Chattisgarh, among others, have announced loan waivers. Rupala’s statement is important in the sense that the Centre is thinking in terms of jettisoning this populist measure. There is a growing realization in the govt circles that it should, instead, try empowering farmers through skill development.

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