BENGALURU: Even as Chief Minister H D Kumaraswamy has assured that his government is in the process of working out the modalities to implement the farm loan waiver as promised in the JD(S) manifesto, farmers in Karnataka have sought a “complete waiver.” The consequences of such a waiver, economists and political observers say, will affect more than just the farming sector.
From destabilising the state’s economy to discouraging banks from lending to farmers, the massive waiver, experts believe, will impact the farmers more negatively. “The waiver discriminates against farmers who have already paid,” said Prof Narendar Pani, an economist and political analyst from National Institute of Advanced Studies. He pointed out that a waiver like this one will discourage farmers from repaying loans. “When farmers don’t repay, banks stop lending. This forces a farmer to approach informal sector with higher interest rates,” he said, explaining how farmers become dependent on private money lenders despite waivers.
According to data by the Reserve Bank of India, Karnataka will need to spend `34,637 crore even if it intends to waive agricultural loans up to just `1 lakh till March 2016. The state will have to shell out Rs 14,703 crore if it decides to only waive agricultural loans availed by small and marginal farmers with a limit of `1 lakh. But JD(S)’ manifesto promised to waive “all farm loans.” Kumaraswamy has said loans taken between April 2009 and December 2017 will be waived. Farmers have been asked to submit details of loans, bank accounts, land holdings, etc.
Essentially, the government has left it to the farmers to make their case on why they need to be considered for the loan waiver. A nodal officer appointed by the government will look into the applications and decide who is eligible for the waiver. Here’s where the experts anticipate trouble.
“There is always a catch and the fine print,” said Devinder Sharma, an agricultural policy researcher and economist. He doesn’t believe that the promise of a `53,000-crore waiver — as mentioned in the JD(S) manifesto — can translate into reality. “How do you classify the beneficiaries? Instead of empowering a single person to decide the fate of an indebted farmer, why not set up a committee that comprises a bureaucrat but is headed by a farmer?” he asked.
The apprehension over the government applying multiple riders to filter out farmers from the waiver is looming large among farmers. While they are willing to wait and watch, unions have already declared that they will hit the street if the JD(S) goes back on its promise of a complete waiver.
The information submitted by farmers will be studied, loans categorised and applications approved before the waiver becomes a reality. The government will have to identify the types of loans availed, decide what loans are eligible for the waiver and what portion of the loan should be waived — all of these will go against the “complete waiver” promised in the manifesto. Karnataka’s agricultural loans account for 8.7% of total agriculture credit in the country, according to data from Reserve Bank of India as of March 2016. This includes crop loans and agricultural investment loans. The average size of an agricultural credit, according to RBI, is `1.16 lakh and a large amount of this is crop loans.
While Kumaraswamy has reiterated that allocation for other sectors will not be cut to accommodate the farm loan waiver, neither he nor Deputy Chief Minister G Parameshwara have spoken about where the money to implement the scheme will come from. “The waiver, in its entirety, cannot be accommodated in this year’s budget. But if it is extended to next year, farmers will have taken new loans in the hope of a waiver,” Prof Pani said, highlighting that while a “one-time” waiver could be manageable, an extension of the scheme will lead to a complete collapse of the system — for banks, farmers and the state.