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Politics Farm and Forest

UP may waive loans of over 33,000 farmers, but is that the way to go?

NABARD warns against the dangers of repeated farmer loan waivers

Vallari Sanzgiri 13 May 2022

farm loan waiverRepresentation Image


Uttar Pradesh’s local news outlets such as Jagran, News 18 Hindi and even News NCR recently reported the state government’s intentions to waive loans of over 33,000 farmers amounting to ₹ 200 cr. However, wisened by their previous encounters with the regime, local farmer leaders accused the administration of making tall claims.

According to News NCR, the Agriculture Department is sending a detailed proposal to Chief Minister Yogi Adityanath to waive the loans of 33,408 farmers who have been waiting for such relief for five years. If approved, the loan waiver will provide relief for farmers in 19 districts. The same will be implemented under the State Government Crop Loan Redemption Scheme 2017 started on July 9, 2017. The scheme waives loans upto ₹ 1 lakh for small and marginal farmers.

Bharatiya Kisan Union (BKU-Shamli) leader Ompal Malik told SabrangIndia that at the time nearly 3,000 farmers in Lucknow were excluded from the list of eligible candidates. “Farmers who in 2017 had loans less than ₹ 1 lakh continued to receive interests. Now some of their loans exceed 1 lakh,” said Malik. As for the latest update, he said no BKU farmer has received any update regarding this announcement. He accused the state government of repeatedly making such announcements without a proper plan of action.

Similarly, another SKM leader of the UP unit, Manish Bharti, said that no farmer, regardless of the size of farmland, has received any information on loan waivers for many years. Instead, many farmers are being asked for loan payment recoveries in Meerut. “They mention 19 districts but don’t specify which regions. All of this shows that they only want to give speeches to placate us. This government is making fun of farmers,” said Bharti.

Is loan waiver truly beneficial?

A NABARD research study ‘Farm Loan Waivers in India’ published on April 22 stated that ‘indebtedness’ is a result of distress and not the immediate cause. An inability to earn enough income indebts a farmer. Recurrent losses and falling margins results in defaults which leads to a vicious cycle of debt- distress- further debt.

“Farm loan waivers (FLW) were designed as a reaction to acute agrarian distress and to ensure the continuity of future credit, but it has tacitly evolved to emerge as a political tool that is strategically used by political parties to influence rural voters,” concludes the study by Shweta Saini, Siraj Hussain and Pulkit Khatri.

It observed that the year wherein an FLW is implemented, the government reduces capital expenditure. Similarly, financial institutions reduce lending and there is worsened credit discipline among farmers in the medium to long run.

Moreover, researchers saw that FLWs only address indebtedness and not the original causes of distress like lack of remunerative prices. As a result, the schemes serve as temporary relief during which farmers incur more debt.

“In such a scenario, a farm loan waiver only proves to be a ‘jury-rigged expedient’ — a quick fix that requires recurrent application,” says the study.

Seeking to understand the political impact, the study said that only 4 out of 21 political parties in the last 30 years lost the election following promises of FLW implementation. These parties included the Samajwadi Party in Uttar Pradesh in 2017.

A related study by Phadnis and Gupta in the report said that all political parties, left-wing, right-wing and centrist parties alike, announce FLWs. Moreover, most waiver schemes were announced by states who could afford the waiver fiscally. After 2016, high fiscal debt did not deter several states from announcing waivers. Another observation was that waivers were announced regardless of droughts in the area, a proxy for farmer distress.

“The timing of waivers was found to be an important factor determining the correlation between waivers and electoral wins – proximity to elections mattered. The closer the announcement of waiver was to elections, the greater was the political mileage gained by parties,” says the study.

Related:

SKM breaks down demand for MSP to masses

Jal Satyagraha as part of farmers' MSP week protests

No MSP committee until Centre clarifies mandate: SKM

UP Assembly Elections: Farmers dealt a mighty blow to the BJP in some constituencies

UP may waive loans of over 33,000 farmers, but is that the way to go?

NABARD warns against the dangers of repeated farmer loan waivers

farm loan waiverRepresentation Image


Uttar Pradesh’s local news outlets such as Jagran, News 18 Hindi and even News NCR recently reported the state government’s intentions to waive loans of over 33,000 farmers amounting to ₹ 200 cr. However, wisened by their previous encounters with the regime, local farmer leaders accused the administration of making tall claims.

According to News NCR, the Agriculture Department is sending a detailed proposal to Chief Minister Yogi Adityanath to waive the loans of 33,408 farmers who have been waiting for such relief for five years. If approved, the loan waiver will provide relief for farmers in 19 districts. The same will be implemented under the State Government Crop Loan Redemption Scheme 2017 started on July 9, 2017. The scheme waives loans upto ₹ 1 lakh for small and marginal farmers.

Bharatiya Kisan Union (BKU-Shamli) leader Ompal Malik told SabrangIndia that at the time nearly 3,000 farmers in Lucknow were excluded from the list of eligible candidates. “Farmers who in 2017 had loans less than ₹ 1 lakh continued to receive interests. Now some of their loans exceed 1 lakh,” said Malik. As for the latest update, he said no BKU farmer has received any update regarding this announcement. He accused the state government of repeatedly making such announcements without a proper plan of action.

Similarly, another SKM leader of the UP unit, Manish Bharti, said that no farmer, regardless of the size of farmland, has received any information on loan waivers for many years. Instead, many farmers are being asked for loan payment recoveries in Meerut. “They mention 19 districts but don’t specify which regions. All of this shows that they only want to give speeches to placate us. This government is making fun of farmers,” said Bharti.

Is loan waiver truly beneficial?

A NABARD research study ‘Farm Loan Waivers in India’ published on April 22 stated that ‘indebtedness’ is a result of distress and not the immediate cause. An inability to earn enough income indebts a farmer. Recurrent losses and falling margins results in defaults which leads to a vicious cycle of debt- distress- further debt.

“Farm loan waivers (FLW) were designed as a reaction to acute agrarian distress and to ensure the continuity of future credit, but it has tacitly evolved to emerge as a political tool that is strategically used by political parties to influence rural voters,” concludes the study by Shweta Saini, Siraj Hussain and Pulkit Khatri.

It observed that the year wherein an FLW is implemented, the government reduces capital expenditure. Similarly, financial institutions reduce lending and there is worsened credit discipline among farmers in the medium to long run.

Moreover, researchers saw that FLWs only address indebtedness and not the original causes of distress like lack of remunerative prices. As a result, the schemes serve as temporary relief during which farmers incur more debt.

“In such a scenario, a farm loan waiver only proves to be a ‘jury-rigged expedient’ — a quick fix that requires recurrent application,” says the study.

Seeking to understand the political impact, the study said that only 4 out of 21 political parties in the last 30 years lost the election following promises of FLW implementation. These parties included the Samajwadi Party in Uttar Pradesh in 2017.

A related study by Phadnis and Gupta in the report said that all political parties, left-wing, right-wing and centrist parties alike, announce FLWs. Moreover, most waiver schemes were announced by states who could afford the waiver fiscally. After 2016, high fiscal debt did not deter several states from announcing waivers. Another observation was that waivers were announced regardless of droughts in the area, a proxy for farmer distress.

“The timing of waivers was found to be an important factor determining the correlation between waivers and electoral wins – proximity to elections mattered. The closer the announcement of waiver was to elections, the greater was the political mileage gained by parties,” says the study.

Related:

SKM breaks down demand for MSP to masses

Jal Satyagraha as part of farmers' MSP week protests

No MSP committee until Centre clarifies mandate: SKM

UP Assembly Elections: Farmers dealt a mighty blow to the BJP in some constituencies

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