Only 40% farm loan waivers in 4 states so far; here are major reasons for delay

It's a season of farm loan waivers announcements in the country as many states, including newly elected state governments in Madhya Pradesh, Rajasthan and Chhattisgarh, have declared packages for loan write-offs for small and medium land-owning farmers. Experts suggest the farm loan waivers announced by these state governments are nothing but populist "political" measures taken by these governments in the run-up for the 2019 Lok Sabha elections.

The newly formed Congress-led governments in MP, Chhattisgarh and Rajasthan are the latest to do so apart from Uttar Pradesh, Karnataka, Maharashtra and Punjab. According to a Business Standard report, in the four states -- Uttar Pradesh, Maharashtra, Karnataka, and Punjab -- only 40 per cent of the promised amount has been waived to date, and just half the beneficiaries have benefited.

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Chief Minister Yogi Adityanath-led Uttar Pradesh government had announced waiver for loans up to Rs 1 lakh covering about 0.86 crore farmers by spending Rs 36,400 crore. However, the actual disbursals to farmers were Rs 24,700 crore, 32 per cent lower than actual credit target. Similarly, Devendra Fadnavis-led Maharashtra government announced a loan waiver of Rs 34,000 crore of which only Rs 17,000 crore has been disbursed so far.

In Punjab, the Captain Amarinder Singh government announced farm waiver of over Rs 10,000 crore, but the actual amount of loans waived was just Rs 3,600 crore, which is Rs 6,400 lesser than the promise.  Meanwhile, in Karnataka, the Kumaraswamy-led government has completed its first tranche of loan waiver of Rs 8,200 crore for 0.2 crore farmers, while its second tranches of Rs 40,000 crore is moving at slower speed, according to the agency report.

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Earlier loan waiver announcements have also proved that a less percentage of people benefit from such schemes. Past experiences show that state governments had not been able to implement loan waivers scheme successfully. One of the main reasons for the unsuccessful implementation of this scheme is too much documentation. Farmers are usually not educated enough to understand their eligibility for loan types or loan application process and ultimately fail to meet bank requirements. Most of the farmers also fail to qualify for loan waivers due to various reasons, including higher limit, lack of coordination between administration and bankers.

Also, be it the Centre or states, the budgetary constraints actually leave no scope for such freebies. The quantum of funds that is needed to carry out such an exercise is way higher than the state's ability to bear such one-time expenses, which can cause an inordinate delay in the loan-waiver process.

Edited by Chitranjan Kumar