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Do farm loan waivers really work?

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Kamlesh Sutar
Kamlesh SutarJun 08, 2017 | 15:23

Do farm loan waivers really work?

Maharashtra is witnessing an unprecedented strike by farmers. Demanding a loan waiver, the farmers are on the streets. After holding discussions with some of the protesting groups, CM Devendra Fadnavis announced that by October 31, his government will declare the biggest ever loan waiver package in the history of the state.

Though the issue has now taken a complete political turn, it has once again raised questions over whether these kind of packages or loan waivers really work.

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This is not the first time that the government has made an announcement of a loan waiver or a special package for farmers - two major decisions in the past pertaining to a special package and loan waiver have failed miserably.

Vidarbha region in Maharashtra has always been notorious for farmer suicides. To stop the unabated deaths, then Prime Minister Manmohan Singh had visited the region in July 2006 and announced a special package of Rs 3,750 crore.

The package also included immediate interest waiver for six districts in Vidarbha worth Rs 712 crore to make the affected farmers immediately eligible for fresh loans.

Yet another feature of this package was a fund of Rs 135 crore to encourage subsidiary income through livestock, cattle and fodder.

Though on paper the scheme looked really good, when it came to implementation it fell like a pack of cards. Several needy farmers were left out of the package. There were cases where several needy farmers applied for livestock, but never got one.

Some RTI documents revealed that the beneficiaries of the package were either local leaders from the ruling party or their kith and kin. While some were lucky to have been allotted a cow or buffalo, the livestock did not yield milk - on the contrary it only increased the already debt-ridden farmer’s monthly expenditure on fodder. Finally they had to sell it off at a lower price.

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Maharashtra CM Devendra Fadnavis is set to announce a loan waiver. Photo: India Today

The next big relief for farmers was announced in February 2008 by then UPA government just ahead of the 2009 general elections. It was a Rs 52,280 crore farm loan waiver scheme that was originally meant to benefit 3.5 crore small and marginal farmers, but it soon became a den of corruption with a series of scams in one department or the other.

In Maharashtra, the loan waiver became a tool for politicians to benefit their kith and kin yet again.

One of the implementing bodies, National Bank for Agriculture and Rural Development (Nabard), had alleged that the scheme was grossly misused in western Maharashtra’s Kolhapur district.

According to the estimates, an amount of Rs 112 crore was wrongly approved by the Kolhapur District Cooperative Central Bank (KDCCB). Manipulated records were shown to Nabard for getting the loan waiver claims sanctioned. After an investigation, more than 44,000 borrowers were declared ineligible.

About Rs 280 crore was disbursed among 1,91,066 farmers in Kolhapur, of which claims of 44,669 farmers worth Rs 112 crore were found to be ineligible. More than 5,000 beneficiaries of the loan waiver were those who had loan amounts ranging from Rs 50,000 to Rs 35 lakh that included some influential local politicians and also relatives of office-bearers of the KDCCB. Close to 40,000 cases were found where the loan was taken for purposes other than agricultural.

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Even here the needy were thus left out.

Both the 2006 and 2008 special packages for farmers looked excellent on paper, but when it came to implementation it only provided yet another opportunity for corruption. So this time, as Fadnavis’s government moots yet another loan waiver on the lines of Uttar Pradesh, they better learn some lessons from past mistakes.

Last updated: June 08, 2017 | 15:23
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