States fail to keep farm loan waiver promise

Progress in UP, Rajasthan and Punjab dismal

Political parties, including the Bharatiya Janata Party (BJP) and the Congress, were quick to announce farm loan waivers for small and marginal farmers before state assembly elections. However, after forming the government, the pace of processing these claims under various political parties leaves a lot to be desired.

Data accessed by Business Standardshow that progress on the ground in the three states of Punjab, Uttar Pradesh and Rajasthan has been dismal.

Take the case of Punjab. Before the state assembly elections in February 2017, the Congress party had promised to waive farm loans and provide free power to farmers in its election manifesto. After forming the government, state Chief Minister Captain Amarinder Singh announced a farm loan waiver for small and marginal farmers to the tune of ~200,000 in June 2017. It was subsequently approved by the state Cabinet in September 2017. The debt waiver was estimated to benefit 1.02 million farmers, and was expected to cost the exchequer around ~95 billion.

To date, the state government has waived loans worth only ~9.99 billion, benefitting 202,000 farmers, said government officials.

State government officials told Business Standardthat the government hopes to waive the outstanding loans for marginal farmers by May 31, 2018.

But all this is easier said than done. The state’s Budget documents show that the Captain Amarinder Singh government has allocated only ~42 billion for debt relief to farmers in 201819. To put this number in perspective, consider that the total capital expenditure by the state is pegged at ~63.8 billion in 2018-19. State officials said their hands are tied, given the state’s finances. Budget documents show that the state’s outstanding debt is pegged at a staggering ~2.11 trillion or 40.8 per cent of gross state domestic product (GSDP) in 2018-19, up from ~1.95 trillion in the previous fiscal year. Its fiscal deficit is pegged at 3.81 per cent of GSDP in 2018-19, down from 4.36 per cent in 2017-18.

In the case of Uttar Pradesh (UP), the Yogi Adityanath-led BJP government, which took oath of office in March 2017, had announced a loan waiver with an aim to benefit roughly 8.6 million small and marginal farmers. The scheme was estimated to cost around ~360 billion to the exchequer.

To fund this massive loan waiver, the state government had allocated ~214 billion in 2017-18 and ~31.6 billion in 2018-19, against the total requirement of ~360 billion. The UP government claims it has processed the claims of 3.6 million farmers with a cost up to ~220 billion in 2017-18. In the current financial year, claims of another 1.1 million farmers are under consideration. These are likely to cost the exchequer around ~40 billion.

“The state government is not able to process the loans as it does not have the list of actual beneficiaries and lacks the resources to fund the farm loan waiver. The government was hard-pressed for finances as it had to allocate money for the Seventh Pay Commission,” said Sudhir Panwar, professor at Lucknow University.

“The delay has caused uncertainty in the minds of farmers. They cannot take fresh loans unless they earlier ones are cleared,” said Panwar.

UP’s neighbouring state, Rajasthan, has been the slowest in processing farm loan waivers. Though the Vasundhara Raje-led BJP government, which would be seeking its re-election in November 2018, allocated ~20 billion towards farm waiver in its Budget 2018-19 after facing agitation from farmers, it is yet to process any claim. The state government had promised to waive loans up to ~50,000 for around 2.8 million farmers.

“The state chief minister is expected to soon announce the waiver as the list of beneficiaries is being finalised,” said a state government officer.