Telangana Government announced Crop Loan Waiver upto Rs 1 lakh.
Kartavya Desk Staff
Syllabus: Agriculture/ Government Policies and Interventions
Source: TH
Context: The Telangana government has released ₹31,000 crore for the Crop Loan Waiver Scheme for waiving farmers’ loans. This scheme, aimed at benefiting over 40 lakh farmers by August end, marks the largest loan recovery in the country.
What are Farm loan waivers?
They are government measures that forgive certain agricultural loans to reduce farmers’ distress, often promised during elections. These waivers involve the government covering the farmers’ debt, providing temporary relief but not solving long-term agrarian issues.
Historical Instances of Farm Loan Waivers:
Year | Waiver Scheme | Key Details
1990-91 | Agricultural and Rural Debt Relief Scheme (ARDRS) | Relief up to Rs 10,000 on select loans
2008 | Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS) | Rs 60,000 crores allocated for farmer relief. Full waiver for small farmers (2 hectares if they pay the remaining 75%
Post-2014 | Various State Government Waivers | Total amounting to Rs 2.52 lakh crores. States: Andhra Pradesh, Telangana, Uttar Pradesh, Maharashtra, Karnataka, Punjab, Madhya Pradesh, Chhattisgarh, Jharkhand, Tamil Nadu
Benefits of Loan Waiver:
• For farmers: Farm loan waivers allow farmers to reinvest in agriculture and diversify into activities like poultry, dairy, and horticulture.
• Political Benefit: A NABARD study (1987-2020) found that only 4 out of 21 state governments lost elections after announcing waivers.
Drawbacks of Loan Waivers:
• Limited Coverage: Example: A 2022 SBI study revealed that only half of the beneficiaries of nine state-announced farm loan waivers since 2014 received write-offs. Maharashtra had a high implementation rate, while Telangana had the poorest.
• Partial Relief: Example: Half of the loans are for non-farm purposes.
• Multiple Loans Per Household: Households with multiple loans receive multiple waivers. Example: A family with loans in different members’ names gets multiple waivers.
• Example: A family with loans in different members’ names gets multiple waivers.
• Exclusion of Agricultural Laborers: Laborers, often more distressed, are left out.
• Erosion of Credit Culture: Encourages non-repayment expectations. Example: Farmers anticipate future waivers, leading to reduced repayment rates.
• Example: Farmers anticipate future waivers, leading to reduced repayment rates.
• Implementation Errors: Prone to exclusion and inclusion errors. Example: CAG found ineligible farmers benefited from the 2008 scheme while deserving ones did not.
• Example: CAG found ineligible farmers benefited from the 2008 scheme while deserving ones did not.
• Impact on Developmental Expenditure: Diverts funds from other developmental projects.
What needs to be done?
• Proper identification:For providing immediate relief to the needy farmers, a more inclusive alternative approach is to identify the vulnerable farmers based on certain criteria and give an equal amount of financial relief to the vulnerable and distressed families.
• Enhance non-farm income:The sustainable solution to indebtedness and agrarian distress is to raise income from agricultural activities and enhance access to non-farm sources of income. The low scale of farms necessitates that some cultivators move from agriculture to non-farm jobs.
• Improved technology, expansion of irrigation coverage, and crop diversificationtowards high-value crops are appropriate measures for raising productivity and farmers’ income. All these require more public funding and support.
• Public Investment: Increase the budget for agriculture focusing on irrigation, electricity, storage, and transportation.
• Direct Income Support: Implement schemes like PM-KISAN and Kisan Credit Card with efficient fund disbursement via DBT.
• Market Reforms: Improve APMCs to ensure fair pricing for farmers.
• Farmer Producer Organizations (FPOs): Encourage cooperative societies for bulk purchasing and better marketing.
• Risk Mitigation: Provide accessible crop insurance schemes to protect against natural calamities.
Observations made by RBI:
As per RBI, loan waivers not only inhibit investment in the farm sector but put pressure on the fiscal of states which undertake farm loan waivers.
In every state election during the last five years, a loan waiver promise is made by one political party or another. Also, loan waivers, as the RBI has repeatedly argued, vitiate the credit culture, and stress the budgets of the waiving state or central government.
Way ahead:
The magic wand of a waiver can offer temporary relief, but long-term solutions are needed to solve farmer woes. There are many dimensions of the present agrarian crisis in India. The search for a solution therefore needs to be comprehensive by taking into consideration all the factors that contribute to the crisis. Furthermore, both short- and long-term measures are required to address the numerous problems associated with the agrarian crisis.
Mains Link:
Given the vulnerability of Indian agriculture to vagaries of nature, discuss the need for crop insurance and bring out the salient features of the Pradhan Mantri Fasal Bima Yojana (PMFBY). (UPSC 2016)
Prelims Link:
Q1. Under the Kisan Credit Card scheme, short-term credit support is given to farmers for which of the following purposes? (UPSC 2020)
• Working capital for maintenance of farm assets
• Purchase of combine harvesters, tractors and mini trucks
• Consumption requirements of farm households
• Post-harvest expenses
• Construction of family house and setting up of village cold storage facility
Select the correct answer using the code given below:
(a) 1, 2 and 5 only (b) 1, 3 and 4 only (c) 2, 3, 4 and 5 only (d) 1, 2, 3, 4 and 5
Ans: (b)