Maharashtra: Farm loan waiver likely to cost Shiv Sena-NCP-Congress govt Rs 1.3 lakh crore

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The Shiv Sena-NCP-Congress promised waiving off farm loans completely in Maharashtra, individually during the poll campaign, as well as together, in their Common Minimum Programme (CMP). However, this promise is going to cost the state exchequer quite a bit.

According to a report in The Indian Express, in order to make the farm sector completely debt-free, the Sena-NCP-Congress government will have to waive off loans of approximately Rs 1,31,578 crore.

In 2017, the previous BJP-Shiv Sena government had implemented a loan waiver for nearly 50 lakh farmers. The outstanding loans were worth Rs 19,000 crore.

The newspaper reported that both off-take and repayment of farm credit has been slow in Maharashtra since 2017. Bankers suggest that this is because of wilful default by farmers, who are relying on promises of loan waiver made during poll campaigns by various political parties.

Data furnished by the State Level Bankers Committee (the top body which oversees lending in the state) showed that Rs 39,591 crore was disbursed by financial institutions till September 2019. This was about 44 percent of the total of Rs 87,322 crore worth of farm loans.

In the last fiscal year, banks had disbursed Rs 37,921 crore, which is about 45 percent of the target Rs 85, 464 crore, the publication reported.

A farmer usually takes a loan from banks at 7 per cent interest at the beginning of a crop cycle. This is to facilitate him to buy raw material such as seeds, fertilizer, etc.

If he repays the loan on time, he gets a subvention of 3 percent – 2 percent by the Centre and 1 percent by the state government. This brings down the effective rate of interest to 4 percent.

However, in the last couple of years low uptake of farm credit has come with an increase in outstanding loans, which is now over Rs 1.31 lakh crore. Officers from the State Level Bankers Committee said that some of these loans were older than 2001.

When the previous government had announced a farm loan waiver, it came with a lot of conditions. For instance, farmers who paid income tax or were employed with government offices, or were elected representatives, were excluded from the scheme. Claims for these loans were filed online and banks disbursed the money only after verifying them with the database maintained by the government.

The current government now faces the tall task of raising enough capital to fund this scheme. Sources told the newspaper that the uncertain condition of the state exchequer is likely to make implementation of the scheme difficult.