Both Congress and NCP had promised a loan waiver in their election manifestoes.
A complete farm loan waiver in Maharashtra — one of the main poll promises of the ruling Shiv Sena, NCP and Congress alliance in the state, albeit made separately during the campaign — will cost the exchequer quite a bit. In order to make the farm sector completely debt free, the state government will have to effectively waive outstanding loans to the tune of Rs 1,31,578 crore.
Both Congress and NCP had promised a loan waiver in their election manifestoes. The erstwhile BJP-led alliance government, in which the Shiv Sena was an alliance partner, had implemented a loan waiver in 2017. It is estimated that outstanding loans worth Rs 19,000 crore of nearly 50 lakh farmers was waived by the state government.
Since 2017, both off-take and repayment of farm credit has been slow in Maharashtra. Bankers have blamed this on wilful default by farmers, who are relying on promises of loan waivers made by political parties on the campaign trail.
Data maintained by the State Level Bankers’ Committee — the apex body of bankers which oversees lending in the state — showed that till September 2019, financial institutions had disbursed Rs 39,591 crore of the targeted Rs 87,322 crore of crop loan — 44 per cent of the target. This was a slight dip from last fiscal year, when banks had disbursed Rs 37,921 crore of Rs 85,464 crore — 45 per cent of the target.
At the start of their crop cycle, farmers avail loans from banks at 7 per cent interest to help them purchase raw material and inputs such as seeds, fertilizers etc. Timely repayment of the loan entails farmers a subvention of 3 per cent by central (2 per cent) and state (1 per cent) governments, bringing down the interest rate to 4 per cent at the farmers’ end.
But in the last few years, low uptake of farm credit has been accompanied by a rise in outstanding loans, which has now crossed Rs 1.31 lakh crore. Some of these loans are even older than 2001, said officers of the state cooperative department. While announcing the loan waiver the last time, the government had made it conditional by issuing multiple guidelines. Farmers who paid income tax or were employed with government offices, or were elected representatives, were excluded from the scheme. Claims were filed online and banks disbursed the money after verifying them with the database maintained by the government.
The bigger challenge before the government would be raising enough capital to finance the scheme. The precarious condition of the state’s exchequer may make implementation of the scheme difficult, said sources.
However, farm activist Kishore Tiwari referred to Chief Minister Uddhav Thackeray’s maiden speech at the floor of the state Assembly and said the government has plans to help farmers pay off their loans. “Meetings have started and the scheme will be announced at the right time,” he said.