Hyderabad: The long delay in implementation of a loan waiver scheme by the Congress government has put the farmers on tenterhooks in Telangana.
With sowing of kharif crops set to begin, farmers are clueless about the quantum of relief they can expect from government and if they should take fresh loans in the meantime.
At a public meeting addressed by Congress leader Rahul Gandhi in Warangal on May 6, 2022, the party had declared that they would write off farmer loans up to Rs two lakh as soon as they came to power. The declaration was incorporated in the Congress manifesto for Assembly elections in November last year.
After nearly seven months in power, chief minister A. Revanth Reddy, on Friday (June 28), told media persons in an informal interaction at New Delhi that the government will release guidelines for the scheme in the next few days.
At another press conference in Hyderabad, following a meeting with his Cabinet on June 21, Reddy justified the delay by stating that his government had only about 100 working days, with time lost due to the model code of conduct ahead of the Lok Sabha elections. Nonetheless, the government was committed to cancellation of loans in one go by August 15, as announced earlier, he said.
He recalled that the previous Bharat Rashtra Samithi (BRS) regime, which also promised the scheme in the 2014 elections and took nine years to write off loans, that too only partially, across its two terms up to 2023. It waived only Rs one lakh per farmer, aggregating to Rs 28,000 crore in four instalments after many postponements and with the interest component of the loans excluded.
The Congress, on the other hand, had taken the responsibility for waiving loans borrowed during the BRS regime, which remained uncleared from December 2018 to 2023. These loans amount to nearly Rs 31,000 crore.
Even as farmers are anxiously awaiting guidelines for the eligibility criteria for waivers, Reddy has made it clear that those who took loans mortgaging gold will not be eligible. Only loans meeting the guidelines of the State Level Bankers Committee will be considered. The loans will be evaluated on the basis of pattadar passbooks held by farmers.
Reddy’s terms are viewed in the backdrop of several speculations that the guidelines will be framed on the basis of Pradhan Mantri Kisan Samman Nidhi Yojana of the Union government and that doctors, lawyers, chartered accountants and other professionals beside income-tax payers will be ineligible.
Due to lack of clarity on what the government intends to do, a progressive farmer of Mahbubabad, S. Jaipal Reddy, said the agricultural operations in villages have come to a standstill. The farmers have stopped the repayment of old loans and are not borrowing fresh ones to start their work. They are not sure whether the government will waive Rs two lakh in one go or in various slabs.
The government’s loan waiver scheme comes at a time when it is carefully managing its expenditures due to the poor fiscal health inherited from the previous administration. The Reddy government has explored various channels to raise the funds required to fulfil its commitment. Apart from commercial banks, the government has also negotiated with the National Cooperative Development Corporation, which funded the BRS government’s sheep distribution scheme. The scheme was hit by a fraud after the first instalment worth Rs 4,500 crore was released. Consequently, the second instalment was cancelled.
Sources said that NCDC funding could also hit a roadblock for political reasons if the Bharatiya Janata Party-led Union government was unwilling to help the ruling Congress in Telangana.
Similar demands from other states
The announcement of crop loan waiver by Telangana has triggered similar demands from farmers in Punjab and Maharashtra. The new BJP government in Odisha also announced a package of waivers for farmers for loans taken prior to 2021-22.
The convenor of Farmers Forum of Punjab, Sarvan Singh Pandher, who is leading the farmers protests in the state, has demanded that the total agricultural debt of the country be written off. This would amount to nearly Rs 18.5 lakh crore.
Bankers at a meeting organised by a financial and business portal last week expressed concern that loan waivers hurt lenders’ asset quality and credit cycles. It hits the credit culture of a wider section in other states where the borrowers otherwise repaid borrowings promptly. They also start hoping for a waiver of their liability. Loan waivers have a clear political motive, they incentivised farmers to default.
Karthik Srinivasan, group head of financial sector ratings at Investment Information and Credit Rating Agency (ICRA), said that farm loan waivers were a nightmare to banks.
Prabhakaran. S, business head of agriculture and priority sector lending at RBL Bank, said farmers delay payments knowing that governments will announce loan waiver around elections.
The Telangana Jana Samiti president, M. Kodandaram, said that loan waivers were the best option to aid distressed farmers, as institutional lending met only 25% of the demand in Telangana. The low lending is attributed to poor repayment by farmers, banks analysing borrowers’ credit worthiness and a crisis in the cooperative sector. There is no other way to replenish capital in the agriculture sector, he added.
