Farm-loan write-offs can offer temporary relief. Governments must look for long-term measures
Union Minister for Finance Arun Jaitley has done well to distance the Centre from helping States to grant farm-loan waivers. This is for two reasons. First, it is expected that the respective States have done their calculations before having announced such relief to the farmers, and have identified ways to realise the resources the write-offs demand. States must also explore other options to tackle the problem of rising debts of farmers. Second, there exists no Central scheme to fund the States. As it is, the Union Government is already burdened with rising non-performing assets and an economy that is crying for higher public spending. Moreover, the Government has already taken steps to tackle rural distress. In a major push to market reforms in agriculture, it had this year, during the Budget Session, increased funding for crop insurance; set a higher target for farm credit and also raised budgets for this sector by 24 per cent. The Government had also improvised on the existing schemes like the Pradhan Mantri Krishi Sinchayee Yojana and the Pradhan Mantri Fasal Bima Yojan. Additionally, a new scheme, the e-National Agriculture Market, was launched to link 585 regulated agricultural markets and ensure better prices to farmers.
The system of States granting loans is in fact a double-edged sword that has continued for ages and also been used as a political tool for vote-bank purposes. No single person or Government must be blamed for the current situation. With one State granting loan waiver, the trend spreads to other agriculture-heavy States with similar demands. In the present case itself, farmers’ protest in Maharashtra and Madhya Pradesh were triggered by the Uttar Pradesh Government's decision to grant loan waivers to farmers. Similar demands have now emerged from States such as Punjab, Rajasthan Haryana and Tamil Nadu. But the situations are completely different from the times when climactic vagaries led the farmers to a vulnerable situation. The spotlight of the present-day protests are the demands for loan-waivers. Arguably, this year has been a bumper crop season. The problem, therefore, is not much with rural distress but with the minimum support prices (MSP) of the crops. And successive Governments have failed to bring the prices of crops and vegetables and also to implement reform measures as recommended by agricultural scientist MS Swaminathan, who envisaged a MSP that pays farmers 50 per cent more than the input cost, which would leave a fair degree of profit with the farmer. In 2008 itself, the UPA Government had given a loan waiver of Rs 72,000 crore. If indeed loan-waiver was the solution, the present situation should not have arisen at all. Farm-loan waiver can be a solution, but to an immediate problem. More so, even the States function under certain budgetary allocations and, like the Union Government, they are already strained. The best recourse for them is to look for long-term measures. The focus must be on infrastructural developments and price stabilisation measures. Efforts must also be made to make the farm produce more profitable for farmers and at the same time affordable to the consumers.