Since 2014, States Have Budgeted Only 63% of Total Farm Loan Waivers Promised

Among the ten states that had pledged to waive farm loans over the last five years, only Chhattisgarh and Tamil Nadu have delivered on the promise.

New Delhi: Since 2014, ten states have promised to waive loans of farmers to the tune of Rs 2,36,460 crore. But they have only budgeted Rs 1,49,790 crore, or 63%, of the total amount promised to be waived, according to data provided by the Reserve Bank of India in a recent report.

This total budgeted amount also included amounts provided in the budgets that were laid out in the 2019-20 budgets – and which would have, in all likelihood, not yet been used in their entirety towards waiving off loans.

If these are not accounted for, the amount that has been provided for waivers till 2018-19 is only Rs 1,12,890 crore, or 47% of the total amount promised.

Also read: Farmers’ Crisis: Are Loan Waivers, MSP Hikes, Assured Income the Solutions?

Since these amounts reflect the amount of money that a state has set aside and not actually spent, this is the maximum amount of loan waivers implemented. In other words, it is quite probable that the total amount of loans actually waived are lower than the amount budgeted.

For instance, in February this year, while presenting the budget for 2019-20, the then chief minister of Karnataka H.D. Kumaraswamy admitted that the state had not spent the total amount allocated for loan waivers. Till then, the state had allocated Rs 15,880 crore for loan waivers but only released Rs 5,450 crore as per the chief minister’s own admission.

Prior to the assembly elections in five states in December 2018, the Congress had promised that it would waive farm loans within ten days if voted to power. It was voted to power in Madhya Pradesh, Rajasthan and Chhattisgarh.

Except for Chhattisgarh, the party has not come good on its promise.

For Rajasthan and Madhya Pradesh, it had promised loan waivers amounting to a total of Rs 54,500 crore. But, so far it has only budgeted Rs 19,240 crore, or 35% of the amount promised to be waived, in these two states.

Last year, when newly-anointed chief minister of Madhya Pradesh Kamal Nath signed a file for waiving farm loans, Congress president Rahul Gandhi declared jubilantly, “1 done. 2 to go,” implying that the loan waiver in Madhya Pradesh has been implemented and only Rajasthan and Chhattisgarh remain.

Also read: Rajasthan Budget Mum on Kisan Credit Card Loan Waiver, Hikes Cow Spending by 145%

However, the state has only budgeted Rs 13,000 crore of the Rs 36,500 crore of waivers promised, according to RBI data, in Madhya Pradesh. In Rajasthan, the Congress has only managed to provide for Rs 6,240 crore – 34% – of the Rs 18,000 crore waiver that had been promised. In Chhattisgarh, however, the Congress government has budgeted a little over Rs 9,000 crore, while it had promised to waive Rs 6,100 crore.

In Karnataka, the Congress and Janata Dal (Secular) coalition had promised a Rs 44,000 crore farm loan waiver in 2018. But, till the 2019-20 budget, only Rs 28,530 crore has been budgeted.

Now, even though the Congress and JD(s) alliance is no longer in power, the new BJP government has promised that the waiver scheme will continue.

In Punjab too, only Rs 7,620 crore of the Rs 10,000 crore that was supposed be waived has been provided for in state budgets.

The situation is not much better in states ruled by the BJP, except the fact that their promises were made earlier than in Congress ruled states of Madhya Pradesh, Rajasthan and Chhattisgarh.

In perhaps the most high-profile loan waiver of all, which was promised before perhaps the most high-profile assembly election of all – in Uttar Pradesh – not much progress has been made since the first budget provision of 2017-18.

The BJP had promised a loan waiver, which was to cost the state exchequer Rs 36,360 crore, prior to the assembly elections in 2017 in UP. When it came to power, it budgeted Rs 21,100 crore in the 2017-18 budget, Rs 5,500 crore in the 2018-19 budget, and only Rs 600 crore in the 2019-20 budget.

So, a total of Rs 27,200 crore, or 74% of the amount promised, has been provisioned in three state budgets that have come after the BJP came to power in UP.

Also read: In Two Districts of UP, Loan Waiver Crisis Is Driving Farmers to End Lives

Maharashtra government also announced a waiver soon after it was announced in UP. The total amount to be waived was to be Rs 34,020 crore. But, till the 2019-20 budget, only Rs 25,480 crore, or 74%, has been provided for in the budgets.

States that had substantially more time to implement the loan waiver have also found the going difficult. In 2014, Andhra Pradesh and Telangana promised to waive Rs 24,000 crore and Rs 17,000 crore respectively. But, five years later, Andhra Pradesh has managed to budget only 53% of the amount promised to be waived, and Telangana has budgeted 84%.

Among the ten states that had pledged to waive farm loans over the last five years, only Chhattisgarh and Tamil Nadu have delivered on the promise.

Regardless, almost all states have, like Rahul Gandhi did, declared that they have fulfilled their promise barely by making an announcement to the effect without the underlying budgetary provisions that are necessary because at the end of the day if farmers are not going to repay the money owed to banks, the states will have to.

It is quite probable that the total amount of loans actually waived are lower than the amount budgeted. Photo: Reuters

Underlying reasons

Some of the reasons for the farm loan waivers not being implemented as promised have to do with procedural issues. For one, all states put conditions on who will be eligible for the waiver and they have limited capacity to carry out the exercise of verification based on the conditions, thereby delaying the process and also, at times, leading to the exclusion of those who might actually be eligible.

Then, there are frequent mismatches between the bank details, Aadhaar details and land records submitted by farmers to be eligible for waiver with the details that various departments and banks within a state would have. Also, cooperative banks often do not, or delay, providing the state with the necessary details of farmers as required by the state.

Finally, perhaps most importantly, the states do not have the fiscal space – given India’s weak fiscal federalism – to implement the loan waivers as they are promised leading up to elections.

For instance, at the time the Congress promised the loan waiver, Madhya Pradesh had provisioned a total budget expenditure of Rs 1,90,736 crore. For the loan waiver, totalling Rs 36,500 crore, to be implemented within 10 days, as the party had promised, almost 20% of the state’s yearly budget would have had to be spent on this alone.

The state’s budgeted expenditure on agriculture in 2018-19 was Rs 37,000 crore. Currently, states have little ability to drastically increase their revenues. So, in order to implement the loan waiver within ten days, Madhya Pradesh would have had to either double its spending on agriculture by cutting in half its spending under other heads, or cut down, almost entirely, its spending on other aspects of agriculture to accommodate the loan waiver – a trade off any responsible government is unlikely to make.