After UP, Maharashtra & Punjab, Karnataka Announces Farm Loan Waiver

The Logical Indian Crew

June 21st, 2017

Courtesy: Times of India | Image Credit: Wikimedia, Hindustan Times

After Uttar Pradesh, Maharashtra and Punjab, Karnataka has now announced farm loan waivers.

On Wednesday, 21 June, the Karnataka government announced a crop loan waiver scheme that will cost the state over Rs 8,000 crore.

The scheme, announced in the state Assembly by Chief Minister Siddaramaiah, is expected to benefit 22,27,506 farmers and will involve a loan waiver of up to Rs 50,000 per farmer.

“Farmers are in distress. They have been demanding loan waiver. We have to respond to farmers, even though it will have an impact on state’s finances,” the Chief Minister was quoted by The Times of India as saying.

Reportedly, a total of 22,27,506 farmers have obtained loan of about Rs 10,736 crore from cooperative banks in the state.

“Centre will have to rescue other farmers in the state”

Siddaramaiah said that the government has decided to come to the rescue of 22,27,506 farmers with crop loans outstanding till Tuesday – that is, loans obtained from cooperative banks.

Siddaramaiah also said the centre will now have to come to the rescue of farmers by waiving the loan obtained by them from nationalised and grameen banks. He said the crop loan obtained by farmers from cooperative banks amounts to just 20% of the total loans. Meanwhile, 80% of the loans are from grameen, nationalised and others banks that come under the ambit of the central government.

However, in March this year, Finance Minister Arun Jaitley had ruled out on farm loan waivers by the centre, saying it was an issue left to the states. “This issue (loan waiver) has cropped up in several states. The centre has its policies for agriculture sector under which we provide interest subvention and other support. We will continue to give all that … If a state has its own resources and want to go ahead in that direction, it will have to find its resources. The situation where the Centre will help one state and not the others will not arise,” Jaitley said in the Rajya Sabha.


The latest in a string of states waiving off farm loans

This is not the first time a government has announced such a package nor will it be the last time. The Uttar Pradesh, Maharashtra and Punjab governments recently announced loan waiver packages for their farmers.

Before this year, there have been several instances of governments waiving farmers’ loans. A timeline of the same can be read here.

The politics of farm loan waivers is settled – they are populist measures that attract votes and goodwill. However, the economics of farm loan waivers is highly debated, with critics saying a lot of the money is mismanaged and such measures negatively affect credit discipline. An analysis of the economics of farm loan waivers can be read here.

A particular concern over farm loan waivers is that such measures elicit a chain reaction of similar demands in the agricultural sector and other sectors as well – either regularly or simultaneously. Indeed there have been calls for waiving off fishermen’s loans in Maharashtra and farmers’ loans in many parts of the country.

In fact, farmers across India have been appealing to the government for loan waivers in the wake of their heavy debts and continuing droughts in many parts of the country. What started with the Tamil Nadu farmers’ naked protests and skull marches, has led to six farmers being killed during protests in Madhya Pradesh and protesters spilling tankers of milk on the streets in Maharashtra.

Amidst the growing hostility, as many as 130 farmers’ associations came under a single banner on Friday and announced a countrywide agitation from July 6.

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