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Widening the scope of loan waiver

The detailed guidelines for the farmers’ loan waiver package expand the scope of the scheme announced in the budget. They also raise the cost to the government by Rs.11,680 crore. In his budget speech, the Finance Minister had estimated that some Rs.60,000 crore would be needed to fund the scheme. While he promised “liquidity” to the banks, he was silent on how they would find the money. Subsequently, it was clarified that the budget will meet the entire cost of the loan waiver over three years. Hence the additional expenditure — the government expects it to be pruned after a detailed audit — will also be met by the exchequer. The onus of implementing the scheme now shifts to the banks. The waiver benefit is now extended to borrowers engaged in activities such as poultry and dairy farming in rural areas. Certain categories of larger farmers in drought-prone areas will get more relief. Since the burden of debt is not merely on the land owner but also on tenant farmers and sharecroppers, these categories have been brought into the waiver scheme. In a sense, the expansion of the coverage was inevitable, given the political compulsions that come into play in implementing such schemes. Even after this, there are bound to be complaints from sections that have been left out.

Banks and other lenders have been asked to identify the borrowers who qualify for the waiver and display the list. A high-level committee comprising senior government and bank officials will oversee the implementation. The expanded scheme is expected to cover 3.69 crores of small and medium farmers and nearly 60 lakhs of “other farmers.” The follow-up measures required are also clear. The credit repayment culture in the rural areas will have to be rebuilt assiduously, once the waiver scheme is out of the way. The scheme by its very nature does very little to alleviate the farmers’ indebtedness to moneylenders and other non-institutional sources. Finally, the fiscal implications of the scheme cannot be brushed aside. With direct and indirect tax collections overshooting their budgetary targets for last year, the Finance Minister probably has some headroom to take on items previously not budgeted for. There is a further cushion as the budgeted fiscal deficit will be significantly below the Fiscal Responsibility and Budget Management Act limit. However, there are many other pressing demands on budgetary resources and the situation is going to be tight. Apart from the loan waiver, there is for instance the Pay Commission award to implement, besides of course the clamour for duty concessions to save the oil companies.

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