Loan Waiver

Yesterday Congress president, Rahul Gandhi made a statement, if  Congress party is voted to power in 2009 Lok Sabha Elections, his party would ensure a farm loan waiver across the country. Looks like he is again falling to Congress Party’s age old gimmics of  announcing and some time giving freebies to garner votes. This happened recently in Madhya Pradesh, Rajasthan and Chattisgarh assembly election, where they tried this trick. As soon as their CMs took the oaths they announced farm loan waiver. He further added that  ‘ We will not let PM sleep till he announces a loan waiver’

This remark by Rahul Gandhi came at a time when Congress is slightly on back foot after the supreme court negated its claim of corruption in Rafale deal, and Delhi High Court awarding life sentence to their leader Sajjan Kumar for his role and involvement in carnage of Sikhs after Indira Gandhi’s assassination in 1984.  So by this announcement he wants to build pressure on the Central Govt for farm loan waiver. I do not understand how centre can announce the loan waiver, when it is a state subject, why he is not asking other political parties who are heading the state govts at various states. He should also persuade leaders like Mamata Banerjee, MK Stalin of DMK and Anna DMK leaders, Kerala’s CPM govt and others non BJP govts. No he will not talk to them, because he knows that they will not listen to him. As all these CMs know that their coffers are empty to announce this scheme. Rahul Gandhi wants central govt to announce loan waiver scheme , so that all the states can ask the funds from the central govt to fulfil farmers’ loan waiver.

Problem is that the loan waiver was started by UP govt in Apr 2017, when BJP came back to power in UP. The total loan waivers announced by various states are as follows, with dates of announcement in bracket:

Chattisgarh (17 Dec 2018)-  Rs 6,100 Cr

Madhya Pradesh (17 Dec 2018)-Rs 35,000 Cr

Karnataka (5 Jul 2018)-  Rs 42,165 Cr

Rajasthan (12 Feb 2018)- Rs 8,500 Cr

Punjab (19 Jun 2017)- Rs 10,000 Cr

Maharashtra (11 Jun 2017)-Rs 34,022 Cr

Uttar Pradesh (4 Apr 2017)- Rs 36,359 Cr

Above all are totaling to Rs 1,72,146 Cr

Now can all these state govts tell how they are going to arrange these funds, as these loans are given by banks or other financial institution, and how they are going to write off these loans. Currently all the public sectors and private sector banks are reeling under the debts of the non recoverable amounts or nor non performing assets,, which are totalling to almost Rs 9,00,000  Cr, and  if banks have to write off all the farmers loans then they will collapse.

Ashok Gulati, Agriculture Chair Professor at the Indian Council for Research on International Economic Relations, said that “ The competitive populism to waive farm loans is nothing but race to bottom. The promise of debt relief is an atonement of political parties for ignoring the agricultural sector for long.” He further added that loan waivers not only create a moral hazard- which indirectly reward the defaulters, and these also helps rich farmers who also take loans. A loan waiver at national level may cost country Rs 7,00,000 Cr. Instead of loan waivers, the govt should think of some other scheme, by which farmers get relief.

I remember when last year Maharashtra govt announced the loan waiver, what Sharad Pawar (Nationalist Congress party President) said to farmers now old loan is waived off, go to bank and apply for fresh loan again. It seems that Congress and its allied parties are encouraging  these type of system, where you first give loans to farmers and then after few years waive off that loan. In this way there are so many rich farmers also get benefits. In India more than 70% political leaders from rural India have farming as their main profession, so all these types of political leaders also get benefits of loan waiver.

Why can’t some one look into the actual problems regarding loan repayment default by farmers, the actual problem may be that he is not getting the correct price for his crop. In this case main problem lies with APMCs or Mandies  to whom farmers sell their goods. All these are controlled by politicians and their middlemen, who fleece the farmers by giving them low price, and then they hoard some of the products by creating shortage in the market, which results in increase rate in retail market and they even controlled the whole sale and retail market also.

There should be some mechanism, where crop of farmers without going through so many middlemen reaches the consumer. I cite a example- in the area where I reside in Mumbai, recently when in the retail price of the onion in our area was Rs 30 per kg- once in a week near my colony a tempo generally comes, who brings the onions directly from the farmers or some times even farmer themselves bring non perishable vegetables like Onion and potato in their tempo. You will be surprised to know these people were selling onions at Rs 10 per kg in 5Kgs pack, now where is Rs 10 and where is Rs 30. Even at the price  of Rs 10 per kg these people must have covered their cost plus freight and profits. So you can imagine farmer may be getting Rs 1 or 2 per Kgs as profit but every middle men who is responsible to bring the same onion to the retail market must be making how much profit per kg and without even going through the process of farming?

In between when Maharashtra govt headed by BJP said that they want to abolish the system of APMCs and middlemen, then all these middlemen and people sitting in APMC went on strike. So presently the said matter is  in cold storage and it is status quo.

So Rahul Gandhi is following the traditions set us by his predecessors, who always waived the farmers loans, and thus deceiving the poor farmers, because in this way position and financial status of poor farmers will never improve, which these Congressmen want and surprisingly they are also forcing other political parties to follow this, and other parties also follow as this is vote catching gimmick. So indirectly poor farmer will always suffer, and these rich farmers who themselves are politicians will always prosper, and who is bothered about the health of nation’s economy.

Waiting for your feed backs/views/comments.

Anil Malik

Mumbai, India

19^th Dec 2018.