Loan waivers help less than 10% of farmers in distress, says NITI Aayog member

Even as states like Maharashtra, Uttar Pradesh, Punjab and Karnataka announced farm loan waivers amounting to thousands of crores, only less than a tenth of those in distress will benefit from such packages, a key agriculture expert at the government’s policy think tank, NITI Aayog, has said.

Pitching for “targeted relief rather than blanket loan waivers”, Prof Ramesh Chand, member at the Aayog, told HT, “Some deserving people get excluded while non-deserving ones get the benefit.”

While supporting government intervention in farm distress, he said, “Some farmers are under great economic distress and they need relief. But providing targeted relief will have a much higher welfare impact.”

Explaining the rationale against loan waivers, Chand quoted National Sample Survey Office data from 2012-2013 to point out that only 18% of farmers take loans from institutional sources.

The latest data from the National Bank for Agriculture and Rural Development (NABARD) accessed by the Aayog puts repayment figure at 70%. “So, eventually, a loan waiver benefits around 5%-10% of farmers and not all of them are non-wilful defaulters.”

Data available with the think tank shows that 50% of those farmers who take loans do so from non-institutional sources like money lenders, paying higher rates of interest.

In parts of Haryana, Punjab and Uttar Pradesh, the rate of interest is often as high as three to four per cent per month and is believed to be the primary cause for farm debt traps.

The Aayog’s view assumes significance amid growing protests from farmers’ organisations demanding loan waivers and opposition parties supporting them. The think tank reports directly to its chairman, Prime Minister Narendra Modi, and its views shape the government’s policy.

Finance minister Arun Jaitley, presenting the Union Budget on February 1, had increased the total agricultural loan target by Rs1 lakh crore to Rs10 lakh crore for 2017-18.

While the state-owned banks have managed to meet stiff agricultural loan targets set by the government every year, the chunk of the low interest credit goes to the rich farmers.

“Waiving loan amounts can bring in short term relief but there has to be a full strategy in place to ensure that loans reach to them and their dependence on money lenders is minimised,” a senior public sector bank official, who did not wish to be identified, said.

About 40% of the total agricultural loan is directed towards Kharif (or monsoon) crops while the rest 60% is for the Rabi season.