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Farm loan waiver: timed for maximum credit

Farm loan waiver: timed for maximum credit
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First Published: Mon, Mar 09 2009. 10 18 PM IST

Updated: Mon, Mar 09 2009. 10 18 PM IST
Elections are around the corner and it is time to take stock of the performance of various policies of the ruling United Progressive Alliance (UPA). Prominent among them is the massive farm loan waiver package it announced in last year’s budget.
It was timely not because it was needed badly by farmers under heavy debt burden, but because it was timed to coincide with the last budget of the UPA to get maximum credit—ignoring almost a decade of agrarian distress for short-term political gain.
Surely, some lives could have been saved if the scheme had been implemented immediately after the UPA took over. Nevertheless, there is no doubt that it was the need of the hour even though one might differ about the timing.
Although the scheme was closed on 30 June, the details are yet to come out, which is unlikely before the end of the current fiscal.
Therefore, it is difficult to evaluate the access and benefits of the programme across various categories of farmers and regions.
Debt burden: A file photo of farmers checking out their names in the loan waiver list at a State Bank of India branch in Uttar Pradesh. The waiver was the need of the hour even though one might differ about the timing. Harikrishna Katragadda / Mint
Fortunately, some broad details of its implementation are available. In response to a question by Communist Party of India (Marxist) MP (member of Parliament) Brinda Karat in Parliament, the government disclosed state-wise provisional figures on the number of beneficiaries and loan amounts waived in each state.
The provisional figures show 36.88 million farmers benefited from the scheme. Of this, 30.1 million were small and marginal farmers and the remaining 6.78 million were medium and large farmers. Total loan waived was Rs65,318 crore. These estimates are close to the initial projections made by the finance ministry.
However, the picture at the state-level is a mixed bag. The biggest beneficiary in amount waived was Andhra Pradesh (Rs11,353.71 crore) followed by Uttar Pradesh (Rs9,095.11 crore) and Maharashtra (Rs8,951.33 crore). These three account for 45% of the loans waived.
Andhra Pradesh has the highest number of beneficiaries (7.75 million), followed by Uttar Pradesh (5.42 million) and Maharashtra (4.25 million). Together, they account for 47.2% of all beneficiaries.
The large number was in line with expectations in Uttar Pradesh, given the large size of the state. Uttar Pradesh accounts for 19.2% of farmer households in India and its share in beneficiaries is 14.7%. On the other hand, Andhra Pradesh and Maharashtra, that account for 6.8% and 7.4% of farmer households in the country, account for 21% and 11%, respectively, of beneficiaries.
Compared with these, Bihar, Jharkhand, West Bengal and Chhattisgarh (states with low per capita agrarian income) together account for 21.9% ofthe farmer households, but account for only 12.4% of the beneficiaries.
The high number of beneficiaries in Andhra Pradesh and Maharashtra appear out of place. The situation assessment survey (SAS) of the National Sample Survey Organisation gives the most recent estimate of indebtedness of farmer households.
A comparison of SAS figures and the provisional estimates suggests that the total number of beneficiaries in Andhra Pradesh is much higher than the total number of (indebted) farmers estimated by SAS.
Compared with the indebted farmer households (44.3% of all farmer households in Andhra Pradesh reported themselves as indebted to institutional sources), the number of beneficiaries is two-and-a-half times. These numbers also look overestimated in Maharashtra, where the reported number of beneficiaries is almost twice that reported in SAS.
But these are not out of place and field reports had confirmed the high incidence of indebtedness in both these states. A large majority of reports and studies on these two states—which happen to be the hotbed of farmer suicides—have also attributed the high incidence of indebtedness as the primary factor for farmer suicides.
Going by these, the high number of beneficiaries and the amounts waived appear to justify the claims made by these studies.
Looking at it differently, these provisional estimates confirm the good network of institutional lending for most of the southern states. On the other hand, the poorer states have benefited little from the loan waiver scheme because of low penetration of the institutional credit network in these states.
Whether all this will translate into votes for the UPA will be known only after the elections. That will depend on which states benefited, which class of farmers benefited and which districts within the states benefited.
A full evaluation of the loan waiver scheme will have to wait till the break-up of beneficiaries—by district, land holding and amount waived off—is made public by the government.
Himanshu is assistant professor at Jawaharlal Nehru University and visiting fellow at Centre de Sciences Humaines, New Delhi. Farm Truths looks at issues in agriculture and runs on alternate Wednesdays. Respond to this column at farmtruths@livemint.com
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First Published: Mon, Mar 09 2009. 10 18 PM IST