New Delhi: The P. Chidambaram-led finance ministry’s decision to ignore recommendations, made both internally and by two parliamentary committees, to provide incentives to those farmers who have been prompt in repaying loans, is coming home to roost.
This is because many of these farmers are now saying that the Congress-led United Progressive Alliance, or UPA, has ignored their good behaviour and instead chosen to only favour defaulters instead.
Mint reporters tracking the roll-out of the farm loan waiver package, which was to officially wrap up on 30 June, are all hearing similar complaints from rural India.
This ought to be especially worrying for the Congress party and its allies since the government had hoped to gain serious political mileage once the Rs71,680 crore loan waiver package was rolled out to farmers.
The debt relief package, which is expected to benefit 43 million farmers, was described by Prime Minister Manmohan Singh in a March parliamentary debate as “an income transfer on an unparalleled scale”.
A government official closely associated with the programme who didn’t want to be identified, said that the agriculture ministry had lobbied for a special provision to those farmers who had not defaulted on their debt service obligations.
“The ministry had suggested that interest on new loans taken by farmers who had been regular in past payments be waived for the next three years. But, it seems that this did not suit finance ministry,” the official said.
Similarly, two parliamentary committees, the standing committee on agriculture and the standing committee of the Lok Sabha on finance, too had unsuccessfully argued back in April for incentives for prudent behaviour.
The aim of creating standing committees of parliamentarians is to provide guidance for broad policy formulations.
The finance ministry, however, chose to limit the debt waiver package to farmers who had failed to repay loans, subject to conditions.
According to a senior government official who was a part of the exercise, the primary aim of the scheme was to provide debt relief to farmers and extending benefits to others did not fit in.
Bankers said a farmer on the default list could become eligible for a fresh loan only after a waiver.
Consider Baba Kothiram Bange and Ramchandra Kothiram Bange, two brothers in Thane Gaon in Vidarbha, who are not on talking terms these past few weeks.
First, they had to break their 16-acre plot into four pieces of 4-acre each and distribute it in the family to help get a subsidy on fertilizers. And now, one of the brothers, Ramchandra, who defaulted on the loan last year, got the waiver but not Baba, who has been servicing his loan regularly.
“He (finance minister Chidambaram) could have given a 5% interest subsidy to everybody,” said B. Murugan, a taxi driver in Sivaganga in southern Tamil Nadu, after he found out the agricultural jewel loan he had taken would not be waived.
Sivaganga is the Lok Sabha constituency that elected Chidambaram in 2004.
Other than creating social problems, not incentivizing farmers who service their loans regularly would have an adverse impact on credit culture in agricultural lending, bankers said.
Vidhya Sivaramakrishnan in Sivaganga and Mehak Kasbekar in Amravati contributed to this story.