THE two major political parties in India, the Bharatiya Janata Party (BJP) and the Congress, are equally guilty of raising the issue of waiving farmer’s loans around election time.

Even smaller regional parties have for years promised farmers that their loans would be erased once the parties are voted to power. Unfortunately, once the political parties win, they soon forget their promises and most farmers continue sinking into deep debt, with many committing suicide.

Of course, besides making some noise about the suicides on the eve of elections, political parties ignore these disasters once they come to power. And continue to wish away the tragedies until it is time for the next round of elections.

This has been happening in India for decades and with parties that were in the opposition reaping the dividends of promising loan write-offs, both the BJP and the Congress have been indulging in this game.

Tragically, the majority of farmers in India are impoverished and do not usually enjoy the benefits of bank loans. It is the affluent farmers, many of who exercise their political muscle to get bank loans, who are the beneficiaries of these loan write-offs.

Many agriculture-rich states like Maharashtra and Punjab announce huge loan waivers for their farmers, but fail to stick to their commitments

For the poor farmers, the only hope is with the local moneylenders, who are generous in providing loans, but extort hefty interest rates that sometimes exceed 50 per cent per annum. They have their musclemen in place to coax the funds out of the poor farmers.

Last week’s victory for the Congress in three crucial states — Rajasthan, Madhya Pradesh and Chhattisgarh — which have been ruled by the BJP for quite some time, follows similar promises by its leaders, especially Rahul Gandhi, the president.

Mr Gandhi, along with many other party leaders, had over the past few weeks promised voters in the three crucial farm-dominated states that the party — on being voted to power — would ensure waiving of all farm loans within 10 days of oath taking.

Similarly, it had promised to raise the Minimum Support Price (MSP) for paddy from Rs2,100 a quintal to R2,500. Most state governments in India are unable to bear such heavy burdens of raising the MSPs, and many would not want to take such a decision when it is well known that the beneficiaries would only be the affluent farmers.

But some farming community leaders appear to have finally seen through the tricks that political parties play. Last week, Sudeesh Tikam, a leading farmer in Chhattisgarh warned the Congress — he had backed the party in the recent elections to the state assembly — that he would monitor its promise of waiving all farm loans.

He said he had decided to back the Congress after the local BJP administration refused his pleas for writing-off farm loans.

LAST month, thousands of farmers from all over India marched to Delhi, the national capital, protesting against the BJP-led government’s apathy towards their demands. The farmers were demanding a loan waiver, raising of the MSP for their produce and forcing traders to accept the new rates.

Farmer leaders are usually vocal with their demands and most political parties agree to meet their needs. The last two years, for instance, have seen several states across India announce loan waivers that now add up to almost Rs2 trillion.

With general elections due in April-May in 2019, many expect farmers to raise their demands further, hoping to encash on government largesse.

Of course, the National Democratic Alliance (NDA) government led by the BJP denies that it is succumbing to the farmer pressure.

Last week, Junior Agriculture Minister Parshottam Rupala informed the lower house of parliament — the Lok Sabha — that the government was not considering any loan waiver schemes, as the move would encourage defaulters, impact the credit culture and perpetuate demand for more waivers.

“Such waivers may impact the credit culture of a state by incentivising the defaulters even if they are in a position to repay the loan and thus create or amplify the moral hazard by discouraging those borrowers who have been regular in repaying their loans,” the minister told parliament. “Further, each waiver granted makes it even more difficult to reject any future similar demand.”

But BJP chief ministers such as Devendra Fadnavis, heading a cash-starved government in Maharashtra, had announced a loan waiver to nearly nine million farmers in the state last year, with the loan amounts adding up to a hefty Rs350 billion.

The state government’s total debts are touching the Rs4tr mark and politicians do not pursue the farmers — including the rich ones in the western parts of the state — to clear loans.

Many agriculture-rich states like Maharashtra and Punjab announce huge loan waivers for their farmers, but fail to stick to their commitments.

The Punjab government, now ruled by the Congress, for instance, had announced a loan waiver of Rs100bn, but has budgeted less than Rs6bn so far.

Even in the three major states that it won recently — Rajasthan, Madhya Pradesh and Chhattisgarh — and where it has promised to write-off farm loans within 10 days of coming to power, the Congress will face major challenges.

The three governments will have to spend more than Rs400bn to keep their promise of writing-off loans, but none of the state governments can afford that kind of write-off. And the BJP-ruled central government will never fund such moves.

The two main political parties will, however, continue to raise the pitch for writing-off farm loans, with general elections just round the corner.

In Odisha, which sees elections next year, the Congress has started promising farmers that all loans would be waived if it is voted to power.

There is speculation that the Narendra Modi government may also opt for a loan waiver scheme in the run-up to general elections, especially after its recent defeat in the three key states.

Published in Dawn, The Business and Finance Weekly, December 17th, 2018



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