What’s in the news?

• A study conducted by State Bank of India’s researchers has revealed that only about half of the intended beneficiaries of farm loan waivers announced by nine States since 2014, have actually received debt write-offs.
• As of March 2022, the poorest implementation of farm loan waiver schemes in terms of proportion of eligible farmers who had received the announced benefits, were in Telangana (5%), Madhya Pradesh (12%), Jharkhand (13%), Punjab (24%), Karnataka (38%) and Uttar Pradesh (52%).
• By contrast, farm loan waivers implemented by Chhattisgarh in 2018 and Maharashtra in 2020, were received by 100% and 91% of the eligible farmers, respectively. A similar waiver announced by Maharashtra in 2017 worth ₹34,000 crore for 67 lakh farmers, has been implemented for 68% of beneficiaries.
• The SBI study was based on outcomes of ten farm loan write-offs worth about ₹2.53 lakh crore announced by nine States, starting with Andhra Pradesh and Telangana in 2014. As many as 92% of Andhra Pradesh’s 42 lakh farmers eligible for loan waivers had benefited, while the number was a mere 5% for Telangana.
• The study noted that despite much hype and political patronage, farm loan waivers by States have failed to bring respite to intended subjects, sabotaging credit discipline in select geographies and making Banks and financial institutions wary of further lending.

Possible reasons

• The report identified rejection of farmers’ claims by State Governments, limited or low fiscal space to meet promises, and change in Governments in subsequent years, as the possible reasons for the low implementation rate of these loan waivers, whose frequency and scale have seen an unprecedented surge in the past eight years.
• Apart from benefits not reaching the targeted farmers, the report also flagged concerns about whether they actually help farmers in genuine distress.
• The report concluded that loan waivers destroy the credit culture which may harm the farmers’ interest in the medium to long term and also squeeze the fiscal space of governments to increase productive investment in agriculture infrastructure.

Reference:

1. https://www.thehindu.com/business/agri-business/only-50-farmers-benefited-from-farm-loan-waivers-finds-study/article65651127.ece