Punjab Cabinet, which met on Wednesday, has finally approved to notify the loan waiver scheme for the state’s farmers. It is too little and too late, given the fact that the Congress had come to power in the state by promising complete loan waiver to farmers. The state is faced with serious funds crunch. The government does not seem to be keen at all about exploring new avenues to generate revenues. It is basking in luxuries of power, leaving the farmers and others in the lurch. There is agitation almost every day. In fact, Punjab is fast becoming a state synonymous with agitations. Farmers of the state are faced with the worst kind of situations. Most of them are reeling under heavy debt, but the relief they have got is nomimal. It will not have any significant impact on their financial health. The amount eligible for debt relief shall comprise outstanding liability under crop loan including principal and interest as on March 31, 2017. The interest outstanding from April 1, 2017 till date of notification shall be additional.
Where in lies the real challenge? As per the data collected from the State Level Bankers Committee (SLBC), there are about 20.22 lakh bank accounts with an outstanding crop loan of Rs 59,621 crore as on March 31, 2017. Besides taking over the entire eligible loan amount of the farmers covered by the debt waiver scheme, the government has also decided to take over the outstanding interest of farmers from April 1, 2017 till the date of notification, which will lead to an additional Rs 400 crore benefit to the farmers. Thus, total loan waiver comes to around Rs 20,000 crore, while the outstanding crop loan has been pegged at Rs 59,621 crore as on March 31, 2017. The government intends to defray the entire loan amount the banks in a phased manner, except for the cooperative credit institutions.
Needless to say the state’s agriculture scenario is quite dismal and facing a crisis both in terms of its economic and environmental sustainability. The increasing costs of inputs coupled with marginal increase in minimum support price have contributed to squeezing the margins of the farmers. As per studies carried out by the Punjab State Farmers’ Commission and Punjabi University, Patiala, the debt per household which was about Rs 1.79 lakh in 2005-06, had increased to Rs 4.74 lakh in 2014-15, and continues to be mounting.
It remains to be seen if the government is able to generate funds to refund loan amount to banks, mostly public sector undertakings, in a timebound manner. The crop loan waiver scheme, based on the recommendations of an expert group headed by eminent economist Dr T Haque, is exptected to directly benefit nearly 10.25 lakh farmers across the state. Chief Minister Captain Amarinder Singh had in June announced waiver of the entire crop loans up to Rs 2 lakh of all small and marginal farmers up to 5 acres of land and a relief of Rs 2 lakh to the remaining marginal farmers irrespective of the amount of loan. The committee, however, did not throw any light on how the government should go about generating revenues. It was certainly not the mandate for the panel, but recommending loan waiver without showing ways to generate funds is like putting the cart before the horse.
The notification envisages that in case of marginal farmer, with less than 2.5 acres of land, the entire eligible amount of those farmers who have total outstanding crop loan liability up to Rs 2 lakh shall be provided as debt relief and in case of eligible amount of more than Rs 2 lakh, only Rs 2 lakh shall be provided as debt relief. In case of small famers with 2.5 acres of land to less than 5 acre, the entire eligible amount of those farmers who have total outstanding crop loan liability upto Rs 2 lakh shall be provided as a debt relief. The debt waiver scheme would cover crop loan disbursed to farmers in the state by scheduled commercial banks, cooperative credit institutions including urban cooperative banks and regional rural banks, collectively called as the ‘lending institutions.’ The fiscal condition of co-operative banks is itself not so sound. Therefore, they will be in for more troubles if the government fails to return their money on time. In that case, they will even be short of working capital.
In the case of a farmer who has taken loans from two separate lending institutions, the first priority shall be given to the co-operative institutions and second to the public sector banks and third to the commercial banks in that order. It is estimated that about 10.25 lakh farmers will be provided debt relief under this scheme. For this purpose, bank branch wise lists of eligible small and marginal farmers shall be prepared under the supervision of the Deputy Commissioner of the concerned district. The funds shall be provided to the DCs and each farmer shall be issued a debt relief certificate by the concerned bank branch after crediting the relief amount in his account. In case of multiple accounts, a total waiver upto Rs 2 lakh shall be provided as per eligibility with the priority being given to co-operative institutions, public sector banks and private banks in the same order. There is a need to further finetune the loan waiver disbursal system.
(The writer is Director, Centre for Economic Policy Research, Chandigarh. Views are his personal)