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Devendra Fadnavis writes off Rs 34,000 cr farm loans

Move to benefit 89 lakh farmers, 100% repayment waiver for loans up to Rs 15L

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CM Devendra Fadanvis announces farm loan waiver at a press conference in Mumbai on Saturday
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Amidst the ongoing sowing operation, Maharashtra Chief Minister Devendra Fadnavis on Saturday announced the promised crop loan waiver worth Rs 34,000 crore for 89 lakh farmers in the state, with 100 per cent repayment exemption for loans of up to Rs 1.5 lakh.

The waiver, which Fadnavis described as "historic and unprecedented" is expected to help all debt-ridden farmers, particularly small and marginal ones. Mid-term loans of farmers who have rescheduled repayment will also be waived, Fadnavis announced.

The decision, which was cleared by the state cabinet after holding discussions with various political parties and farmers' organisations, will bring back 40 lakh farmers into the institutional credit stream, making them eligible for fresh loans.

However, farmers paying income tax, all MPs, legislators, central and state government employees, except class IV category, won't be eligible for the loan waiver.

Fadnavis said the government will tie up with banks to work out instalment schemes for loan repayment. To incentivise timely repayments, the government will pay subsidy of 25 per cent or up to Rs 25,000 to farmers who are regular with their payments.

The cut-off date for eligibility will be June 30, 2016 and not June 30, 2017, as demanded by various farmers' organizations.

However, the loan waiver is expected to take a toll on the state's finances, coming at a time when the public debt is expected to cross Rs 4 lakh crore. It is estimated that the write-off will lead to a 1.5 per cent jump in the fiscal deficit by the end of 2017-18.

Fadnavis insisted that the waiver will be implemented without compromising fiscal discipline, and hinted that some development schemes could face spending cuts to generate funds for the waiver. However, investment in agriculture will continue to rise so that farmers don't fall into a debt trap again, he said.

At Rs 34,000 crore, Maharashtra's waiver scheme is the largest among states that have announced similar write-offs, followed by Andhra Pradesh at Rs 20,000 crore. Incidentally, the state's agricultural household debt is the lowest among its peers at Rs 54,000 crore.

As for the implementation of the MS Swaminathan Commission report on remunerative prices for agricultural produce, Fadnavis said the government will seek the Centre's intervention.

Analysis

The state government’s decision is expected to pacify the farmers who have been up in arms over the past few months seeking loan waiver and other concessions.
The govt faces an uphill task in maintaining fiscal discipline following the loan waiver. It will need to explore newer avenues of generating funds.

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