Maharashtra govt planning to use direct transfers to farmers' accounts for loan waiver

Faced with rising demands for waivers of agricultural loans, the Maharashtra government is planning to go in for direct benefit transfers (DBT) of grants into the accounts of farmers instead of paying banks for write-offs. This, the state government feels, will enable farmers to meet their short-term credit needs and partly repay some of their outstanding loans.

Chief minister Devendra Fadnavis said farmers have outstanding borrowings of Rs 30,500 crore with banks and the state government will seek central aid for these loan write offs. The ruling Shiv Sena has joined hands with Congress and NCP in the Opposition to paralyse the Maharashtra legislature during the Budget Session seeking crop loan waivers.

However, government sources admitted that a complete loan waiver would affect the repayment culture and burden the already cash-strapped exchequer, which also has to deal with the increased Rs 21,500 crore annual outgo due to the implementation of the 7th Pay Commission recommendations.

It will also leave the state government with less funds for investment in the agriculture sector. The state is apprehensive of the traditional system of loan waivers wherein banks, including the financial institutions in the co-operative sector which are controlled by the Congress and NCP are compensated, will directly benefit farmers.

Finance minister Sudhir Mungantiwar, who will present the state's budget on Saturday, said they were considering various options including transfer of cash doles into the accounts of individual farmers as grants on lines of the decision to channelise benefits for 74 schemes through this route. The state is collecting data on the landholdings of farmers, whether they are dry land or irrigated and the type of crops grown before a decision is taken on granting any relief to them.

Maharashtra has 1.36 crore landholding farmers who have taken loans of Rs 1.14 lakh crore, which includes Rs 63,000 crore agricultural debt. Of this, 31.57 lakh farmers owe Rs 30,500 crore as outstanding loans to banks. Of the estimated 11.97 crore population in the state, agriculture provides direct and indirect employment to 2.60 crore.

"The government supports loan waivers for farmers but has opinions on when and how it is to be done," said Fadnavis, who was speaking in the state legislative assembly on Wednesday, while blaming the Congress and NCP for the state of the agricultural economy.

Fadnavis added that after the erstwhile Congress-led government waived off around Rs 71,000 crore worth agricultural loans in 2008, the state had seen around 16,000 farmer suicides in the next five years despite this. He pointed to a central government report which said that farmers whose loans had been waived off found themselves indebted in a year.

Fadnavis claimed loan waivers would only help the co-operative banks in Maharashtra which are controlled by the Congress and NCP.

Mungantiwar said they were taking measures like increasing irrigation coverage, providing soil health cards, power connections for agricultural pumps and boosting credit supply, processing and marketing facilities and improving technology access to ensure that farmers could boost their income and were not indebted. He added that the farm sector had seen positive growth after four years of negative growth and stressed that instead of just announcing loan waivers, the focus needed to be on income generation for agriculturists.

“All farmers need equal treatment. Why shouldn't loan waivers be extended to those who repay loans?” questioned Mungantiwar, adding that the decision needed to be “scientific and sensitive and shorn of injustice".