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Congress’ Farm Loan Waiver in MP, A Reality Check

Farm loans of over 35 lakh farmers upto Rs. 2 lakh have been waived off which would be costing the state exchequer Rs. 35,000- 38,000 crore, but with MP’s rising debt it will not be a cakewalk for Congress.
farm loan waivers MP

Representational Image. | Image Courtesy: Money Control

Bhopal: The farm loan of more than 34 lakh farmers, up to Rs. 2 lakh, have been waived off by the new Chief Minister of Madhya Pradesh Kamal Nath soon after swearing-in on Monday, December 16.

According to the Madhya Pradesh Agricultural Department estimates, this waiver will benefit more than 34 lakh farmers and it will cost between Rs. 35,000 to 38,000 crore for the government exchequer.

The farm loan waiver order stated, “The Madhya Pradesh government is waiving off the farm loan of below Rs. 2 lakh of government registered farmers who have taken loan from national and co-operative banks till March 31, 2018.”

Farmers’ issue emerged as one the biggest poll issue in the Madhya Pradesh Assembly elections. According to the government reports, more than 18,000 farmers have committed suicide in last 15 years in the state due to farm debt. Besides, the state has also been an epicenter of farmers’ protest for last few years demanding actual minimum support price.

Also Read: Why BJP Lost Ground in Madhya Pradesh After 15 Years

In this situation, announcing farm loan waiver below Rs. 2 lakh was a game changer move played by the Congress to win the state. Congress President Rahul Gandhi had promised to waive of farm loan within 10 days of forming the government during the assembly elections campaign, setting aside the economics.  

Soon after the confirmation of forming the government in the state, Congress sent a team, comprising bureaucrats to visit Punjab and Maharashtra in order to understand the loan waivers declared by governments there last year.

Additionally, a four-member team from the Madhya Pradesh Agency for Promotion of Information Technology has also been sent to Chandigarh to understand the software and portal developed by the Punjab government in connection with loan waivers. A letter dated December 14 in this regard was issued by Rajesh Rajora, Principal Secretary, Department of Agriculture, Government of Madhya Pradesh. The letter stated, “The Government of Madhya Pradesh is starting the procedure of farm loan waiver as soon as possible and within the next 15 days, software will be developed in order to operationalise the portal. On this portal, the database of 50 lakh farmers will be uploaded by acquiring it from thousands of banks.”

What is the Reality behind the Waiver?

It is significant to note that Madhya Pradesh has a debt of Rs. 1.86 lakh crore and the move of farm loan waiver will cost between Rs. 35,000 to 38,000 crore on the government exchequer.

To know the reality of farm loan waiver in Madhya Pradesh, NewsClick talked to agriculture experts, farmer leaders and farmers.

Welcoming the government’s move of loan waiver, agriculture expert GS Kaushal said that the Congress delivered what it had promised in its manifesto but it’s not a permanent solution. “This farm loan waiver was overdue in Madhya Pradesh and it will give short-term relief to more than 35 lakh small farmers. But this is not a permanent solution, Congress should chalk out a plan to give the actual minimum support price of the crop, so, the governments don’t need to waive off farm loans every time.”

Also Read: Farmers’ Victory! MP and Chhattisgarh Announce Agri-Loan Waivers

When asked about the directives to waive off farm loan and what kind of strings the government can attach, he replied, “The government has asked banks not to take money from farmers whose loans are below Rs 2 lakh. Now, the matter is between government and banks.” He further said, “The farm loan waiver amount (Rs. 35,000 to 38,000 crore) is huge. So, the government is likely to pay the amount to banks on intervals.”

He later advised the state government to quash the Bhawantar Bhugtan Scheme, (launched in 2017 after Mandsaur farmers’ protest) which is only benefiting the businessmen.

Meanwhile, the farmers’ leader Yogendra Yadav and Jay Kisan Andolan convener Avik Shah have shown their concern over the written order. In an official press release, Yogendra Yadav said, “It is a welcome move but the Congress has promised the same sop in Punjab and Karnataka but till now nothing has been seen on the ground. So, we will not let our demands to rest until they materialise.”

Avik Shah said, “It is too early to say anything when the order is only on papers. It is a good sign that the farmers’ issue has been getting proper attention but we will continue to fight until the order turns into reality.”

Speaking with NewsClick, agriculture economist and former director of the central board of governors of the Reserve Bank of India based in Punjab, Sardara Singh Johl, said, “Congress promised the same in Punjab and CM Amarinder Singh promised to waive the loan of farmers within a period of 15 days after the formation of his government last year, but still nothing has happened. The Punjab government was already in a debt of Rs. 2.5 lakh crore and they promised to waive the farmers' loans, which was up to Rs. 87,000 crore.” Johl said Punjab’s government is now waiving the loans in intervals up to the amounts of Rs. 100-150 crore but this has led to problems like irregular salaries and pensions in the government sector.

“Similarly, MP is also under debt and they have promised to waive the loans worth of thousands of crores, how can they do so?” Johl asked.

Also Read: MP Polls: Congress, BJP Promise Moon, But Where is the Funding?

“There is no chance that banks will waive the loan. Such kind of promises are wrong and false in nature. Because of such promises, it becomes difficult for farmers to acquire loans in future. It spoils the credit culture and people just wait for the government to waive their loans. Farmers, everybody come to distress,” he added.

Talking to NewsClick, 58-year-old farmer, Hari Prasad, a resident of Sehore district, who had 3.5 acres of land said, "I had taken a farm loan of Rs. 1.5 lakh from Bank of India last year and was worried about its repayment. But the MP government's recent order came as a big relief and now I'm tension free."

Another farmer, Gorelal Patel of Sehore district who has 2 acres of land, said, "I had taken a loan of Rs. 50,000 from Bank of India but now I'm free of all debts."

War of words between Congress and BJP

The farm loan waiver move has kicked up a war of words between the Congress and Bharatiya Janata Party (BJP) in the state. Former leader of Opposition, Ajay Singh said, “This is a historical moment that the Congress has waived farm loan of more than 35 lakh farmers in one go, hours after coming to power.”

While former Finance Minister Jayant Maliya said, “The state government has only issued an order of loan waiver but there are no terms and condition. The picture will be clear once the government would frame the guidelines of loan waiver.”

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