Move will help BJP in state, but leave finances in tatters
decision taken by the Devendra Fadnavis government on Saturday to waive off farm loans of ~34,000 crore is likely to have a serious impact on financial health of the state government but could yield political dividends to the ruling BJP.
The state government has decided to waive off loans of 40 lakh farmers with an upper limit of ~1.50 lakh and extend incentive to those who have been repaying their loans. It will be equivalent to 25% of the repaid loan with an upper limit of ~25,000. “This will cover 90% of farmers in the state,”said Fadnavis. It is the highest farm loan waiver announced by any state in India’s history, he added.
Farmers form a significant chunk of voters in the state and if a majority of them are happy with the waiver, it will be a huge political advantage for Fadnavis and BJP. Sources close to the CM say he was initially reluctant to take the decision since he was wary of the financial implications on the state. When the demand was first raised, he had pointed out how a waiver would not be a long-term solution to farmers’ problems.
He was also not sure about the timing. “Such decisions are always political and taken closer to elections like the Congress did ahead of 2004 general elections,”said a key BJP functionary.
But the Fadnavis government was forced to react as farmers’ outfits launched agitations and opposition parties as well as ally Shiv Sena started cornering it over the issue. “We did not want to be painted as a party that is not farmer-friendly. Further, we were alarmed when there were attempts to bring all farmers’ outfits together to intensify the protests,”the functionary said.
The decision has now taken away an effective political tool from the hands of the opposition as well as Shiv Sena. Opposition as well as some farmers’ outfits are not happy with certain conditions may even continue protests.
But that is not Fadnavis’ concern. He can handle the same politically. His problem will be the financial burden on state exchequer when the state government already has debt of over ~4 lakh crore on its head.
Fadnavis has admitted to HT that the waiver would put stress on the finances of the state for two years. It also means the state government will have less funds to spend on developmental work in the run-up to the elections. Finance Minister Sudhir Mungantiwar will have to do a tightrope walk while preparing the state’s next annual budget. The Goods and Services Tax has taken away his right to increase taxes at will.
In this background, the decision has now led to fresh speculations there could be mid-term assembly elections in the state.
“Such decisions are taken closer to the elections to take political advantage of the same,”said a senior BJP minister. “If the elections are held as scheduled in 2019, there would be several issues we will have to face as the ruling party. The political advantage we get because of the loan waiver may not matter much after two years. If there is a bad monsoon next year, there could be a fresh demand for loan waiver,” he opined.