Centre will not fund farm loan waivers, says Jaitley

Most states’ fiscal health leaves little room for manoeuvre

Unionfinanceminister Arun Jaitley hinted on Monday that the central government will not help with money for farm loan waivers,underscoringamajoreconomicchallengeforMaharashtra, which promised to write off loans equaltonearly80%ofitsfiscaldeficit,andforatleastfourotherstates facing similar demands.

Maharashtra, Madhya Pradesh, Haryana, Rajasthan and Punjab have witnessed growing resentment in the agriculture sector where stagnant incomes have left millions with piling debt. The crisis has triggered violent protests recently, with a debt write-off a central demand in all the regions.

Protests in Madhya Pradesh left five people dead last week and cultivators in Maharashtra held a more than a week-long agitation that ended on Sunday only after the government agreed to waive off loans for 1.34 crore farmers.

There have also been rumblings in Haryana, Rajasthan and Punjab, weeks after Uttar Pradesh’s new government wrote off ₹35,500 crore in loans to small farmers. “States which want to go for these kind of schemes, will have to generate them from their own resources. Beyond that as the central government, I have nothing to say,” Jaitley said.

An HT analysis shows that if the governments agree to waive off loans, most states will almost double their fiscal deficit and be left with practically no money for welfare projects (see box).

“The waiver will translate into a cut in development spending by 30%”, said a Maharashtra finance department official.

Officials in UP say the loan waiver has led to pruning of allocations of all departments as the Centre was not willing to share the burden. In almost all major agrarian states, the loans of small farmers are close to 80% of the fiscal deficit last year.

The last big farm debt waiver came in 2009, when the UPA government waived ₹72,000 crore before the general election.

In MP the estimated loan waiver for small and marginal farmers with less than 2 hectare of land would cost roughly ₹30,000 crore, or 85% of the state’s agriculture budget.

In Rajasthan, which goes to polls late next year, farmers owe ₹67,500 crore to banks — double the state’s fiscal deficit.

Farm debt here is fast becoming a political issue, with CM Vasundhara Raje facing pressure from the Congress and the RSSaffiliated Bharatiya Kisan Sangh (BKS).

Haryana is also facing pressure from farm unions. They threatened on Monday that they will block national highways if their debt is not written off.