State can’t afford to waive off farm loans, say experts
The main problem is that there is no focused attempt to pull out farmers from the crisis and they have been pushed deeper into debt...
The Rajasthan government, which is in a bad financial shape after bailing out power discoms in the past two years, cannot afford to waive off farm loan, experts have said. With total loans given to farmers exceeding ₹67,000 crore, any move to waive off even a part of the loan will lead to a spurt in fiscal deficit.
“Loan waiver will be a difficult exercise for all the states but particularly so for Rajasthan as our external borrowings have far exceeded the limits. If the government does give a loan waiver, we can then expect a cut down in the welfare schemes,” economist and former member of PM’s economic advisory council, VS Vyas, told HT.
Rajasthan’s fiscal deficit in 2016-17 was ₹23,014 crore, which is 3.9% of GDP. The state government released a sum of ₹40,050 crore to the discoms during 2015-16 and if this is taken into account the fiscal deficit of state rises to ₹63,070 crore (9.36% of GSDP). In 2016-17, the state government released a further ₹20,000 crore to the discoms.
A CAG report on state finances tabled in the assembly this year stated that the state government failed to contain fiscal deficit within 3% of gross state domestic product (GSDP) at the end of 2015-16 as laid down in the Fiscal Responsibility and Budgetary Management (FRBM) Act.
Experts said that burden of farm loan waiver, which is a short-term measure, should fall on the Centre which should also announce a hike in MSP.
“It is the duty of the Union government to bail out farmers in this hour of crisis, but it is passing the burden onto the state. The chief minister should write to the Centre urging it to release the funds. When the Centre can write off loans of the corporate sector, it can do the same for the agriculture sector,” agriculture expert Devinder Sharma told HT.
“The government has failed to implement its promise of providing 50% profit over the cost of production to farmers and on top of it has discouraged states from announcing the bonus,” he said.
Two farmers organisation, Kisan Mahapanchayat and All India Kisan Sabha, are demanding loan waiver in Rajasthan and the Congress has also come out in their support. While the state unit of Bharatiya Kisan Sangh (BKS) is not asking for loan waiver, it wants the state government to ensure that the produce is bought at MSP.
Sharma said that the state government can take limited measures, but the union government alone can initiate structural reforms needed in the agriculture sector.