Cong wants to revive scheme that CAG punched holes in

In order to help the country’s small and marginal farmers, the Congress has promised to bring a nationwide loan waiver scheme on the lines of its 2008-09 programme should the party be voted to power after the next Lok Sabha elections.

The programme of 2008-09 is the one that was found to be riddled with a lot of discrepancies and irregularities.

Moreover, experts say loan waivers themselves are not a long-term solution to the problems facing agriculture and are mostly a vote-catching proposition.

The Agriculture Debt Waiver and Debt Relief Scheme, announced by the Congress-led United Progressive Alliance (UPA) government in 2008, was estimated to bring benefits to around 38.8 million farmers in the form of either debt relief or debt waivers of ~650 billion in all (provisional figures).

The scheme was implemented by scheduled commercial banks, regional rural banks, cooperative credit institutions (including urban cooperative banks), and local area banks.

Under this programme, the “eligible amount” was waived for small and marginal farmers. In the case of other farmers, there was a one-time settlement scheme, which offered relief by way of a rebate of 25 per cent of the “eligible amount”, on condition that the farmer would pay the remaining 75 per cent. The scheme was hailed as one of the key reasons why the ruling coalition returned to power in 2009.

However, the programme later faced criticisms, with a Comptroller and Auditor General (CAG) report, tabled in Parliament in 2013, finding that almost 9 per cent out of the 80,299 accounts audited were not eligible for debt waiver or relief.

“Overall, the performance audit revealed that there were lapses or errors in 22.32 per cent of the 90,576 cases checked. This raised serious concern about the implementation of the scheme,” the CAG report said.

Former agriculture secretary Shiraz Hussain said loan waivers were not a long-term solution.

“The government will have to finance such waivers from its budgetary resources. The moot question is: Does the government have such resources? Most loan waivers have been announced by states with elections in mind, without even recognising whether it is needed or not,” Hussain said.

He said agriculture was doing well during UPA-1. Global prices were high and exports were booming, which was not the case thereafter, he said.

The CAG report found several instances of farmers taking loans for non-agricultural purposes or loans not meeting the eligibility conditions.

The report also pointed out that microfinance institutions were given benefits under the programme in violation of debt waiver guidelines, while banks claimed undue benefits like penal interest, legal charges, and miscellaneous charges from the government under the scheme.

The CAG team audited the records of 90,576 farmers at 715 branches of various banks in 25 states. The sample included 80,299 accounts of farmers who got the benefits and 9,334 accounts of those who were denied benefits.

When the report was tabled, the issue rocked Parliament, with the Opposition labelling the scheme as a big scam. The then finance minister, P Chidambaram, had assured action against banks involved in irregularities as well as ineligible recipients of the scheme.

Chidambaram had also directed the Reserve Bank of India and Nabard to identify errors in the execution of the scheme and take action against erring banks and ineligible beneficiaries.

In an intervention in the Rajya Sabha, the then prime minister, Manmohan Singh, too had promised “stringent” action against wrongdoers.

But the agriculture minister of the time, Sharad Pawar, had said there was no “misappropriation” of funds under the farm debt waiver scheme and sought a more comprehensive audit by the CAG. He had also slammed the sample size taken by the CAG as being too small.

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