Dharmendra Jore: How much will the loan waiver help farmers?

How much will the loan waiver help farmers

Serving bureaucrats seldom make public comments on political decisions taken by the government they work for. But a senior IAS officer, Rajgopal Devara, has come out in the open, albeit in his personal capacity, to analyse a farm loan write-off that was declared in two phases - firstly a restricted one with lot of eligibility conditions in place, and then a more liberal format on Saturday by Chief Minister Devendra Fadnavis.

Devara, who worked earlier as principal secretary of cooperation and marketing department, attributes the success of getting the government to yield, mainly to the unity of farmers and several other factors such as irresponsible statements that some senior leaders (BJP's state unit president Raosaheb Danve) made against distressed farmers and RBI governor's remark that agricultural loan waiver write-offs could lead to fiscal slippages and result in inflation spillovers.

The bureaucrat has blamed demonetisation for diverting farmers to private money lenders and commercial banks from the government-run credit system and thought that political agitations that preceded farmers' state-wide protest created an anti-government opinion.

Going further, Devara accused the state government of lethargy in handling the tur dal issue and trying to weaken the strike by dividing farmers. For the record, the tur dal fiasco did lay a foundation to a state-wide protest which was further fuelled by UP government's announcement of a loan waiver.

Many questions
I don't know whether Devara has breached service rules by expressing uncomfortable views that come with a disclaimer that his article, published in a Marathi daily on June 25, is his personal opinion. But such open debates call for answers to many questions that are raised by stakeholders - the farmers, policy makers, and the people who think that they suffer because of state largesse like loan waivers.

A pertinent question is: will there be no further demand for a farm loan write-off in future? The earlier write-off came a decade ago, and despite that sop farmers' suicides did not stop.

Gradually, the tragedy started hitting regions where farmer suicides were unheard of. As of now, all regions except Konkan are affected by farmers' deaths.

It seems that the demand for assistance is unlikely to cease. What farmers have been saying is now supported by National Accounts Statistics-2017 report which endorses that farming is not a profitable venture. It says that the output value is declining because of increased input cost. To simplify this, the farmers have been spending more on farming than what they get after selling their produce. The finding should further cement farmers' demand that the procurement prices of any agricultural commodity should be based on 'production cost plus 50 per cent' (as recommended by a panel of MS Swaminathan).

Responding to such demands, Fadnavis has repeatedly said that Maharashtra would benefit from this recommendation only if we increased our productivity. He has been assuring to spend even more on various schemes for increasing yield so that we compete with other farming states.

Enforce cuts elsewhere
If the government does not want the farmers to repeat their demand, say after every five or 10 years, what should it do to make farming a sustainable enterprise? The government has an explanation at hand; it says it spent Rs 12,901 cr in assisting distressed farmers in 2015-16 and a year before it had spent Rs 8,037 cr on similar schemes. The total amount spent in two years is more than half of what will be spent in waiving off loans of 90 lakh farmers (Rs 34,000 cr).

But will the government be able to spend more on making farming sustainable in such an 'expensive' scenario? The answer is a big 'no'. Instead, it will have to enforce a massive cut in other schemes, arrange for making more revenue by creating a path different from the GST regime which comes into force from July 1.

The state's revenue deficit was projected to improve to Rs 35,030 cr this year from last year's Rs 37,950 cr, but with extra load, the distress in treasury should increase manifold. In addition, the state's overall debt burden is expected to cross R4 lakh cr very soon. The 7th pay Commission should prove yet another mammoth financial burden in coming months.

Simply put, having catered to a large vote bank of farmers, CM Fadnavis now faces an even bigger challenge of meeting expectations of the remaining class of voters, notwithstanding elections - mid-term or full-term.

Dharmendra Jore is political editor, mid-day. He tweets @dharmendrajore Send your feedback to mailbag@mid-day.com