Government instructed bankers to prevent diversion of crop loan waiver funds, warning of action against those depositing released fund in other accounts of farmers.
About Farm Loan Waiver
- Farm loans are either crop loans or investment loans taken from banks to buy inputs or agricultural equipment.
- Centre/State government can offer a waiver of penal or loan interest or a full waiver of outstanding farm loans.
Need for farm Loan Waiver
- Tackle agriculture distress caused by deteriorating soil/water quality, increasing input costs, low productivity, etc.
- Poor production due to natural calamities, poor monsoon etc. impacting loan repayment capability of farmers.
- Curb farmer’s suicide due to indebtedness e.g. Vidarbha region (Maharashtra).
Argument against farm waivers
- Fiscal strain e.g. Maharashtra government decision to waive off crop loans cost about Rs 45,000 crore (2020).
- It is a temporary relief and can lead to wilful default by farmers.
- Doesn’t address root cause such as low productivity, lack of formal credit etc.
- Poor implementation, e.g. SBI study (2022), only half of the beneficiaries of the nine farm loan waivers announced by State governments since 2014 have actually received write-offs.
Way forward
- Access to formal credit; Investment in infrastructural development; Enhancing crop insurance; and Remunerative prices for produce.