It is the season for Loan Waiver. Farmers are on strike in Maharashtra. Their demand two fold – better market price for their products, and a waiver of loans.
On the first issue, there is a legitimate grouse. farmers say, that they spend more money transporting fruits and vegetables to the markets, than they make out of farming. I have not been independently able to verify this – and the point, in a post truth world – is not whether this is true or not, but whether it is plausible. And, it is entirely plausible that this is the state of sorry affairs. Also, with farmers following trends of what sold well this year, to plan next season crops, there is a possibility that demand may not carry through the next season, and prices of the crop fall. This is what happened to farmers in Andhra Pradesh and Telengana. , who saw the reigning price of dry red chilli, last year, and increased production. This increased production, massively decreased prices, and the centre had to bail out farmers.
Last year, as prices of dry chilli hit Rs 12,000 per quintal, lakhs of farmers in Telangana and Andhra Pradesh sowed the crop hoping for good returns this year. Production increased by 14% in Telangana and 25% in Andhra Pradesh. In Telangana, against an average of 2 lakh metric tonnes every year, nearly 7 lakh MT of chilli has been produced in 2016-17. In Andhra, production increased from 7.93 lakh MT last year to 9.22 lakh MT this year. As bags of chilli began to cause a massive glut in market yards in the first week of April, prices crashed by 50%. With prices still between Rs 5,000 and Rs 6,000 per quintal
Price support is one thing, and a unstructured loan waiver is another. When the UPA government waived loans to the tune of Rs.60,000 crores, in 2008, it was a one off, single shot activity across the country. There was a fair amount of discontent even then, because the loan waivers only accounted for the loans taken from the formal sector (Banks), and not the loans taken from money lenders.
The current Government led by Mr Modi promised fiscal prudence, but given the constant cycle of elections, their promises have been slightly hollow (except when it comes to the middle class). Part of the election promise in UP, was the waiving of loans of UP farmers. It was promised in Punjab as well. Farmers in Punjab have stopped paying interest to banks, in anticipation of a loan waiver. Part of the protest by farmers from Tamil Nadu was on the waiver of loans. The Madras HC has ordered the Tamil Nadu Government to waive off all agricultural loans. Farmers in Maharashtra are currently protesting, expect the rest to follow. After all, why should farmers of one state alone have the advantage. And, when the farmers protest, Governments will capitulate – afterall, who wants to mess with 65% of the electorate.
The Government has seriously messed up this one. In it’s desire to win elections, they have abandoned basic common sense. Loan Waivers, if at all they are considered, should have been a single shot write off across the nation, rather than this piecemeal capitulation to protesters.
It seems very likely that all the fat cat industrialists, and billionaires, will get large chunks of their loans waived, on the face of it, to protect banks. Once again, fiscal indiscipline rewarded. I am waiting for SME’s to ask for a similar grant. Why should they alone pay interest?
Who is left? the idiot middle class, abandoned by all parties, sitting there saying “here tax me more, after all you have to waive the loans for the rest”