New Delhi: In keeping with its electoral promise, the Bharatiya Janata Party (BJP) government in Uttar Pradesh (UP) under chief minister Yogi Adityanath is giving top priority to farm loan waiver.
Senior ministers in the UP cabinet said that the government was already in touch with the Union finance ministry to discuss the modalities of the farm loan waiver promised during the polls. UP has been one of the worst-hit states due to two consecutive years of drought in 2014 and 2015, which has worsened rural distress.
“We are committed to farm loan waiver. Prime Minister Narendra Modi made the commitment and we will come out with a detailed plan on farm loan waiver. We are in touch with the Union finance ministry,” said a senior cabinet minister of UP, on the condition of anonymity.
A recent State Bank of India (SBI) report said the UP government will need Rs27,419.70 crore to waive off loans to farmers. The last big farm loan waiver took place in 2008 when the United Progressive Alliance (UPA) government announced a Rs60,000 crore debt waiver package for small and marginal farmers.
A loan waiver has many adverse consequences, besides the fiscal hit to the exchequer.
It leads to moral hazard as it encourages farmers to delay or default on loan repayments in the hope that the government will announce another loan waiver. After the 2008 waiver, many bankers complained about rising loan defaults in the agricultural sector even when there was a good harvest.
SBI chairperson Arundhati Bhattacharya recently flagged the negative effects of a loan waiver on the credit repayment culture among farmers.
Also, it goes against the National Democratic Alliance’s philosophy so far of empowering the poor rather than handing out economic entitlements.
