Just few days back, the Congress governemnt in 3 states claimed to waive off farm loans with endless conditions. Within three days of announcement, a farmer committed suicide as he was not entitled for the farm loan waiver.
Madhya Pradesh and Rajasthan waived all short-term crop loans while the Chhattisgarh government will pay for loans farmers have taken from the state’s Gramin Bank. The waivers will cost between Rs 35,000 to Rs 38,000 crore in Madhya Pradesh, Rs 18,000 crore in Rajasthan and Rs 6,100 crore in Chhattisgarh.
Even before the bank could implement the order, the government is now saying that they do not have money. Officials cited the limited fiscal space and said it will be difficult to implement other major poll promises in the current financial year. Budgets in the three states will be presented in February-March next year, months before the national polls due in April-May 2019.
The other promises include unemployment allowances of Rs 10,000 and Rs 3,500 each to a member of a family in Madhya Pradesh and Rajasthan. The Congress has also pledged a stipend of an unspecified amount in Chhattisgarh. In Chhattisgarh, the party has also promised liquor prohibition that, too, will lead to revenue losses.
In Madhya Pradesh, the farm loan waiver burden would be about one-fifth of the total expenditure of Rs 1,86,683 crore for 2018-19, of which around Rs 1,25,000 crore has been spent till October end.
Officials pointed out the previous government has availed 90% of the borrowing capacity of Rs 60,000 crore to fund sops before the polls.
Madhya Pradesh’s principal secretary (agriculture), Rajesh Rajora, said most money provided for different schemes in the budget has been spent. “We are looking at different options to fund the farm loan waiver,” he said
In Rajasthan, the farm loan waiver burden would be around one-sixth of the total budget of Rs 1,07,865 crore, of which about Rs 77,000 crore has been spent. University of Rajasthan’s economics professor, V V Singh, said around 25% of the budget will be spent on meeting these poll promises. He added any additional spending will result in an increase in the fiscal deficit, which is 3.01% of the Gross State Domestic Product (GSDP).
Gehlot on Tuesday insisted his government has a borrowing capacity of Rs 36,000 crore as per the present budget. The state has already taken over Rs 25,000 crore loan. Gehlot admitted to the fiscal constraints. The state’s outstanding liabilities are 27.57% of its GSDP, which is above the 25% limit the Fiscal Responsibility and Budget Management Act has set.
Rajasthan finance commission’s former chairperson, Jyoti Kiran Shukla, called the implications of the waiver announcements on the state budget huge. Shukla said the state has to determine what revenue base it will generate to meet these expenditures. In Chhattisgarh, the farm loan waiver and increasing the minimum support price of paddy and maize to Rs 2,500 per quintal would take away one-tenth of the state’s budget of Rs 83,179 crore.
A Chhattisgarh finance department officer hoped they would be able to implement the promises without breaching the fiscal deficit target. “Some promises may find reflection in the next budget. The political leadership will take the decision.” Hindustan Times
Earlier, the economists in the country and the bankers had expressed great concern after the Congress announced farm loan waiver calling it a disaster to the economy and the country’s overall growth.
State Bank of India’s group chief economic advisor Soumya Kanti Ghosh estimates the collective burden will range from Rs Rs 60,000 crore to Rs 70,000 if the election-bound states, Andhra Pradesh, Odisha and Haryana, in 2019 decide to waive farm loans.
So, the Congress government now has an excuse to escape from their duties in the name of farm loan waiver. Whether or not the farmers will get benefit or not is also doubtful as the Congress governemnt in Karnataka had also promised farm loan waiver which till now they haven’t. Over 44,000 crore amount which was sanctioned by the government which until now has not benefited more than 800 farmers.
Only time will tell if farmers will really get any benefit from the Congress government or the tax payers money will vanish without a trace.