JOIN USTo ward off the public ire, the leaders are blaming the commercial banks and the RBI, as the villains coming in the way of implementation.
The predicament of the Andhra Pradesh and Telangana chief ministers, N Chandrababu Naidu and K Chandrasekhar Rao respectively, is something similar to a certain person whose trouble did not end even after assigning, in his will, sufficient assets to his offspring.
Asked by his friend why was he so much depressed, was it due to his not being able to give anything to his children, he says that was not the reason because he had assigned the property worth millions of rupees – house sites and buildings in posh localities of the city - to each of his four kids in his will.
Then the inquisitive friend asked what actually was bothering him. The answer was: ‘I have allotted the properties alright, but the worry is how to acquire them for distribution since I don’t have a single rupee with me’.
This was a joke. But it was not a joke to the chief ministers of two states to implement their poll promises to write off the farm loans – conservatively estimated at Rs 45,000 crore in Andhra and Rs 19,000 crore in Telangana.
As pressure mounted on them to give a practical shape to their promises, both the chief ministers caused to issue the guidelines on the implementation of their loan waiver schemes without the mention of the source of funds required– similar to the pauper in the story who wrote his will assigning properties without actually owning them. The chief ministers indicated waiving the farm loans of each farming family to the extent of Rs1.5 lakh in Andhra and Rs1 lakh in Telangana.
While making the promise to waive the loans, with their entire focus that moment being on winning the polls, the political leaders seem to be not very serious about the model code of conduct of the election commission which reads, “In the interest of transparency, level playing field and credibility of promises, it is expected that the manifestos also reflect the rationale for the promises and broadly indicate the ways and means to meet the financial requirements for it.” Trust of voters should be sought only on those promises which are possible to be fulfilled.
The leaders tried that time to make the people believe the schemes were really implementable. But, after actually winning the poll battle, they are finding it difficult to garner the required resources.
Furthermore, to ward off the public ire, they are finding it convenient to point their fingers at commercial banks and the Reserve Bank of India, as the villains coming in the way of implementation of their promises.
Unjust blame
In particular, the chief ministers are expecting the RBI to direct the banks for rescheduling the payments, so that the governments can provide funds in phases, in their successive budgets. It is outright injustice, in this case, to blame the RBI and the banks.
The commercial banks, after all, are the institutions who accept deposits from the public to lend to the needy. Their maintenance cost and profits come from the difference in their borrowing and lending rates.
When the borrowers default payment they can’t meet their obligation towards their depositors. So, they can never write off the loans. They want their loans to be repaid. They have no objection if government takes the liability.
Similarly, the Reserve Bank cannot ask the banks to write off or reschedule the loans without following its own norms. It can advise for rescheduling farm the loans only in cases where the yield is less than 50 per cent of the normal.
In fact the RBI is agreeable to reschedule the loans in 100 out of 475 mandals of Telangana and 120 of 653 mandals of Andhra Pradesh as they meet the criterion for rescheduling. So, there is no sense in blaming the RBI for not supporting the schemes of the state governments.
All this is not to say that the farm loans should never be waived. It is only to focus that the schemes are not well thought out and bring little benefit to the farming community. Firstly there is no veritable plan, together with the present waiver, for the development of agriculture in these states whereby farmers will not need such waivers in future.
Secondly, the benefit is limited only to the institutional borrowers which means about 73 per cent of the farmers who do not get bank loans will be outside the scheme. Thirdly, the quantum of benefit Rs 1 lakh in one state and Rs1.5 lakh in the other has not been determined by any scientific evaluation of the need.
Finally there are many difficulties in the implementation even after finding the wherewithal; for instance, distributing the waiver proceeds when one persons availed loan from more than one bank is not going to be easy. So far the announcement of waiver has done more harm than good to the farmers in two states.
As the farmers did not repay the dues, with the hope of the waiver, the banks could not disburse fresh loans although the disbursement season for kariff has almost concluded. This has resulted in the farmers either going to the private money lenders or suspending their farming operations during the season.
The lessons learnt from the experience of these two Telugu speaking states should, therefore, be an eye opener to rest of India.
The government of India should take fresh look at the rural credit scenario and to work out a comprehensive plan to give relief to the farmers in distress in an effective manner with the goal to help the farmer, not with an eye on the elections.