Farm distress: Karnataka CM Bommai under pressure to waive crop loans

Chief Minister Basavaraj Bommai is under pressure from farmers to waive their loans, which they say will cushion the stress in the agriculture sector amplified by heavy crop losses due to floods.

In November alone, heavy rains have damaged crops spread across 5.81 lakh hectares, according to preliminary government data. This figure is higher, some argue.

The Chief Minister’s Office (CMO) is flooded with representations by farmers asking for their crop loans to be waived.

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“Many farmers who are eligible for incentive under the (2018) Crop Loan Waiver Scheme (CLWS) are representing for waiver of the loans even after their crop loan accounts are credited with the incentive amount. Some farmers whose loan accounts were not eligible under the CLWS and hence rejected by the branch managers are also representing to the government for a waiver of their crop loans (sic),” the Finance Department stated in a letter to the State Level Bankers’ Committee recently.

If Bommai bites the bullet, he will be the fifth consecutive chief minister to waive loans, starting with Jagadish Shettar, Siddaramaiah, H D Kumaraswamy and BS Yediyurappa (he waived loans of fishermen in 2019).

“At least those farmers who have lost their crops should be given a loan waiver,” farmer leader Kuruburu Shantkumar told DH.

According to him, crops on 8-10 lakh hectares have been lost. “Farmers borrowed crop loans. How will they repay with their crops destroyed,” he asked. Pointing out that the Centre’s crop insurance isn’t of much help as it doesn’t cover all crops, Shantkumar said: “Just like how industries get help when they’re in distress, the government should protect farmers.”

Much as Bommai would like to play the populist CM, he faces constraints as the finance minister. Understandably, the Finance department (FD) is against a fresh loan waiver as that will dent the state’s coffers. “A fresh loan waiver isn’t under discussion, and shouldn’t be,” a senior FD official said.

The last crop loan waiver, in 2018 when the Congress-JD(S) coalition was in power, cost the government Rs 15,597 crore.

Experts say loan waivers are “bad economics” that should be avoided. “It will lead to a revenue deficit and it’ll be very difficult to come back from that,” Madhusudhan B V Rao, senior research advisor at the Centre for Budget and Policy Studies, said.

Among the signs of farm distress in Karnataka is the rising agricultural NPAs: from Rs 17,571 crore in September 2019 to Rs 18,185 crore in September 2021.

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