The AIADMK government’s move to make good its electoral promise made before the 2016 Assembly elections and waive cooperative farm loans has proved to be a mixed blessing, data available on quantum of fresh crop loans disbursed by cooperative banks/societies in 2016-17 show: at about ₹4,228 crore, the disbursement was way short of the target of ₹6,000 crore.
In May 2016, the government had announced waiver of agricultural loans of around ₹6,095 crore, benefiting 16.94 lakh marginal and small farmers (who owned land up to five acres).
The loans included medium- and long-term ones too, apart from crop loans of one-year tenor.
The ‘waiver effect’ on fresh disbursal was unmistakable as data for the next year prove: during 2017-18, there was a rise in the amount of crop loans by about ₹2,000 crore, benefiting over 10.6 lakh farmers.
Findings of a study commissioned by the Reserve Bank of India (RBI) and released a few days ago reveal that the largesse in 2016 itself could have come in the way of continued institutional support to the farmers.
For the purpose of its study, the RBI covered 22 Primary Agricultural Cooperative Credit Societies in seven districts.
Post-waiver troubles
To understand the impact of the State debt waiver scheme on the beneficiary farmers, agricultural credit given to all farmers for three years — 2015-16, 2016-17 and 2017-18 (up to December 15, 2017) — was analysed.
After the study, the RBI concluded that “in the year of implementation [2016-17], the probability of obtaining credit post-waiver is higher for non-beneficiary [or big] farmers, who are just above the cut-off acreage of five acres, than beneficiary farmers [marginal and small farmers in this case].”
The RBI has cited five reasons for this: primarily, the authorities in charge of cooperative institutions took time to verify details of accounts of eligible farmers for the loan waiver scheme, delaying the sanction of new loans.
Two, the cooperative banks had suffered reduction in recyclable funds due to the phased reimbursement of the waiver amount. (The societies were to be compensated to the extent of approximately ₹1,200 crore annually.)
Three, non-beneficiary farmers were preferred to the beneficiary farmers, as the latter were encouraged to make prompt repayment of the crop loans and avail themselves of the State government’s scheme of full interest relief with the promise of new loans.
Four, post-waiver, the number of new borrowers, mostly in the category of marginal and small farmers, went up.
Demonetisation also had its impact, restricting credit flow of the cooperative institutions for a few months (in 2016-17).
‘No surprise’
Senior officials of the State, looking after the cooperative institutions, say the findings of the Reserve Bank come as no surprise to them.
They point out that the “adverse impact” on the marginal and small farmers was only for one year.
This subsequently got corrected, a point acknowledged in the RBI study too.
For the current financial year of 2018-19, the State government has fixed the target for crop loan disbursement at ₹8,000 crore.
