KTR's Claims on Farm Loan Waivers Don't Tell the Whole Story

Claim: In the last 6 years, Telangana Chief Minister KCR has released ₹27,718 Cr towards farm loan waiver. This is second only to Maharashtra.

Fact: Misleading

Recently, Telangana's Minister for Municipal Administration & Urban Development, Industry & Commerce, Information Technology, KT Rama Rao (KTR) tweeted extolling the implementation of the state's farm loan waiver scheme. The working president of the ruling Telangana Rashtra Samiti (TRS) and son of Chief Minister K Chandrasekhar Rao, KTR said that his father had released Rs 27,718 towards farm loan waivers in the last six years. This is an overestimation.

This is the amount budgeted rather than the amount released, according to the Reserve Bank of India. Telangana government's own figures, however, don't add up. In Telangana's maiden election in 2014, following the state's bifurcation from Andhra Pradesh, TRS had promised a loan waiver of Rs 17,000 crore for all farmers with loans up to 1 lakh.

This had been done in a staggered manner over four years and by the end of 2018, Rs 16,124 crores of debt belonging to 35,29,944 farmers had been waived off. These waivers have been completely cleared by the government, according to Dr B Janardhan Reddy, Agriculture Secretary to the government of Telangana and Commissioner of Agriculture.

Ahead of state elections that year, TRS promised another round of farm loan waivers for those who had a debt of less than 1 lakh and in the 2019-20 budget Rs 6,000 crores were allocated towards this. In the following year's budget, the government announced waivers worth Rs 6,225 crore.

These were part of a new tranche of waivers of Rs 24,738 crore that were again to be closed in four instalments. So far this year, Rs 1098 crore has been released but that has been facing hiccups.

According to RBI's State Finances report 2020-21, which only tracks the funds allocated towards the waivers and not actually released, Telangana has allocated 163% of the amount it has announced. But there are some glaring discrepancies in this data. For example, even though it considers the latest budget it hasn't included the most recent announcement of Rs 24,000 crore in Telangana's tally of amount announced which instead shows the old figure of Rs 17,000.

KTR's claim of the state being the second largest to budget waivers is true based on this RBI report. It is behind Maharashtra which allocated Rs 42,468 against the Rs 56,020 crore that was announced.

Based on this report, Telangana is one of the three states that has actually completed the implementation of its farm loan waiver scheme while other states have lagged behind. How? It's a question of priorities, Dr Reddy says. But it will have no small impact on the state's exchequer. Already Telangana's average fiscal deficit is 3.5% of GSDP, of which 0.6% is due to farm loan waivers. And the state is staring at revenue losses of nearly Rs 50,000 since the pandemic, he says.

In September 2019, an Internal Working Group at the RBI produced a report on the impact of farm loan waivers on state finances. Noting a significant rise in waivers in the preceding two years, the RBI said this could depress the state government's investment in capital expenditure. The delays in budget allocation, and staggered waiver of loans, has led to a rise in non-performing asset (NPA) levels and less liquidity in the agricultural credit market.

A 2017 study by the National Institute of Rural Development & Panchayat Raj which surveyed 1,400 small and marginal farmers (SMF), large and medium farmers (LMF) and landless labourers in Telangana showed that 80% of SMF and 67% of LMF felt that the debt waiver scheme would have been beneficial to them, had it been a one- time settlement. The current model has helped bankers recover their NPAs but left farmers unable to receive any fresh loans or access their whole credit limit.

Lingala Naresh, Founder of Tharunam and a farmer himself, explains this. "This year, the government waived off debts of up to Rs 25,000, the first of four installments. So if I had a loan of one lakh, I would be left with a debt of Rs 75,000, on which interest builds cumulatively, until I end up paying nearly Rs 30,000 in interest over the next four years." This is one reason why the government had to announce a second round of waivers; there were a lot of pending loans from the last time.

And this is the farmers who actually have been able to access institutional credit. Tenant farmers, who are often the real cultivators, are nowhere on the radar. This problem became even more acute after 2014. Until this time, tenant farmers, irrespective of land holdings, had some access through loan eligibility cards that were being issued by the united Andhra government, says Dr G V Ramanjaneyulu of the Center of Sustainable Agriculture. Then the Telangana government stopped issuing these cards.

In 2018 came the Rythu Bandhu scheme which provided every farmer Rs 5,000 per acre per season towards input costs. The landowner, who didn't want to lose out on this, started leaving out the names of cultivators from official documents, further distancing them from any legal recourse. "So what was meant to compensate for the costs of cultivation became an incentive for land ownership," he says. This is the same formula duplicated in loan waivers; they were never really designed to benefit the tenants.

But any help is good, says Dr Reddy, when "the ship is full of holes and even a little water can sink it". While the government doesn't use any metrics to measure the impact of these loan waivers, one is tempted to look at the farmer suicide statistics. Telangana has consistently had the highest number of farmer suicides in the country, usually coming in at the second or third worst-affected state each year.

The National Crime Records Bureau's Accidental Deaths and Suicides in India publish details of farmer suicides in the country. But since 2015, they have stopped publishing the causes of farmer suicides. In 2015, out of the 1,358 farmers (cultivators who owned land or leased land), 632 people took their own lives due to bankruptcy and another 395 due to farming-related issues. We don't have this breakup for the 491 farmers who died in 2019.

Experts and farmers are in agreement that the waivers are not quite solving the problems that they were meant to. Because it's not the debt itself that is the problem, says Dr Ramanjaneyulu. "The overall economic viability of farming is the issue. Until you fix the production system that can reduce the risk, cost and have better price realisation, loan waivers are not going to have any impact," he says. "Loan waivers are good if they are done on a case by case basis and only in extreme situations. A blanket waiver only benefits big farmers and absentee landlords."