18 April, 2020
8 Min Read
When there is a poor monsoon or natural calamity, farmers may be unable to repay loans. The rural distress in such situations often prompts States or the Centre to offer relief,reduction or complete waiver of loans. Essentially, the Centre or States take over the liability of farmers and repay the banks. Waivers are usually selective , only certain loan types, categories of farmers or loan sources may qualify.
For instance, in 2008, crop loans and investment loans were waived for marginal and small farmers (those with less than 2 hectares of land ownership); other farmers were only given a 25 per cent reduction.
Importance of Farm Loan waiver
In Favour of loan waiver:
Against Farm Loan Waiver
While loan waiver schemes are like a band-aid on a wound, it is the larger agrarian distress that demands urgent policy attention.
Unless there are steps ‘to raise productivity, reduce costs of cultivation by providing quality inputs at subsidised rates, provide remunerative prices following the recommendations of the Swaminathan Commission, ensure assured procurement of output, expand access to institutional credit, enhance public investment for infrastructural development, institute effective crop insurance systems and establish affordably scientific storage facilities and agro-processing industries for value addition’, farmers will continue to be bonded to low-income equilibrium and repeated debt traps.
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