This smacks of double standards. Soon after Uttar Pardesh Chief Minister Yogi Adityanath announced a Rs 36,359-crore farm loan waiver, benefitting more than 95 lakh small and marginal farmers, the Reserve Bank of India governor Urjit Patel has lamented that any such move ‘undermines honest credit culture’ and ‘could affect the national balance sheet.’
But when it comes to corporate loans, the Chief Economic Advisor Arvind Subramaniam has already gone on record saying that writing-off of bad loans of the corporate sector makes economic sense. "This is how capitalism works,” he said. If this is true, I don’t know why capitalism doesn’t work the same way for farmers.
But before we see how the loan waiver policy discriminates farmers, it is time to know what quantum of corporate loans are likely to be struck in the days to come. The Public Accounts Committee of Parliament has estimated that the total bad debt of public sector banks, known as Non-Performing Assets (NPAs), stands at Rs 6.7 lakh crores. Out of this 70 per cent belongs to the corporate whereas only 1 per cent default is of farmers. As per the credit agency, India Ratings, more than Rs 4-lakh crore of stressed corporate loans is likely to be waived.
UP CM has therefore taken the right step. I am so glad that Punjab and Maharashtra too are likely to follow suit.
This is not the first time that corporate loans are likely to be written-off. Between 2012 and 2015, Rs 1.14 lakh crore of corporate NPAs has been written-off. Surprisingly, no state government was asked to bear the burden from its own resources. Neither did the State Bank of India chief Arundhati Bhattacharya ever remark that the routine waiver of corporate loans leads to a disruption of credit disciple. This is how the banking system discriminates the poor borrowers, and frowns when farmers use the same clean-up mechanism that has been reserved for corporate balance sheets.
Agriculture has been continuously faced with a terrible agrarian distress over the past few decades. With every passing year, the bad debt has been mounting leading to a serial death dance on the farm. Over 3.18 lakh farmers have committed suicide in the past 21 years, and there is hardly a day when farm suicides are not reported from one part of the country or another. At a time when Union Minister of State for Agriculture in November 2016 had acknowledged in Parliament that farmers are reeling under outstanding debt of Rs 12.60 lakh crore every year, writing-off of farm loans not only makes good politics but also good economics.
Yogi Adityanath has therefore taken the right step. I am so glad that Punjab and Maharashtra too are likely to follow suit. The decision by the Madras High Court directing the Tamil Nadu government to extend the loan waiver to big farmers since they too had been impacted by the continuing severe drought will bring an additional budgetary burden of Rs 1,980-crore on the State. And if you have seen the Tamil Nadu farmers, carrying skulls and bones of fellow farmers who had committed suicide, protesting in New Delhi for nearly 25 days now, the extent and gravity of the terrible farm crisis that prevails needs no better expression.
Over 3.18 lakh farmers have committed suicide in the past 21 years. There is hardly a day when farm suicides are not reported from one part of the country or another.
Punjab is expected to waive off Rs 36,000-crores farm loans. Maharashtra is wanting to write-off Rs 30,500-crore. But if you too are swayed by the same biased argument that speaks of credit indiscipline when it comes to farm loan waivers, it’s time for a comparison. According to a report published in Business Standard (Mar 23) the steel giant Bhushan Steel alone has a bad debt of Rs 44,478-crore, which is more than what UP has written-off. Essar Steel carries bad debt of Rs 34,929-crore, which it wants the RBI to write-off. This alone is more than the entire farm loan waiver that Maharashtra is planning.
Since the corporate were provided massive tax concessions to the tune of Rs 17.15 lakh crore in the three year period 2013-16, I see no reason why the corporate bad debts should have piled up. Doesn’t this undermine honest credit culture, Mr Patel?
(This article first appeared at http://devinder-sharma.blogspot.in)