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Loan waiver

Loan waiver

Fulfilling a campaign promise, Punjab Chief Minister Captain Amarinder Singh on Monday announced that his administration would completely waive crop loans of up to Rs 2 lakh for small and marginal farmers who own up to five acres in the state. Irrespective of their loan amount, the State government will offer Rs 2 lakh relief for other marginal farmers. Overall, this measure is expected to benefit nearly 10.5 lakh farmers, while costing the State exchequer Rs 24,000 crore. Punjab has become the third state this year — after UP and Maharashtra— to announce a farm loan waiver.


The Centre's position on farm loan waiver is clear with Union Finance Minister Arun Jaitley stating that the NDA government will not implement any farm loan waiver scheme, as it is keen on meeting its fiscal targets for this year. Earlier this month, Jaitley had said that states keen on setting aside farm loans would have to generate funds from their own resources. Farmer agitations have spread across other states like Tamil Nadu and Madhya Pradesh in recent weeks, making similar demands of their respective elected representative. Punjab has suffered a prolonged period of agrarian distress, and such measures will bring definite relief to the farmers.

More than loan waivers, however, the farm sector requires fundamental structural reforms. Investment in rural infrastructure—electrification and construction of canals—will aid the process of mitigating losses due to crop failures. Besides, other factors such as lack of reforms to the Agricultural Produce Market Committee (APMC) Act, weak bargaining power resulting from small farm size, and lack of warehousing facilities are also important. Fiscal conservatives believe that farm loan waivers have a deleterious effect on the budgets of both the Union and State governments, and increase inflation.

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