February 22, 2020
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Saving Vidarbha

Maharashtra works on a supplementary waiver package for this crisis-hit region

Saving Vidarbha
Saving Vidarbha
State's Bounty
  • Raise the land holding ceiling for central loan waiver eligibility from 2 hectares to 6 hectares
  • Create a separate Vidarbha package within the Rs 60,000 crore waiver
  • Write off debts to cooperative credit societies over a fixed period of time
  • Introduce a bill that empowers government to take over land mortgaged to moneylenders
  • Push for a flat Rs 50,000 per farmer one-time waiver irrespective of land holding


The Maharashtra government is working overtime trying to plug gaps in the Rs 60,000-crore loan waiver for farmers announced in the Union budget. As things stand now, Vidarbha, the state's worst-hit region which has seen nearly three suicides a day for the last two years, will benefit the least from the largesse to farmers announced by the Centre. Which is why the state government is drawing up a supplementary plan so that its distressed farmers are brought into the ambit of the relief package. "We are seriously thinking and working on ways to address the Vidarbha crisis, either within or outside the loan waiver in the Union budget. The state will have to offer relief to farmers not eligible for the loan waiver," Chief Minister Vilasrao Deshmukh told Outlook.

The state government is working on a twofold plan. The first involves going out on all cylinders to get the Union budget proposals amended for Vidarbha. Currently, the waiver applies to those with land holdings up to two hectares. The state government's draft proposal is to raise the land holding ceiling to 15 acres (approximately six hectares) because over half of the nearly 18 lakh farmers in Vidarbha have holdings that average 7.5 acres (about 3.03 hectares). The two-hectare cutoff immediately disqualifies them from claiming any relief. The proposal also pushes for a flat Rs 50,000 per farmer one-time waiver irrespective of land holding, as this would take care of most crop loans in Vidarbha.

The proposal addressed to Prime Minister Manmohan Singh, Congress president Sonia Gandhi and Union finance minister P. Chidambaram was submitted last week. Maharashtra MPs have been instructed to further push for these amendments during discussions on budget proposals in Parliament.

The entire effort, say officials, is geared to ensure that Vidarbha gets a larger share of the waiver, or is included as a separate package in the Rs 60,000-crore waiver. Basic number-crunching by the state government led it to conclude that of the nearly Rs 10,000 crore that will accrue to Maharashtra as its share in the Rs 60,000 crore, barely Rs 536 crore—just five per cent—will benefit farmers in Vidarbha. The larger share will go to sugarcane and grape growers in western and north Maharashtra, who have smaller land holdings and better access to institutional credit and are therefore eligible for the waiver.

Earlier studies have shown that indebtedness in Vidarbha is as deep as 90 per cent, with a huge component of the debt owed to non-institutional sources, mainly local and regional moneylenders. Bank loans mean crop loans but farmers are forced to take credit for other reasons—to buy seeds, implements or weddings. Finance minister P. Chidambaram, while announcing the loan waiver, openly acknowledged that he could do nothing about non-institutional indebtedness. Says a senior Maharashtra bureaucrat: "It's left to the state to pull a rabbit out of the hat, as it were. We can't pay off moneylenders but we have to address that part of the crisis."

This complex second part of the government plan to address the issue of non-institutional indebtedness has presently little clarity. Officials say there is "no fiscal instrument that can take care of non-institutional indebtedness" but they have been told to conjure something that "is believable and deliverable". The plan is to address cooperative credit societies and moneylenders separately. Sources disclose that the state government plans to do "a Chidambaram" with the cooperative credit societies—write off the debt owed by farmers over a fixed period of time so that farmers can access a new line of credit.

Moneylenders are a more difficult proposition. But officials say they have called for district-wise data so that licensed moneylenders can be distinguished from unlicensed ones. "The idea is to give mortgaged land from unlicensed moneylenders back to the farmers," disclosed an official. The government plans to introduce a bill that empowers local officials to seize such land. NCP president Sharad Pawar declared, post the budget, that farmers need not pay back unlicensed moneylenders. Sources say the party is keen to don the activist-saviour role in seizing land back and returning it to farmers. The Congress would like to pursue a legal and administrative option. Both parties privately admit that the moneylender-politician nexus runs deep in villages and "would be difficult to break".

Agrarian economist Dr Ajay Dandekar, who chaired a study on Vidarbha farmers suicides for the Bombay High Court, points out: "Some farmers will benefit from the loan waiver but only a small percentage. Even after Chidambaram's waiver and state government operationalising its Plan B, the core issues remain unaddressed—non-remunerative prices for output and very high input costs. The cycle of indebtedness will continue." Economic analysis has shown that indebtedness to non-institutional sources is over 60 per cent. "There is no way out of the situation except to put more money in the farmers' hands, and the government can do this through better support price for cotton," says an official who served in Vidarbha and produced the most comprehensive report on the situation.

Whether the state package will be part of the budget to be presented in the state legislature on March 19 or independent of it is a matter of detail, but the Congress-NCP government is clearly feeling the heat. "The state government had to do something, anything, about Vidarbha. There's pressure from Delhi too, we are reminded that agriculture is a state subject," says a top Congress functionary who was witness to the ire and desperation that Vidarbha farmers openly exhibited before Mani Shankar Aiyar, Union panchayati raj minister, when he visited villages in Akola and Yavatmal districts the very next day after the Union budget.

Economists have pointed out for years that cotton pricing has to be made more remunerative and non-crop loans made available to farmers through institutional credit mechanism like banks for any long-term impact on the crisis. Till then, waivers will remain a sop, a short-term band-aid solution.

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