Maharashtra’s Loan Waiver Makes Default A Rational Choice

Maharashtra has elections for 17 seats of the Legislative Council, the upper legislative body of the state, scheduled on June 18. It is no coincidence that the timing of a Rs 36,585 crore loan waiver to farmers has been announced just now by the ruling Mahayuti.

This was a promise made before the Assembly election but is, however, not the first or even the second such waiver. In the last 10 years, Maharashtra has had three such waivers. The first was in 2017 for Rs 34,000 crore. This was for loans taken up to Rs 1.5 lakhs between 2001 and 2016. The second waiver was in 2019. The total sum was Rs 20,000 crore. That was for loans between 2015 and 2019. The current one waives loans taken up to Rs 2 lakh between 2019 and 2025.

We can infer that it is now turning into a permanent waiver. After a few years, what are the odds that another waiver from 2025 to 2028 is not announced when the Lok Sabha and Maharashtra elections are due? Secondly, everyone is doing it. The first and third loan waivers were by the alliance led by the BJP, but the second one was by the present opposition, the Maha Vikas Aghadi when they were in power. A loan waiver is now a default signal to farmers. There is severe distress among them, especially in years of drought, as had presaged the first waiver, but they are also increasingly organised to create movements that unnerve governments, making future waivers inevitable.

The state has a responsibility for the welfare of its citizens but repeatedly allotting such vast numbers to one particular group will have consequences. When you give something for free, the money is coming from somewhere and that is a finite resource. At some point, the bill will come calling.

Also, consider the fallout of such a policy. If you waive loans for farmers who didn’t repay, what about those who paid? It is unfair to them. The policy has an answer. It gives up to Rs 50,000 to those who repaid their loans. So if a farmer took a loan of Rs 50,000 and repaid it, he would get the entire amount back. However if he repaid a loan of Rs 2 lakh he would only get Rs 50,000 back. But those who didn’t pay would get Rs 2 lakh waived off. What do you think the farmer who repaid it this time will do in future?