Burden of farm loan waivers on states, says Jaitley

Any financial burden arising from waiver of farm loans by the various state governments will have to be fully borne by the state governments themselves and the centre will have no role in such fiscal leveraging, finance minister Arun Jaitley said on Monday.

Jaitley's statement follows announcement by Maharashtra government that it would waive all loans to farmers in the state amidst nationwide protests fy farmers demanding debt relief and remunerative prices for their produce.

The government of Uttar Pradesh had earlier announced waiver of Rs36,359 crore of loans to small and marginal farmers.

The state governments' move comes after the Reserve Bank of India warned against competitive loan waivers, which, it said, could increase the risk of fiscal slippages.

Jaitley made it clear that there will be no funding from the centre. "I have already made the position clear that states which want to go in for these kinds of schemes (farm loan waivers) will have to generate them from their own resources. Beyond that the central government has nothing more to say," Jaitley said.

Despite a bumper crop and ample rains farmers in many states complain that the sharp fall in produce prices has undone all productivity gains.

Instead of price stabilisation policies the authorities are resorting to the easy option of debt relief to free farmers from loan repayment, irrespective of what happens to the farmers' produce.

Meanwhile, Reserve Bank governor Urjit Patel has warned of the fiscal situation likely going out of hands if states keep on doling out, which may also stoke inflationary expectations.

"The risk of fiscal slippages, which by and large can entail inflationary spillovers, has risen with the announcements of large farm loan waivers," the RBI said in its second bi-monthly monetary policy review for 2017-18 announced last week.