If all affected states also announce farm loan waivers the Uttar Pradesh, Maharashtra, Karnataka and Punjab did, then the total cost the exchequer could be upto Rs 2.5 lakh crore or 0.5% of GDP, estimates ratings firm CrisilBSE -0.77 %.
Termimg farm loan waivers as a “paradox” in a year of normal monsoon, Crisil said, “We estimate that if other states also announce loan waiver schemes the way Uttar Pradesh, Maharashtra, Karnataka, and Punjab did, the collective cost to the exchequer would be ~Rs 2.5 lakh crore – or 0.5% of GDP – per year, assuming the waiver gets equally staggered over three years.”
The ratings firm has said that the cost could be significantly high for Tamil Nadu, which has the highest outstanding agricultural loans among states. Kerala, Madhya Pradesh and Rajasthan, too, could feel some pressure.
The pain points for the farmers are all too visible. And unless measures to lower this pain are planned and implemented carefully, and soon, there could be a gaping hole in the exchequer as well, it said.
On the crop outlook, Crisil said that despite, pockets of stress, kharif production is expected to be healthy. Regions that witnessed weak rains either enjoy a strong irrigation cover or are those that contribute less to kharif production. The government’s first advance estimates suggest kharif production could be 2.8% lower on-year for foodgrains and as much as 7.7% lower for oilseeds. But the decline is also because last year had seen a sharp increase in the area under coverage and production for most crops. Compared with the normal or the typical average for the period, sowing is higher and production as per trend.
The flipside to good monsoon and bumper crop of last year however is that prices for most foodgrains have fallen and consequently reduced farmer profits. For pulses and oilseeds, prices fell even below their minimum support prices (MSPs) and cost of cultivation, resulting in a loss on the margins, Crisil said. “For several crops, prices and profit margins have continued to decline in recent months” it said.