Loan waiver could have been handled better: Plan panel memberOctober 31st, 2008 - 12:11 pm ICT by IANS
New Delhi, Oct 31 (IANS) The government’s Rs.710-billion farm loan waiver could have been done in a “better manner”, says Planning Commission member Abhijit Sen.Drawing a distinction between a situation-specific loan write-off with mass debt waiver, Sen told IANS: “My preference has always been for assessing why a loan should be waived, and not for general waiver.”
Sen’s statement comes in the wake of the recent farm loan write-off by the central government; in February, Finance Minister P. Chidambaram announced the waiver of Rs.600 billion to bail out nearly four million small and marginal farmers. This was later increased to around Rs.710 billion.
“I do not grudge the debt waiver, but what I would say is that it could have been done in a better manner, which was not general, and was linked to some kind of assessment,” Sen, also a professor of economics at the premier Jawaharlal Nehru University (JNU) here, said in an interview.
“Some sort of debt assessment council or a debt tribunal should be in place where you make an application and give the reason why your debt should be waived off. In most such cases, the bank itself should waive off debts,” he said.
“That is, it (debt waiver) should have been on a case-to-case basis, in which case the same amount of money could have been used to ensure that those who really suffered would get much more than what they really got.”
Sen said there are situations that warrant loan write-offs, especially when developments beyond human control make repayment impossible.
Citing an example, he said two or three years of continuous drought can ruin farmers. There could also be individual-specific cases, like a farmer falling ill and being unable to farm.
Sen said any across-the-board debt waiver is a “bad idea”, and added: “If you keep doing that, the culture of banking itself is destroyed.”
But the economist said he didn’t actually disapprove of the recent farm loan waiver. “I have no real grudge. The period between 1996 and 2004 was bad for agriculture. It was bad as the rate of growth was low, and prices were low. So, farmers did suffer.”