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Economy Mar 6, 2013

Farm loan waiver: CAG picks holes in UPA’s pet scheme

By Firstbiz Editors

Another one of Finance Minister P Chidambaram's pet schemes is under attack.

An audit by the Comptroller and Auditor General (CAG) has found rampant irregularities in the farm loan waiver scheme announced by the United Progressive Alliance government in 2008. The CAG report was tabled in Parliament today.

According to a report on CNN IBN, the report is critical of the implementation of the scheme and alleged that over 13 percent of beneficiaries were eligible but not considered for a loan waiver at all.

The CAG audit, which covered over 90,000 farmers' accounts between April 2011 and March 2012, found lapses in about 22 percent of the cases.

Whom did the farmer loan waivers truly benefit? Reuters

Whom did the farmer loan waivers truly benefit? Reuters

No acknowledgement was taken from over 34 percent, or a third, of the farmers who had benefited from the scheme, the report said. The acknowledgement is necessary so that farmers don't take fresh loans from banks.

The CAG has now instructed the government to issue directions to banks to launch a drive to obtain the acknowledgements, the report stated.

The CAG also found that over 8.6 percent accounts audited were ineligible and 13 percent were disqualified by banks. Over Rs 20 crore was doled out for ineligible farmers or for other purposes, the CAG report said.

Moreover, loans worth over Rs 164 crore were waived in violation of guidelines. Over 4,800 cases checked were given incorrect benefits, the report said.

The scheme, announced by then Finance Minister P Chidambaram in his Budget for 2008-09, aimed to write off bank loans worth Rs 52,000 crores taken by small and marginal farmers holding up to 5 acres of agriculture land and taken loans up to Rs 50,000.

The scheme was widely considered to be instrumental in bringing rural voters under the UPA fold, eventually helping the alliance to return to power.

The scheme had also attracted criticism from various quarters. A section of the economists had seen this as fiscal profligacy by the UPA with dangerous consequences.

According to the CNN IBN report, more than 3.7 crore farmers were to benefit from the scheme.

Considering only 90,000 accounts have been audited, this is likely to be just the tip of an ice berg. In the coming weeks, more skeletons are likely to tumble out of the loan waiver closet.

by Firstbiz Editors

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