Loan waiver schemes for small farmers are tools of economic, social justice: SC

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The purpose of waiver of agricultural loans is to uplift distressed farmers and bring about just social order, said the Supreme Court on Tuesday as it approved Tamil Nadu’s loan waiver scheme of 2016 for small and marginal farmers.

“The purpose of providing a waiver of agricultural loans is to uplift the distressed farmers, who have been facing the brunt of the erratic weather conditions, low produce, and fall in the prices because of the market conditions,” noted a bench of justices Dhananjaya Y Chandrachud and AS Bopanna. The bench highlighted that a loan waiver scheme is also in pursuance of the Directive Principles of State Policy.

“The impugned loan waiver scheme is, in essence, a social policy in pursuance of the Directive Principles of State Policy, introduced with an object to eliminate inequality in status, income, and facilities… The objective of promoting the welfare of the farmers as a class to secure economic and social justice is well recognised by Article 38,” said the court.

Article 38 says the state shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic, and political, shall inform all the institutions of the national life.

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Approving the Tamil Nadu government’s scheme, the bench noted the 2016 loan waiver scheme for farmers owning land up to five acres was introduced with an endeavour to bring substantive equality in society by using affirmative action to uplift the socially and economically weaker sections.

“Due to the distinct degree of harm suffered by the small and marginal farmers as compared to other farmers, it is justifiable that the benefit of the scheme is only provided to a specified class as small and marginal farmers constitute a class in themselves,” said the court.

It held the classification based on the extent of landholding had a rational nexus with the object sought to be achieved through the scheme which kept farmers with big landholdings out of its purview. “The classification based on the extent of landholding is not arbitrary since owing to the inherent disadvantaged status of the small and marginal farmers, the impact of climate change or other external forces is unequal.”

The court set aside the 2017 Madras high court’s judgment, which directed the state government to extend the benefit of the scheme also to the big farmers.

Allowing a petition by the National South Indian River Interlinking Agriculturists Association, the high court held the grant of loan waivers only to small and marginal farmers to be arbitrary and directed the state government to grant the same benefit to all farmers irrespective of the extent of landholding.

The top court overturned this judgment, finding substance in the state’s policy of drawing a distinction between classes of farmers based on their landholdings.

“Small and marginal farmers are resource deficient; they do not have borewells to overcome the drought. These farmers are usually dependent on large farms to access land, water, inputs, credit, technology, and markets,” said the bench.

It referred to a 2019 report of the Union ministry of statistics and programme implementation that showed that households having lands less than 0.01 hectare use 93.1% of the agricultural loans for non-agricultural purposes. “In sharp contrast, a household that owns 10 hectares of land only uses 17.1 percentage of the agricultural loan for non-agricultural purposes. This depicts the poverty that envelops the class of small and marginal farmers,” said the bench.

It also cited statistics on the percentage distribution of the indebted agricultural households which depicted that 27% of the households that hold between 0.01- 040 hectares of land; 34% of those who hold between 0.40-1 hectare and 20% of those who hold between 1-2 acres are indebted. “On the other hand, only 4.5% of those who hold 4-10 hectares and 0.6% of those who hold 10 plus hectares are indebted,” said the bench.

It also quashed the high court’s observation that the loan waiver scheme was constitutionally suspect also because it was in pursuance of an electoral promise made by All India Anna Dravida Munnetra Kazhagam before the 2016 assembly polls.

“It is settled law that a scheme cannot be held to be constitutionally suspect merely because it was based on an electoral promise. A scheme can be held suspect only within the contours of the Constitution, irrespective of the intent with which the scheme was introduced. The scheme propounded by the state of Tamil Nadu passes muster against the constitutional challenge,” said the top court.

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