On Thursday, 7 December 2017, the Maharashtra government announced that its marquee farm loan waiver scheme was well and truly underway. The late-evening press release put out two important figures to show substantial ground had been covered in implementing the scheme:
• The work of identifying beneficiaries for the waiver had gathered pace; out of 71.11 lakh applications, 41 lakh had been validated (green list). This was a near-impossible leap from just 69,832 green listed farmers just ten days earlier on 25 November.
• Rs 19,537 crore, that is, more than 80 percent of the Rs 24,000 crore estimated cost of the scheme, had already been released to the banks.
A day later, on 8 December, the government announced that across the state banks would work over the weekend to speed up disbursal to farmers.
These figures suggest that Chief Minister Devendra Fadnavis scripted the narrowest of escapes from a gathering political storm. It would have hit him with full force on 11 December in Nagpur where the state Assembly begins its winter session.
So how did he side-step the storm? Did the government suddenly discover its administrative mojo after weeks of running in the dark? Or was it a political sleight of hand, a mere passing of the buck to somebody else, the banks in this case?
The latest round of Firstpost investigations into the mess the loan waiver scheme has become suggests that it is all that and more. To fully understand how the government is trying to extricate itself from this mess, a bit of background is important.
Events of 7 December
Chief Minister Fadnavis chairs a meeting with the State Level Bankers Committee (SLBC, a working group of all banks), one of many in recent weeks. On the agenda is the status of loan waiver scheme. At Rs 34,022 crore (now revised to Rs 24,000 crore), it is the biggest loan waiver scheme by any state government. But what should have been one of the high points of his tenure had become a first-grade administrative nightmare thanks to the banks.
A few weeks ago, the banks had spoiled his dream of delivering a leakage-free Aadhaar-linked waiver scheme. They had turned in spurious lists of defaulters (beneficiaries of loan waiver) and brought the disbursal process to a complete standstill. The waiver process was to benefit 71.11 lakh debt-ridden farmers. The process was to begin on 18 October and end on 20 November. But as of 25 November, records accessed by Firstpost show, the government had cleared loans only to a tiny “green list” of 69,832 verified beneficiaries.
From ghost accounts to duplicate accounts to imaginary Aadhaar numbers to incorrect outstanding loan amounts, the lists were riddled with unthinkable errors in data-keeping that shake one’s faith in the banking system. It highlighted how casually the banks deal with public funds as explained in this Firstpost investigation.
This shoddy job by the banks has delayed the disbursals by nearly two months. Debt-ridden farmers are getting restive, opposition parties are smelling blood and various government departments are stressing about how to make sense of the rubbish that the SLBC had turned in in the name of a defaulters’ list.
But none of that stress shows up in the chief minister’s meeting with the SLBC, at least publicly. Instead, a chirpy statement is put out by the chief minister’s office saying he “thanked the banks for their contribution to the entire process” and appealed to them to improve their efforts to “rectify errors in the remaining applications in a time bound manner”.
Two important questions arise from the events of 7 December:
• Instead of roasting the banks for rank inefficiency and utter lack of due diligence—bordering on criminal negligence—why was the chief minister thanking the banks for their “contribution to the whole process”? After all, they had, by design or default, completely derailed his plans for a two-level, fool-proof beneficiary-verification process.
• How exactly did the government cover so much ground in ten days between 26 November and 6 December after being grid-locked and immobile for the 40 days prior?
The tell-all document
A closely-guarded document of the government accessed exclusively by Firstpost affords answers to both these questions. This is a document prepared by the Cooperation Department showing the status of the loan waiver scheme as of 2 December. It consists of two excel sheets, one for scheduled commercial banks (33) and one for district cooperative banks (30). Here is the document:
Loan waiver amount credited to beneficiaries accounts via commercial banks as on 2 December 2017
REPORT SHOWING LOAN WAIVER AMOUNT CREDITED TO BENEFICIARIES' ACCOUNTS IN COMMERCIAL BANKS AS ON 2 DECEMBER 2017
REPORT SHOWING LOAN WAIVER AMOUNT CREDITED TO BENEFICIARIES' ACCOUNTS IN DISTRICT COOPERATIVE BANKS AS ON 2 DECEMBER 2017
REPORT SHOWING TOTAL AMOUNT CREDITED TO BENEFICIARIES' ACCOUNTS AS ON 2 DECEMBER 2017
Besides other metrics, the sheets mapped each bank against the number of beneficiaries (green list), the number of beneficiaries double-checked, the amount the government had transferred to each bank and the amount each bank had disbursed before 25 November and after 26 November (till 2 December).
NOTE PUT UP TO HIGH POWER COMMITTEE ON LOAN WAIVER SHOWING STATUS AS ON 5 DECEMBER
This document is a storehouse of information. It gives the status of things as on 25 November and 2 December in one place (columns 11 to 16 in the excel sheets above). It records that as 25 November the "green list" was 69,832, the money transferred to banks was unavailable and the money disbursed by banks was Rs 439 crore. On 2 December the corresponding figures stood at 1,325,250, Rs 8,610 crore and Rs 4,428 crore. Read with two other status reports, publicly released by the government on 5 December and 6 December, it allows us to string together the rapid growth in the “green list” and the money released to the banks between 26 November and 6 December. On 5 December, after a meeting of the high powered committee set up to rescue the scheme, the publicity department announced that as on that day, the "green list" stood at 17.49 lakh and the money transferred to banks at Rs 10,332 crore. Just a day later (6 December) another statement revealed that the "green list" had grown to a whopping 41 lakh overnight. This comparative table here shows the miraculous upswing:
|DATE||GREEN LIST||AMOUNT RECD BY BANKS||AMOUNT DISBURSED BY BANKS|
|25-Nov||69,832||Not Available||Rs 439 Cr|
|2-Dec||1,325,250||Rs 8,610 Cr||Rs 4,428 Cr|
|5-Dec||1,749,000||Rs 10,332 Cr||Rs 5,141 Cr|
|6-Dec||4,100,000||Rs 19,537 Cr||Not Available|
Look at the exponential spike in the "green list". It grew from just 69,832 verified beneficiaries to 41 lakh in ten days or 5,871 percent. Similarly, the amount of money transferred by the government to the banks. The excel sheet doesn't capture how much money the government transferred to banks as on 25 November. But we have the figure disbursed by the banks on that date, Rs 439 crore. Since the banks couldn’t have disbursed more money than they would have received, it is safe to assume that the government would have transferred Rs 439 to banks, not more. From Rs 439 crore on to Rs 19,537 crore is 4,450 percent jump in ten days.
That is a scorching pace especially considering that no progress was made between 16 October (when the attempt to prepare an error-free list of beneficiaries blew up in the government’s face as reported exclusively by Firstpost) and 25 November.
So, what explains the sudden gush of positive results?
From the beginning Maharashtra’s farm loan waiver was going to be different from that of other states for two reasons:
• That it was the biggest loan waiver scheme by any state
• That it would be linked to Aadhaar to eliminate leakages
In June, Fadnavis set the size of the loan waiver at Rs 34,022 crore based on information provided by the SLBC. Banks had then put the total number of defaulters at 89 lakh. A cursory check revealed lakhs of ghost accounts prompting the government to seek a revised list from the SLBC. The revised list, now seeded with Aadhaar, shrunk to just 77.29 lakh. It thereby brought down the cash outgo for the government from Rs 34,022 crore to Rs 24,000, a whopping Rs 10,000 crore saving as reported in this Firstpost report. This underscored that Fadnavis was right not to trust the banks and to insist on Aadhaar-linkage.
The government formally launched the scheme in August. To ensure a two-level verification mechanism, farmers were also asked to separately apply for the waiver citing their Aadhaar number. When both the lists were run through a software to come up with a masterlist of beneficiaries, it turned out that even the fresh list submitted by the SLBC was full of errors. It corrupted the software and details of only 69,832 beneficiaries matched (green list). With an error percentage of more than 95, the entire process was vitiated. That was on 16 October. From then till 25 November the government had been struggling to make headway (read the section “what went wrong” in this report). But the process had not moved an inch, costing VK Gautam, principal secretary, IT, his job perhaps unjustifiably.
But from 26 November things began to move at supersonic speed. The green list of beneficiaries grew from 69,832 to 13.25 lakh to 17.49 lakh and then 41 lakh in all of ten days. It was as if the government had found a magic formula to identify correct beneficiaries.
A dead giveaway
It was not magic, of course. The government had decided to dine with the devil, the banks. It had junked its elaborate two-level system of verification. Out went Aadhaar-linked validation, Fadnavis’s pet plan. The government went back to what it could have done to begin with but did not want to do because it did not trust the banks: it decided to rely entirely on the data supplied by the banks and quickly transferred Rs 19,537 crore (as of 6 December) to the banks. From justified distrust in the banks to complete dependence on the banks, the government had made a quick U-turn without making any public announcement.
The government has not officially announced the burial of the Aadhaar validation process. But it can be easily deciphered from a letter that the chief minister is believed to have written to the SLBC, complaining about how their tardiness had grounded his plans. In an unsourced report, The Hindustan Times, writing about Fadnavis’ meeting with the SLBC on 7 December, also reported about a letter that the CM had written to SLBC asking, among other things, the banks to give the government a “district-wise list of beneficiaries” to whom they were releasing the funds. The Times of India also reported about the CM’s letter. The two reports remain undenied by the chief minister’s office.
The fact that the government was seeking the district-wise list of beneficiaries from the banks is a dead giveaway that the government had ceded control over the list of beneficiaries to the banks and was releasing funds without being fully conversant with who it was going to. A far cry from the strict validation process envisaged under the Aadhaar-linkage plan and an unavoidable U-turn to skirt steep political consequences.
In making this U-turn the government achieved three things:
• It created an illusion of big forward movement in implementation
• It ensured that when the Assembly convenes on Monday, it will be able to say with a straight face that the loan waiver process was substantially over; a half-truth, but privilege rules don't measure truth in degrees
• It passed the buck to the banks so the onus would now be on the banks to quickly disburse the money already released and buy the government some time away from the spotlight
That might be a masterstroke to nail the banks which had caused this whole mess in the first place. It might also get the government a less rocky ride in the Assembly but the government’s head is still not out of the noose because it is not enough to show movement on paper. If a massive loan waiver scheme was indeed near completion, it was miraculously noiseless. There was radio silence on the ground. The farmers were neither feeling it on the ground or in their banks.
The government is taking care of the first part by keeping the banks open this weekend to answer farmers’ queries. That will create a lot of buzz on the ground about disbursal. But there is no telling when exactly the farmers will see the money in their banks and the news on that front is still very bad.
Even the few disbursals that the banks made before 25 November were riddled with all kinds of comic errors. In Latur, for example, farmers had received text messages from banks saying their loans had been waived but were verbally told that the transactions might be reversed. (Read this exclusive ground report)
Do banks have the capacity to scale up disbursals from a few thousands to more than 71.11 lakh in a matter of weeks? Highly unlikely. While the government is dumping money on the banks like there’s no tomorrow, banks are unable to keep pace with disbursals. Take, SBI for example. As of 2 December, out of the Rs 8,610 crore released to all 63 banks, SBI alone took Rs 2,371 crore. That is more than 25 percent of the funds released to 63 banks. But SBI disbursed only Rs 600 crore, a dismal disbursal rate of 25 percent. SBI's "green list" was 2,65,778 (one-fifth of the overall "green list" of 13,25,250) but it had completed disbursal to only 1,36,498 beneficiaries, a coverage of just about 50 percent. Other banks are managing a 50 percent disbursal rate but since a major chunk of the disbursal will have to happen through SBI, the picture is not pretty at all. It might only get worse as government off-loads more funds.
Racing against time to get the farm loan waiver scheme going before the start of the Assembly, the Fadnavis government has thrown all caution—and Aadhaar—to the winds. It is now at the mercy of the banks to see this through quickly and efficiently. But as our investigations have shown, speed and efficiency are in severe short supply with the banks. The mess could just get messier from here. The last word has not been written on Maharashtra’s loan waiver yet.
Updated Date: Dec 10, 2017 15:40 PM