Supreme Court Approves TN Government’s Loan Waiver Scheme for Small Farmers

The Supreme Court on Tuesday ruled that a government programme designed to help socially and economically disadvantaged people cannot be considered dubious just because it was based on an election pledge. 

This judgement comes after a scheme that was launched by the AIADMK as an electoral promise in May of 2016 which was based on waiving off loans of small and marginal farmers was challenged in the Madras High Court by the  National South Indian River Interlinking Agriculturist Association a farmers body based in south India. 

The High court had at that time set aside the decision in April 2017 which led the Tamil Nadu State Government to appeal to the Supreme Court for justice. 

On Tuesday while upholding the loan waiver scheme introduced by the previous AIADMK government for small and marginal farmers in Tamil Nadu, a bench of Justices D.Y. Chandrachud and A.S. Bopanna laid down the legislation. 

Justice Chandrachud also observed that “It is settled law that a scheme cannot be held to be constitutionally suspected 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 schemes propounded by the State of Tamil Nadu passes muster against the constitutional challenge”.  

A “Small farmer” is defined as someone who owns land between 2.5 and 5 acres, while a “marginal farmer” is someone who owns less than 2.5 acres. 

The scheme should have been extended to all farmers, according to the High Court. It claimed that the AIADMK was merely following through on its election promise to implement the scheme if it was elected to power. According to the High Court, the scheme was implemented without appropriate research. 

The Supreme Court overturned the ruling of the High Court, citing flaws in its reasoning. 

The state of Tamil Nadu had also stated that the benefit was offered to small and marginal farmers because they were more vulnerable to variable climate conditions due to their low technology and capital, and that by providing this plan, the state's limited financial resources could be put to the best possible use. 

According to an affidavit filed by the state, the number of small and marginal farmers who would benefit from the waiver of Rs. 5780 crore in crop debts would be 16, 94,145. Waiving other farmers' crop loans at Rs. 1980 crore, on the other hand, will assist only 3, 01,926 farmers. 

The Bench of Judges also stated that “The objective of promoting the welfare of the farmers as a class to secure economic and social justice is well recognized by Article 38 of the Constitution. It needs to be determined if the classification based on the extent of landholding has a rational nexus to the object sought to be achieved.” 

Citing the 2019 report titled "The Situation Assessment of Agricultural Households and Land and Holdings of Households in Rural India, 2019," the court added that the households with small landholdings of less than 0.01 hectares used over 90% of agricultural loans for non-agricultural purposes, compared to households with 10 hectares of land who used only 17% of agricultural loans for non-agricultural purposes. 

It was also discovered that in comparison to the rest of the farmers, small and marginal farmers had a large capital and resource deficiency.