Friday, March 07, 2008

PIL challenge to loan waiver scheme

The Supreme Court has refused to hear a challenge to the Rs 60,000 crore farm loan scheme proposed in the recent budget, TOI reports. Chief Justice Balakrishnan said that the SC could not entertain the PIL at the present stage when the proposal was being discussed in Parliament. Any hearing could happen only after the proposal had been approved by Parliament.

However, the TOI reporter says that the legal challenge could still continue. He points out that in the case of Mandal II, a bench of the SC decided to entertain a challenge even before the relevant Bill had been passed by Parliament:

Going by Justice Balakrishnan's reasoning, the PIL should not be entertained till at least the proposal is pending in Parliament. In other words, it should be dismissed outright. But since it could come up before any of the benches, there is no predicting the outcome of the PIL.

Barely two years ago, a bench headed by Justice Arijit Pasayat entertained a PIL on another contentious issue, Mandal II, even before the Bill concerned was introduced in Parliament. And when the Bill was subsequently introduced, Justice Pasayat stretched the system to the extent of telling Parliament not to proceed with it till the court decided its validity. It was only after the government's counsel protested that the judiciary could not interfere with legislative functioning, Justice Pasayat toned his order down to saying that a copy of the parliamentary standing committee's report on the Bill should be "placed in a sealed cover before this court."

In the event, the sealed cover was rendered meaningless as the government gave the report to the court only after it was tabled in Parliament.

The general rule, however, is that since a Bill is merely a proposal and not legislation, it falls outside the domain of the courts. This is because a Bill has no legal force and is liable to be changed or even dropped by Parliament.
As for the farm loan package itself, I think the opposition to it is overdone. The cost of Rs 60,000 crore is eminently affordable. It is a one-time cost whereas the tax deductions given on income tax - which would amount to Rs 4000 per month for those earning more than Rs 10 lakh- are forever. My main concern, as I point out in my Et column, is that the banking system should not be loaded with the cost. The government should pick up the tabs.

There are , of course, many implementation issues. Farmers who have repaid their loans are being penalised. So are banks that have already made provisions. But the point about such packages is that you help those in distress. Those who can pay or who can cover the cost do not need government support.

There are other issues. Distress may not have to do only with the size of the farm- somebody with over 5 acres in a rainfed area may be worse off than somebody with a small farm in an irrigated area. I have also seen reports that the package may not help those who have borrowed heavily from money-lenders. Note, however, that the Radhakrishna committee on distressed farmers had favoured help to this category as well through a long-term loan.

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