The government's auditor or CAG has said that the 52,000-crore scheme was marked by problems in one of every five cases. 90,000 farmer accounts were audited for the report, which was shared with parliament today.
The scheme to write off the loans of nearly three crore farmers across the country who own less than five acres of land was announced by Prime Minister Manmohan Singh in 2008 and is credited with being one of the major reasons for his government's re-election a year later.
The CAG report said that "farmers who had taken loan for non-agricultural purposes or whose loans did not meet eligibility conditions, were given benefits under the scheme." Other farmers, who qualified for assistance, were overlooked.
13 crores were over-paid to farmers who got benefits in excess of their entitlements, the report said. Another 20 crores was given to farmers who were ineligible for the scheme.
The auditor also reprimanded the Department of Financial Services (DFS) in the Finance Ministry for inadequate monitoring of the multi-crore scheme.
Thousands of farmers were not given a certificate declaring that their debts had been waived, making it tough for them to get new loans they desperately needed.
In recent years, CAG assessments have turned into a nightmare for the government. The auditor said a telecom scam in 2008 cost the country 1.76 lakh crores and another 1.85 lakh crores were lost because there was a lack of transparency in how the government allocated coal fields to private companies.