The Hindu Business Line : Forget loan waivers, bring in positive reforms

Rural reforms need more than just a human face with tears; needed are strong and compassionate people to head what seems to be a directionless government machinery.

"Wanted, person with a good heart and positive outlook. Must be necessarily sensitive with a cool temperament. Ability to socialise, especially after-hours is a must. Common sense will be an add-on."

A matrimonial? Well, it is a wish-list for the dream-man or woman. Not for marriage, though, but for solving some of the endless problems of Rural India.

The more one sees the fancy macro-policies dished out by think-tanks, the more the heart aches for the real performer. Who will work on all that is to be achieved through these policies?

Two immediate pictures from Maharashtra come to mind: One is that of an emotional Prime Minister declaring a debt-relief package for the farmers of Vidarbha; the other is that of a bewildered Maharashtra Industrial Development Corporation (MIDC) trying to acquire land at Chakan for a large Special Economic Zone from outraged farmers.

Needed a more logical plan

Dr Manmohan Singh shed tears at Sewa Gram; tears that will cost around Rs 3,400 crore to either the Exchequer or the banks, depending on who passes the buck more smoothly.

Well, don't get it wrong. Farmer suicides definitely need to be addressed, but debt relief may not be the best, certainly not the only, way out. As the farmers in Vidarbha put it, writing off the loan interest solves just 15 per cent of the problem.

The larger problem lies in the fact that when cotton (one of the main crops of Vidarbha) is harvested, prices start falling with the result that the farmers simply cannot get the necessary margins.

Now, given that the moneylender is literally standing at the farmer's door-step wanting to claim his share of the crop, the former has no holding capacity.

For those blessed with some holding capacity, there is no local storage facility. Therefore, they too have to sell the produce before it perishes. Thus, what the farmer needs are price controls on cotton, minimum support prices and better infrastructure.

Since all these will require time and thinking, quick relief has been provided in the usual form, by writing off the loans. This opportunity will be used by the banking industry to convert some non-performing assets into regular loans with the result that their books might look distinctly better by year-end.

This is relief all right, but only for the banking industry. What of the farmer? What is more pertinent right now is to ask why is it that farmers are so poverty-stricken and so indebted?

Small land, less yield

There is enough analysis to suggest that farming on small, marginal land is unproductive. The majority of Maharashtra's farmers work on small pieces of land, which explains why they do not make profits.

Add to this insufficient public investment in dams, irrigation systems, canals, etc., and the result is a heavily indebted farmer.

But why is this debt sourced from the local moneylender and not from such institutions as, say, Primary Agricultural Credit Societies (PACs), Regional Rural Banks (RRBs) or the branches of nationalised banks? The answer, quite simply, is transparency. When a farmer applies to a bank for a loan, he has to state the purpose for which it is sought.

Plans have to be transparent and projections made. This is not as troublesome as it is intimidating for the farmer. The moneylender lends money even in the middle of the night, no questions asked. And often, the money is indeed needed for marrying off a daughter or paying off a nasty loan taken the previous year. Will the banks finance these needs?

Banks are, after all, commercial enterprises. They have to make profits and stick to NPA norms, as prescribed by the Reserve Bank of India . They are not wrong in their reasoning, but their approach could be slightly different. Needed at the local rural branches is the manager who is somewhat of a maverick, a consultant, a banker with a heart and a social worker with a head.

In the rural areas where bank data are hard to come by, not to mention credit histories, needed are people who will work after-hours by socialising, participating in local festivals and fetes, and marriages and funerals so as to find out informally the credit histories of individuals or families.

These managers should know the cropping patterns and be able to give some advice on sticky issues. They should be able to communicate in the local language, local dialect even, and persuade farmers to spend wisely.

Resettlement, The Major concern

The other issue of land acquisition by the MIDC is stickier still. On the one hand, is the Ministry of Commerce trying to make a Shenzhen out of every industrial park and, on the other, there is simply not enough land for all the parks. The history of re-settlement is bad enough to cause the farmers to doubt the efficacy of the transfers. Farmers, whose land were acquired for SEZs, were given unimportant jobs on the industrial premises, hurting their dignity. Also, there is the question of price. Land is often acquired very cheap from farmers and given to the clients at ten times or more the purchase price.

Again, what is needed is a micro-approach. One needs to find some good resettlement officers who can deal with this issue. Worldwide, resettlement, is a huge concern.

China, which is dealing with a lot of resettlement woes as a consequence of its unprecedented growth, seems to have had a few success stories. The World Bank, the Asian Development Bank and most international development institutions have special re-settlement officers to help in developing a pro-poor perspective towards growth.

Rural Maharashtra or rather Rural India really needs better manpower if its problems are to be tackled. Rural reforms need more than just a human face with tears; needed are strong and compassionate people to head what appears to be a directionless government machinery.

(The author is Economic Advisor, Mahratta Chamber of Commerce, Industries and Agriculture, Pune. She can be contacted at manasip@mcciapune.com)

More Stories on : Agriculture | Economy | Rural Development | Farm credit

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