The Hindu Business Line : The noose of debt

The single most important cause of farmer suicides is their inability to pay back the loans they have taken, often from private moneylenders. This age-old problem is yet to be resolved in a durable fashion.

Piecing together information from various sources, the picture that emerges on the number of total suicides and those by farmers is depicted in the Table.

By any standard, it is a sad state of affairs to see several thousand farmers committing suicides, with the number rising far too fast — from 10,000 to 25,000 — in just seven years, to be taken lightly.

Thousands of miles away in the American states of Kentucky, North Carolina and South Carolina, during the 10-year period of 1990-99, 1,100 farmer suicides were reported.

That is, 110 suicides on the average per annum and for an estimated rural population of 6.6 million for all three states combined yield an average of 16.7 farmer suicides per million rural people.

In the Indian case, the estimated number of farmer suicides of 25,000 in 2002, when juxtaposed against the rural population of 750 million implies an average of 33 farmer suicides per million rural residents.

The rate is twice that of the US and underscores the gravity of the situation.

A sad commentary

Just a few days ago, it was reported that an advocate has filed a Public Interest Litigation in the Supreme Court seeking intervention in the matter of farmer suicides (The Hindu, August 4).

The petitioner pointed out that in the last five years over 10,000 farmers had taken the extreme step. The worst-affected States were Maharashtra, Andhra Pradesh, Karnataka and Kerala.

This would seem a sad commentary on all of them, which were respectively known for industry and commerce, extraordinary achievements in rice cultivation, IT growth, and significant human development.

Information available on the Internet via Info Change News and Features, August 2005, refers to an earlier PIL filed by an NGO, based on which, in December 2004, the Bombay High Court requested the Tata Institute of Social Sciences (TISS) to submit a report on the possible causes for the suicides.

The survey found that 644 farmers had committed suicide in Vidarbha, Marathwada and Khandesh regions of Maharashtra between January 2001 and December 2004.

TISS investigated 36 of the 644 cases of suicide, studying their causes and the reasons for the desperate state of farmers and submitted its findings to the High Court, in March 2005. The TISS study found that suicides occurred both among large landholding owners and the landless, and across all caste groups; yet, the vast majority (83 per cent) constituted small and medium landholders.

The causes for suicides were common: Repeated crop failure, inability to meet the rising cost of cultivation, and indebtedness.

In all the cases, the extreme step was taken only after all avenues were exhausted. Seventy per cent of the suicide victims grew cotton as their primary cash crop.

Production-price mismatch

The other important points of the TISS report were the mismatch between the cost of production and the low minimum support price or the market price leading to huge losses; debt, from a low Rs 10,000 to Rs 3 lakh and inevitability half the amount borrowed from private lenders who charge an usurious 5 per cent per month.

Recommending immediate cash grants to the families of the bereaved, the TISS report concluded that long-term measures should be taken up for the rehabilitation of the agrarian production system itself, with policies that encourage marginal and small farmers, who have no livelihood options outside the agricultural sector.

The criticality of agricultural advance for national development can be perceived from the simple fact that the Indian farming community is vast, comprising over 200 million farmers and farm workers, with the rural population accounting for over 70 per cent of the total.

Insights from 11th Plan draft

Insights into the medium-term policies and programmes concerning the agricultural sector are provided in the Eleventh Plan Approach Paper available from the Planning Commission. The Plan target growth rate for agriculture has been set at about 4 percent.

The Approach Paper notes that on the demand side there is evidence that farmers face adverse demand conditions including the prices received for agricultural products not keeping pace with the costs or the general price level.

On the supply side, the Plan document affirms that no dramatic technological breakthrough comparable to the Green Revolution is in sight.

Policy distortions

Though most of the growth required in cereals, pulses and oilseeds is possible through plausible yield increase in currently low-yield regions, specific constraints and policy distortions that have produced the yield gaps have to be identified and addressed. The Paper recognises that lack of credit at reasonable rates is a persistent problem, in large part reflecting the collapse of the cooperative credit system.

"The failure of the organised credit system in extending credit has led to excessive dependence on informal sources usually at exorbitant interest rates. This is at the root of farmer distress, reflected in excessive indebtedness."

Clearly, the single most important cause of farmer suicides is their inability of the farmers to pay back the loans they have taken, often from private moneylenders. Here is a problem that is yet to be resolved in a durable fashion.

(The author, formerly with the National University of Singapore and the World Bank, currently holds a few honorary/visiting positions. He can be reached at bhanoji@gmail.com.)

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