The Hindu Business Line : Achieving Sisyphean proportions

The extended loan waiver is an improvement as the dichotomy between small, marginal and other landholders has been attenuated to some extent. But it still suffers from serious drawbacks, not the least of which is the ‘district approach,’ says SHARAD JOSHI.

A district is not the ideal unit on which to base a farmer’s waiver eligibility as there are wide variations in water availability across even the blocks of a district.

The more the Finance Minister grapples with the problem of farmers’ loan waivers, the more he appears to get bogged down in its complexities. How did this massive burden of farmers’ indebtedness arise at all? For decades, those in authority have been placing the blame on such diverse factors as uneconomic size of holdings, vagaries of climate, pest damage, inordinately high rates of interest, low level of literacy, diversion of loans to non-agricultural purpose s, low yields, addictions to alcohol/drugs and even sheer laziness of the farmer community.

These anti-farmer calumnies have, for decades, persisted in the textbooks on agriculture. It was in 1986-89 that things changed. The statistical data submitted by the Ministry of Commerce to the World Trade Organisation (WTO) on the subsidies given to farmers made it quite clear that the farmer was not to be blamed for his penury and colossal burden of debt that was crushing him.

All economists and political parties had to concede that the farmers’ indebtedness was largely a result of successive governments’ deliberate measures to keep domestic agricultural prices depressed by using one or the other of their vast armoury of instruments of market intervention.

Agriculture, as a whole, had become a losing proposition, irrespective of the size of individual holdings or geo-climatic zones or the State in which the land was located.

Rising indebtedness

The indebtedness continued even after private money-lending was proscribed and replaced by an elaborate structure of co-operative credit.

The attempts to promote formal credit institutions such as commercial banks and the co-operative credit institutions further impoverished the rural economy inasmuch as rural savings were sucked into the urban sector. Farm indebtedness was unrelated to the merits or demerits of any particular credit institution. No matter what the source of credit, indebtedness continued to rise.

Even the colonial government was sensitive to the misery of farmers, as seen in the alacrity with which it responded to the Deccan riots; the governments of Independent India, however, have not cared to respond to the demands of the farmers’ organisations for debt relief/loan waivers, voiced at least since 1984. The matter was brought to a crunch by the spate of farmers’ suicides that numbered over 1,50,000 since 1985.

An analysis of the suicides showed they were spread fairly equally across all castes and age-groups.

There was a preponderance of landholders among those who took their lives. Clearly, the landless labourer, who could count on his fixed income, howsoever uncertain, was generally better off than the landholding farmer, who faced the vagaries of nature as well as the tyranny of the political state.

The highest incidence of suicide was among the cotton-growing farmers in Andhra Pradesh, Karnataka and Vidarbha. That was conclusive evidence that the phenomenon of indebtedness and suicides was directly related to the extent of negative subsidy imposed on various crops. Cotton suffered from the highest negative subsidy since pre-Independence days.

Cotton growers had become further vulnerable because of the extent of the use of pesticides the crop needs as also the rising incidence of spurious pesticides/seeds and adulteration. Those in authority continued to put the blame on the various factors mentioned above. They could not have signed a confession that the suicides were a direct result of the anti-farmer economic policies they had followed since Independence.

Faulty basis

The farmers had made a clear case that their loans were both illegal and immoral and that the quantum of loan was insignificant compared to the loss caused to the farm community from the negative subsidies imposed by the government.

Even before February 29, when the Finance Minister announced the Loan Waiver and Debt Relief scheme (LWDR), the country at large expected that, in the last Budget before the general election, there would be some attempt to assuage the farmers’ anger.

The Finance Minister ought to have prepared a scheme of debt relief which should have recognised that the uneconomic character of the agricultural vocation is a national phenomenon not related to the size of the holdings or to the character of the institution from which the loan was obtained. It made no sense to make a distinction between the loanees on the basis of the size of holdings or between the various lenders on the basis of their structural character. This is the truth that the UPA government could not afford to accept as it established the culpability of all the governments since 1947.

The Finance Minister tried in the initial version of the LWDR to stick to the belief that indebtedness is caused by the uneconomic size of holding, the vagaries of nature and the tyranny of private moneylenders. The loan waiver scheme announced in the last Budget was clearly based on this theory.

The scheme caused widespread dissatisfaction, impossible to ignore. The Finance Minister has since announced an extension of the scheme that increases its cost from Rs 60,000 crore to Rs 71,680 crore.

Under the extended version, all farmers — small, marginal and big — in 237 identified unirrigated and drought-prone districts in various States will get a minimum one-time debt relief of 25 per cent of the outstanding loan amount, or Rs 20,000, whichever is higher.

The extended version is, of course, an improvement over the initial one, in that the dichotomy between the small, marginal and other landholders has narrowed to some extent. The farmers with holdings larger than five acres will now be entitled to some benefit if they are located in the districts identified as drought-prone.

Still not logical

That, however, does not make the scheme any more logical or consistent. The indebtedness is not due to any natural climatic factors. It is more the result of the State’s keeping agricultural prices depressed.

The list of the identified districts is going to raise more questions than it resolves. Since in most southern States the monsoons start in the first week of June, there will be uncertainty as to which farmers are entitled to get fresh crop loans and which farmers are not.

The non-seasonal rains that the Northern region has been experiencing of late suggest that the onset of the monsoons in the North will be considerably delayed. As a result, farmers in the southern region may become vulnerable to uncertainty about eligibility to get fresh crop loans.

Fixing the district as a unit for judging the eligibility of a farmer for the loan waiver is irrational. In crop insurance schemes, it is acknowledged that even a block is a highly unsatisfactory unit for settlement of claims.

The availability of rainwater varies widely within a district. There are regions within a district that benefit from major or minor irrigation schemes while others do not. Treating all the farmers in a given district as a homogeneous category would be an absurdity.

Further, the list includes some districts that are well-endowed with water resources while it excludes certain others have long been recognised as drought-prone. The ‘district approach’ will only result in many inter-district disputes, which may be difficult to resolve.

The UPA government and the Finance Minister P. Chidambaram, in an effort to clear the ruling parties of the charge of chronic animosity towards farmers, seem to be making things so complicated that it is impossible to come up with workable remedies that will make a real difference.

The Finance Minister is apparently unable to shake off the burden of farmers’ indebtedness, which is weighing him down even more each day.

(The author is Founder, Shetkari Sanghatana and Member of Parliament, Rajya Sabha. E-mail: sharad.mah@nic.in)

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