The Hindu Business Line : Who benefits from the waiver?

An analysis of its various clauses reveals that the ADWDR scheme contains within itself the seeds of a new generation of farm indebtedness. It could thus prove more a liability than an asset for the government in the ensuing general elections.

Sharad Joshi

The last act in the drama surrounding the Agricultural Debt Waiver and Debt Relief Scheme (ADWDR) announced by the Finance Minister on the February 29 is unfolding in rural India. All the leading banks were instructed to put on their notice-boards the lists of farmers who actually benefited from the scheme.

The banks faced a Herculean task and certainly tried their best to acquit themselves creditably.

The details of the scheme in close print cover some two dozen pages. On June 18 the Ministry of Finance issued clarifications on some 32 points. To prepare detailed lists of the beneficiaries of the scheme mentioning the financial extent of the benefit derived by them 12 days after the issue of clarifications was no simple task. In addition to preparing the lists of beneficiaries, the lending banks were required to issue individual certificates to each farmer loanee.

Guidelines

The small and the marginal farmers were to be given certificates mentioning the amounts borrowed by them since March 31, 1997 till March 31, 2007 and which had remained unpaid till December 31, 2007. The calculation was further complicated by the fact that the loans that were rescheduled under the packages announced by the government in the years 2004 and 2006, and which had remained unpaid, were also required to be mentioned.

On June 18 the Government made a further amendment and ordered that all loans, even those taken before 1997, were to come under the purview of the scheme if they were covered under the rescheduling packages announced in 2004 and 2006. The certificates for the small and marginal farmers had to give the total amounts of crop loans, short-term loans and long-term loans that had become overdue and, hence, eligible for debt relief.

‘Other farmers’

As regards ‘other farmers’, that is those holding more than five acres of land, the certificate was even more complex. It had to mention all loans taken between 1997 and 2007, which had become overdue. The loans rescheduled under the 2004 and 2006 packages taken before 1997 had to be taken into account.

Three-fourths of the amount overdue was to be paid by the loanee farmer in three instalments on September 30, 2008, March 31, 2009 and June 30, 2009. These farmers had to sign affidavits committing themselves to this schedule of payment. The certificates in their favour do mention the amount overdue as also 25 per cent thereof, which becomes eligible for debt relief.

The lists were put on the notice-boards of the lending banks, much to the disappointment of most farmers — small and large — who did not find their names therein. The farmers, however, did not fail to notice that the biggest beneficiaries were large farmers who had managed to avail themselves of big loans, taking advantage of their positions on the boards of directors of the lending banks. In Satara district of Maharashtra a single individual who happens to be the chairman of a co-operative bank has benefited to the extent of Rs 35 lakh from the scheme.

Overdues are new loans

I organised interaction sessions in two villages of Satara district — Chinchani Vandan and Patkhal. The feedback from the farmers brought out some astonishing facts. The ADWDR scheme covers crop loans, investment loans for increasing production in agriculture as also investment loans in activities auxiliary to agriculture, such as dairy, poultry, piggery, and so on.

As regards the crop loans that are taken by the farmers for meeting costs of input such as tillage, seeds, fertilisers, manures, pesticides, power and labour, and which are supposed to be returned within 18 months, the whole scheme has become ridiculously pointless because of the widely rampant practice of conversion of old loans into new loans every year, year after year. This system works on the following lines.

At the opening of the crop season, a farmer who has not been able to repay his previous loans finds himself ineligible to get a fresh loan for the coming year. The Chairman/Secretary, very condescendingly, offers him a way out. If the loanee farmer can manage to pay the chairman/secretary about 4-5 per cent of the outstanding loan, he agrees to juggle the books of accounts to show that the old overdue loan has been settled and a fresh loan is paid to the farmer. Under this system, crop loans never become overdue. Consequently, the provision in the scheme for the write-off of overdue crop loans is entirely redundant.

In the two villages where I interacted with the farmers, I came across only one case of overdue crop loan. The case of this farmer is very peculiar. He and his brothers live together and cultivate the land together. However, on paper they are all small farmers because the ancestral land has been subdivided between them in successive generations. It so happened that in the last two years, for some reason, he was not able to convert his old crop loan into a fresh one. As a result, he will benefit from the loan waiver scheme. The small as also the large farmers, thus, gain nothing from the waiver of the overdue crop loans.

Investment loans

As regards the investment loans the position is more bizarre. The certificates issued to the farmers mention the amounts of loans taken between 1997 and 2007 and then mention the amounts overdue without mentioning the amounts repaid by the loanee farmer time to time.

The certificates do not mention the rates at which the interest was calculated nor is there any way of knowing for sure if the lender bank has charged simple interest or compound interest. There is, thus, no way of knowing if the lending banks have observed or flouted the instructions of the Supreme Court against charging of compound interest.

As if this is not enough, there is an even curiouser stipulation. The ‘other farmers’, that is those holding more than five acres of land, in order to be eligible for the debt relief, are required to repay the first instalment of 25 per cent of the overdue amount on or before September 30, 2008.

Now, the farmers in Maharashtra are unlikely to get any new income this year before that date. They would, hence, not be able to respect the schedule of repayment and would, automatically, be disqualified not only from the debt relief but even from getting fresh loans. The only way they can save themselves is by taking recourse to borrowing from the private money-lender. The ADWDR scheme thus contains within itself the seeds of a new generation of farm indebtedness.

The UPA Government, in order to avoid owning up its responsibility for the farmers’ indebtedness and mass suicides, announced a highly legalistic scheme. Indications are that the scheme will itself prove a massive liability for it in the ensuing general elections.

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

Related Stories:
Farm loan waiver: An ill-conceived package
Loan waiver gets bigger with inclusion of ‘other’ farmers
‘Farm debt waiver scheme completed in 30 days’
Minister reviews progress of debt waiver scheme in Bengal

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