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No freedom from debt

Shriya Mohan | Updated on January 09, 2018

Storming through: The protest in Mandsaur against the killing of six farmers in police firing soon spread nationwide as a protest against farm distress, bringing State governments to their knees   -  The Hindu

Two months since Mandsaur, the anger in the farm sector continues to simmer

It’s two months since six farmers died in a police firing in Mandsaur, Madhya Pradesh, agitating over farm distress. The incident became a flashpoint for farmer protests across the country, compelling Maharashtra, Uttar Pradesh, Punjab and Karnataka to offer farm loan waivers. But are the waivers just a populist measure to bypass the need to address structural issues? BLink talks to farmer activist Kavitha Kuruganti, from the Alliance for Sustainable and Holistic Agriculture (ASHA), on policy measures to restore farmer income and dignity of livelihood.

Why are farmers angry today? Why are they being forced to sell below minimum support price (MSP)?

There are several reasons for farmer anger and turmoil... Pressure of indebtedness, lack of support during disasters, debt burden increasing and prices being non-remunerative.

In this age of climate change, farmers hardly have any support. Disaster compensation payouts are as low as ₹2,750 per acre for rain-fed crops, if paid. The National Disaster Relief Fund norms are inadequate. Crop insurance remains badly designed and executed.

International agricultural trade pacts that Central government signs, are one of the reasons for the crisis. For instance, in free trade agreements like the Regional Comprehensive Economic Partnership (RCEP) where India is getting into partnership with 15 countries including China, Japan and New Zealand, Indian farmers are forced to compete with subsidised farmers elsewhere. When you enter into these trade deals without consulting State governments, without deep studies on possible impacts, Indian agricultural interests are traded away. In RCEP, tariffs will be kept very low. For many farm products India will have a zero per cent import duty. Our farmers will get priced out!

A study on farm suicides, commissioned by the Indian government, reveals that one of the proximal factors that triggers a suicide is institutional lenders sending notices, which threaten their collateral landholdings and the dignity of their livelihood.

About MSP, I want to add that a farmer’s real cost of cultivation isn’t estimated properly. But even this lower-than-actual estimate isn’t covered by the MSP. In cotton, for example, costs estimated officially are not covered by MSP announced. And we need to ensure margins over farmers’ costs, which are not given.

What can be done to ensure better prices?

First, an expanded public procurement within existing food schemes, which means purchasing a more diversified variety that includes pulses, millets, etc, and purchasing larger quantities. While as much as 25 per cent could be directly absorbed into the food schemes, the Shantakumar Committee estimated that presently it is no more than six per cent. Second, price compensation — where the government isn’t procuring, it should compensate for the price difference using mandi data. This is extremely useful for perishables.

Third, there should be effective market interventions for crops not procured for food schemes, and non-perishables. Market interventions help when prices are crashing in a mandi and the procured material should then be disposed of intelligently. Fourth, legal mechanisms should institute punitive measures for trading below MSP, and when mandi data shows cartelisation.

Fifth is strengthening farmer interface with markets through farmer-producer organisations (FPO). Can’t the government give storage and processing facilities, mobile vans and working capital for these collectives to find remunerative markets?

Prime Minister Narendra Modi had spoken about doubling farmer incomes but we can’t seem to act beyond loan waivers.

Loan waivers in times of acute distress bring immediate relief, but don’t address the root causes of the crisis. Any waiver providing relief from institutional loans is actually not addressing distressed farmers, most of whom are marginal and small farmers not under the ambit of institutional credit.

From NSSO’s (National Sample Survey Office) 70th round, we know that the outstanding institutional credit of small and marginal farmers up to two hectares of land, constituting 82 per cent of Indian farmers, is ₹67,469 crore, whereas for all other farmers, it is ₹1,19,115 crore.

However, when you talk about informal credit, small holders have ₹71,923 crore outstanding (more than their loans from formal sources), while larger farmers have only ₹36,897 crore.

That tells you that if you’re talking only about institutional credit, only a small number who have taken larger chunks of bank credit will benefit. If you look at the farm suicide data, most suicides are of smallholders and tenant farmers. If you really want to provide debt relief to the most vulnerable, you will have to think differently.

The Kerala Debt Relief Commission Act is a good example. Here, commission members camp in suicide-prone talukas. They summon citizens, adjudicate and settle informal loans too, including by a debt-swapping process. There is a one-time settlement attempted with the external usurious moneylenders and that loan is absorbed by formal banking. We’re proposing debt swapping to go hand-in-hand with waiver.

The Seventh Pay Commission places a ₹1 lakh crore public financing burden to cater to 58 lakh government employees. Loan waiver, from NSSO data, places ₹1.9 lakh crore burden to offer relief to 4.7 crore households, in comparison. After liberating farmers from current loans, formal and informal, we must ensure they don’t get into a debt trap again by having effective disaster relief, crop insurance and cost-effective agri-technologies

Published on August 04, 2017

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