Why loan waivers do not curb farmer suicides

Farm loan waiver to provide relief to distressed farmers has become a common practice. But the waiving of loans has not really addressed the predicament of the small farmers, if we compare farmer suicides in a State that also offered farm loan waiver.

Ninety per cent of farmer suicides in India during 2014-2018 took place in five States — Maharashtra, Karnataka, Telangana, Madhya Pradesh and Chhattisgarh. Together, these States have waived farmer loans worth ₹93,614 crore — that is 59 per cent of the total agricultural loan waiver in India during this period.

Out of total farmer suicides during this period, 41 per cent suicides took place in Maharashtra, which has waived ₹36,914 crore.

Interestingly, loan waiver is among the popular schemes even in States that have seen fewer farmer suicides compared to the top five States that reported the highest number. States including Rajasthan, Tamil Nadu, Uttar Pradesh and Punjab reported less than 1,000 farmer suicides during this period. But Uttar Pradesh waived ₹25,233 crore while Rajasthan waived ₹15,603 crore in this period.

Illegal credit system

Farmer leaders and activists have pointed out that loan waivers have largely benefited big farmers and not the small and marginal farmers (SMF), who don’t get loans from financial institutions. These farmers turn to private moneylenders. For example, the Marathwada and Vidarbha regions of Maharashtra, known as farmer suicide zones, have a strong illegal credit system where thousands of moneylenders provide loans to farmers, charging excessive interest rates.

Many of these farmers have extremely small holdings and hence cannot approach the formal lending system. According to the Ministry of Agriculture, roughly 85 per cent of the total operational holding in the country (about 43 per cent of the gross cropped area) is with the SMF category. There are around 21.6 crore small and marginal farmers (or 4.3 crore families). The SMF are the most affected during times of floods, droughts, and other natural calamities and majority of them are more prone to commit suicide due to pressure from the moneylenders.

It’s not only the State governments that are providing financial relief to curb farmer suicides and reduce agrarian distress. With a view to provide income support to all farmer families across the country, to enable them to take care of expenses related to agriculture and allied activities as well as domestic needs, the Central government started the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN). The scheme aims to provide a payment of ₹6,000 per year, in three 4-monthly instalments of ₹2,000, to farmers’ families, subject to certain exclusions relating to higher-income groups.

The way out

But experts say that such financial aid and loan waivers are not a lasting solution to farmer distress.

The government had undertaken a study “Farmers Suicide in India: Causes and Policy Prescription” in 2016-17 through the Institute of Social and Economic Change (ISEC), Bengaluru. The study covered 13 States and concluded that frequent crop failure due to the vagaries of the monsoon, absence of assured water resources and attack of pest and diseases are the most important causes of farmer distress.

The study suggested that there is need to bring individual farmers under the ambit of crop insurance and insisted that judicious use of available water is required. Government intervention through MSP covering the cost of production plus reasonable profit margin will also help, the report added. Risk-hedging through crop and enterprise diversification should be encouraged to reduce farmers’ distress, aiming at sustainable income, and regulation of the informal credit market is necessary, the study added.

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