Starting with Tamil Nadu a few months ago, a sudden surge in farmers’ protests in recent days across the country – Madhya Pradesh, Maharashtra and Karnataka – seeking waiver of farm loans has put the respective State governments and the Centre on the defensive.
It all started ten years ago with the ₹70,000-crore loan waiver announced by the previous government.
More recently, the new government in Uttar Pradesh decided to waive farm loans worth ₹37,000 crore. Farmers in other States are now demanding similar treatment. How far is it justified?
Writing off farm loans is a perverse incentive that neither helps build capacity among growers nor improves the efficiency of farm activities. It is more a dole than anything else.
Usually, receiving such an unwarranted incentive becomes habit-forming and more often than not, promotes a tendency to treat farm loans as a grant rather than as a debt.
Difficult conditions Having said this, it is no one’s case that farmers should not be treated softly. Under Indian farm conditions, farmers are greater risk-takers, much more than industrialists, but their risk-reward profile is seldom favourable.
In most parts of the world, especially in developed economies, agriculture is almost invariably subsidised. Countries adopt various ways to deliver direct and indirect benefits to growers.
Often, they find ways to beat the commitment made under the WTO agreement (to reduce farm subsidies). In our country, agriculture enjoys little subsidy and often, suffers negative subsidy in the form of various restrictions.
The status of farmers differs across the country. For instance, in Tamil Nadu, Karnataka and parts of Maharashtra, inadequate rains, and lower prices have weakened farmers’capacity to repay loans.
The same cannot be said to be the case in Madhya Pradesh where agriculture is a success story of recent years. The annual average growth rate of agriculture in the last five years has been a spectacular 14 per cent.
Rural infrastructure, road connectivity, marketing reforms and easy credit have combined to encourage growers in MP to produce more. Diversification from cereals to high-value horticulture crops has also meant improved incomes.
Surely, farmers in MP are much better off than their counterparts in many other States.
However, the protests there seem to have garnered disproportionate media attention and coverage primarily because of the unfortunate events in Mandsaur.
Lasting solution Be that as it may, we have to find a lasting solution to the recurring problems of farm distress and waiver demands. Although agriculture is a State subject under the Constitution of India, it devolves on the Centreand the State governments to find practical solutions that would not unduly hurt the banking system and the fiscal situation while advancing growers’ interests.
As a short-term measure, instead of writing off loans, rescheduling or restructuring them should be explored. This is particularly important in States that have suffered natural calamities, such as poor rainfall.
From a medium-to-long-term perspective, it is vital to step up policy support, investment support and research support for agriculture.
Some of the important steps to revive agriculture include:
• Strengthening the input delivery system
• Rapidly expanding irrigation facilities
• Investing farming with multiple technologies
• Investing in rural infrastructure
• Using ICT to deliver price, market and weather information to growers
• And last but not the least, work to build capacity among farmers to withstand market volatility as integration with the global market grows.
Supply-demand mismatch All anti-farmer restrictions such as those on storage, marketing and export trade should be done away with. We have a surfeit of pulses with domestic production (224 lakh tonnes) and imports (64 lakh tonnes) reaching record highs. Yet, growers continue to desperately seek remunerative prices, but cannot because of poor exim policy support and inadequate procurement support.
Soyabean growers are disillusioned as the lucrative export market for soyameal has nearly dried up in the last two years. Low prices of pulses and oilseeds cannot be treated as isolated incidents. They represent a trend that cannot be overlooked. However, policy-makers seem to be clueless.
Preserving the innate pride of our farming community should be on top of the nation’s agenda. Genuine growers will go back to their farm once the southwest monsoon covers the entire country in the next two weeks.
The writer is an agribusiness and commodities market specialist. Views are personal