: AGRICULTURE, POLITICS AND CREDIT:
B. YERRAM RAJU*
The eight-day fast of the Opposition leader of Andhra Pradesh in the cause of a host of relief agenda for the farmers unfolded yet again the nexus between agriculture and politics. Many questions and few answers emerge from the episode in a State that still has a share of 23.9 percent (at constant 1999-2000 prices) in State GDP in the primary sector. There would appear to be a peculiar psyche of the farmers and the downtrodden. 62.2 percent of working population in the State is still dependent on rainfall and this is copious during the season – but at wrong time and with heavy flooding of farm fields destroying either the total crop or rendering unsuitable for consumption. The gross area sown in the State has gone up to more than 140lakh hectares during 2010-11 compared to 135.67lakh.ha. According to the State Government acreage under irrigation increased by a little over 5lakh ha.
The total food-grain production in the State reached an all time high of 204.21lakh tons during 2007-08 even amidst the adversities. Credit disbursed under priority sector in the State jumped from Rs.24346cr in 2004-05 to Rs.51487cr by March 2009 despite a host of relief and write-off packages in the interregnum. The estimated crop loss in paddy, cotton, and tobacco alone, not to speak of vegetables and other stored crop is in a little over 5lakh ha. Under the RIDF, NABARD created additional irrigation potential to an extent of 21.58lakh acres that enhanced the demand for credit from those farmers. Last year there were torrential rains and flooding of the most unusual order in Kurnool and other districts that led to the worst-ever flood calamity that still haunts the State Government due to poor delivery of the announced relief packages.
Then there is a spate of suicides on one count or the other. And yet the spate of farmer-suicides in December 2010 alone touched 137 – and just in October and November 2010 we heard of the suicides of the micro-finance victims in good numbers. Last year, there were suicides to bemoan the death of the former Chief Minister, YSR. Cash relief was announced to all these suicide-affected families from time to time either from the exchequer or the political parties. 63.41lakh farmers in the State got relief under the All-India Agriculture Debt Waiver and Debt Relief Scheme, 2008 to the extent of Rs.11353cr. 37lakh farmers got the benefit under the State Government relief package of Rs.5000 per farmer not covered by the AIDWDR to the extent of Rs.1820crores. The 16-suicide prone districts got the PM’s special relief package of Rs.9650.55crores. The package included interest waiver, loan reschedulement, irrigation, watershed, animal husbandry, plantation and horticulture etc. Where all these relief packages got delivered? Were they delivered in full? Why this phenomenon of suicides is rampant in Andhra Pradesh compared to the rest of the States that faced similar natural calamities. Is it inadequacy of package or improper delivery of the package or the agrarian structure or a combination of all these responsible for the politicians to reap a rich harvest?
State Government from time to time announced a slew of packages:
• Organic farming with an outlay of Rs.31cr to encourage use of vermin compost and improve soil fertility;
• Seed village scheme with the supply of foundation seed at 50 percent cost
• National Agriculture Insurance Scheme with village as insurance unit;
• Pilot weather based Insurance Scheme
• Farmers’ field school;
• Agriculture Technology Management Agency with 90:10 :: Central Government :State Government
• 3percent per annum rate of interest for prompt repaid agricultural loans
• Revamping the rural cooperative credit structure under Vaidyanathan package with about Rs.2100cr of which Rs.1872cr already released;
• Increased power supply to the farm sector at an enormous subsidy.
• Special efforts to increase area under pulses
• NABARD provided liquidity support to the State Cooperative Bank and RRBs to tide over the temporary liquidity stress caused due to implementation of relief packages of the order of a little over Rs.50000cr.
Still, not all the perfumes of Arabia could sweeten the little hands. The consumer in Andhra Pradesh, known as granary of rice, supplying huge quantity of rice to the central pool, pays Rs.25-30 a kg.
Structurally, the State has the largest sub-divided and fragmented holdings; there were no mutations carried out; owners migrated with farm riches to the urban and metro areas with investments in real estate, hotel and film industry. Nearly 85percent of the actual farmers are leaseholders and yet the joint liability group finance ‘innovated’ by NABARD (it is actually a rehash of the aborted group lending scheme of State Bank in the 1970s) did not take off. State Government’s persuasion also did not succeed with the Bankers in an environment of distrust and high risk of the clientele prone to high political interference with every party demanding at the time of repayment a write-off. Most of those who demand for such write-off are private money lenders and they have a vested interest in such write-off so that the money they lent could easily get recycled. I wish a detailed study into this aspect by an independent institution would disprove this hypothesis.
In a study undertaken by the author in 2007 on farmers’ suicides, the revelation was that the costs of agriculture continue to rise with no corresponding rise in returns – this is accentuated further with the implementation of MNREGA that pushed the labour costs to nearly 40 percent of total production costs compared to half of it a decade back driving many to move to substituting with technology; ever widening social divide in the villages and inexplicable leakages and private lending at huge cost. Despite all that the Banks show as flow of credit to agriculture, how many new farmers and how much of new credit and for what new projects had access to such increase leave many doubts than answers. Periodical write-off of credit is a serious disincentive to the flow of farm credit as equity and payment ethics are running counter to each other. You can’t keep on demanding write-off of credit and yet ask bankers to keep increasing credit flow. Bankers justifiably view lending to agriculture as a high-risk portfolio not withstanding the more favourable risk weights released by the RBI to respond to Basel II capital adequacy norms. The politician knows it and various committees in the past clearly voiced against the write-off and yet, both the centre and state governments indulge in this wasteful luxury. Are the politicians chasing wrong ends? If so, what is right? Nowhere in the world farming progressed without timely and adequate credit that get recycled with prompt repayments and insurance and guarantee mechanisms to respond to natural calamities appropriately.
Too many institutions claim support to farmer absorbing most of the subsidies and grants more by the deliverer than the farmer. There are twelve ministries from Government of India that have to join to decide on any support system for the farmer. Added to this there are at least five ministries at the State level that require cohesion. None of them joins a round table even once a year to reduce the institutional burden and increase the delivery of benefits to the farmer – whether it is input subsidy or rate compensation or market access. Environment and weather are hostile. Exploitation is at the hilt. Still, the farmer is feeding this country! Series of reliefs and loan reschedulements are like the serial bombs that would explode in the hand that holds. Series of reliefs and loan reschedulements are like the serial bombs that would explode in the hand that holds. We have to find solution where the problem exists. There is a nexus between agriculture, politics and credit in this democracy where illiterate vote bank is the raison de etre for a politician’s saddle.
(The Author is an economist and presently Member, Expert Committee on Cooperative Banking, Government of AP. The views expressed are personal. Can be reached at firstname.lastname@example.org)