Farm Loan Waivers – No
longer the need
B.
Yerram Raju
From corporates to the individuals, irrespective of
activity, want their loans to be waived. Who wants to live in debt? But can the
economy giving such waivers live without debt? Simply put, a firm ‘No’. The
rising public debt of the sovereign puts not just the present but the future
citizen in debt for it is the next generation that has the responsibility to
repay. Farm sector is not just exception, but the future is not just generation
away but only a crop season away. This should clear the way for the argument
against the loan waivers of any kind save very serious exceptions.
Politicians and farmers are good friends close to the
elections and bad enemies to farm economics. Rahul Gandhi stirred the hornet’s
nest at Warangal on the 6th May while announcing that if Congress is
elected to power in Telangana, it would waive off Rs.2lakhs for each farmer
from his debt portfolio. Such slogans pre-elections are not new to the farmers,
ever since V.P. Singh/Charan Singh duo indulged in crop loan write-off in 1990s.
The scheme received the ire of Comptroller and Auditor General for its bad
implementation. RBI repeatedly advised the political parties not to indulge in
this luxury as the states do not have that much resource apart from encouraging
bad borrower behaviour. But do all farmers look for such write-off? What
exactly they need?
Doubling farm income remained a far-cry leading scores
of farmers to double-up to Delhi to fight against what they considered as bad
farm laws. The much-needed farm reforms that were bypassed during the first
phase of reforms in the 1990s could have been triggered had there been
political sagacity and cooperative federalism. Be that as it may, it has become
difficult for governments to do what the farmers want, save the exception of
government of Telangana, that I would explain latter. There are good number of
farmers who took to mixed farming, organic farming, natural farming, and use of
technologies intensely.
Farmer is generally short of cash at the beginning of
the crop season. This leads him/her to go to the money lender who is wont to
give credit on his own terms. The revenue from his previous crop would not be
to hand at that moment as it would have been up for sale but not sold. If he
had no dairy or poultry or allied activity to come to his rescue, even family
would be on the brink of starvation despite his four or five acres of land!
Government of Telangana is the first government to
think of giving Rs.10000 at the beginning of the season in cash. It also
arranged for insurance against untoward calamity in the family while working on
the farm - may be a snakebite or an
accident or loss in family up to Rs.5lakhs. Both these schemes are monitored by
the Chief Minister to ensure that there is no slip up in the releases. The
result is that farmer does not have to wait at the banker’s gate for a loan! On
top, all the 789 Primary Agricultural
Cooperative Societies in Telangana have been digitized and linked to core
banking solutions of around 298 DCCB
-branches and State Cooperative Bank. This opened a reliable credit window for
the farmers when credit is needed. Marketing paddy, the principal crop of the
state is engaged in a street fight between the union and state. The result,
however, is good as the farmers realized that they should go more for alternate
crops that have better markets and yield better price. When asuras and devas
churned the ocean, both milk and poison emerged and the churning is still on.
Illustratively, Saritha, a commerce postgraduate from Rapakapalle
village in Hanumakonda district took to zero budget natural farming on her
four-acre land. She collected rainwater to farm a fishpond; honeybee-keeping,
polyhouse for vegetable cultivation and an acre of paddy cultivation. She
established two retail outlets for her farm produce and multiplied her farm
income. She is proud to say that she could hedge the risks of farming through
mixed farming as one or the other agricultural activity gets her sustainable
income year-long. She also influenced two thousand farmers in and around her
village. There are many more of her ilk in Telangana.
Credit for farming is a necessary but not sufficient
condition for sustainability because farmer’s liquidity is always locked up
either in soil or silo. As long as farmer’s credit requirement is viewed in
exclusion for production purposes alone, the empty valet of farmer stares at
the banker. In spite of nearly five decades of engagement of banks with
farmers, bankers have no trust in them. Similarly, farmers also lack confidence
in banks that they would meet their genuine requirements in time. It will be
interesting to see from the RBI data that the banks lent to farming mostly in
irrigated tracts – nearly 83% of lending took place in just twelve states. National
Bank for Agriculture and Rural Development (NABARD) took up watershed programme
on a mission mode that helped many water-starved tracts could get crop-relevant
water using latest technologies. Kisan Credit Card has become a fancy
instrument that did not give credit comfort to the farmer. Revisiting this
instrument and modifying its delivery mechanism is more imminent now than ever.
The banks’ concerns are equity and discipline while
the farmers’ concerns are adequacy, timeliness, and multipurpose credit –
production, consumption, and marketing. Farming unlike any other activity is
prone to risks arising from natural calamities and each calamity is different
in nature and dimension.
Chanakya in his magnum opus Artha Sastra clearly
mentions that if a natural calamity like cyclone, holocaust, continuous drought
for over two years, repeated floods, tsunami etc., it is the responsibility of
the state to bail out the farmers by relieving him from all the debt and give
cash to him for sustenance. He never advocated loan write-off as it would
debilitate the farmer of his own capacities and creates trust-deficit with his
lender. Strengthen the insurance mechanism for farming sector. Make available
lending to farmer at no more than four percent per annum. Announce the produce
price well ahead of the season. Interest reimbursement is a budget game and put
an end to it.
It has become a fashion for all the political parties
to announce loan write-off from the state exchequer. It is difficult to imagine
that they are ignorant of the consequences. But they indulge in this political
ploy. A responsible democracy like ours shall refrain from such sloganeering
and Election Commission should impose a ban on such announcements.
The views are author’s own.
https://timesofindia.indiatimes.com/blogs/fincorp/farm-loan-waivers-no-longer-the-need/
