KEY TRENDS
• The loan waiver and debt relief package announced by the Prime Minister of India provides for complete write-off of all outstanding debt held on December 31, 2007 to scheduled commercial banks and co-operative societies, of small and marginal farmers, that is those holding less than 2 hectares of land
• The Government of Kerala established a Debt Relief Commission, to identify the pockets and categories of severe agrarian distress and provide relief accordingly
• Minimum Support Price (MSP) for common variety of paddy increased from Rs.550 per quintal in 2003-04 to Rs.900 per quintal for the crop year 2008-09. In case of wheat, increase was from Rs.630 per quintal in 2003-04 to Rs.1080 per quintal for the year 2009*
• Agriculture credit flow was Rs. 2,87,000 crore in 2008-09. The target for agriculture credit flow for the year 2009-10 is being set at Rs. 3,25,000 crore**
• Under the interest subvention scheme for short-term crop loans to farmers for loans upto Rs.3 lakh per farmer, the interest rate has been fixed at 7 per cent per annum. However, additional subvention of 1 per cent on the part of the Government would bring down the net interest rate for these farmers to 6 per cent per annum**
• Under the Agricultural Debt Waiver and the Debt Relief Scheme, the last date to repay back 75% of the outstanding loans by farmers owning more than two hectares of land has been extended from 30 June to 31 December, 2009 due to late arrival of the monsoon**
• A special taskforce would be prepared to seriously check the debt crisis in Maharastra, where farmers have borrowed from private moneylenders**
• The allocation for Rastriya Krishi Vikas Yojana has been increased by 30% over Budget Estimates of 2008-09**
* Interim Budget 2009-10
** Union Budget 2009-10, which was presented by the Minister of Finance Shri Pranab Mukherjee on 6 July, 2009
**page**
• The draft policy, as suggested by the National Commission on Farmers, calls for developing and introducing a Livelihood Security Package for farmers by providing them technology choice according to agro-ecological conditions and market demand; soil health enhancement and water conservation; quality and affordability of inputs; credit and insurance and market tie-up, besides necessary health care facilities linked with the National Rural' Health Commission.
• The loan waiver and debt relief package announced by the Prime Minister of India provides for complete write-off of all outstanding debt held on December 31, 2007 to scheduled commercial banks and co-operative societies, of small and marginal farmers, that is those holding less than 2 hectares of land.
• For all other farmers, there will be a one-time settlement for the outstanding debt, whereby 25 per cent will be written off if the farmer repays 75 per cent.
• It excludes from full benefits all the farmers on dry land and poor quality land who hold more than 2 hectares, even though studies show that they are among the worst affected from the agrarian crisis. This package excludes the majority of farmers who have taken debt from private sources..
• The Government of Kerala established a Debt Relief Commission, to identify the pockets and categories of severe agrarian distress and provide relief accordingly
• In a bid to boost procurement of grains and provide competitive prices to farmers, the minimum support price (MSP) for rabi crop for the 2008-09 season has been raised in January, 2009. The MSP of wheat, which earlier was Rs.1,000 per quintal for the 2008-09 marketing season, has been raised by Rs.80 to Rs.1,080 per quintal. The minimum support price (MSP) for the common variety of paddy was raised to Rs. 850 a quintal from Rs. 745 and for Grade A to Rs. 875 from Rs. 775 as an “ad hoc measure.”
According to the Interim Budget 2009-10,
http://indiabudget.nic.in/ub2009-10(I)/bh/bh1.pdf:
• Plan allocation for agriculture increased by 300 per cent from 2003-04 to 2008-09. Rashtriya Krishi Vikas Yojna launched in 2007-08 with an outlay of Rs.25,000 crore to increase growth rate of agriculture and allied sector to 4 per cent per annum during Eleventh Plan period.
• Agriculture credit disbursement increased three times from Rs.87,000 crore in 2003-04 to about Rs.2,50,000 crore in 2007-08.
• To strengthen short-term cooperative credit structure, revival package in 25 states involving financial assistance of about Rs.13,500 crore is being implemented.
• Interest subvention to be continued in 2009-10 to ensure that farmers get short-term crop loans upto Rs.3 lakh at 7 per cent per annum.
• The Agricultural Debt Waiver and Debt Relief Scheme, 2008 was implemented by June 30, 2008 as scheduled. Debt waiver/debt relief amounting to Rs.65,300 crore covers 3.6 crore farmers.
• Despite higher procurement cost and higher international prices during the last 5 years, the central issue prices under Targeted Public Distribution System (TPDS) maintained at July, 2000 level in case of Below Poverty Line (BPL) and Antyodaya Anna Yojana (AAY) categories and at July, 2002 levels for Above Poverty Line (APL) category.
• Minimum Support Price (MSP) for common variety of paddy increased from Rs.550 per quintal in 2003-04 to Rs.900 per quintal for the crop year 2008-09. In case of wheat, increase was from Rs.630 per quintal in 2003-04 to Rs.1080 per quintal for the year 2009.
According to the Report of the Expert Group on Agricultural Indebtedness (July, 2007), http://www.igidr.ac.in/pdf/publication/PP-059.pdf:
Recommendations
• There is an urgent need to expand the production base of agriculture with emphasis on small and marginal farmers so as to integrate them with mainstream development. This calls for appropriate technological innovations, institutional alternatives and introduction of novel instruments of intervention.
• Institutional credit availability to agriculture should be increased, excluded sections of the farmer households be brought into its ambit and a qualitative improvement in the credit delivery arrangements be brought about. The debt burden of farmers to informal sources should be reduced by formalising it through transferring the informal debt to formal institutions.
• Rainfed areas are particularly prone to year-to-year fluctuations of production and degradation of environmental resources. Concerted efforts are needed to rejuvenate their natural resource base as also to stabilise and augment the income sources of farm households.
• There is need to introduce space and information technology for weather forecasting.
• To ensure that rural development and poverty alleviation programmes benefit poor farmers, farmers’ organisations should have a role in their design, implementation and monitoring.
• The Government of India responded to the agrarian crisis through a package of relief measures for 31 distress-affected districts spread over Andhra Pradesh, Karnataka, Kerala and Maharashtra. In addition, the Governments of these states, as also the Government of Punjab, have come out with relief measures, inter alia, providing compensation to the bereaved farmers’ families
• It also recommends continuation of ‘Non-Credit Component’ of the Prime Minister's Relief Package for two more years
• The Expert Group recommends that the main focus of the programme of ‘financial inclusion’ should be on the basis of credit needs of all small borrower households. Institutional credit should be extended to those excluded farmer households who do not have access to any source of credit.
• Urgent steps should be taken to set up mobile branches of banks in rural areas to ensure that the farmers are served at the doorstep, simultaneously reducing transaction costs on either side
• The Expert Group recommends the conversion of the Kisan Credit Card (KCC) into a full featured Bharat Kisan Card (BKC) – an electronic document to be issued to each farmer incorporating the details of land, buildings, other assets and those of the credit facilities enjoyed. This has to be put on a mission mode.
• The Lead Bank Scheme (LBS) was designed to bring about close coordination between district planning authorities and banking institutions. In the context of emergence of new institutions such as federations of farmers’ SHGs and the growing need for credit counselling by farmers, the Expert Group recommends that RBI should revitalise LBS
• The Expert Group recommends that appropriate legislation should be enacted to facilitate creation of mortgages without procedural complexities
• The Expert Group recommends early updating and computerisation of land records. This would facilitate noting the charge on the land, and improve availability of credit
• The Expert Group recommends that crop loans should be extended to tenant farmers on the basis of tenancy records. To achieve this, it is necessary to legalise tenancy with due protection to small and marginal farmers and put tenancy in the Record of Rights (ROR).
• The Expert Group feels that Micro Finance Institutions (MFIs) should be an integral part of mainstream banking.
• National Bank for Agriculture and Rural Development (NABARD) should provide effective guidance and training to the banks in the formulation of projects related to agriculture and the rural non-farm sector.
• The Expert Group recommends that the banks should continue to make special efforts to induct qualified graduates in agriculture and allied sciences in their staff
• The Expert Group is of the view that the 18 per cent prescription of priority sector lending to agriculture by banks is a long-standing commitment, as a matter of public policy. However, this target is not being met by the banking system and there is a huge gap. The Expert Group recommends that the Government should ensure that banks fulfil this commitment.
• The Expert Group also recommends a Farmers Livelihood Improvement Mission (FLIM) at the state and district levels headed by the Chief Minister and the District Collector respectively. The mission should be supported by a Livelihood Support Centre (LSC) having professional expertise and manpower to organise the farmers, identify economic
• opportunities for the farmers, particularly for small and marginal farmers and create projects and systems in coordination with different stakeholders.
• Given the importance of the crop insurance scheme for covering yield risks, the Expert Group recommends that a high level committee should thoroughly evaluate the scheme with a view to making it more effective
• The Expert Group feels that the high level committee recommended above should also make a comparative evaluation of crop insurance, rainfall insurance and insurance based on moisture stress indices derived from satellite imagery data
• To mitigate the impact of price collapse in cases of commodities not covered under Minimum Support Prices (MSPs), the Expert Group recommends that financial support may be provided to farmers out of a ‘Price Risk Mitigation Fund’
• The Expert Group recommends that surveillance and advance crop assessment systems should be initiated in distressed districts of rainfed areas by using satellite imagery.
• The Expert Group further recommends that NRSA should strengthen its Research and Development (R&D) to establish links between satellite imagery data relating to soil moisture/ vegetative cover and actual yields based on crop cutting experiments
• An adequate number of input testing laboratories needs to be opened at the panchayat/block level to facilitate quality checks of inputs such as seeds, pesticides and fertilisers.
• The Expert Group further recommends that the extension system should be revived by strengthening the linkage between agricultural universities and extension personnel, setting up of Krishi Vigyan Kendras (KVKs), agri-clinics, Agricultural Technology Management Agencies (ATMAs), farmer field schools and technology kiosks. Adequate budgetary provision should be made for reviving the agricultural research and extension system
• The Expert Group underlines the need for expanding the livelihood opportunities for the rural population and recommends that income diversification opportunities should be created by promoting allied agricultural, agro-processing and other rural non-farm enterprises with a view to improving the sources of income of the farmers in general and the small and marginal farmers in particular as well as that of landless agricultural labourer households
• Expenditure on health is an unforeseen burden that leads to heavy borrowing, largely from informal sources, by affected families. This calls for immediate steps of strengthening the primary healthcare facilities. In addition, the Expert Group recommends implementation of health schemes for rural people.