Rhetoric no salve for farm distress -PP Sangal

-Financial Express

Farmers in India (also in undivided India) have generally been poor, and it has not been only the phenomenon of post-reforms period in Independent India, as believed by some. Yes, now it is becoming worse day by day. Farmers’ distress over the past few years has taken a new dimension so much so that political parties, without exception, are now using it as an opportunity to win elections by promising farm loan waivers if they come to power. This has already happened in 11 states since 2014-15 when the BJP-led NDA-2 came to power at the Centre. These states are Andhra Pradesh, Telangana, Chhattisgarh, Tamil Nadu, Jammu and Kashmir, Uttar Pradesh, Punjab, Karnataka, Maharashtra, Madhya Pradesh, Rajasthan. Of these, the two states of Chhattisgarh and Rajasthan (under both Congress and BJP regimes) have offered two waivers each.

However, after the results of the recently-held elections in the three states of Madhya Pradesh, Rajasthan and Chhattisgarh, a question is being asked whether farm loan waivers are the right strategy to combat farmers’ poverty? It has now been realised, by all rightly thinking persons, that loan waivers are only an election stunt and not a solution to alleviate farmers’ poverty on a permanent basis. There are two main reasons for this:

One, loan waivers do not benefit small and marginal farmers (who are the main suffers) because they normally borrow from non-formal sources such as private moneylenders, which constitute 40% of total loans, and not from any formal institutions like banks, etc. Thus, nearly 60-85% of farmer households, varying from state to state, do not benefit from loan waivers, which come with a lot of riders, too.

Two, and importantly, loan waivers limit the government’s resources for further development work, disrupt the credit cycle, and cripple the fiscal health of an economy because a huge amount is spent on loan waivers and which goes down the drain. Currently, the total agricultural loans amount to Rs 10.5 lakh crore, while only 23% of this has been waived since 2014-15. Can the states afford this?

After episodes of loan waivers, a new plan has been thought over to placate farmers. Telangana is the first case in point, which is paying Rs.4,000 per acre per sowing season to all farmers without any upper cap. West Bengal has announced Rs.5,000 per acre yearly to 72 lakh peasant families, but restricting only to small/marginal families, unlike Telangana. Odisha, too, under its initiative called the Krushak Assistance for Livelihood and Income Augmentation (KALIA), announced a special package of Rs.10,180 crore, in which 60 lakh small, marginal and landless farmers each would get Rs.10,000 in two instalments for rabi and kharif crops for three years. Lately, Maharashtra is also mulling with a similar idea. It should be understood that these direct cash transfers would entail large amounts like loan waivers. Will it be sustainable or not?

For benefiting farmers, the Centre, in conjunction with states, has fixed the minimum support price (MSP) for several major crops. This scheme is not working satisfactorily because of insufficient funds and inefficient management, resulting in distress selling by farmers at a price much lower than MSP. Further, it has been observed that crop insurance is not benefiting farmers due to its tardy implementation.

In the above scenario, it appears that neither loan waivers nor the recent experiments by some states for direct cash transfer will eventually help poor farmers. Here, what is required is to increase farmers’ incomes on a permanent basis, so that they don’t fall into frequent debt traps. From all considerations, I think MSP, along with other measures as described in my two earlier articles (‘Wither Jai Kisan?’, February 1, 2018,goo.gl/b2E1SB, and ‘Making agriculture climate resilient’, May 18, 2018, goo.gl/sJd47g), can provide an answer to farmers’ distress, provided the following steps are taken by the Centre and states:

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Financial Express, 21 January, 2019, https://www.financialexpress.com/opinion/rhetoric-no-salve-for-farm-distress/1449844/

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