Indian Agrarian crisis and the Great Government Loan Waiver

I attended the Nani Palkhivwala memorial lecture today, at Chennai. This lecture was given by the renowned Agricultural-economist-journalist-Magsaysay award winner Sri P Sainath – auther of ‘Everybody loves a good drought’.

The person introducing him on the dais mentioned that Sainath has walked over 7000 Kms, and is one of those who literally ‘walks his talk’.

The topic was on the Loan Waiver being implemented for farm loans.

Sainath is a gifted speaker. And like all good economists he has lots and lots of data at his finger tips. All that he said was backed by data. Here’s a brief of what he said. E & OE  – I would probably commit some errors in my communicating what he said – and for that I seek your forgiveness. I am human – not an economist.

Sainath began by giving data that showed that millions of farmers are moving out of farming – but no one knows where to. He talked of the loan waiver scheme which was announced by the Honorable Finance Minister P Chidambaram this budget,  and was proclaimed as ‘historic and unprecedented’. Sai proved that it was not so – indeed during the pre-independence days, Punjab had enacted a law for loan waiver, as did Madras Presidency soon after. And that even the Britishers used to use that as a tool, when the going was bad for agriculture – for the same goose laid golden eggs during the good times. With a flourish, he said that the film Lagaan had Karza-maafee in the theme.

He went on to point out a fundamental difference between the old waivers and the present one. The pre-independence waivers had non-bank money-lender debts also within their ambit. Whereas the current one addresses only bank loans. And Sai argued that the bank-credit was a minor part of the farmers debt. It was non-bank money lenders who are the major creditors. And he said the money lenders were not the traditional old Bengali movie type usurers. He said that now, the input companies – the ones supplying fertilizers, seeds etc – were active in money lending. They charged high rates of interest, made a lien on the produce and in general hijacked all the hay. He gave examples of other types of money lenders – including school headmasters…

Even in the bank-loan-waiver, he said that there was a gap between the policy announced by the Minister and the implementation rules announced by the Government. Apparently, the rules announced in May cover only a subset of bank-loans, having time cut-offs etc.

He argued that the policy did not treat differently wetland ands dryland farmers – and therefore was skewed in favor of wetland owners. He said that wetland holdings also tend to be smaller, and therefore within the purview of the maximum land holding allowed for loan waiver, and the farms were richer too.  He showed that the worst affected districts – Vidhardbha in Maharashtra, Anantapur in Assam, Hassan in Karnataka etc were getting a minor fraction of the benefit of the waiver. The major portions were going to the states and regions of the political powers that be – in Centre and State.

He said the scheme of giving cows to disadvantaged farmers in dryland areas was a joke. The cow needed more food than the farmer – who wasn’t able to feed his own family in any case. The cow was an additional burden that the farmer doesn’t want.

He said that waiver policy had also antagonized the good borrowers – those who repaid loans. And now, no one  wants to repay loans any more.

He said that the banks in the rural areas were working overtime to implement the loan waiver scheme and were totally confused by all kinds of directives – confusing the cranium off their heads. And to meet the numbers – they were using all tricks in the book. They included already written off loans in the waived amount sanctioned. Also agricultural credit was ill defined. You could get a cold storage in a metro and it was classified as Agricultural Credit. He gave a few hilarious examples…

Net so far: Waiver doesn’t cover all of the agri loan burden – only a minor part. And even in what it covers, there is a gap between policy and implementation. And the policy itself is skewed in favor of wetland farmers. The problem is acute for dryland farmers – where maximum farmer suicides have occurred.

Talking of farmer suicides – he argued that the accepted number of around 140000 or so since 1995 was the right most column in the stats which had the following columns – Total death, Distress Death, Non-distress death, Farmer among distressed, Non Farmer, ‘Eligible deaths’… So go figure the real number.

He said that now, if you go to Vidharbha the farmer doesn’t give you tea with milk. Only black tea. Milk is scarce, precious… Not the picture of a farmer that people have.

He argued that the shifting of farming from food to cash crops was completely erroneous in policy. He gave data about subsidies in USA and Europe. He argued that the cotton farming in India or other developing nations could not compete with subsidized US produce. He also argued that the usage of pesticides was excessive and dangerous in India. And that water contamination was a issue. In general, Indian agriculture, as it is now, is a horror story in the making.

He said that Export led policy of India, had led to export of farm produce from India, which, in some part, has gone as cattle feed to Europe. And that European cows are given state subsidy three dollars per day per cow. And that was more money than a days wage of the Indian farmer.

He said that the net waiver would be around 45000 Crores or so. And that was for millions of farmers. And that should be seen in contrast to greater waiver given to a few hundred business houses during the NDA regime. He did say that there was no difference between Congress and BJP. Tax waivers were given to IPL and such, and not to marginalized farmers…

He painted a real start picture of rural poverty. And farmer suicides. And skewed policies. And *&^% politicians – who couldn’t recognize a farmer if he hit them on the face.

He said that net-net: Farmers dont have money. Banks have run out of money to advance. Government doesnt have money to fund the banks for this whole thing. In short, there’s no money. And the rains are also delayed. No money to buy new seeds. Crisis.

In sum, he said that he, personally, wasn’t in favor of loan-waiver as a policy. But it should be used as a tactic during times of need. Even Britishers have done so. And that the problems of agriculture aren’t going to go away even if all the loans are waived.

He was pained by the fact that India, an agriculturally self-reliant country at one time, was now a net importer.

And that there are solutions to the problem. He and others have been telling Government about it. If only someone would listen…

Jai Sainath!

One Response to “Indian Agrarian crisis and the Great Government Loan Waiver”

  1. M A Prasad Says:

    In my opinion loan waivers always introduces more bank loan defaults – this is a vicious circle. What government should have done is to give some kind of grant to farmers for next agricultural season, banks should waive the interest – good if government susidiased this interest from their grant – and give institutional finance for next season. Also when farmer makes more money due to prevalent economic boom, some amount from them should also be taxed

    All this is unpalatable to politicians (all parties/tribes) and they spoil the environment. As long as vote bank prevails over all other democratic norms this situation would become from bad to worse.

    I met one honest farmer who has been repaying loans – even borrowing from money lender to repay to banks – he is double penalised

    I know nothing would improve ……..

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