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Fooling Farmers

Fooling Farmers

They were again on the roads, agitating and demanding some respite. They were beaten up and a few were killed. Some say the agitation was politically motivated and some others blame the government for their plight. This has been their condition for the last 70 years. This time the problem was in Maharashtra and Madhya Pradesh. The other day it was in Uttar Pradesh. There could be any other state in the coming days.

There have been many stories about how and what led to this unrest. There were some suicide notes that were handed over to the Police when the story-tellers were no more. This has been a never-ending tale for the Indian farmers, who toil in rain and shine so that the entire country can have food.

Barely two months after the UP government announced a farm loan waiver, the state governments of Maharashtra and Madhya Pradesh followed suit. The farmers have been agitating for the last 10 days and the chief ministers, who were initially reluctant, could not find any other way but to announce a loan waiver with immediate effect. 

No one has any idea about the extent of the loan waiver — who all will get the benefit and for how long? But, then, a few words mentioning waiver had such a magical affect that the farmers relented. Chhattisgarh seems to be the next state where such an announcement is likely to be made. The Congress manifesto, too, had promised such a waiver in Punjab.

Simply put, it starts with elections and continues till elections are announced again with pro-farmer manifestoes. The Adityanath Yogi government announced a loan waiver at its first cabinet meeting. After all, it wanted to prove that it could walk its talk.

In a country where petrol and diesel prices change every day, none of the stalwarts seems to have the will to end this vicious circle. No one could understand what ails the agriculture sector. And no one could actually think of a solution. What a pity!

Poor farmers are used as scapegoats for assuming power. And when a disaster strikes, the leaders show their face and make another announcement, presenting themselves as their all-weather friend.

Even though the Centre has stayed away from announcing such relief packages except in 1990 and 2008, the state governments have taken such decisions from time to time. The VP Singh government announced the bailout to fulfill the promise made to the farmers in the run up to the elections in 1990. The Congress government made a similar announcement in 2008 just before the Lok Sabha elections in 2009.

Have such waivers actually helped the farmers? The Comptroller and Auditor General (CAG) of India in its report had a different story to tell. A field audit was conducted to verify the authenticity of loan waivers announced by the Central government in 2008. Out of the 25 states, it was found that only 13.5 per cent farmers were eligible for getting a loan waiver. However, the lending agencies did not consider their case.

The report says that of the 90576 farmers who were given loan waivers, 8.5 per cent were not eligible. A large number of beneficiaries, whose loan was waived off, did not take loan for agricultural practices. This involved an amount of Rs. 20.5 crore. The CAG found that 2824 farmers had submitted manipulated documents to avail of the scheme. Around 1500 farmers were not given any benefit. On the contrary, the money was given to a few micro-finance institutions!

Besides, the lending agencies did not issue any debt waiver certificate to 34 per cent of the farmers and they could not take fresh loans.

The government repaid interest amounting to Rs. 5.33 crore to the lending agencies, which was against the guidelines. The scheme entitled the lending institutions to bear the burden of interest. The scheme was not monitored by any agency. So this was the plight of farmers despite a loan waiver of Rs. 52,000 crore.

While the RBI Governor termed loan waivers as moral hazard during April 2017, political parties seem to have made it a placard to placate the farmers. And the real beneficiaries do not get any benefit. They suffer silently at the cost of those who are able to produce certain documents.

In a country, where most of the agricultural activities depend on rain, the drought-hit farmers do deserve some relief but not at the cost of credit discipline. A study conducted by the Indian Statistical Institute Kolkata in collaboration with the World Bank reveals that after the loan waiver scheme of 2008, there was an increase in repayment defaults. The farmers, who at some point of time were very particular in repaying the debt, too became defaulters.

The banks too had to suffer after the massive loan write-offs. The non-performing assets (NPAs) shot up drastically from 2009-10 to 2012-13 when the scheme was implemented.

The debt waiver schemes being announced one by one in most of the states are likely to have a ripple effect on the economy. As the Centre refused any support to the state governments, the schemes will affect investment in the agriculture sector. Either the governments will borrow money to fund the scheme or they will cut the budget to be spent on agriculture. In other words, the state governments will not be able to implement their plans and an investment-hungry farming sector will remain stagnant.

The politically influenced move has neither helped the farmers nor the country. The temporary relief has actually been a hurdle in the growth of agriculture as a majority of the farmers could not adopt new technology and remain stuck in the vicious circle of loans.

According to the government data, Rs. 12.6 lakh crore was disbursed as agriculture loan as on September 2016 and more than 50 per cent of the farmers were in debt with an average credit of Rs. 47,000. A study conducted by HSBC global research in 16 states recently concluded that the state governments crossed their fiscal deficit targets during FY 17. While there was an increase in current account expenditure, there was a considerable decrease in capital expenditure. In such a scenario, farm loan waiver is likely to stretch the fiscal deficit even further.

The report submitted by the National Commission of Farmers gave a slew of recommendations for improving the condition of farmers way back in 2006. Even after more than a decade, nothing substantial has been done in this front. The formula suggested by MS Swaminathan for fixing the Minimum Support Prices (MSP) — at least 50 per cent more than the average weighted price — has remained on paper only. The BJP in its election manifesto promised to implement the recommendations to bring  acche din for the farmers. But as has been with the formula, the electoral promises remained a  jhumla. One can only hope that the BJP does not apply the trick of copying and pasting the formula in its election manifesto for the 2019 elections!

In a way, loan waivers recite a tale of half-hearted approach of the government towards implementing reforms in the agriculture sector. More than seven decades after independence, we do not have a national agriculture policy. It shows how fragmented our approach has been towards our farmers, who incidentally form 58 per cent of our population but contribute only 17 per cent to the GDP. And whatever they produce, it rots in the open. For instance, 2016-17 was a bumper year as production of pulses shot up by 35 per cent. With little storage facilities, farmers had to sell in distress. What a waste of resources, Modiji!

(The writer, a company secretary is director, communications, Deepalaya and can be reached at )

(Published on 19th June 2017, Volume XXIX, Issue 25)