Farm loan waivers are back in the news headlines with a bang. The politically astute, but an absolutely ridiculous move in every other way, by the BJP in Uttar Pradesh, has predictably opened up a Pandora’s box of the same. A self-goal by the BJP, who talks about a new working style, but falls back to polemics.
The opposition parties in Maharashtra and Madhya Pradesh have already started the clamour for loan debt waiver for farmers. Most likely, in the coming days, other states will join in, and a movement will be created. Crying in the name of the farming community is the sure fire way of getting back into political relevancy. It also creates a lot of angst in the urban population, which is quite natural
The last farm loan waiver was done by the UPA govt in 2008-9, and reaped the political harvest in the national elections of that year. It cost the exchequer 66000 crore, and along with other freebies took the nation on a path of profligacy and high budget deficits, with very high inflation in double digits.
Does farm loan waiver help the small farmers? In study after study and multiple reports, it is clear that the smaller the farmer, higher the chance that he is not in a position to take a loan from the banking / official system. It is estimated that over 80% of the farmers do not have access to official system of loans, although the farm loan waiver is always announced with them as targets. That is the whole tragedy of the waivers. The Big farmers, who don’t need waivers reap the biggest benefits, if not all. Seems they are more political targets, rather than economic ones.
In Maharashtra loans worth 7000 crores were waived off in 2009, and it was touted that this would help in eliminating distress in farmers who were committing suicides. Did it really help? As per records, after 2009, over 16000 farmers committed suicide till the calendar year 2016. That is only slightly less than the average of previous 6 years.
As a generational BJP supporter, it was really disheartening to see the party use this method for vote gathering. Personally, had thought that such old style methods had been given up for good by the party and we would be watching something innovate and good to help farmer’s distress. Is there no other remedy which could be sued to alleviate farmer’s distress?
The need of the hour is to get more and more farmers into the official banking system and extend loans to them. With the Jan Dhan Yojana, it is estimated that over 98% of households now have a bank account. This needs to be leveraged to benefit the farmers.
Banking credit to agriculture, for the year 2017-2018 has been fixed at about 10 lac crores. It has been over 7 lac crores for over 4 years now. These loans qualify for the priority sector lending, and banks have to extend these loans compulsorily. Unfortunately, most of these loans are garnered by the big farmers, corporations and others, with the small farmer getting a very small percentage of the same. How to solve this problem of poverty amidst plenty?
The Government needs to come out with a comprehensive agricultural loan policy. Start treating the farming sector as an industry. As the MP CM says “Kheti, faayde ka dhandha hona chahiye”.
Like the MUDRA loan for the non-farming sector, we need a MUDRA type scheme for the farmers, specially the small farmers.
From the 10 lac crores, a significant percentage, say 25% should be given to small farmers, having less than 2 hectares (as an example). The loans should be given for a fixed period of 5 years with yearly/ semiannual repayments. If MUDRA loans can be advanced without any collateral, why cannot farmers get loans without the same? These loans should be combined with the soil health card and Pradhan mantra fasal bima Yojana. Even the fertilizer subsidy can be included in this mix. Banks also have a guarantee thru the PMFBY.
The loans should be treated as a commercial transaction and the loaners should be allowed to set a reasonable interest rate for the same. State Governments, if they so wish, can do some interest subvention and pay the same directly to the loaners. With the government wanting to increase cashless and online transactions, this method would provide a great impetus.
Once a farmer is assured of loans for a period of time, they can plan things out in a better way. When you compare productivity of farms in different states, you wonder what the output from farmers can be if good practices are used. An increase in farmer’s income, with increased productivity, is the biggest poverty alleviation program possible
In the name of socialism, farmers have been denied their due, apart from polemics like “Annadatta”, and a romanticized version of rural living. Farmers are not beggars asking for doles and freebies. They just want to get what is their due, which, frankly has been denied to them till date. And Farm loan waiver is certainly not what is going to get or give the farmers what they deserve. Hope better sense prevails.
Sanjay Nath
March 17, 2017Great work and analysis Mukul,this entire farmer loan waiver is a humbug largely. A system put into play by The Power man and his lobby to generate surplus black grain for his coffers. His nephew, came out with greater remidies,pissing in a dam would do what development via irritation can’t. Where are the Dam dams??? Where are silos, to store grain in large numbers….are we awaiting another monsoon for the harvests to persish. Mr. P has scammed the nation in several ways…well it’s time to wake up now.