Firstpost
Oct 10, 2018
Apart from a higher minimum support price
(MSP) for their produce – which the Union Cabinet announced last week for the
rabi crops as it had done for the kharif crops in July this year – the
agitating farmers have been insisting on loan waivers because of growing
indebtedness.
According to the Situational Assessment
Survey (SAS) of 2013 released in 2016, 52 percent of an estimated 90.2 million
farm households in rural India were indebted – up from 48.6 percent a decade
earlier in 2003.
In 2013, the average of outstanding loan
for farm households was Rs 47,000. The indebtedness went up progressively with
the size of landholdings – from 41.9 percent for those at the bottom with less
than 0.01 hectare to 78.7 percent for those with more than 10 hectare. Southern
states were at the top: Andhra Pradesh (92.9 percent) Telangana (89.1 percent)
and Tamil Nadu (82.5 percent). The states at the bottom were Assam (17.5
percent), Jharkhand (28.9 percent) and Chhattisgarh (37.2 percent).
In 2003, the average amount of outstanding
loan for farm household was Rs 12,585. Indebtedness was lowest among the
landholdings both at the top and at the bottom in terms of landholding – 1.4
percent for those with less than 0.01 hectare and 0.8 percent for those with
more than 10 hectare.
Almost 80 percent of indebted farmer
households possessed two hectare or less. Indebtedness was higher among the
southern states: Andhra Pradesh (82 percent), Tamil Nadu (74.5 percent) and
Punjab (65.4 percent) Kerala (64.4 percent) and Karnataka (61.6 percent). At
the bottom were Meghalaya, Arunachal Pradesh and Uttarakhand – with less than
10 percent farmer households indebted.
Clearly, the dynamics of indebtedness has
changed in many ways between the two surveys. Not only farmers’ indebtedness
has increased in terms of percentage of households but also in terms of amount.
The reasons for availing loans have also
gone through a sea change. In 2003, two most important purposes for taking loan
were ‘capital expenditure in farm business’ and ‘current expenditure in farm
business’, accounting for 58.4 percent of the total. The next was ‘marriages
and ceremonies’, followed by other non-farm businesses, education and medical
treatment. A decade later in 2013, the tables turned with farm loans in rural
areas accounting for only 28.6 percent of the loan while those from non-farm
business accounting for 60 percent.
Where do the farmers get their loans from?
The 2016 SAS report says, 60 percent of outstanding loans were taken from
institutional sources, the rest from non-institutional or informal sources,
including 26 percent from moneylenders. The share of institutional loan
increases with the increase in the landholding. While the poorest (landholding
less than 0.01 hectare) sourced only 15 percent of outstanding loans from
institutional sources, that for the richest (more than 10 hectare) was 79
percent. No wonder, when it comes to mounting an agitation, the rich and poor
farmers participate with equal enthusiasm.
Why has the indebtedness gone up? Poor
remuneration from agriculture produce has been cited as one of the prime
reasons. The input costs have gone up four times in the first half of the
current decade alone while income has more or less stagnated.
Nearly 57 percent of the average monthly
income from farm business (cultivation and farming of livestock) is spent on
crop production – 24 percent on fertilisers, 21 percent on labour and 11
percent on seeds.
The Government of India has taken three initiatives
to reduce debt burdens on farmers : (a) popularising Kisan Credit Cards (KCC)
for short-term loans up to Rs 3 lakh for cultivation at 7 percent and interest
subvention of 3 percent, (b) RBI is providing relief measures in areas affected
by calamities, including restructuring of loans and moratorium and (c) Pradhan
Mantri Fasal Bima Yojana (PMFBY) providing comprehensive insurance cover
against crop failures.
While PMFBY has not been as successful as
the government would have liked – from delay of claim payment for as long as 18
months to declining enrolment – prompting it to declare penalties for delayed
payments, there has been a substantial decline in long-term credit (or
investment credit) in agriculture, causing concern in many quarters. The Economic
Survey of 2015-16 pointed out that long-term credits had declined from 55
percent in 2006-7 to 39 percent in 2011-12 and sought immediate measures to
arrest the decline. This was followed by an increase in allocation for
long-term credit fund (LTRCF) of NABARD, the result of which is not yet clear.
There is yet another way of providing
relief to farmers, easy and popular though not necessarily the best way to
address the issue – waiving off their loans. Karnataka is only the latest state
to join the long list of states. Maharashtra, Punjab, Uttar Pradesh, Tamil
Nadu, Jammu and Kashmir, Chhattisgarh, Andhra Pradesh, Telangana and Puducherry
have announced farm loan waivers. But the central government has stood firm in
its resolve not to take recourse to it even when angry farmers from Uttar
Pradesh, Rajasthan and Madhya Pradesh have pitched their tents in the capital’s
outskirts. Less than a year to go for the general elections, the face-off
between the government and farmers has set the stage for an interesting battle
for the next few days.
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