How a small farmer gets a big zero in Punjab

Ruchika M. Khanna in Chandigarh

The irony with government documents is that you have to read the fine print before coming to a conclusion. For instance the Punjab budget: the Congress government congratulating itself for unveiling its biggest pro-farmer measure of a loan waiver of Rs 2 lakh each for over 10 lakh farmers. These farmers are now “debt free.”

First, what the government has promised: 8.75 lakh small and marginal farmers (with land less than five acres) have taken average crop loans of Rs 2 lakh each - which is being completely waived. The remaining each of the 1.45 lakh small and marginal farmers has taken loans worth Rs 11 lakh- 12 lakh on average. They will get a relief of Rs 2 lakh each. Around 8,000 farmers who have committed suicide because of their debt burden will get a complete waiver on the entire loan amount. 

In all, the liability will be Rs 9,500 crore. But because many farmers have two or more loan accounts, the net liability is Rs 8,500 crore, which Punjab government is taking over, and will pay in annual installments. 

Now the fine print on the waiver and the claim for the highest allocations for agriculture. Against a pre-election promise of a complete debt waiver to 31.29 lakh farmers, who owe Rs 85,360. 86 crore to various banks, the waiver is a relief for only one-third of them. Those excluded are farm labourers, who account for half of farm debt-related suicide cases. Equally ignored are the farmers who borrow from arhtiyas (commission agents). 

Mutually acceptable debt reconciliation and settlement will be targeted in case of loans raised from non-institutional resources such as aarhtiyas, money lenders, commission agents or shopkeepers. The loan being waived is only the crop loan: the amount taken as a working capital for each crop cycle. So, any loan taken by farmer for either buying farm equipment; or for social functions will not be waived, even if it is less than the promised Rs 2 lakh.  The crop loan is generally never overdue. It is only when a farmer clears his dues that he becomes eligible for the next crop loan. As a result, NPA under this head is very low. So, those who already have a good credit rating are getting the waiver.

Given severe financial constraints, the government could not have taken over the entire crop loan. Punjab’s debt now stands at Rs 1.95 lakh crore. More than half of what the state earns goes towards  paying salaries and pensions. Even total small and marginal farmers — 17,19,038 — who have availed of agriculture loans worth Rs 36,600.37 crore, are not included in the scheme. Only the small (those having 2.5-5 acres) and marginal farmers (those with less than 2.5 acres) who availed of crop loans are the identified beneficiaries. 

A study on farmer suicides, conducted by experts from Punjab Agricultural University, Punjabi University and Guru Nanak Dev University, has identified almost 7,000 cases of suicides because of mounting agriculture debt. 

Dr Sukhpal Singh, one of the experts, says the actual farm suicide figure is much higher. Of the reported cases, 40% of the suicides were committed by farm labourers/landless farmers. 

The government is gloating over 65% hike in allocation for agriculture by marking Rs 10,500 crore. What it has not admitted is that Rs 7,660 crore of this amount will go towards paying power subsidy for agriculture, Rs 1,500 crore for debt relief, Rs 422 crore for agriculture research and education and Rs 125 crore for soil and water conservation. This means that only Rs 853 crore is left for spending on agriculture and allied activities.