A prescription for debt-free agriculture

IT leaves you dumbstruck. The Reserve Bank of India (RBI) has directed banks to go in for a ‘compromise settlement’ with 16,044 fraudsters, crooks and wilful defaulters people who can pay but give a damn who had collectively defrauded the banks to the tune of

Rs 3.46 lakh crore by the end of December 2022. After a cooling period of 12 months, the defaulters will be eligible for fresh loans.

This comes at a time when banks in Rajasthan have launched an exercise to impound the cultivable land of 19,422 farmers who have defaulted on loan repayments in the past four years.

A year ago, the Punjab State Cooperative Agricultural Development Bank had planned to issue arrest warrants to speed up the recovery process against 71,000 defaulting farmers. The unpaid amount was Rs 3,200 crore a fraction of what the wilful defaulters collectively owe. The bank had, in fact, served legal notices to 2,000 farmers with landholding exceeding five acres, which the state government subsequently withdrew.

While a majority of the wilful defaulters, including a number of crooks who have run away with public money, will get the banks to write off their outstanding amount as part of the ‘settlement’, defaulting Rajasthan farmers have no such choice. A majority of the farmers will lose their only source of livelihood. With the RBI throwing a ‘raksha kavach’ around the crony capitalists, it is only the poor farmers (and defaulters in other categories) who are left to fend for themselves. This shows how the banking system actually helps the rich become richer and the poor to be driven against the wall.

A few months back, a pregnant daughter of a farmer in Jharkhand was mowed down by the goons of a non-banking firm under the tractor that they were forcibly trying to drive away with. In the past, there have been reports of auctions of tractors and other machines that are seized by the banks. Not only confiscating the movable property of farmers, but also impounding their arable land and even putting farmers in jail for dishonouring the cheques (that are taken blank from farmers) are routine tactics. Across the country, such stories abound where high-handedness against the defaulting farmers adds to the agrarian distress, pushing them to survive at the margins.

Non-payment of dues eventually turns out to be a torture for the defaulting farmers. They may have genuine reasons, such as crop failures and a sudden crash in the prices, but for the banking system, even if the defaulting amount is petty, they are an easy target. Much of the farm suicides that happen and the agrarian distress that exists are because of the indebtedness, which are mounting with each passing year.

The National Crime Records Bureau (NCRB) has often recorded this as the primary reason behind farm suicides and the latest Situational Assessment Survey for Agricultural Households, released in 2021, has worked out that every farmer carries an average debt of Rs 74,121. With nearly 70 per cent of the farmers indebted, the average debt has steadily increased by 57 per cent since 2013.

Knowing that farmers have been denied their rightful income over the decades and considering that not more than 14 per cent of the entire harvest is procured at Minimum Support Price (MSP), for the farmers producing the remaining 86 per cent of the crops, the distress price they often get does not even cover the cost of production and, thereby, entails great pain, suffering, sorrow and mental distress. And finally, when the farmers fail to repay a bank instalment, even their lands are taken away. Imagine the mental strain the defaulting Rajasthan farmers must be under with the sword of Damocles hanging over their head.

This is the worry of a Karnataka farmer, Echaghatta Siddaveerappa. Hailing from Chitradurga district, he invited me a few days back to visit his village to see how they had found an ingenious solution to the vexed crisis. When a few farmers in his taluka received a bank notice asking them to pay the pending dues before the recovery proceedings were launched, these farmers came up with an innovative idea. Using the Swaminathan Commission’s formula to estimate the comprehensive cost of production plus 50 per cent profit, they packed their crop produce (equal to the amount pending against their name) and reached the bank’s office. They approached four banks, and asked the banks to accept their pending dues in kind.

“We took a crop loan from the bank. We produced a bountiful harvest. But with market prices remaining low, we are unable to recover even what we had spent. In that case, how do the banks expect us to pay back in time?” an anguished Siddaveerappa asked me, adding: “Sir, why should the banks take away our tractor and machinery or seek court’s orders to put us in jail? Why don’t they instead take our crops?”

Well, all said and done, there is certainly merit in what the angry farmers say. After all, they produced the crops for which the loans were taken. And they were willing to pay it back in kind.

To the question as to what the banks would do with the crop harvest, the answer is simple. If the banks can put to public auction the seized tractors or the impounded cultivable lands (for which they have no inbuilt expertise), they can also plan to put the harvested crop for sale. The banks will need to rent storage space or enter into an arrangement with Mother Dairy and other organised retailers like Reliance Fresh, Big Basket and Big Bazaar.

Certainly, this is not going to be a prohibitive cost that the banks cannot undertake. If the banks have the resources to write off corporate bad loans to the tune of Rs 13 lakh crore in 10 years, and are able to provide huge ‘haircuts’ to the defaulting units under the insolvency proceedings, it is time to put the profits where they belong. This surely is the prescription for a debt-free agriculture.