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Let it be year of farm reforms

For four years in a row, Pradeep Sharma, a potato grower from Agra district in UP, has been suffering losses.

Let it be year of farm reforms

For real: Agrarian crisis is staring us in the face. We need to get to the bottom of it.



Devinder Sharma
Food & Agriculture Specialist

For four years in a row, Pradeep Sharma, a potato grower from Agra district in UP, has been suffering losses. Cultivating potatoes in 10 acres this year, he brought 19,000 kg to the mandi, only to get a profit of Rs 490 after selling his entire produce. In anger, he sent his paltry earnings to the Prime Minister, thinking perhaps ‘he will come to understand my problems’. A few days earlier, an MP farmer, Bherulal Malviya, had died of shock after selling his 27,000 kg of onions for just Rs 10,000 in Mandsaur market. 

Such distressing media reports depicting the misery of the farming community have hogged headlines for some time now. With losses mounting over the years, farmers have been literally surviving on loans, taking credit from both formal and informal sources. As of September 2016, Rs 12.60 lakh crore was the outstanding agricultural loan. Compare this with the average income of Rs 20,000 per year in 17 states, roughly half the country, the desolation is clear.  

Picture the agrarian distress that prevails in the ongoing debate over whether farm loan waiver is the right answer to address farmers’ woes, and secondly, how will the state governments bear the fiscal burden? The speed at which the newly elected Chief Ministers of MP, Rajasthan and Chhattisgarh have announced waivers soon after assuming office, questions are being asked about the ‘economic viability’ of an otherwise ‘politically sound’ measure. The bigger question being tossed around is: Where will the money come from?  

It doesn’t end here. After Telangana launched the trend-setting Rythu Bandhu programme providing a fixed amount of Rs 8,000 per acre (now raised to Rs 10,000) per year as direct income support to farmers, it has triggered a chain reaction among states to announce similar or improved versions of financial aid. First, the erstwhile Congress government in Karnataka came up with similar package to provide Rs 5,000 per hectare to dryland farmers. After the recent electoral debacle in the Hindi heartland, and fearing the Congress and BJP’s promise to waive farm loans if voted to power, and obviously in an effort to woo farmers ahead of the forthcoming Assembly elections, Odisha declared an economic package. Instead of a waiver, it announced a Rs 10,180-crore package for three years under the Krushak Assistance for Livelihood and Income Augmentation (KALIA) programme for land-owning farmers, tenant farmers as well as landless labourers and sharecroppers. This will benefit 57 lakh households. 

Jharkhand was quick to follow it up with Rs 2,250-crore schemes to help 22.76 lakh small and marginal farmers with Rs 5,000 per acre, per year, with an upper limit of 5 acres. And while Haryana is contemplating a pension scheme for farmers, West Bengal has come up with the Krishak Bandhu Scheme, under which a farmer will get support of Rs 10,000 per acre, per year. It will provide a life insurance cover of Rs 2 lakh per farmer, irrespective of the cause, for farmers between the age of 18 and 60. The premium will be paid by the state government. 

After Chhattisgarh announced the waiver, Rs 1,248 crore has already been transferred to accounts of 3.5 lakh farmers in the first phase, waiving a maximum of Rs 2 lakh each. In Punjab, despite the slow progress, 4.14 lakh small and marginal farmers, who had defaulted on cooperative and commercial banks, have got a waiver of about Rs 3,500 crore. For the country as a whole, a total of Rs 2.3 lakh crore of farm loans announced by Karnataka, MP, Maharashtra, Andhra Pradesh, Rajasthan, Telangana, Punjab, Rajasthan, Chhattisgarh and Tamil Nadu will benefit an estimated 3.4 crore farm families. 

Compare this with corporate loan write-offs. According to the RBI, in the four-year period between April 2014 and April 2018, Rs 3.16 lakh crore has been written off, while only Rs 32,693 crore of the outstanding amount has been recovered. As on September 30, 2018, besides the PSUs, there were only 528 borrowers who had NPAs of Rs 6.28 lakh crore, while only 95 of them had defaults exceeding Rs 1,000 crore. While no questions are being asked about the ‘economic viability’ of the write-offs of a handful of corporate waivers, a lot of heat is being generated over farm loans. 

Meanwhile, gross NPAs have increased by a whopping 11.2 per cent, reaching Rs 10.39 lakh crore in 2017-18, and only Rs 40,400 crore have been recovered through the much-touted Insolvency and Bankruptcy Code (IBC) and Sarfaesi Act. The surge in NPAs is happening despite providing an economic stimulus of Rs 18.60 lakh crore to the industry in the past decade. It was in 2008-09 that the government started a stimulus package of Rs 1.86 lakh crore to the industry at the time of global economic meltdown in 2008-09, a package that still continues. In simple terms, the industry is getting a direct income support every year.  

Considered to be ‘less distorting’ than farm loan waivers, reports indicate that the Centre is looking at the possibility of providing a direct income support of Rs 4,000 to farmers. Estimates point that it will cost the exchequer Rs 2 lakh crore. While this may appear big, the fact is that Rs 4,000 a year is less than Rs 340 a month, almost equal to the price of two cups of coffee/tea at a trendy shop. If Rs 340 per month is considered to be an appropriate financial sop for the beleaguered farming community, it only shows the extent of deprivation and income inequality that prevails.  

While loan waivers are an economic necessity and governments will have to find adequate resources, direct income support is not a permanent solution. Agriculture needs robust reforms in addition to the immediate sops. If the government can provide 7,000 steps, both small and big, for ease of doing business, there is no reason why a similar amount of initiatives cannot be considered for ease of doing agriculture. After all, it involves 52 per cent of the population. There lies the perfect economic prescription for ‘Sabka saath, sabka vikas’.

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