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BRP Bhaskar: Farmers need more than relief
April 18, 2017
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India’s farmers who have lived precariously for ages are paying a heavy price for the rapid growth of the national economy in the era of globalisation. More than 300,000 of them are believed to have taken their lives in distressing circumstances.

Factors that contributed to the worsening of farmers’ condition include credit constraints, cut in agricultural subsidies, rise in input costs and fall in the prices of produce. Many farmers switched from food grains to cash crops expecting higher returns but their hopes did not materialise.

The first steps towards economic liberalisation were taken by Manmohan Singh as finance minister in PV Narasimha Rao’s government in 1991. According to a study report, during 1996-2003, on an average 15,000 farmers committed suicide each year. During 2004-2012, the figure rose to 16,000.

Agriculture is a state subject and the markets are regulated by state laws. Many states adopted a model law drafted by the Centre in 2003 to ensure fair prices to farmers. Middlemen who are able to exert influence on the supply chain defeated its purpose.

The Centre is now in talks with the states to draw up a new model Agricultural Produce Market Committee Act which will provide for a single licence and single-point levy of market fee at the state level. It envisages this as the first step towards a single licence and single-point levy of market fee at the national level.

While procedural reform can take its time, steps to provide relief for farmers in distress cannot wait. Appeals to the Centre by Congress Vice-President Rahul Gandhi, who has toured affected regions in several states, have so far fallen on deaf ears. Betraying total lack of compassion for the suffering farmers, a leader of the ruling Bharatiya Janata Party dubbed Rahul Gandhi a ‘distress’ tourist.

The last time the Centre intervened directly in the issue was when Manmohan Singh’s first government announced a loan waiver and debt relief programme. It is believed to have benefited 42.8 million farmers and cost the exchequer Rs 700 billion. It probably helped the Congress-led United Progressive Alliance to win a second successive term.

Earlier this month, the new BJP government of Uttar Pradesh, the largest state, announced waiver of crop loans of up to Rs 100,000 of small and marginal farmers in fulfilment of the party’s electoral promise. About 21 million people, constituting 92.5 per cent of the state’s farming community, are expected to benefit. The state government also decided to write off bad loans of about 700,000 farmers totaling Rs 56.30 billion.

While these steps will go a long way in relieving the distress of farmers, there is concern over the way they will impact the state’s finances, which were already facing a deficit of about Rs 500 billion.

The Centre allows the states to float bonds to cover the cost of debt relief programmes. However, lately the experience is that they do not attract investors. It thus becomes necessary for the Centre to bear a good part of the burden.

Loan waiver is only a palliative measure. It does not improve the farm economy. A World Bank study has shown that banks tend to move away from areas with high bailout percentages to those with lower percentages. They fear that waivers increase the tendency to default on loans as the borrowers believe a new government will bail them out.

The UP bailout has prompted farmers in other states to press their governments for similar relief measures.

Maharashtra’s BJP government has said it will study the UP scheme to see if the state can adopt it. Opposition parties in the state have been agitating for debt relief measures for some time.

In Tamil Nadu, which has been in the grip of drought for more than a year, the government decided last August to write off the loans that small and marginal farmers had taken from cooperative banks. It cost the state about Rs 58 billion. The big farmers who were left out moved the high court and won a favourable verdict.

The bailout did not end the misery of the state’s farmers. They are now staging demonstrations in New Delhi demanding water for their parched lands.

A large section of the farming community still depends on private money-lenders for their credit needs and the government’s debt relief measures do not benefit them.

Indian agriculture is plagued by chronic problems which call for more than palliative measures. The Centre needs to draw up a comprehensive programme, in consultation with the states, to make farming remunerative and sustainable.

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 The author is a political analyst of reckoning
 

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