Farmer crises continue despite Modi's reform measures

farmer-reuters19716 The Centre has clearly said that the states that announce loan waivers have to fund the schemes themselves | Reuters

Like growth without jobs, India has the unique problem of record foodgrains output in the midst of a sever agrarian crisis .The produce is not enough to help farmers repay their loans. The insurance simply does not cover them whenever there is a natural calamity. Farmers committing suicide, shrinking size of land holdings and people wanting to leave agriculture as a profession and farming as a way of life are all there for people to see. Rarely have all these converged as they have in the last decade or so. And the government knows it.

When Prime Minister Narendra Modi was campaigning in 2014, the BJP manifesto had 20 points under the sub head “Agriculture - Productive, Scientific and Rewarding”. Many of them pertained to setting up of agro processing industry, re-orientation of pest management, implementation of farm insurance scheme and strengthening and expanding rural credit facilities. There was no mention of loan waiver.

The manifesto did, however, mention increased public investment in agriculture and rural development and steps to enhance profitability in agriculture, by ensuring a minimum of 50 per cent profits over the cost of production, cheaper inputs and new technologies.

There are many voices in the Union government against loan waivers even as Uttar Pradesh Chief Minister Yogi Adityanath has announced a loan waiver. Union Finance Minister Arun Jaitley has clearly said that the states that announce loan waivers have to fund the schemes themselves.

Agriculture Minister Radha Mohan Singh believes that loan waivers will not help the farmers. “We need to build capacity, make agriculture remunerative and provide markets to farmers and give them cheap timely credit. Farming has to be made profitable and productive; we need to reduce input cost, increase production, ensure proper remuneration, insulate them from natural calamities through insurance,” said Singh as the Modi government completed three years in office. He believes that a lot of Indian farmers have improved since the BJP came to power. He has gone by the fact that the agricultural output has been a record.

The government last week announced an interest subvention scheme to appease the farmers. “Avail of interest subvention, find the real and right price through the electronic National Agriculture Market, and take to online trading of farm produce to get the best price. And avail of interest subvention to  store the post harvest produce in approved warehouses for six months within which to find the best price,” said the government.

The cabinet approved the interest subvention scheme for farmers for the current fiscal. Farmers can avail of short term crop loan of upto Rs 3 lakhs at an interest of 4 per cent, with loan and interest being repayable within one year. The government has earmarked a sum of Rs 20,339 crore for  this.

The government also approved an interest subvention scheme for post harvest storage in government approved warehouses for six months. With a 2 per cent subvention, it will bring the interest payable by farmers to 7 per cent.  Farmers who do not pay back in time will see the subvention reduce.

The scheme was first implemented in 2006-07 and has been in operation ever since with the government renewing it annually. It is essentially an interest subsidy scheme, with the government  directly making good the subsidy given by public and private sector banks, cooperative banks and the regional rural banks that use their own funds to disburse farm loans. The NABARD will be paid the interest gap in cases of refinance by rural and cooperative banks. 

While the scheme is intended to provide easy short term crop loan to farmers, it does not address the farmers indebtedness that is driving them to suicide. Bharatiya Kisan Union leader Rakesh Tikait says  the interest subvention scheme will not address the real issue behind the farmers agitation. 

According to the government, this institutional credit will help in delinking the farmers from non-institutional sources of credit, where they are compelled to borrow at high rates of interest.

Ironically enough, since the crop insurance under Pradhan Mantri Fasal Bima Yojana (PMFBY) is linked to availing of crop loans, the farmers will not get the benefit of insurance if they do not access crop loans. “The insurance is an eye wash” says pro-farmer activist and food policy analyst Devinder Sharma. He explains that what the farmer gets is depending on the average loss in the village, while a farmer who has lost all, has lost way above the average of the village. 

The soil health card  scheme had failed in Gujarat when Modi was the chief minister, Sharma points out, adding that even a Tata Institute of Social Sciences study has established that 70 per cent of loans meant for agriculture has in fact gone to the agro-industries sector given the definition of priority sector banking.

The government claims that farmers' incomes will double by 2021 given the market reforms it has undertaken to help farmers get remunerative prices. According to the cabinet note on this, the 

electronic National Agriculture Market (e-NAM) that was launched in April 2016 aims at integrating the dispersed APMCs through an electronic platform and enable price discovery in a competitive manner to the advantage of the farmers.

“While the farmers are advised to undertake online trade, it is also important that they avail themselves of post-harvest loans by storing their produce in the accredited warehouses. The loans are available to Kisan Credit Card (KCC) holding small and marginal farmers at interest subvention of 2 per cent on such storages for a period of upto six months. This will help the farmers to sell when they find the market is buoyant, and avoid distress sale. It is, therefore, needful for the small and marginal farmers to keep their KCCs alive,” the cabinet press note said.

Though the manifesto spoke about 50 per cent profit over and above the cost of inputs, the government has been trying—in vain though—to reduce the cost of inputs, and not touched the Minimum Support Price whose enhancement can in one stroke, make farming less loss-making.

The cabinet referred to Modi government initiatives like Soil Health Card, Input Management, and Per Drop More Crop in Pradhan Mantri Krishi Sichai Yojana. But for now, none of these has addressed the farmer's debt burden. 

Sharma and other activists believe that the government's idea is to wean people off agriculture, and let corporates take over farming.

In the states, however, leaders dealing with farmers, who are voters too, believe that a one-time waiver with some terms and conditions is not a bad idea. After Adityanath announced the waiver in UP, Punjab Chief Minister Amarender Singh said since loan waiver was part of the Congress manifesto for the state, and approved by none less than economist and former prime minister Manmohan Singh, they would implement it, and find ways of financing it. A committee has been set up to suggest how this should be done. 

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