Waiving
Of Loans:
Not In The Right Direction
By K.Jayaram
06 March,
2008
Countercurrents.org
The UPA government proposed waiver of loans for small and marginal farmers worth Rs.50,000/- crores and one time settlement for other farmers worth Rs.10,000/- crores, in which government giving rebate of 25% if farmers pay the 75% of loan amount at a time. This is applicable the loans which were taken before March 31st, 2007.
The important twist in the proposal is the deadline for waving of loans i.e 31st March. Farmers generally took loans from the banks in the months of June to August as crop loans to invest on inputs. In most of the cases banks force the farmer to repay the loans by taking fresh loans. This will increase the debt burden on farmers. According to one estimation only 20% of marginal farmers are going to be benefited by this proposal.
Certain districts like Ananthapur, in which banks adjusted books through crop insurance were not covered under this proposal.The premium was paid by farmers, as it is compulsary to get credit through Kisan credit cards. Government did not pay any mount for these loans. At the end of the year the actual amount is much less than the proposed Rs.60,000/ crores.
This budget failed to take concrete measures to adress the issue of informal credit. According to Rangarajan committee 77% of farmers depended on informal credit. This situation is more worsen in case of small and marginal farmers as 80% of them are depend on informal sources. This budget doesnot consider the recommendations Radha krishna committee to address this issue.
The most important problem for farmers is access to credit. Stringent rules to access the credit through Kisan credit cards such as "No dues certificate", "2-3 years of good track record", "Farmer should have at least one acre of irrigated land", "mortage rules", "loans should be paid with in 12 months", "absence of provision for revolving loans" "Third party guarentee" etc. This budget is failed to remove these rules. Removal of these rules would definetly improve the access to credit.
Prior to liberalisation period Regional Rural Banks (RRBs) are the major source of crdit to the farmers. After liberalization these RRBs gradually reducing their share in agricultural credit. Disturbing trend in regional rural banks is withdrawal from rural areas. 3,000 RRBs were closed with in a period of three years. This trend leads to shift of source of credit from rural areas to urban areas. No measures were proposed in the budget to retain the RRBs in rural areas.
Indebtedness is more serious in case of those farmers who are cultivating commercial crops such as Cotton. Most of these farmers had land more than 5acres. According to the budget proposal these farmers are not eligible for waiving of the loans. Other important section of farmers not covered under this scheme are tenant farmers.
There is no long term measures in the budget to make farmers debt
free. No measures were proposed to eliminate the root cause for indebtedness.
This can be better adressed by increasing public investments but there
is no concrete measures to increase the public investments in agriculture.
(K.Jayaram,
is an agriculture economist, working with center for sustainable agriculture,
Hyderabad based organization, his email id is jayaramcsa@gmail.com)
