Open Forum
New Delhi, 30 May 2008
Farmers Acute Debt
Burden
TIGHTEN NOOSE ON
MONEY-LENDERS
By Dhurjati Mukherjee
The increasing debt of farmers and also of small artisans
has been a cause of concern all over the country, reaffirming the fact that the
high growth rate has not reached the lower segments of society in the rural and
backward regions. Estimates suggest over 18,000-20,000 farmers have committed
suicide since the UPA Government took charge. Moreover, there are reports of
death haunting farmers in Maharashtra’s Vidharba region, Karnataka, Andhra
Pradesh and Punjab.
A survey by the Invest India Economic Foundation and IIM
Dataworks last year revealed that the total debt of farmer households in the
past two years is estimated at about 31 per cent. Also, most of the debts in
the rural sector are due to monies generally taken from money-lenders as
pointed out by another estimate. Of every Rs.1000 debt taken by farmer
households, Rs 257-260 is sourced from money-lenders.
As is well known, money-lenders charge very high rates of
interest which range from 20 per cent to 36 per cent or even more. The
penetration of money-lenders is significant even in States like Andhra Pradesh,
Tamil Nadu and Punjab which have adequate banks
to disperse loans. As per available figures, loans from moneylenders in these States
are 53.4 per cent, 39.7 per cent and 36.3 per cent respectively.
According to renowned economist and West Bengal Finance
Minister Asim Dasgupta, the need of agricultural credit was to the tune of Rs
10,000 crores of which a mere Rs 800 to 900 crores came from institutional
sources. Thus, the bulk of credit came from the rich peasantry to whom high
rates of interest were the major source of extraction of surplus value. But the
Left Front Government could do very little in developing alternative
institutional sources of credit through cooperatives in the State.
The reasons for indebtedness are not very difficult to
assume as there has been an all-round crisis in the agricultural sector. These
include: uncertainty over monsoon rainfall; low returns from crop cultivation; increasing
cost of inputs and low returns; unremunerative prices for the produce because
of dominance of middle men and increasing expenditure on medical services and
other basic necessities.
The increasing incidence of suicide by farmers in several States
has highlighted the problem of indebtedness as the central issue. The Centre
formed an expert group on agricultural indebtedness under the Chairmanship of the
Director of the Indira Gandhi Institute of Development Research Radhakrishnan,
to examine the problem and suggest measures to provide relief to farmers.
The expert group suggested increasing agricultural productivity,
enhancing investments in agricultural infrastructure, research and extension
and putting in place an effective system of rural mitigation, both in
production and marketing. But the most important suggestion was that all States
should enact a legislation that would require money-lenders to register with
the authorities and fix the maximum rate of interest they could charge.
The model legislation proposed included: simple and
hassle-free procedure for compulsory registration and a periodical renewal of
moneylenders; a simplified dispute resolution mechanism to ensure better
enforcement; the option of the rule of damdupat
– which exists in five States --- restricting the maximum amount of
interest chargeable by the moneylender and periodical fixing of the maximum
rate of interest which should be notified by the State Government.
To tide these problems, the Union Finance Minister
Chidambaram announced loan waivers of Rs 50,000 crores for over 3.5 crore small
and marginal farmers with holdings of not more than two hectares each and another
Rs 10,000 crores has been set aside for bigger farmers who will get 25 per cent
off on their loans if they pay the remaining 75 per cent. Pressure is now being
put to increase the 2 hectares limit to cover more small farmers.
The Government has assured banks that they would be
compensated in three years time and is likely to come up with a combination of
bonds and other market instruments. Though the benefits will go to those who
have accessed loans from the Government and cooperative institutions, nearly
two-thirds of the farmers who remain at the mercy of money-lenders have been
left out. For reasons best known to him, the Finance Minister has ignored the Radhakrishnan
Committee report proposal of creating the Moneylenders Debt Redemption Fund.
There has been criticism on two scores. One, about the large
segment of indebted farmers who have borrowed from money-lenders and have been
left out. Two, whether the one-time waiver would help farmers in the long run. Clearly,
the high interest charged by the money-lenders needs to be looked into and the
maximum interest chargeable should be framed and those violating this dealt
stringent punishment.
Meanwhile, the Parliamentary Committees on Finance and Agriculture
have divergent views on who should be the beneficiaries of the farm loan
waiver. The Finance Committee Chairman Ananth Kumar has argued against segregation
of farmers and the waiver scheme should be available to all uniformly. However,
the Agriculture Committee Chairman Ram Gopal Verma wants the limit of two
hectares revised keeping in mind the difference in productivity of irrigated
and non irrigated land. He also feels that farmers who had repaid their loans
be given incentives such as interest subvention so that the scheme does not
send any wrong signal to debtors.
Apart from undertaking plans of agricultural rejuvenation,
it is also necessary that loans have to be made available to the 114 million
small farmers at low rates of interest. Banks and cooperatives have to come
forward to help the rural sector instead of acting as an instrument of
transferring rural savings to metropolitan centres. Estimates suggest that over
Rs 100,000 crores is being siphoned from rural branches to urban and
metropolitan centres. There has to be some scheme whereby bank loans could be
easily made available, preferably without any guarantee to small and distressed
farmers or weavers.
There is also an imperative need to regulate the interest rates
charged by money-lenders, whether individually, in the garb of an NGO or
self-help group. There has to be effective monitoring at the block and
sub-divisional levels both by the administration and by the panchayats so that money-lenders cannot
exploit poor farmers and artisans.
Significantly, the present policies which encourage
expropriation of land, extinguish people’s livelihoods and confer benefits on
big business may not lead to real development. It is thus imperative that the
concerns of the farming community be addressed and a proper strategy worked out
for alleviating the problems of small farmers. --- INFA
(Copyright India News & Feature
Alliance)
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