Loan write-off of little use, say experts
The biggest agriculture loan write-off in the country’s history would cost the exchequer Rs 60,000 crore, but may not alleviate the debt misery of most farmers.
The package is expected to benefit four crore small and marginal farmers and kindles hope that it would be the beginning of an end to farmers’ suicides.
The waiver, however, comes with two riders. It will benefit only those farmers who have taken loans from institutional bodies, like banks, rural co-operatives and credit schemes. But when over half the farmers don’t go to banks, the waiver may hardly meet its purpose.
There is still another problem.
The government has set a plot size criterion for complete loan write-off. Farmers with less than two hectares will get a complete waiver.
This clause, economists say, would exclude many farmers in Vidarbha, Maharashtra, and southern Karnataka, two regions where farmers' suicides are routine. “These farmers are the worst affected by agrarian distress… because their holdings are on dry land and larger than two hectares. They will not be able to get the waiver,” said development economist Jayati Ghosh.
The Budget, which Prime Minister Manmohan Singh called “a farmers’ budget” offers the waiver to three crore small and marginal farmers and a 25 per cent one-time relief to another one crore farmers who owe money to institutional sources.
“This waiver will hopefully mark the beginning of an end of farmers suicides,” said M S Swaminathan, chairman of the National Commission on Farmers. “But... about half the farmers are indebted to informal sources.”
Nearly 25 per cent farmers borrow from moneylenders who charge anywhere between 25 to 40 per cent interest per annum.
Another 15 per cent borrow from traders and are forced to sell their produce to them at lower rates while paying the same rate of interest. Another 10 per cent borrow from relatives.
The C. Rangarajan Committee that submitted its report on farm loans this month said “only 27 per cent of total farm households are indebted to formal sources — of which one-third also borrows from informal sources”.
Ghosh said the Centre should have set up a debt commission to include loans from informal sources.
Atul Anjan, a CPI member and member of the National Commission on Farmers, said: "The provisions for agriculture in the budget are a mere eyewash. The loan waiver is the only silver lining."
He said: "There is nothing in the budget that will take agricultural growth to four per cent."
Experts feel the waiver is a one-time measure to provide relief to farmers but it does not address the problem of providing better seeds or more water to the sector.
Although there was a demand from farmers to bring down the interest rates on loans to four per cent, the budget retained the earlier rate for short-term crop loans at 7 per cent.