All about proposed changes in law on rural indebtedness

To streamline and regulate the non-institutional loan that farmers take, also a pre-poll promise of the Congress party, the Punjab government proposes to amend the ‘Punjab Settlement of Agricultural Indebtedness Act 2016’. Cleared by the state cabinet on Thursday, the amendment needs to be passed in the monsoon session of the assembly that began on Friday. The move is seen as a step to woo farmers, who comprise a large vote bank. HT explains the issue threadbare and what it means for stakeholders.

What is the change proposed?

A top official with the state agriculture department says the amendment will simplify the system of grievance redressal for farmers, who owe money to commission agents (arhtiyas). By this amendment, the government plans to constitute five tribunals in all division headquarters with the commissioner as its head. Two members each would be drawn from the agriculture and the revenue department.

What is the system now?

The previous SAD-BJP government that had brought the act had formed 22 district-level forums with a retired sessions judge to head each. However, this system did not take off as the remuneration offered to forum heads was found to be meagre, at Rs 30,000 a month.

What is the role of arhtiyas?

There are 23,000 arhtiyas in the state and they lend about Rs 30,000 crore to 20-22 lakh farmers attached to them. These agents also play an important role in the procurement of wheat and paddy. Procurement agencies get their grain filed and cleaned by a commission agent and the amount of MSP for foodgrain of farmers attached to him is credited into his account. In lieu, he gets 2.5% commission.

What is needed?

The act itself is silent on the the rate of interest that the commission agent can charge from farmers and the maximum limit that he can lend. Reports say the commission agents charge exorbitant rates of interest. The Akali-BJP regime fixed the interest rate at 11.75%, but this was never implemented due to the strong lobby of commission agents. Additional chief secretary agriculture Vishavjeet Khanna said, “The government, by the way of a notification, will fix this issue.”

Why is licence being mandated?

The majority of the money lenders in the state have licence to work as commission agents. As per the proposed amendment, they need a licence to lend money, which the state finance department gives. Without this licence, they cannot lend money and approach the tribunals for grievance redressal in case a credit goes bad. The act also provides for both farmers and money lenders to approach the tribunal for redress of grievance. These amendments came after a cabinet sub-committee recommended that there needs to be a tab on lending to farmers, depending on his pay-back capacity.

How have arhtiyas responded?

In a sharp reaction, commission agents have decided to shut all 149 mandis in state from Saturday. They claim that the state cannot fix the amount that they lend to farmers. Referring to another amendment in the Mandi Board Act that that the government cleared on Thursday, according to which the government seeks to impose a levy on the commission that arhtiyas get on procurement of food grain, Ravinder Singh Cheema, president of an association of arhtiyas, said, “The majority of commission agents have meagre earnings. Our business is also seasonal and unstable.”

Even though no percentage of levy has been fixed, Cheema claimed that the government planned to impose an exorbitant 20%.