Kisan Kranti Yatra: After raising minimum support prices, will the Centre blink and waive farmers’ loans?

Apart from a higher minimum support price (MSP) for their produce – which the Union Cabinet announced last week for the rabi crops as it had done for the kharif crops in July this year – the agitating farmers have been insisting on loan waivers because of growing indebtedness.

According to the Situational Assessment Survey (SAS) of 2013 released in 2016, 52 percent of an estimated 90.2 million farm households in rural India were indebted – up from 48.6 percent a decade earlier in 2003.

In 2013, the average of outstanding loan for farm households was Rs 47,000. The indebtedness went up progressively with the size of landholdings – from 41.9 percent for those at the bottom with less than 0.01 hectare to 78.7 percent for those with more than 10 hectare. Southern states were at the top: Andhra Pradesh (92.9 percent) Telangana (89.1 percent) and Tamil Nadu (82.5 percent).

The states at the bottom were Assam (17.5 percent), Jharkhand (28.9 percent) and Chhattisgarh (37.2 percent).

 Kisan Kranti Yatra: After raising minimum support prices, will the Centre blink and waive farmers’ loans?

Representational image. Reuters

In 2003, the average amount of outstanding loan for farm household was Rs 12,585. Indebtedness was lowest among the landholdings both at the top and at the bottom in terms of landholding – 1.4 percent for those with less than 0.01 hectare and 0.8 percent for those with more than 10 hectare.

Almost 80 percent of indebted farmer households possessed two hectare or less. Indebtedness was higher among the southern states: Andhra Pradesh (82 percent), Tamil Nadu (74.5 percent) and Punjab (65.4 percent) Kerala (64.4 percent) and Karnataka (61.6 percent). At the bottom were Meghalaya, Arunachal Pradesh and Uttarakhand – with less than 10 percent farmer households indebted.

Clearly, the dynamics of indebtedness has changed in many ways between the two surveys. Not only farmers’ indebtedness has increased in terms of percentage of households but also in terms of amount.

The reasons for availing loans have also gone through a sea change. In 2003, two most important purposes for taking loan were ‘capital expenditure in farm business’ and ‘current expenditure in farm business’, accounting for 58.4 percent of the total. The next was ‘marriages and ceremonies’, followed by other non-farm businesses, education and medical treatment. A decade later in 2013, the tables turned with farm loans in rural areas accounting for only 28.6 percent of the loan while those from non-farm business accounting for 60 percent.

Where do the farmers get their loans from? The 2016 SAS report says, 60 percent of outstanding loans were taken from institutional sources, the rest from non-institutional or informal sources, including 26 percent from moneylenders. The share of institutional loan increases with the increase in the landholding. While the poorest (landholding less than 0.01 hectare) sourced only 15 percent of outstanding loans from institutional sources, that for the richest (more than 10 hectare) was 79 percent. No wonder, when it comes to mounting an agitation, the rich and poor farmers participate with equal enthusiasm.

Why has the indebtedness gone up? Poor remuneration from agriculture produce has been cited as one of the prime reasons. The input costs have gone up four times in the first half of the current decade alone while income has more or less stagnated.

Nearly 57 percent of the average monthly income from farm business (cultivation and farming of livestock) is spent on crop production – 24 percent on fertilisers, 21 percent on labour and 11 percent on seeds.

The Government of India has taken three initiatives to reduce debt burdens on farmers : (a) popularising Kisan Credit Cards (KCC) for short-term loans up to Rs 3 lakh for cultivation at 7 percent and interest subvention of 3 percent, (b) RBI is providing relief measures in areas affected by calamities, including restructuring of loans and moratorium and (c) Pradhan Mantri Fasal Bima Yojana (PMFBY) providing comprehensive insurance cover against crop failures.

While PMFBY has not been as successful as the government would have liked – from delay of claim payment for as long as 18 months to declining enrolment – prompting it to declare penalties for delayed payments, there has been a substantial decline in long-term credit (or investment credit) in agriculture, causing concern in many quarters. The Economic Survey of 2015-16 pointed out that long-term credits had declined from 55 percent in 2006-7 to 39 percent in 2011-12 and sought immediate measures to arrest the decline. This was followed by an increase in allocation for long-term credit fund (LTRCF) of NABARD, the result of which is not yet clear.

There is yet another way of providing relief to farmers, easy and popular though not necessarily the best way to address the issue – waiving off their loans. Karnataka is only the latest state to join the long list of states. Maharashtra, Punjab, Uttar Pradesh, Tamil Nadu, Jammu and Kashmir, Chhattisgarh, Andhra Pradesh, Telangana and Puducherry have announced farm loan waivers. But the central government has stood firm in its resolve not to take recourse to it even when angry farmers from Uttar Pradesh, Rajasthan and Madhya Pradesh have pitched their tents in the capital’s outskirts. Less than a year to go for the general elections, the face-off between the government and farmers has set the stage for an interesting battle for the next few days.

Read Part 1 here: Low income major cause of agrarian distress, but is higher MSP solution to farmers' woes?


Updated Date: Oct 10, 2018 15:40:14 IST