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April 06, 2008




Page: 8/34

Home > 2008 Issues > April 06, 2008

Farmers need a new deal not virtual waiver
By Prakash Javadekar

Though government boasts of Rs. 2.30 lakh crores of agricultural credit, the reach of institutional credit is just 36 per cent of farmers. Others borrow from money lenders. This class is not covered by loan waiver.

Farmer needs eight things. Assumed remunerative prices, control on input costs, storage and credit facility, institutional credit, efficient market linkages, loans at low rate of interest, heavy public investment in irrigation and research besides comprehensive farm income guarantee insurance scheme. Assuring this is the justice to the sector.

Loan waiver declared by UPA government with much fanfare in the Budget speech, is a political exercise in desperation. The Rs. 60,000 crore bonanza is not real as the details are emanating from Reserve Bank of India and Banking Division suggest.

Slogan without proper financial provision is not sound economics and not ethical at all. The three-year provision does not only mean buying time, but smacks only of gimmick. Budget is an annual exercise but this three-year spread is binding future governments while trying to usurp political benefit instantly.

But there are other important aspects which must be considered with more seriousness.

First, why did the government remain a mute spectator for four long years, when farmers were committing suicides in thousands? The agrarian crisis was grave and Dr. M.S. Swaminathan had warned the government, that if remedial actions are not taken immediately, the country will face total ?Agriculture Collapse?. The cotton farmers in Andhra and Maharashtra, spice farmers in Kerala, wheat farmers in Punjab and Bundelkhand and farmers from all over the country were committing suicides during the four years of rule of UPA. The government did not even bother to find out the reasons for such a distress. Instead, the PM declared a package with some fanfare to help the farmers. It helped ailing banks and did not improve the bottom line for farmers. As a result, suicides continued unabated.

Second, the waiver package is half-hearted and leaves out 80 per cent farmers. Five acre ceiling for being eligible for waiver is impractical. India has only 30 per cent of its land irrigated. Remaining 70 per cent is dry land farming, depending heavily on mansoon. In these areas land holding below five acre is totally uneconomical.

So landholdings in dry land tend to be large. Further, traditionally though brothers are conducting farming separately, records do not get divided till the father is alive. All these farmers are not covered under loan waiver.

More importantly, though government boasts of Rs. 2.30 lakh crores of agricultural credit, the reach of institutional credit in just 36 per cent of farmers. Others borrow from money lenders. This class is not covered by loan waiver.

Private agriculture borrowings by farmers who avail institutional credit are also not covered. The scheme does not cover the farmers, who despite their distress pay up loan installments. The scheme covers only those whose loans are not just outstanding, but whose loans have become overdue. The finance ministry has clarified that the scheme covers only agriculture loans and not the allied loans. Thus, the number of beneficiaries is just around 20 per cent. The figures arrived at by Rajasthan and other states government also testify the same.

Any subsidy which does not help universally all in crisis, is not a good subsidy.

Only one sentence from the speech of Finance Minister was true. He said, ?we are not obliging farmers but are doing our duty?.

The truth is that under Congress rule spread over half a century since Independence, the terms of trade in agriculture have always gone against farmers. That is why farmers remained poor and agriculture starved of private and public investment.

A remunerative price is the key to deliver justice. M.S. Swaminathan Commission has recommended that MSP should be 50 per cent above the cost of production as calculated by the Agriculture Cost and Price Commission (ACPC). Unless producer gets remunerative prices, the business won?t work. But in Congress regime, MSP was barely meeting ?paid out costs? not the depreciation, rent, renewal of land, own labour and other indirect costs.

In last four years input costs shot up vertically as the prices of pesticides, fertilizsers, seeds, water and electricity zoomed up. This must be noted carefully and we will realise the hollowness of UPA?s claim of substantial increase in MSP. It is the substantial increase in input cost which has converted agriculture economy in to debt and subsequent death trap.

So any help to ailing agriculture is of course not an obligation from government but actually admission of guilt. All these subsidies should be considered as unpaid prices in the past.

But waiver like schemes not only prove partial but do not address the main cause of distress.

Farmer needs eight things. Assumed remunerative prices, control on input costs, storage and credit facility, institutional credit, efficient market linkages, loans at low rate of interest, heavy public investment in irrigation and research besides comprehensive farm income guarantee insurance scheme. Assuring this is the justice to the sector.

The ACPC has recommended Rs. 1100 as MSP for paddy, wheat and cane Rs. 3300 for cotton. And even these recommendations are not based on Swaminathan formula. Still the government has not accepted the ACPC recommendations.

Today fertilisers are available only in black market. The government is not delivering. Prices of pesticides and seeds are going northward, without any intervention from the government.

Taking institutional credit to 100 per cent farmers is a challenge but can be achieved by sincere efforts.

The NDA started storage?cold storage?good roads?harbors development as a core strategy for efficient market linkages. Now this has slowed down.

Unless there is heavy public investment in irrigation the optimum land utilisation is not possible. Potential can be tapped with irrigation only. Same is the case of research which only ensures higher productivity.

National calamities visit agriculture frequently in one or other form at regular intervals. It destroys the farmer?s economy. Today?s insurance schemes are essentially ?Bank loan insurance schemes?, which ensure banks and don?t help farmers positively. Novel insurance scheme launched by NDA, of ensuring guaranteed income to farmers is the way out. This scheme was applauded by Chidambaram in his first budget speech but he never bothered to carry it forward.

This is the ?New Deal? which farmers are seeking. Unless such approach and holistic vision is adopted, loan waiver like packages will prove futile.

(The writer is MP and National Spokesperson BJP and can be contacted at pjavadekar@gmail.com.)




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