The agriculture budget with its farm loan waiver of Rs 60,000 crore has overshadowed all other aspects of Budget 2008. The urban middle class appears incensed! Commentators have churned out pieces opining how the Indian economy would suffer a setback because it could not tolerate the burden of this massive write off. This same bunch of people have not had a thing to say when the government routinely writes off bad debts in the industrial sector or pours crores into various Pay Commissions for the bureaucracy. But let the government spend some money on farmers and all hell breaks lose.
In an astonishing display of insensitivity, there is a refusal in urban India to accept that the farm sector needs help to pull out of the crisis created by appallingly biased government policies over the years. This is despite the now routine reporting about the terrible state of Indian agriculture, the prevailing agrarian crisis and the widespread and acute farmer distress. The loan waiver now is the least the government can do to begin the process of healing the farm sector. It should be understood clearly that the farmers have not created this mess because they shirk work or cannot manage farms. That they continue to produce food under these austere and adverse conditions is nothing short of a miracle. Let it be said again that the current agrarian crisis is the result of unfair and exploitative policies crafted by successive generations of bureaucrats and politicians in this country.
Despite the outpouring of resentment over the money being spent on farmer relief and the displeasure over it even in political circles, there cannot be a rollback since that would be ethically and morally indefensible. It would also mean certain suicide for the government in an election year. So the money will be found from the revenues earned from a booming economy and invested in loan write offs. Rs 50,000 crores has been provided for farmers with less than two hectares of land and relief of 25 per cent has been provided on the loans taken by farmers with landholdings bigger than that. As the budget details are discussed in the Parliamentary Committees in the recess before Parliament reconvenes, correctives to the agriculture budget will undoubtedly be proposed. There is for instance, recognition of the fact that a blanket limit of two hectare land holding to qualify for relief would not be fair. Larger land holdings in rain fed areas should be entitled for relief since productivity is much lower under barani conditions compared to irrigated regions.
Another valid issue being discussed now is how to help the large numbers of farmers who are indebted to private moneylenders. A mechanism must be found for this. Kerala has shown a model by setting up a Farmer Debt Relief Commission with powers to find solutions that can be implemented. This kind of exercise can be undertaken at the state level, so that farmers in trouble can be identified and helped through this one time scheme. State Agriculture Departments, Agriculture Universities, Panchayati Raj Institutions (PRI), and NGOs should be brought together to work at the district level. The debt with private moneylenders should be negotiated and a compromise formula worked out to make a final settlement. The government must find the money to settle this problem also.
In the bank exercise and institutional loan write offs, great vigilance needs to be exercised to ensure that the write offs are not exploited by fat cat farmers growing grapes and sugar in Maharashtra. There should be some monitoring and oversight committee of citizens, with a sentinel function to watch where the money of the loan waiver is going. Keeping in mind the high levels of corruption and the routine siphoning off of government funds by people who were not intended to be the beneficiaries, there must be a tremendous effort to ensure that the ?business as usual? method of functioning does not a pour the waiver into illegitimate pockets. One of the best monitoring mechanisms is transparency. All banks should be required to publish in the local newspapers and national dailies, details of the farmers whose loans are being written off.
But the real challenge is how to utilise the Rs. 60,000 crore waiver. It cannot be an end in itself. Nor will the farmers? problems be solved with just writing off the loan. The loan waiver is only a beginning, it enables the farmer to become credit worthy again. The farmer can take loans once more to cultivate crops. It is here that careful interventions are required so that the cycle of debt is not repeated. A system developed at the district level and administered with the help of the constellation of State Agriculture Departments, Agriculture Universities, Panchayati Raj Institutions (PRI), and NGOs can help the farmer to access institutional loans linked specifically to accessing critical agriculture inputs needed to boost productivity. These could be good quality seed, fertilizer and pesticide, the loan can be used to create water bodies to provide irrigation for a second crop in single crop rain fed areas. Where appropriate, the new credit can be used to acquire livestock or develop poultry or fisheries for additional off farm incomes.
Creative intervention can link credit worthy farmers directly to the many agriculture schemes that have been promulgated to provide a boost for agriculture productivity. The Rashtriya Krishi Vikas Yojana with a budget of Rs 25,000 crore is only one scheme that is earmarked for agriculture, in this case, specifically to bridge the yield gap between the real genetic potential of the crop variety and what the farmer actually gets. In the case of millets for instance, the yield gap between the potential of varieties in the field and what the farmer gets, is almost 300 per cent. Here, output could be trebled with proper farm management. There are many other schemes, like the National Food Security Mission, the National Horticulture Mission and the National Fisheries Development Board. All of which have allocations of several thousand crores that can be used to help those farmers who are indebted to private money lenders. The National Commission on Farmers had recommended an interest rate of four per cent for agriculture loans. Perhaps the small farmers indebted to moneylenders can be provided loans at two per cent interest till they recover their financial basis.
This could also be a good time to try to correct some of the other things that have been going wrong with agriculture, for example the over dependence on the rice-wheat rotation in the surplus producing agriculture zones. This has led to the dependence of the Public Distribution System only on wheat and rice, pushing out many traditional cereals from the food basket. If small and marginal farmers can be provide financial support and incentive to cultivate cereals that have relevance to local dietary preferences, such as millets like ragi, jowar and bajra and pulses like mung, urad and arhar, then more than one goal can be achieved. Freeing the estimated four crore farmers from the debt burden must show itself in increased agriculture productivity. Only then will the waiver become a creative instrument of relief. M.S. Swaminathan has estimated that appropriately used, the new credit worthiness of farmers should produce an extra 50 million tons of food grains per year. The Finance Minister has rightly pointed out the need to assess the output of investments made in the budget. The increased production of 50 million tons per year should be made the outcome monitor for the budget outlay for the loan waiver.