Kumaraswamy’s Farm Loan Waiver Scheme For Karnataka Is Faulty And Inadequate, Say Stakeholders

The farm loan waiver of the Janata Dal (Secular) or JD(S)-Congress coalition government led by Chief Minister H D Kumaraswamy in Karnataka has been dubbed a “populist move”, as a result of which a gamut of issues that have dogged farmers since the land reform days have been left unresolved. Economists, farmer leaders, farmers and bankers from different agrarian districts believe that Kumaraswamy and his associates have left gaping holes in the farm loan waiver scheme.

“Honestly speaking, the farm loan waiver has not benefited over 90 per cent of farmers in Karnataka. It had not done so when former governments did this sham either. The present government is only continuing this tradition,” farmer leader Manohar Shetty told Swarajya.

“There are a number of issues that are to be addressed. Firstly, banks, vyavasaya sahakari societies and souharda sahakari societies follow their own rules and regulations on farm lending rates, though their priority area includes micro finance and farm lending. However, they do not package their loans in such a way that it benefits the farmer, who borrows for agricultural operations where uncertainty is the name of the game. Secondly, regulatory organisations such as National Bank for Agriculture and Rural Development (NABARD), Reserve Bank of India (RBI) and Indian Banks Association (IBA) need to exercise the teeth they have been given by the government to regulate secondary-level lenders, especially in the farm loan sector. Without these premier organisations participating in the regulating process, lenders will always lay stress on recoveries only and there will be no effort to achieve the real objectives of farm sector lending. Thirdly, the quantum of loan should be scientifically benchmarked. The farmer cannot be treated on a par with any other borrower in the secondary or tertiary sectors,” Shetty said.

Farmers in different agrarian sectors such as horticulture, plantation, paddy, commercial crops and spices cultivation also have problems as none of them will benefit from the farm loan waiver.

“The mechanism of waiver announced by the government will benefit only a miniscule who have less than two acres in the short-term. In dryland farming areas such as Chikkaballapura, Doddaballapura and other central and northern parts of the state, no benefit of farm loan waiver will accrue as the loan offtake in these areas is huge. Since dryland farming involves no or minimum long-term loans, farmers still suffer short-term loan default. In many cases, farmers suffer due to failure of the marketing and pricing system. The government must understand that a loan waiver or crop insurance claim does not apply just to wetland or rain-fed crops. The state government has failed to identify the problems inherently plaguing agricultural funding and finance in different regions. The waiver announced by Kumaraswamy in his budget is not scientific,” said Lakshminarayana Reddy, president of the Karnataka Rajya Raitha Sangha (KRRS) of dryland farm region of central Karnataka.

According to a study conducted by the Paramashivaiah committee of the infamous Nethravati River diversion project of 2002, dryland farming in central Karnataka needs a different crop insurance policy as there are no major water sources, and with just one or two inches of rain, crops might suffer the possibility of failure.

“But we have transformed the crop pattern today and are becoming one of the leading horticultural crop cultivation areas in the state, if not the country. All this is being done without the help of governments. Our farmers are no doubt big borrowers from banks and the cooperative sector, but we feel the current loan waiver scheme will not help farmers in anyway as most of them repay after the crop sells,” said Lakshminath, a farmer leader in Doddaballapura.

Various farmer bodies in Karnataka had hoped that the entire burden of Rs 1.12 lakh crore held by all farmers in the state would have been waived. This would have been an ideal situation for the farmers. In fact, this is the recommendation given by the study committee on agricultural financing led by farmer leader Sachin Meega.

“We are disappointed that Kumaraswamy has scaled it down to Rs 34,000 crore with a cap of Rs 2 lakh per farmer, which does not mean anything. Many of them would have repaid the loans and those who defaulted in the last two years would have got some benefit, but that is not how things work out in agricultural finance. If the crop loan is not cleared by the banks or by government agencies in time, and if inadequate sums are disbursed, farmers will have no use for the loan. They will anyway be pushed into the vortex of private money lenders and forced to pay exorbitant interest. This is how they succumb to suicidal tendencies. There has to be more reforms rather than just doles,” Meega says.

According to the study, the size of the crop loans were determined by insurance companies on panchayat basis. The companies had stipulated that in the entire panchayat area, the crop loss should be to the extent of 60 per cent, in order for the panchayat to be eligible for insurance. “This a faulty system. Crop insurance must be made available to each farmer on an individual basis just like motor vehicles insurance or health insurance. When crop insurance fails to address individual claims, the farmer goes into depression,” Meega says.

For example, Malnad area, which grows plantation and spices, is always in need of not just crop insurance, but also farm loans. This region comprising Shivamogga, Chikkamagaluru, parts of Dakshina Kannada, Kodagu and Hassan has also been disappointed by the loan waiver scheme just announced. These are areas where crop failure happens with every change in weather. Failure has been witnessed in areas that cultivated arecanut, coffee, tea, spices and horticultural crops. The Planters Association of Karnataka, headquartered in Madikeri, has made many suggestions to the Insurance Regulatory Development Authority (IRDA) as well as to the state government, but neither has the crop insurance pattern changed, nor has the government disposition towards loan waivers, says Shetty.

However, political intonation like in every field has crept into agricultural activism too on many occasions, as seen in the state’s rice bowl, Mandya, where the Congress and the JD(S) are now feeling the heat for whipping up a faulty and defective loan waiver scheme. The Congress is under fire from farmers for being clay-footed about the loan waiver proposal of the Chief Minister, while the JD(S) is under fire for allegedly not going the extra mile for making the loan waiver more expansive and effective.

In Mysuru, Chamarajanagar and Mandya areas, water-intensive crops such as paddy, millets, ragi, sunflower and tobacco have been seen as high-risk ones. Leaders such as Madhu Madey Gowda, Athmaram and Ambareesh from the Congress are battling hard to save the face of the party in the region. Second-line leaders of both parties have, however, told Swarajya that the farm loan waiver scheme is likely to boomerang on these two parties by the time 2019 approaches.

Later, speaking to Swarajya, M Veeresh, Shivamogga district unit general secretary of the KRRS, said, “The Government of Karnataka has not done us a favour by waiving the loans of farmers to the extent of two lakh rupees. On one hand, the waiver will not help any farmer as most of them are not defaulters in the given period. On the other hand, the government's guidelines for waiver is not complete without specifying the quantum of loan defaulted on by the farmer. In the period between 2009 and 2018, the defaulters have been very minimal according to bank and cooperative society records.

KT Gangadhara, State president of the KRRS, told Swarajya, “The Chief Minister has not clarified what would be the total quantum of loan waiver and during what period it will be applicable. If he has taken the 2008-to-2017 (December 31) period, this loan waiver does not mean anything. The CM has also talked about the second wave of loan waivers, but even there, he has not specified the timeline, which only means that H D Kumaraswamy’s government has not done its homework”.

The KRRS will hold a massive rally on major national highways in the state on July 21 on the thirty-eighth anniversary of Naragund Bandaya (Naragund Revolution) and block all national highways protesting against the “oppressive disposition” against farmers of the state.

Naragund Bandaya as it is known is a revolution enacted by farmers of the state on 21 July 1980. Two farmers were killed in police firing when they were protesting against the increase in levy on Malaprabha betterment.

The KRRS will also issue a notice to the government on 18 July to get its act together regarding the loan waiver.