Rural Indebtedness: Last Call For A Liberal Farm Policy 

The farm-loan waiver promise by Prime Minister Narendra Modi in the run up to the Uttar Pradesh elections has been haunting all states. Then came the State Bank of India chairperson’s statement about disruption of the credit cycle. While farmers’ organisations roundly condemned the banker, liberals have welcomed her.

Recently, the Supreme Court has admitted a public interest litigation regarding rising farmer suicides across the country. Maharashtra and Andhra Pradesh top the list. Crop failure, market collapse and unfair banking practices are the major reasons for these suicides. Suicides are only the tip of the iceberg of farmer distress. The estimated farm loan (restructured due to chronic pendency) is about Rs 12 lakh crore, private lenders excluded. For the 60 crore farming community, it is about Rs 20,000 per head. There is simply no possibility that farmers can repay the debts. And they need loans even for the next kharif. There is impending doom on the farms.

The Shetkari Sanghatna holds that the word karja mafi (loan waiver) is an insult to those who feed India’s population in the face of aasmani (weather) and sultani (bad policies) hardships. As all farm indebtedness springs from anti-farmer laws and policies, it is illegal and immoral to hold the farmer responsible for it. We believe that the loan figures have been manipulated five to tenfold by institutions (banks, cooperatives, micro finance societies, credit societies etc.) as well as private licensed and unlicensed money-lenders.

Rural indebtedness is systemic, systematic and deep-rooted in the state policy of India since the British era and the Nehru-Indira era policies only perpetuated it. The last seven decades converted the political economy into a socialist system, especially against farmers. Legislation related to land-holding, land ceiling, land transfer and land use regimes, non-alienation of tribal land etc, and the Essential Services Maintenance Act or ESMA (and the Ninth Schedule of the Constitution closing all legal challenge to this abrogation of property rights) have dealt a body blow to farm economy.

The average land holding per family has plummeted to just about 1 hectare; hence farming is a losing enterprise whatever the farm produce price or the much-hyped minimum support price (MSP) or the 50 per cent profits promised by M S Swaminatham Commission. Several other weird laws like anti-cow slaughter, wild animals’ protection, animal rights etc are adding to the untold suffering and losses of farmers. The Union government is also acting in favour of anti-GM lobbies of Gandhian, left and right hues.

An estimation in 1993 submitted by the government of India to the World Trade Organisation clearly states that farmers were made to suffer an aggregate loss on 17 major crops for a decade. Currently, the food security system supports mainly wheat and rice, and offers better market prices over the last five-six years. The food security system has further distorted the cropping pattern by supporting select produce. Even today the current restrictions on internal stock and trade (termed as ‘anti-hoarding’ measures) of tur/urad/moong has disadvantaged local traders, resulting in a fall of market prices from about Rs 10,000 a quintal in 2016 to Rs 5,000 in 2017.

What is worse, the defunct ‘procurement’ centres in various states are of no help. On the contrary, the Union government has imposed no stocking limits and no import duty on pulses and wheat imports. The MEP (minimum export prices) restrictions on onion have continued to the detriment and suffering of several districts, where onion is the only crop, given the soil and weather conditions. During the week of writing this article, two more farmers in Nashik district have committed suicides due to failure to repay just Rs 60,000 due to the slump in the onion market.

The last two decades, especially the last four to five years, have escalated the already harsh challenges before the farmers. The successive droughts, hailstorms, weather fluctuations and floods have devastated large tracts in the country and led to a fall in farm produce. To add to these woes, the international and domestic prices of farm produce have declined. It is needless to state that the bumper harvest of kharif and rabi this year will also erode farm incomes by a mix of demand-supply and restrictive trade policies favouring the voter-consumer.

The farm policy of the Modi government can be described as follows:

• Increase farm productivity with soil card, improvements in irrigation etc
• Reduce prices and improve supply of inputs (but actually fertilisers prices have gone up)
• Better support in the form of interest subvention on crop loans and crop insurance
• Reduce prices by restricting exports and encouraging imports so that the consumer gets a stable bonanza, even as we speak of national agricultural market, scrapping of Agricultural Produce Market Committee (APMC) monopoly and better procurement.

The policy can be summed up simply as ‘produce more in adversities, sell at half the price while keep talking about doubling the income’. There is no talk of liberal free trade for Bharat, only more of the bankrupt welfare state. Along with fair banking practices, we need to ensure fair insurance mechanisms and not welfarism in the garb of insurance.

All political parties in India are basically socialist. The bankrupt socialism of robbing farmers (disorganised on caste-language and crops) for vote-bank politics is the real cause of chronic farm distress, suffering, suicides and destitution. All the parties want to please the consumer by keeping the food basket cheap, no matter what happens to farmers. The 1991 economic reforms have also systematically bypassed the farm and rural economy. This colossal bias and injustice is the very cause of over 3.5 lakh farmer suicides in the country.

For a liberal restructuring of rural and agro-economy, we propose Sharad Joshi’s Bharat Utthankaryakram. The twin objectives include a legal, dignified and economically facilitated exit policy for those who want to leave and fair farming policies for those who want to pursue farming. We believe that market prices realised in open un-manipulated market, rather than MSP, should be the market signals for farmers.

This entails:

(a) Writing off of all outstanding debts (illegal and immoral) and power arrears of all farmers.

(b) Scrapping of all the existing laws and mechanisms related to farm lands, farm-produce and trade namely

• The land ceiling act and land-use acts
• Essential Commodities and Services Maintenance Act (ESMA)
• Land Acquisition Act (LARR)

(c) Removing all the blocks and interventions in processing, transporting and trading of farm produce to clear the way for realisation of fair price.

(d) Also remove all restrictions on research and development of farm technology including GM technology. The education and training systems should be freed from the clutches of governments.

(e) The state has a solemn duty to provide public goods like infrastructure (roads, irrigation, power, transport) and foster open policies to stimulate private investment in labs, marketing, processing etc. For this a mega fund of Bharat Utthan Nidhi (भारत-उत्थान-निधी) should be established.

(f) The state also has a solemn duty to update all land records urgently and efficiently with the help of IT systems so that families can sell, rent, mortgage, transfer, monetise these resources and plan their future economic activities.

(g) Scrap the National Food Security Act and Food Corporation of India in favour of cash transfer to needy families.

(h) Institute a forensic audit of all farm loans and hold banks accountable. Ensure fair banking practices in farm – credit system as per Reserve Bank of India regulations.

A mere loan waiver is no solution. There can be an intermediate practical solution as follows: central and state governments bear the accumulated interest (institute a forensic audit for this) and a moratorium of 10 years on all farm loans and undoing of all anti-farmer restrictive legal/administrative mechanisms causing farm distress. Let farmers do their business or exit safely and they will pay proudly off the principal if given the chance. This should save both the banking and farmers. Is NDA listening?