Loan waiver not enough

We need a mechanism for providing relief to farmers indebted to private moneylenders

Budget 2008 has been completely overshadowed by the single act of the loan waiver provided for India’s indebted farmers. Rs50,000 crore has been provided for farmers with less than 2 hectares of land and relief of 25 per cent has been provided on the loans taken by farmers with landholdings bigger than that. The total package amounts to Rs60, 000 crore.

The urban middle class is enraged at the finance minister’s audacity in providing relief to the farm sector in a crisis of such a magnitude that farmers are driven to taking their lives. Pieces are churned out everyday opining how the Indian economy would suffer a lasting 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 it steps in with several thousand crores to bail out the Life Insurance Corporation or the Unit Trust of India when they faced crises of their own making or when banks and financial institutions recommend huge write-offs to lift ailing, badly managed industries out of the mess they create every now and then.

This is a good time to point out to the outraged middle class that this loan waiver is the least the government can do to begin the process of healing the farm sector. It must be reiterated that the farmers have not created this mess because they shirk work or cannot manage farms. The current agrarian crisis is the result of insensitive and exploitative policies crafted by successive generations of bureaucrats and politicians in this country. Despite widespread reporting in the media over several years, about the terrible state of affairs in rural India, clever commentators on the edit pages of leading dailies show no acknowledgment of the atrocious state of Indian agriculture and the pervasive farmer distress. There is a refusal to accept that this sector too needs help to pull out of the crisis created by appallingly biased government policies over the years.

Despite the raving and ranting over the debt waiver, there will not be a rollback since that would be ethically and morally indefensible. It would also mean certain suicide for the government, particularly in an election year. So the money will be found, without much difficulty, from the revenues earned from a booming economy. As the budget details are discussed in the Parliamentary Committees now, attention must be paid to the lacunae in the finance minister’s announcement, which is to be seen more as a grand gesture, than an implementation plan.

Several correctives are needed if the debt waiver is to achieve its goal of helping farmers in distress. Most of these have been pointed out already. There is recognition of the fact that a blanket limit of 2 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. 

An outstanding issue needing attention is the farmer indebted to private moneylenders. Some mechanism must be found to provide relief to them. 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 should be undertaken at the state level, so that farmers in trouble can be identified and helped through this one-time scheme. There is no need to rush the write-offs into the banks. It is more important to target this relief carefully and try to help as many genuine farmers as possible. The help of the local administration, panchayats, civil society groups and others must be taken to identify farmers indebted to private moneylenders and negotiate a mechanism to clear those outstanding loans.

 Great vigilance must be exercised to ensure that a combination of statistical jugglery and outright corruption does not allow this money to be siphoned off and poured into the pockets of fat cat farmers growing grapes and strawberries in Maharashtra. A multi-representational oversight body should be set up to track the allocations made from the loan waiver corpus to watch where the money is going. Such a Citizens Sentinel must be put in place before the money starts to flow because it is almost possible to see the likes of wine and sugar barons rubbing their hands in anticipation. The finance minister owes it to the taxpayer with whose money he has been generous, to make sure the money goes where it is meant to. 

The writer is a commentator on developmental issues.