Discontent, anger and unrest among farmers did not erupt a few weeks ago. It had been there when the UPA regime ruled; and existed since earlier than that. Whenever farmer sentiments threatened to manifest or began to manifest in politically inconvenient ways, the Government under siege applied a quick-fix method: Write off the loans the community owed to the public sector banks. If the policy-makers had their way, they would order waiving off dues to private money-lenders as well. The move would quell the disquiet for the moment, only to resurface in the next season. The cyclical repetition of the anger and its redressal would lead us to believe that the debt burden is the crux of the agrarian crisis.
It's true that farmers have been facing a debt crisis. They borrow from the banks for their agrarian needs. When their crops fail, they are unable to recover the amount to repay. When there is too much of the crops, the market prices fall so sharply that they are unable to get even their investments back and are unable to clear their bank dues. Either way, they suffer. Unlike in the case of industrialists, they do not have obliging bank officials to offer them further loans to get rid of their earlier dues. Failed industrialists do not commit suicide as a result; they escape to foreign locales and hire the best legal brains to fight their cases in Indian courts in absentia. The farmer, tied to his village and land and family, hangs himself at home or from the nearest tree.
Yet, we cannot escape the real issue. If loan-waivers are the solution, how many of these are needed and how often are they required to get rid of the problem for goodIJ The short answer is that they are not the way out, and study after expert study bears this out. And yet, there is a competition going on to waive off agrarian loans. Uttar Pradesh has done it, and so have Madhya Pradesh, Maharashtra, Punjab, Andhra Pradesh and Telangana. Now Karnataka has followed suit. It’s an open-ended list. Each State has to bear the burden of thousands of crores of rupees in the process. The populism is obvious — Shiv Sena chief Uddhav Thackeray frowns at the use of the term ‘karz maafi’ and says maafi is pardon for a crime, and crime is not what the farmers have committed; instead loan write-offs should be ‘karz mukti’ or freedom from loan. It’s a good way to placate one’s conscience but a harmful way to deal with the situation.
We need to confront the reality. The average earning of an agricultural household (and let’s keep out the rich farmers) across the country has not kept pace with the costs of production. Because farmers have been producing more, their input expenses on electricity, water, seeds, fertilisers, fuel etc have risen. The cost per hectare has gone up while the return per hectare has been not equally commensurate.
Sometimes obvious explanations are the best ones. Crops fail because of poor monsoon. Vast tracts of agricultural land depend on rains for irrigation. This must change. Various schemes have been initiated by the the Centre and the State regimes to boost the irrigation network. The project must be expedited. On the other hand, crops are in abundance when there is bumper production. Market rates fall and farmers are compelled to burn their produce — and all their hopes of a decent return on their labour as well. State intervention is needed on a big scale to lift the excess crop and provide a dignified return to farmers.
The issue of minimum support price (MSP) is a favourite with our policy-makers. For many of them, it holds the key to a solution. The MSP is a necessary tool to ensure decent returns to the farmer and check his exploitation in the market place. MSPs keep getting revised and more products are added the list every now and then. But a good MSP alone is not enough; accompanying policies must also be in tune. For instance, many States this year registered a record production of pulses. The result was that pulses were sold at far below the MSP in the market. And yet there also existed a decade-old ban on the export of pulses which prevented the excess crop from being sold abroad at good rates and bringing returns to the farmers. How sillier can a policy get!
Re-working policies and enhancing agricultural infrastructure are not easy tasks. Easier is to write off loans. Ironically, even this hasn’t been working to the satisfaction of the farming community. There is already resentment in Uttar Pradesh — as there is and will be in other States — that the loan waiver has been beneficial to only a small section of the community. Soon there will be allegations of favouritism, of political appeasement, of mismanagement of the process to get the loans written off. This is not the end; States will bleed as they waive off loans totalling tens of thousands of crores — in the case of Uttar Pradesh, it’s pegged at roughly Rs36,000 crore, and Punjab it’s Rs20,000 crore. When it comes to farm loan waivers, political ideology doesn’t matter — the first State is ruled by the BJP and the second by the Congress. The Centre has already said that States will have to find the resources to fund the write-offs. In 2015-16, the debt-to-State GDP ratio of all States combined was at 3.6 per cent — higher than the maximum of three per cent recommended by fiscal prudence.
But then who caresIJ So long as the crisis of the moment is contained somehow, there is no immediate need to think of tomorrow.