Oh! What a lovely waiver
The UPA government's waiver of farm loans that was announced in the Union budget is no solution to even the immediate crisis let alone long-term agrarian problems. Nothing in this budget will raise farm incomes, writes P Sainath.
It was around the distress in regions like Vidarbha and Anantapur that the present ‘farm loan waiver’ was conceived. Growing knowledge of that distress, breaking through even the filters of a media unmoved by the crisis in the countryside, made the waiver both thinkable and acceptable. Odd then, that in its present form, it excludes the very regions whose pain brought it into existence.
Millions do indeed get relief from what is a positive step. (Though not quite as ‘unprecedented’ as some believe). Even the colonial raj went in for loan waivers or ‘karza maafi’ more than once. And those waivers addressed private moneylender debt. (There were no nationalised banks in those days.) That’s something the present waiver does not touch - even though usury accounts for the overwhelming share of farm loans. In Vidarbha, money owed to private lenders would account for between two-thirds and three-fourths of all debt. In short, we haven’t begun to resolve the debt crisis of these and millions of other farmers.
Unproductive holdings
The failure to touch moneylender debt is just the first problem. In Vidarbha, the average landholding size is 7.5 acres or 3.03 hectares. Way above the two-hectare cut-off mark for the bank loan waiver. Up to 50 per cent of Vidarbha’s farmers are above this limit. Not because they are big landlords. They tend to have larger holdings as their land is unproductive and unirrigated. Poor adivasis in Yavatmal, for instance, often own over ten acres but get very little from their land. In Anantapur in Andhra Pradesh, too, many farmers will be left out by size or other norms. By contrast the farmers of Western Maharashtra, the Union Agriculture Minister’s stronghold, will benefit greatly. Their holdings are smaller, well-irrigated and more productive.
For those with over two hectares, there is the old deal of “one-time settlement” of their bank loans. In this case, if they repay 75 per cent of the loan, they will be given a rebate of 25 per cent. Only very large farmers will gain from this. If the rest, drowning in debt, could pay 75 per cent of their dues, they wouldn’t be committing suicide. They would pay hundred per cent.
Then, of those farmers falling within the two-hectare limit, only a small group have access to bank credit. So the gainers in this crisis-hit region will be a small percentage of the total number of farmers. It doesn’t end there, though. The few who do qualify, gain much less than farmers in, say, Western Maharashtra. The average crop loan in sugarcane territory is Rs. 13,000 per acre. Apart from which farmers there get up to Rs. 18,000 per acre for drip irrigation. In Vidarbha’s cotton regions, they get loans of just Rs. 4,400 per acre. So the scale of the write-off will be far greater for the relatively better off farmers. In political terms, this benefits Union Agriculture Minister Sharad Pawar’s base. At the same time, it undermines the farm base of the Congress in Vidarbha. Indeed, the average loan for the grape growers (outside of Vidarbha) is Rs. 80,000 per acre.
The cut-off date of March 31, 2007 works against even the small group of Vidarbha farmers who do benefit. Loans in the cotton regions are taken between April and June. In the cane growing regions, they are taken between January and March. This means the Vidarbha farmer has one less year of loans waived than the others.
Since no distinction has been made between dryland farmers and others, anomalies abound. West Bengal and even the non-crisis regions of Kerala have large numbers of farmers below the two-hectare limit. With agriculture in bad shape, don’t grudge them the windfall the waiver brings. But it is odd the same does not happen for farmers in dryland regions who need it most. What’s more, the farmers of Bengal and Kerala have far more access to bank credit than those in Vidarbha do.
The State government itself reckons that Rs. 9,310 crore of the waiver comes to Maharashtra. That is, almost a sixth of the total. Of this, a fraction goes to Vidarbha, the rest being collared by better off farmers. And what of other dryland farmers across the nation? Those in, say, Rayalaseema or Bundelkhand? What do they get?
Is the waiver ‘unprecedented’? Each year, nationalised banks write off thousands of crores of rupees as bad debt. Mostly money owed by small numbers of rich businessmen. And theirs is not a ‘one-time waiver.’ It is a write-off that recurs every year
Between 2000-04, banks wrote off over Rs. 44,000 crores. Mostly, this favoured a tiny number of wealthy people. One ‘beneficiary’ was a Ketan Parekh group company that saw Rs. 60 crore knocked off. (The Indian Express, May 12, 2005). However, those ‘waivers’ are done quietly. In 2004, last year of the NDA, such write-offs went up by 16 per cent. Such ‘waivers’ have not slowed down since 2004.
Staggering giveaway
And all this is apart from the annual Rs. 40,000 crore ‘giveaway’ to the rich, mainly corporate India. That has been the average in the budget every single year for over a decade. Then there are the straight handouts. No one knows how many thousands of crores are lost by handing out spectrum the way it’s being done. But we know it’s a staggering amount. Tot up the ‘tax holidays,’ exemptions and the rest of it and you’re looking at sums that make the ‘unprecedented’ one-time farm loan waiver look like loose change.
Loans in the cotton regions are taken between April and June. In the cane growing regions, they are taken between January and March. This means the Vidarbha farmer has one less year of loans waived than the others.
• Life on credit, death in installments
But let us look, for instance, at the millions of farmers owning less than one hectare - the largest group. Some 7.2 million of them have accounts in scheduled commercial banks. And the total outstandings against these accounts is Rs. 20,499 crores. (Reserve Bank of India: Handbook of Statistics on the Indian Economy 2006-07.) As Devidas Tuljapurkar of the All-India Bank Employees Association points out, that’s about the same amount the nationalised banking sector writes off each year as bad debt. Mainly for industry. Those farmers with between one and two hectares hold 5.9 million accounts and owe Rs. 20,758 crores. That is: these 13 million account holders owe less than the Rs. 44,000 crore written off by the banks during just the NDA period for a tiny number of rich people.
The waiver does bring great relief to large numbers of farmers. But it is no solution to even the immediate crisis let alone long-term agrarian problems. Nothing in this budget will raise farm incomes. Which means farmers will be back in debt within two years. Their incomes have long been much lower on average than those in other sectors. And they fall further behind each year. Worse, fresh credit will not come cheap. Pleas for ‘low-interest or no-interest loans’ have been ignored. There is no mention of a price stabilisation fund to shield farmers from the volatility of corporate-rigged global prices. Besides, the idea of a five-year repayment cycle has not been touched. And the highly unjust crop insurance rules that dog regions like Anantapur remain unchanged.
However, there is still a long way to go in the budget session. So these problems can be set right if the government is sincere about helping those worst-hit by the crisis. It could work all these measures into the final document and also adjust the terms for dryland regions.
One funny outcome of the budget is that the media are now talking about farmers. Of course, the ‘analysis’ of what is ‘pro-farmer’ comes from the elite. From CEOs, stockbrokers, business editors, corporate lobbyists and touts in three-piece suits. On budget eve one anchor posed a question to his panel in words to this effect: “Will it be a pro-poor, aam aadmi budget or will Mr. Chidambaram use the opportunity to do something good [for the country] in terms of reforms.”
When the budget rolled out, one anchor said: “And now for the budget bad news. India Inc.’s plea for a cut in corporate tax rates went unheeded.” Isn’t that cute? If a budget is pro-poor, it cannot be good for the country. If it does not give the corporate world more goodies, it is bad. And of course, the elite panellists mostly rued this “gigantic giveaway.”
While gasping at the size of the “write-off” it’s worth asking why the loan waiver comes up now. Why not in 2005, when the demand was already being made? Or in 2006 when the Prime Minister visited Vidarbha and was shaken by the widespread distress. Mr. Pawar has outsmarted his rivals. Had the step been taken then, the credit would have gone entirely to the Congress. No prizes for guessing who opposed it then (when it would have cost much less).
For three years, while the misery and suicides mounted in Vidarbha, there was not even the admission that a loan waiver was possible. Indeed, it was shot down by those now taking out full page ads claiming credit for it. As they complain in Vidarbha, this is not about karza maafi. It is about seeking voter maafi (voters’ forgiveness) in election year.
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P Sainath (2008) ‘Oh! What a lovely waiver’, India Together, 11 March 2008. https://indiatogether.org/waiver-op-ed/
13 reader responses
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P V Krishna · 12 March 2008
As said in the article, The waiver will not solve the problems that are besetting the farmer. Even when the countries such as US and EU countries are supporting their farmers in a big way, the media in our country is unreasonably equating this waiver to regressive step to development. As the author wrote, Many in Ananthpur district, AP have even 20 acres, but still they are willing to work for a monthly salary of 1000 in a nearby towns. Finally the people who knows the hunger can only correctly explain what is hungry. I want to add a piece of information to the article.The contributions by farmers in terms deposits exceeds their share of credits. What justifies the inaction of political leaders and bureaucrats to save the farmer who is feeding the whole country,
Kapil · 13 March 2008
Mr. Sainath, I have been reading your articles for some years now and would like to start by expressing deep admiration for your work. However I find that while you do acknowledge in passing that the loan waiver will have at least some positive effect ("Millions do indeed get relief from what is a positive step" ) you could have explored that point of view in greater detail( the very idea of millions getting relief means we are better off with this waiver than without) before launching into very valid criticisms(some of which however while true are not criticisms of the debt relief itself but of the media potrayal(and middle class/rich people attitudes) of the same, for example the media calling this a bad populist measure while glorifying handouts to corporates). When armchair analysts like myself will discuss the agrarian relief issue with others, we will get the invariable "even the torch bearer for the farmers Sainath says relief for farmers is a bad idea". That will be bad for ANY (even better, enlightened and better focussed) moves by the government and to address the rural crisis.
Krishna · 14 March 2008
Mr Kapil, I disagree with you. No doubt the loans could give relief to millions of farmers. But when the farmer is entitled to get a meal, in what positive way it can be described that he got only a morsel?
Tamal Mukherjee · 15 March 2008
Instead of bailing out PSU Banks, the govt should have asked them to book losses. The government could then have used this Rs.60000 crore fund to build world class irrigation system for farmers throughout India in the next 4 years.
Gaurav Singhal · 16 March 2008
The author has raised points someone deeply acquainted with the rural India can only raise. It is good that Rahul Gandhi recently has voiced similar concern over the criterion chosen in the waiver. Perhaps it is the result of sincere journalists like Sainath that the political class gets policy direction, although many a times after a prolonged delay. The author has rightly suggested measures like 'low-interest or no-interest loans', price stabilisation fund, five-year repayment cycle and crop insurance to address the agrarian crisis deeper. Let us hope that some action on that front is seen in future by the establishment. 60,000 crore loan waiver would enable crores of farmer to be eligible for fresh loans. In this way, it would help these crores of farmers in distress and thus help in increasing the farm incomes, the author has missed this point. Although, as Sainath rightly points out, the most needy farmers will be left out of this relief... what a cruel mockery!!
Anurag Shekhar · 16 March 2008
I am a great admirer of Sainath & his work. But i fail to understand why he is being so pessimistic about the loan waiver. Even if it helps one tenth of poor farmers, still it is a good step. Also, if somebody so educated & committed like Sainath will only talk about problems, who will suggest solutions. I think it's high time that we start talking about educating farmers about technology, crop rotation, weather information, seed variety, state of the art farming technologies etc. We must talk about our great institutions like IITs & IIMs,where we invest tens of thousands of crores each year giving innovative solutions to day to day problems of farmers.
Nitin Arora · 17 March 2008
Mr. Sainath, firstly thank you for the great work you are doing and opening up our eyes to great problems our farmers face. I thought I had problems till I saw your video on global inequality you gave in Portland. Secondly, how can somebody like me (a guy who works in an MNC and is fairly busy during the weekdays) stop being a Nero's guest. How can I contribute even a little in making lives of our farmers a little better. I don't mean this as charity but giving them their due due viz. a decent living as citizens of this nation? How can i do my little bit?
Laxmi Narayana Paladi · 17 March 2008
There might be thousands of permanent solutions to the farmers problems. But before finding and implementing them, the farmer needs to be brought out of debt trap, which is causing suicides. Many people may talk several times about permanent solutions. But nobody is there to show them, so far. Leave aside implementation of them. Being the main permanent solutions, nobody talks about 1) Intensive afforestation and 2) Efficient conservation of the existing resources.
R.Sajan · 18 March 2008
1. Small farmers be given interest-free credit. 2. Bankers be made small farmer and agriculture-friendly. 3. Scales of finance be raised realistically. 4. Corruption in bank branches in rural areas be eliminated. 5. Bank officials' denying credit to farmers so that private moneylenders might get business, be put down. 6. The illegal system of Agriculture Gold Loans in South India branches of banks be stopped, so that genuine farmers do not have to pledge gold. 7. Such Agriculture Gold Loans be made eligible for debt-waiver, unlike the experience in Kerala during the Devi Lal Loan relief. 8. The Kerala model of labourers' unions wrecking agriculture in the State from 1969 be held up, for the rest of the country as a lesson.
Pathikrit Ghosh · 24 March 2008
I would like to take a tangent from the distressed world of the farmers to the urban recipients of loans. We have seen an increase in the cases of banks resorting to coercion by force for recovering loans disbursed and also penalties being slapped on the concerns resorting to such dubious means. Never do I recall a nationalised bank being involved in such tactics. The point I am trying to make is that lenders leading farmers to suicide are similarly unlikely to be nationalised banks. Rather my guess would be that it would be private money lenders and their ilk. So does providing waivers on loans from nationalised banks and rural cooperative banks perhaps hits a different target. Following the budget, media as it is its wont, went on an overdrive covering the various facets of the waiver, some genuine and some absolutely inane. One such genuine case would a feature which appeared in NDTV regarding the dismay of the farmers who have paid back the loans. Their economic condition is not diametrically opposite to that of the defaulters, may be marginally better in many cases and at par in some other. What happens to these people who actually fulfilled their commitment by repaying the loan? Does their honesty get appreciated in any way whatsoever or is it that they are being penalised for being honest? I fear the latter to be the case. In the feature mentioned above, one such farmer expressed his disappointment on being penalised for doing the correct thing and decided to wait and watch the next time over before repaying back the loans. So we now turn some people "crooks" with our myopic implementation. While so much has been said about the dismal performance in the agriculture sector as compared to manufacturing and services, we perhaps need to do some soul searching that in the duration of the Sixth Five-Year Plan agriculture was ahead of services in terms of growth. The growth rate in absolute percentage point terms has been the highest in the history of Independent India. Incidentally this period does not correspond with that of the proclaimed golden age of Green Revolution. One misnomer which needs correction is the repeated insistence by the government that the food grain production is at an all time high. It is a no-brainer that with positive growth being clocked year after year (immaterial of the size of this growth)the production is bound to be the highest ever. I think that the modalities of agricultural reform can be decided at a later stage, we perhaps need to give a second dekko to our level of commitment to this cause.
Mitesh Damania · 13 April 2008
The problem is low price agriculture prices. If we can somehow educate the consumers to pay higher prices and buy Indian crops (not subsidized imports) we can solve this problem and save the farms. We then need to transfer the higher prices paid by the consumer to the farmer. Very hard to do since there are many middlemen who'll keep the money. So there needs to be a nonprofit type organization that insures that higher prices paid to the farmer can be advertised to the consumer via a stamp or logo on the bag. Perhaps have a serial number on the bag that can be validated on a website to insure no fraud. Consumers can report where they bought fraudulent crops through the website.
amit kumar · 2 May 2008
i indeed agree with mr.sainath.the loan waiver scheme is just an eyewash.previously also,debt relief has been provide and the government is also running programmes to combat the evils of this vicious cycle of peasnt suicides,what is actually needed is a comprehensive scheme to look into thie issues that plague the condition of a farmer.this is only a myopic undersatndin of tje problem and while this may help some farmers,the solution,and i mean a permanent one,is far away
SRIVANI BASKEY · 12 May 2008
i agree with your views one thing i want to share is that mostly the accounts which fall under the debt waiver belongs to big people who for availing benefits did not got renewed the accounts and they distributed below 5 acres to each member of the family. Poor small farmer who has the land holding of 1 to 3 acres sincerely repaid the loan by sacrificing his one square meal, got renewed his account and he is the big loser in the debt waiver package