National Situation

Beyond the first anniversary of the debt-relief programme – what does it hold for the indebted Indian farmers?

Sushovan Dhar

 

Andhra Pradesh has recorded 25 farmers’ suicides in the last two months. Dozens of impoverished farmers struggling with debt and poor rainfall have killed themselves in southern India in recent weeks, leaving behind families plunged even further into poverty, activists and politicians said. Nearly every day, newspapers report more farmer suicides in Andhra Pradesh, a state of 80 million people where 70% of the population depends on agriculture — and which has suffered badly this year from weak monsoon rains. Officially, the total number of suicides stands at 25 in the past six weeks. But opposition parties and farmers' groups say the true total is more than 150.

II

When a high-level team from the Central Government was visiting different districts and assessing the loss because of drought in the region, 11 more farmers from Vidarbha[i] ended their lives since September 1. Nine farmers killed themselves by swallowing pesticides while two ended their lives by hanging themselves, reports said. It is suspected that most of the farmers had taken the drastic step because of crop failure. Paddy, Soyabean and cotton crops were badly affected because of paucity of rains in the region, he pointed out.

An average two farmers now commit suicide every day in the region. As many as 48 farmers have committed suicide in Vidarbha last month while the figure was 784 last year. The farmers' pressure groups in Nagpur attributed rising costs of cultivation, low rate of remunerative price of agriculture produces, lack of credit availability for small and marginal farmers and repeated crop failures are the main reasons for such a pathetic state of farmers in the region.

Indebtedness as a grave problem for the Indian farmers arrived at the horizon ever since the government openly embraced the neo-liberal economic since 1991. Within a few years the nation started witnessing the pandemic of farmers’ suicide and saw it spread across the country.  This tragic and unprecedented phenomenon caused by increasing debt-driven vulnerability of peasant households started with the cotton farmers of Andhra Pradesh and gradually afflicted farmers – primarily growers of various commercial crops in other parts of the country. The government was initially in an attempt to deny & downplay its grave economic policies as a reason for such suicides and was making all possible efforts to attribute the suicides to social problems such as family disputes or alcoholism. However, as things went out of proportion and after numerous political protests and social affront besides a number of sustained enquiries and reporting of the same the government was compelled to announce the Agricultural Debt Waiver and Debt Relief Scheme, 2008[ii]. The much-awaited debt-waiver scheme arrived much later than necessary, and lamentably after more than 1, 60,000 farmers have ended their lives over the last decade.

A number of analysts point out that financial liberalisation not only swung credit flows towards urban areas but also starved agriculture of credit. It was therefore an important cause of the more than decade long agrarian crisis that characterised rural India. Starved of institutional credit, farmers switched to high-cost non-institutional sources of borrowing. When farm prices collapsed globally in the 1990s, farmers, caught in the pincer of falling prices and rising indebtedness and with nowhere to turn, started committing suicides. However, the government has still date never acknowledged its flawed credit policies or the trade policies that have been instrumental behind this catastrophe devastating large parts of rural India.

The government claims that till date over 36 million farmers have benefited from debt waivers[iii]. However, the waiver is only for the loans taken from the commercial or regional rural banks and no care has been taken of the farmers who have taken loans from the informal sources. Also the limitation of 5 acres has also caused problems for the farmers as there as some areas in the country where farmers have more than 7 acres of land but they are still poor as the land is not fertile.


As discussed earlier[iv], the limits of the scheme was evident from its inception and it was coupled with a total apathy to apply the same. Indeed a shocking revelation comes from a RTI (right to information) query regarding implementation of the prime minister’s and chief minister’s special relief package for distressed farmers in suicide-prone Vidarbha. The worst fears of planners and activists came true as a huge scam relating to relief schemes for the families of farmers who committed suicide in Maharashtra’s Vidarbha region came to the light. The revelations point to large-scale corruption and irregularities in the implementation of a subsidised cattle scheme in Yavatmal district, known to be the epicentre of farmer suicides. The scheme, in which 50% of the cost of buying a cow or a buffalo is subsidised by the government for poor, bereaved farmer families, is being abused[v] by undeserving beneficiaries including a six-time former Member of Parliament (MP), relatives of a sitting Member of the Legislative Assembly (MLA) and several former MLAs. The cattle scheme was put in place to help the families of indebted farmers who were the sole breadwinners and had ended their lives. Its purpose was to enable distressed families to supplement their income as farming had become uneconomical in Vidarbha’s unirrigated cotton-growing hinterland.

Another problem was the definition used to categorise poor and marginal farmers based on that of the debt waiver relief scheme. It is problematic and cannot be accepted, as it does not differentiate between irrigated and non-irrigated land. Thus, while adivasi farmers in Nasik and Vidarbha holding more than five acres of unirrigated land were excluded from the debt relief scheme even though they are in the category of poor peasants, the better off small farmers of Western Maharashtra holding five acres of irrigated land were beneficiaries of the debt relief scheme.

Another controversy developed when the national agriculture Minister Sharad Pawar took a ‘u-turn’ on raising the two-hectare land-holding cap stipulated in the government’s farm loan waiver. Activists complained that it was a stunning breach of umpteen promises of raising the land-holding ceiling in un-irrigated areas. Only 400,000 farmers out of a total three million in Vidarbha have a land holding less than two hectares (five acres) and only 100,000 of them are eligible for loan waiver though most of those deprived of the benefit because of a larger land holding are in dire straits and are committing suicide. The fact that un-irrigated lands have low productivity but high input costs - because of inappropriate farm practices promoted by the government - is commonly known and hundreds of farmer suicides in the last five years have highlighted the frightening agrarian crisis in such regions. About 80% of farmers in each village of Vidarbha have been left out of the government’s ambitious farm loan waiver package. Farmers say the manner in which the scheme was drafted and implemented shows little understanding of rural India and the conventional agricultural practices followed here. In most villages, the agricultural land is owned by the whole family, where the title is usually in the name of the family’s eldest male member. While on the land revenue records a farmer may own 15-20 acres, his actual per capita holding may be far less. The current ceiling of 5 acres (2hectares) makes these farmers ineligible for a full waiver. The most deserving have been left to fend for themselves.

As argued earlier, a cardinal weakness of the scheme is that ‘agricultural / professional moneylender’ is more important than banks or standard credit institutions for farmers with lower land holdings. Informal sources of credit outweigh the formal sources in case of farmers with up to 0.40 hectares of land. Apart from the moneylenders, there are a lot of other informal sources that farmers approach for their credit needs. Informal lending is a peculiar phenomenon in Indian agriculture, and as Arindam Banik points out, “Farmers, on an average, borrow much larger amounts from commission agents or traders than workers do from employers or tenants from landlords[vi]”. Still, the problem of indebtedness due to informal sector lending is not considered in the loan waiver scheme.

Indeed, the benefits of the loan waiver scheme would be very short-term, and the same problem of indebtedness might arise in the next season also. This is because the need for credit would never end, and due of the lack of a long-term solution in this approach, the productivity and the yield will not increase and many farmers would continue to be defaulters.

Several reports and studies identify the heavy rural indebtedness as the major reason behind the suicides but more importantly, indebtedness arises from a mismatch between the cost of production and the market prices. So, in order to get farmers out of this indebtedness induced suicide trap, improving the market mechanism would be crucial. Cost of inputs has also gone up drastically after the increase of pest attacks 1995 onwards, and thus the increasing need for application of pesticides. The short term policy of the government should have ideally targeted these problems in order to put an end to the increasing trend of farmer suicides.

It is a well known fact that the current scheme provides only a very short term relief, with a very limited outreach and it does not cater to the problems of agriculture. The last budget should have given a large push to core issues like public investment in infrastructure, land and water management including rain water conservation and watershed development, research and extension, price stabilization, etc, to make cultivation viable and profitable. There is no doubt that agriculture could have benefited more if the same amount had been used for development of infrastructure.

A simple provision of credit will also not end the woes. It is almost a fallacy to believe that credit or its waiver alone can mitigate the problems of the afflicted farmers. Timely availability of the right kind of fertilizers, genuine and quality seeds is very important. The marketing component of the chain is weak and the Government can improve the storage, transport and processing facilities of grains, fruits and vegetables and prevent distress sale of produce. Measures for raising output and good prices for production are fundamental rather than mere credit which, in the absence of viable agriculture, push them back into a debt trap. The issue is not that of availability of institutional credit, but access, ease, and terms and conditions of such finance.

In retrospect, Agricultural Debt Waiver and Debt Relief Scheme, 2008 has been a petite step towards the solution and there is a need for more effective measures that will negotiate the huge debt burden of farmers to informal sources. The adoption of unilateral and misplaced targeting rules based on size of and holdings limits the effectiveness of such a policy. A more inclusive debt-relief policy that also constitutes a debt-relief commission, expansion of rural institutional credit facilities and improved real returns for agriculture can effectively release the primary sector from the clutches of deflation and indebtedness in which it has come to be ensnared under the neoliberal regime.

The severe crisis in the agricultural sector must be addressed, and the viability of farming in India ensured. There are a slew of measures that are needed to ameliorate distress and increase the vibrancy of farming. These should include better support prices, more rational policies in international trade, special programmes and direct subsidies for agricultural revival including the building of farm ponds on every farm, better credit policies and effective crop insurance. Questions of credit, trade, and technology must be re-examined keeping the farmer’s long-term interests in mind. However, subsidising farmers through lower wages for agricultural labour, or transferring a share of resources meant for those who are worst-off in rural India, is the most unjust way to help the Indian farmer. The legitimate concerns of the farmers need to be separately addressed. The fragile success of a debt-relief programme cannot lift the entire rural economy and the population out of the morass.


[i] An area of the Indian state of Maharashtra where the suicides have occurred at a magnitude much higher than anywhere in the country.

[ii] The Finance Minister, in his Budget Speech for 2008-2009, announced a Debt Waiver and Debt Relief Scheme for farmers.

[iii] The Hindu, April 6, 2009

[iv] See AVP, issue no….

[v] The information, provided by the deputy commissioner of Yavatmal’s animal husbandry department, says former Congress MP Uttamrao Patil and members of his family got 10 cows, sitting MLA of Digras Sanjay Deshmukh’s wife and mother got a cow each, ex-minister and former guardian minister of Nagpur district Shivajirao Moghe’s relatives got eight cows, four relatives of Wani ex-MLA Wamanrao Kasawar’s got eight cows, while Congress leader Suresh Lonkar’s relatives bagged six cows. The contractor who supplied the cows, Amol Kshirsagar, also got a subsidy on two cows!

[vi] Arindam Banik, June 20,2006, Farmer Suicides: Beyond the Obvious The Hindu Business Line