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Is loan waiver a permanent solution?

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By Vinod Chandrashekhar Dixit

Indian agriculture is in dire need of mechanization and modernization to make it a self-sustaining commercial activity. It has become more of a compulsion for the farmers instead of a promising career opportunity.
Dry lands are the worst-hit by the agrarian crisis and deserve special treatment. It is common knowledge that farming is of little viability on small holdings in dry lands. When nature rides roughshod over debt-ridden farmers in the form of erratic monsoon and crop failures, they face grim options.
Indebtedness is a key reason for the many farmer suicides in the country. Loan waivers provide some relief to farmers in such situations, but there are debates about the long-term effectiveness of the measure. Waiving loans addicts the farmer to the concept that repayment is not to be expected.
It is just like giving alms to able bodied beggar and perpetuating begging habits. It is to be remembered that loan waiver has not helped the farmers as it is a relief only for one season with the farmers going back to grind in the next. Giving such sop is also not economically viable as it reduces government’s fiscal power to intervene when needed the most.
Loan waiver is not a permanent measure for the farmer’s agony but it will prove to be a drag in the long run. It is a retrograde step in the development of the entire agricultural sector. Farmers are virtually on their death bed, so some booster dose will be helpful, but for how long the farmers will be kept alive.
Farm debt waiver is not a permanent solution to farmers’ problems. In India where annual agriculture waste is about Rs 96,000 crore, farm loan waiver is just a poll sop with no long term economic gain for farmers in distress. The real crisis for Indian farmer is that he or she is not in control of the produce, unlike other businesses, and is dependent on cartel of traders to fetch a decent price. Don’t we think our Indian agriculture needs to be diversified and alternative sources of income generation like animal husbandry, horticulture; floriculture etc. should also be made a part of the agricultural milieu.
Here the point is not that government should not help distressed farmers. Some recent government initiatives such as developing an open market for agricultural produce, increasing coverage of crop insurance, building rural roads, among others are likely to be useful to the farming community.
The farm loan waiver is one of India’s most popular, often-used political tools. In 2009, it helped to return to power Manmohan Singh’s Congress-led government, which offered borrowers a bailout program in which 37 million farmers benefited from waivers of Rs 52,200 crore.
In 1990, the government of Prime Minister V. P. Singh also offered an agricultural debt relief program of up to Rs 10,000 for each borrower. In Andhra Pradesh and Telangana, two separate regional parties came to power in 2014 on the promise of a loan waiver and now in MP, Rajasthan and others.
The waiver should, therefore, consider the agro-climatic factors and the farmers’ distress level. Crop losses caused by poor storage facilities, transport and assured market were among the reasons that drove farmers to borrow. Instead of waivers alone, it is important to provide overall relief to the most-affected farmers in distress in a targeted manner and pointed to the failure of past farm loan waivers in ameliorating farm distress.
Farm waivers increase the budget deficits of federal and state governments and escalate inflation. Farmer’s distress will hurt farm economy till sops such as farm loan waiver is given and farmers are not empowered to make their produce remunerative. For that to happen, the government needs to be ‘technology enabler’ instead of waiving loans. Don’t we think our farmers need to be counseled for cost reduction? Drip irrigation or micro irrigation techniques are not only eco-friendly but also friendly economically where they can save water and electricity both.

The writer can be reached at [email protected]


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