The Uttar Pradesh Chief Minister Yogi Adityanath announced a waiver of crop loans up to Rs. 1 lakh. Although this move falls short of the BJP’s election promise of waiver of all crop loans, it brings welcome relief to one third of UP’s farmers indebted to banks.
Meanwhile, Tamil Nadu’s farmers, hit by severe drought, have been resorting to more and more desperate measures to get the attention of the Tamil Nadu state government and now the Modi Government in Delhi. The Tamil Nadu farmers’ protests are a reminder that farmers’ distress and agrarian crisis in India has vast dimensions. Farmers all over India need relief, and governments also need to take urgent steps to reverse policy measures that are causing and sustaining the agrarian crisis.

The Uttar Pradesh Loan Waiver

The cost of the UP loan waiver which will benefit around 70-80 lakh farmers is Rs. 36,359 crores including a write-off of NPAs (Non-Performing Assets) worth Rs. 5,630 crores. 40 percent of the total households in UP are engaged only in agriculture, but UP’s expenditure in agriculture in below the national average; this crop loan waiver is less than half percent of the state GDP and 8% of government’s total revenue. Farming by sharecroppers and tenants is the predominant phenomenon, but they are excluded from any legal entitlement in absence of a proper framework. The marginal peasantry are forced to take private loans from money lenders at exorbitant rates and this waiver is immaterial for them. So, out of over more than two crore farmers in UP, of whom more than 90 percent are marginal farmers, only a small fraction will be benefited.

Severe Drought And Farmers’ Distress in Tamil Nadu

All 32 districts of Tamil Nadu have been declared drought-affected, and the state is facing its most acute agrarian crisis since Independence. Since October 2016, the agrarian distress killed over 250 farmers in the state – they either committed suicide or died from sheer shock at seeing their crops wither in the fields.

The Cauvery water-sharing dispute with Karnataka followed by a weak North-east monsoon resulted in severe water scarcity in the state. The seven districts of the Cauvery delta are the worst affected, but there have been farmers’ deaths outside the delta region also. Demonetization contributed to the crisis, with farmers being unable to withdraw money from cooperative banks for a crucial period. Farmers were forced to turn to usurious moneylenders – getting caught in a vicious debt trap. Demonetization also meant that farmers were unable to sell off cattle as a last resort. Tenant farmers were particularly badly hit.

The Central Government has just released amounts from the National Disaster Response Fund (NDRF) for drought-hit Tamil Nadu and Karnataka. The assistance to Tamil Nadu includes Rs 1748.28 crore for drought (Kharif), Rs 264.11 crore for relief from the cyclonic storm Vardah and Rs 2.06 crore under the National Rural Drinking Water Programme.

The measures announced by the Tamil Nadu State Government since January have been highly inadequate to match the scale and depth of the crisis. The crisis has been a long time in the making and has deep roots. As Prema Revathi, Senthil Babu and V Geetha remarked in a piece ‘Tamil Nadu’s season of discontent’ (March 11, 2017, The Hindu), “For its part, the state government appears content to follow a well-trodden path, announcing loan waivers, soft loan options, and compensation in case of “proven” suicides. It does not appear to have a sense that what we have here is a crisis, one that has been in the making for decades. … Meanwhile, farming continues as it has for the past four decades: High input costs, low procurement prices and a market that is not friendly to the small and marginal farmer….Hardly debated except in fringe political circles, the agrarian problem remains one that only farmers, their unions and unions of agricultural labourers are concerned about.”

Indebted Farmers vs Indebted Corporations

The Tamil Nadu farmers have been demanding a loan waiver from the Government. Similar demands have been raised by farmers of Punjab, Maharashtra and Rajasthan. But the Union Finance Minister made it very clear that loan waivers must be financed by state governments and the Centre was not willing to extend any support.

Meanwhile, as usual, the loan waiver in UP met with various disapproving noises from bankers and policy planners. SBI Chairperson Arundhati Bhattacharya had said that agricultural loan waiver disrupts “credit discipline.” The RBI Governor Urjit Patel reacted by saying that such decision of UP Government “undermines an honest credit culture…impacts credit discipline….plugs incentives for future borrowers to repay. In other words, waivers engender moral hazard.”

One wonders why the SBI Chairperson and RBI Governor see no similar “moral hazard” and “indiscipline” in the massive write-offs of NPAs of the super-rich and corporations? The slippage of standard accounts to NPAs is fairly low in the agriculture sector – just 3% in 2015 as compared to the Iron and Steel industry (7.8%) or Textiles (6.4%). NPAs of cooperative banks in Punjab – most used by farmers – are almost nil to less than 1 percent. Maharashtra’s cooperative banks too have shown a high improvement rate in their NPAs which was reduced by 50 percent to 11.7 in three years ending 2015. Contrast this with the ‘fiscal discipline’ displayed by India’s corporations.

India’s corporate debt surpassed 50% mark of country’s GDP many years ago. In reality more than 16% of the Banking sector’s assets are rendered nonperforming, till last year.

The debt of Reliance Industries more than doubled to over Rs 1.38 lakh crore till 2014 in few years. Between 2009-10- 2013-14, Vedanta group’s Sesa Sterlite’s debt suddenly exploded from Rs 1,961 crore to more than Rs 80,568 crore which is more than the total farmers’ loans in any one state of the country. Adani Enterprises is indebted by more than Rs 71,980 crore.

The rate of recovery of bad loans by banks fell from 22% in 2013 to 10% in 2016. Public sector banks (PSBs) wrote off Rs 1.54 lakh crore of bad loans between April 2013 and June 2016. Banks wrote off NPAs of Rs 56,012 crore during 2015-16. In November 2016, SBI wrote off loans of 63 wilful defaulters to the tune of Rs 7,000 crore: more than 80 per cent of the amount owed to it by these top defaulters. In 2015, SBI agreed to refinance Rs 5,000 crore of loans to the Adani Power subsidiaries — Adani Power Maharashtra (APML) and Adani Power Rajasthan (APRL), using the 5/25 scheme. Following outrage at the proposal, the SBI shelved a proposal to lend $1 billion to the Adani Group for the development of Carmichael coal mine in Australia. But in 2016, in reply to the RTI query seeking to know “the basis of giving huge loans to Gautam Adani Group along with the evidence that the loan was connected to the coal mines of Australia,” the Central Information Commission (CIC) said that “records related to loans given to industries promoted by Gautam Adani cannot be disclosed as these are held by State Bank of India in fiduciary capacity and involve commercial confidence.”

Farmers are regularly jailed, prosecuted and humiliated for non-payment of petty loan amounts. In drought-hit Bundelkhand last year, farmers were publicly named and shamed on a blackboard at the tehsil office, for failure to repay loan amounts. Yet, the Government and banks refuse to make top corporate defaulters’ names public despite demands by concerned citizens. On April 18, 2017, the Central government handed over to the Supreme Court a list of corporations owing more than Rs 5 lakh crore to banks, in a sealed cover envelope. Why not make the names public? How come the names of corporations refusing to repay massive bank loans are kept secret – while the same courtesy is not extended to impoverished farmers?

PM Modi’s Chief Economic Advisor Arvind Subramanian recently made the policy quite clear. He said that the government needs to bail out large corporate borrowers at times “even though it may lead to charges of cronyism.” He said “You need to be able to forgive those debts because this is how capitalism works. People make mistakes, those have to be forgiven to some extent. Political system has to be able to do that and ‘bad bank’ is one way of trying to do that.” How come corporations can be chronically forgiven by the Central Government and banks for making “mistakes” – but the Central Government becomes a hard taskmaster when it comes to waiving farmers’ loans?

Need To Address Structural Aspects of Agrarian Crisis

Agricultural loan waivers tend to be announced as election promises – in other words, they happen only when votes are at stake. But they are almost never accompanied by the urgently needed changes in the regressive agricultural policy framework. Governments do not work towards developing capacities of infrastructure like irrigation and cheaper storage; ensuring remunerative prices, lowering input costs; and more importantly by democratizing the land relations to safeguard the rights of sharecroppers and tenants. Far from completing unfinished land reforms, what we have instead are policies facilitating forcible land grab.

It is the hard labour of ploughing, sowing, watering, and harvesting which is left for the farmers, and every other aspect of agriculture is handed over to the control of greedy market forces that leave farmers penniless and more indebted after every harvest. Their produce serves for the cash profits for the corporations for inputs like seeds, pesticides, and farm equipment. Current policies are forcing farmers, in absence of basic infrastructure, to leave the traditional farm techniques which are environment friendly and move towards cash crops and more chemical inputs in the form of herbicides and pesticides leaving our agriculture and climate highly vulnerable.

Encouraging farmers to produce ‘remunerative’ cash crops has also proved to be a mirage because the market has been monopolized by private forces. When farmers become habituated to producing a certain crop in view of the relative profits, they suddenly find that after 3-4 years, prices of their harvest drops to near zero in a market that is neither ‘free’ nor fair’ for farmers, but is a corporate-controlled entity. In the last two years onion farmers in Maharashtra, tomato farmers in MP, potato farmers in UP, orange and kinnow producers in some states were forced to sell their crops at throwaway prices in APMC Mandis and many threw away their harvest because the prices in Mandi could not cover even the cost of cartage. This scenario inflicted less by the vagaries of nature and more by the capitalist policies is depressingly anti-farmer and if it continues then the loan waiver will prove to be a very short term relief like in the past. We should keep in mind that after the decontrol of prices the cost of some fertilisers has risen up to 14 times, while the MSPs of various crops have not even doubled during the last ten years!

A universal farm loan waiver is immediately needed in all states and this also must be accompanied with the measures to reframe the agriculture policies to prioritise farmers’ needs rather than corporate greed: i.e to make agriculture cost-effective so that farmers are able to live with dignity and pride. The profits of agriculture must reach the farmers and agricultural workers alone – who feed us all – and not any other entity.