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JULY 20,2017

Think beyond loan waivers

  • Indian agriculture is characterised by low scale and low productivity.
  • About 85% of the operational landholdings in the country are below 5 acres and 67% farm households survive on an average landholding of one acre.
  • More than half of the area under cultivation does not have access to irrigation. Agriculture income generated at average size of landholding is not adequate to meet farmers’ needs.
  • The problem is exacerbated by weather and market risks.
  • According to the latest National Sample Survey on Situation Assessment Survey of Agricultural Households (NSS-SAS), 13.9% farm households experienced negative return from crop production during 2012-13.
  • Non-farm income comprised 40% of the income of farm households, but access to non-farm sources of income is highly skewed as about 40% of farm households reported zero income from such sources.

Increasing debt burden

  • Modern agriculture requires investment in farm machinery and use of purchased inputs like seed, fertiliser, agri-chemicals, diesel and hired labour.
  • Most often, savings generated from unremunerative crop enterprise are inadequate for such investments.
  • Rising expenses on health, education, social ceremonies and non-food items put additional financial demand on farm families.
  • Consequently, majority of the farmers have to take loans from institutional or non-institutional sources or both.
  • The share of institutional loans disbursed during a year to agriculture and allied sectors has risen from 8.9% of the value of output in 2000-01 to 31.4% in 2015-16.
  • The ultimate goal of farm loan waiver is to lessen the debt burden of distressed and vulnerable farmers and help them qualify for fresh loans.
  • The success of the loan waiver lies on the extent to which the benefits reach the needy farmers.

Loan waivers suffer from several drawbacks in this respect.

  • First, it covers only a tiny fraction of farmers.
    • According to 2012-13 NSS-SAS, 48% of the agricultural households did not have any outstanding loan.
    • The farmers investing from their own savings and those borrowing from non-institutional sources are equally vulnerable to weather and market risks.
    • But all such households are outside the purview of loan waiver.
  • Second, it provides only a partial relief to the indebted farmers as about half of the institutional borrowing of a cultivator is for non-farm purposes.
  • Third, in many cases, one household has multiple loans either from different sources or in the name of different family members, which entitles it to multiple loan waiving.
  • Fourth, loan waiving excludes agricultural labourers who are even weaker than cultivators in bearing the consequences of economic distress.
  • Fifth, it severely erodes the credit culture, with dire long-run consequences to the banking business.
  • Sixth, the scheme is prone to serious exclusion and inclusion errors, as evidenced by the Comptroller and Auditor General’s (CAG) findings in the Agricultural Debt Waiver and Debt Relief Scheme, 2008.
    • It appears that loan waiving can provide a short-term relief to a limited section of farmers; it has a meagre chance of bringing farmers out of the vicious cycle of indebtedness.
    • There is no concrete evidence on reduction in agrarian distress following the first spell of all-India farm loan waiver in 2008.
  • In the longer run, strengthening the repayment capacity of the farmers by improving and stabilising their income is the only way to keep them out of distress.

Sustainable solutions

  • For providing immediate relief to the needy farmers, a more inclusive alternative approach is to identify the vulnerable farmers’ based on certain criteria and give an equal amount as financial relief to the vulnerable and distressed families.
  • the sustainable solution to indebtedness and agrarian distress is to raise income from agricultural activities and enhance access to non-farm sources of income.
  • Improved technology, expansion of irrigation coverage, and crop diversification towards high-value crops are appropriate measures for raising productivity and farmers’ income.
  • Another major source of increase in farmers’ income is remunerative prices for farm produce.
  • Another major source of increase in farmers’ income is remunerative prices for farm produce.
  • This requires removal of old regulations and restrictions on agriculture to enable creation of a liberalised environment for investment, trading and marketing. Agrarian distress and farmers’ income will be addressed much better if States undertake and sincerely implement long-pending reforms in the agriculture sector with urgency.


Conserving water, the ancient way

  • Temples today are primarily religious monuments, occasionally visited for their art and architecture. However, in the past, their walls served as record-keepers

Reverence for the resource

  • Temple inscriptions were always documents connected with the sale, transfer and maintenance of irrigated lands.
  • Temple inscriptions were always documents connected with the sale, transfer and maintenance of irrigated lands.
  • Today, we consider water to be a right. However, in the older traditions, it was a representation of god that residents were duty-bound to protect and conserve.Further, the respect for water transcended the public sphere and was part of individual homes as well.
  • In the Pandya empire, water conservation was a completely local affair. The entire community, through the elected temple mahasabha , managed it. This meant that there was constant supervision, ownership and responsibility
  • Water from the Tamirabarani and the Vaigai rivers was taken through channels into formations like eri s (small lakes) and per-eri s (bigger lakes). Channels created square parcels of lands called sadiram s and they were subdivided into smaller padagam s of land, all of which had numbers. There were as many as 20-24 padagam s in a sadiram . They were taxed differently based on how fertile they were — a system far more complex and farmer-friendly than today!

Care for the local terrain

  • Maintenance of the tanks through desilting and enlargement and building and maintaining of new canals was a continuous process. More than a hundred inscriptions across the region deal exclusively with this. Fishing rights for the lakes helped defray maintenance costs. Revenues were high enough for the excess profits to be deployed in building larger halls in temples that could be used for public functions.
  • Many inscriptions also talk of reclaimed lands and tax concessions provided following natural disasters and how, after a disaster, the community quickly acted together to set the system right.
  • True, the inscriptions don’t paint a utopian world. They talk about disputes related to water sharing and taxes; deaths that happened during desilting; and fights over excess water for more rounds of crops. However, these disputes were quickly resolved and in a way that the river or tank was respected.