How Best to address the Farmer's Problems

• The distress of the farmers has been aggravated by the decline in earnings from agricultural operations, the cost of inputs, the commercialisation of agriculture and the dependence on money lenders.
• The suicide by farmers in several states has highlighted the problem of indebtedness as the central issue.
• High indebtedness offsets the process of credit recycling, impedes production and productivity and forces a person into the debt trap.
• The institutional credit has expanded rapidly after bank nationalisation and more so over the last 3 years. From Rs 1865 crores in 1971-72 to Rs 86,981 crores in 2003-04, it nearly doubled to Rs. 1,80,486 cores in 2005-06 during 2006-07, it reached Rs 2,03,296 crore. Despite this, the credit needs of agriculture have not been fully met.
• The debt of the farmer households was estimated at Rs. 1.12 lakh crore in 2003, of which 48,000 crore was from non-institutional agencies including money-lenders. Nearly 74% of the debt from non-institutional agencies was at interest rates exceeding 20% per annum and in some cases 30% per annum.
• Why do farmers borrow from money lenders at interest rates which are much higher than those charged by banks? Many farmers face problems in gaining access to banks, then the problem of rigidity, insistance on a collateral, in adequate loans and procedural delay. These are the major reasons why the rural people approach non-institutional agencies.
• The indebtedness stems from the uncertainty over the monsoon rainfall. The return from the crop cultivation is not always assured. Though the aqricultural credit has increased, most of the farmers depend on non-institutional sources and exploitative terms and conditions.
• The dominance of middlemen often prevents the farmers from getting remunerative prices for their produce. The farmers often have to take loans for social functions and medical expenses from money lenders at a still higher rate of interest.
• The expert group's suggestions on increasing agricultural productivity, enhancing investments in agricultural infrastructure, research and extension, putting in place an effective system of risk mitigation both in production and marketing area are important aspects to be implemented.
• Indian agriculture is largely rainfed. The other factor is commercialisation. The farmer thus gets exposed to production as well as market risks.
• There is a need for an aquaculture risk fund to provide relief to the farmers through the banking system. If there are two failures in a span of 3 to 5 years, the fund could be used for writing off the principal loan amount.
• The farmers feel neglected and are quite distressed. Half measures or generous pronouncements won't do. Agriculture and farmers need should be at the centre stage of the planning system. A high powered standing committee ought to review the flow of agricultural credit.
- Balasaheb Vikhe Patil
Statesman 18/1/2008