Where Did We Let Them Down?

The winter crop was bountiful — so bountiful that prices of cabbages and cauliflowers dropped by as much as 76 per cent at some wholesale markets. Cauliflowers sold for Rs 5 a kilo in some markets in February. Two successive years of bumper crops of onions saw prices of the tear-jerker plummet by as much as 40 per cent at Lasalgaon in Maharashtra, which is the biggest trading centre for onions. The market price of Rs 500 short-changed onion farmers by Rs 300 for every quintal of produce.

In the months that followed, vegetable farmers in Haryana flung tomatoes and other vegetables across highways to draw attention to their plight. Low returns on produce threw farmers into a debt trap. So, when Uttar Pradesh chief minister, Yogi Adityanath, fulfilled a poll promise to waive farm loans to the tune of Rs 30,000 crore, the demand for a similar boon spread quickly to other states like Maharashtra, Rajasthan, Karnataka and Haryana.

The Maharashtra government has since granted a loan waiver of Rs 35,000 crore to its small farmers, but many  other states are now in a quandary. At Mandsaur, which is the largest wholesale market for pulses and lentils, protests led to police firing, in which five farmers died.

On 15 June, a lentil farmer, Narendra Prasad Yadav, swallowed poison at the market, after his money-lender, snatched away his entire earnings of Rs 45,000. Newspaper reports said Yadav owed the man Rs 50,000. A day later another farmer in Shivpuri district hung himself from a tree, taking the toll of farmer suicides in Madhya Pradesh to eight since protests broke out.

16 June was also the last day of Congress leader, Jyotiraditya Scindia’s, 72-hour sit-in demonstration or satyagraha at Bhopal, to show solidarity with farmers killed in police firing and to demand a loan waiver for farmers. Since the Mandsaur protests, political parties of  myriad hues have raised their voice to decry the plight of farmers, from the Communist Party of India (Marxist) to the Indian National Lok Dal.

The same day, farmers’ organisations put up road blockades across the northern plains and into the arid heartland of Chhattisgarh and Madhya Pradesh. As many as 62 farmer unions announced that they would block traffic for three hours on all national highways across the country, to demand waiver of loans and implementation of the Swaminathan Commission report.  The report calls for sweeping reforms, better farm credit, insurance and better access to technology. In Haryana, the blockade was led by the Bharatiya Kisan Union. In Gujarat, Congressmen blocked highways. Opposition parties that had gathered to discuss a strategy for the Presidential elections in the capital, decided to call a Bharat Bandh to empathise with farmers in distress.


Even though the Union government has remained pretty adamant in its stance that state governments would have to fend for themselves, should they choose to waive agricultural loans, it did take some quick steps to quell the storm that was brewing. On 14 June, the Union Cabinet met and approved an interest subvention scheme for farmers running into Rs 20,339 crore. It met again the following day to approve a 10 per cent increase in the minimum support price (MSP) for pulses, cotton and oilseeds for the 2017-18 financial year. Incidentally, the MSP for pulses has catapulted every year and yet, a lentil farmer swallowed poison in mid-June, because his earnings from his produce did not match up to his debt to the village money-lender.

Raju Shetty of Shetkari Sangthna from Maharashtra, said, “I have written many letters to the PM but did not receive a reply. He promised to double farmers’ income but ended up doubling their debt.” He was also critical of the Union government’s stance on loan waivers. “It was the Central government’s decision to import commodities which reduced prices,” Shetty said, adding, “then why should states arrange for loan waivers?” He also alleged that suicides by farmers was on the rise. A research paper of the University of Agricultural Sciences, Dharwad, though, shows that incidences of suicides by farmers had actually declined from 15,964 in 2010 to 12,360 in 2014 (see graph a).

So, could the loan waivers being demanded prove the genie that could cure the Indian farmlands of all their travails? Statistics suggest that the Indian farmer has wriggled out of the grips of the village money-lender to a great extent and is now extremely savvy with institutional credit. Ministry of Agriculture & ISAE data indicates that institutional credit to the agriculture sector (including short-term, middle-term and long-term loans from commercial banks, cooperative banks, regional rural banks and other agencies) had catapulted from Rs 5,11,029 crore in 2011-12 to Rs 8,77,527 crore in 2015-16 (see graph b).

Loan disbursements to farmers have jumped by Rs 36,000 crore in a span of three years, indicating that farmers had indeed, begun to show more faith in institutional credit. An economist at the Indian Society for Agriculture Economics quipped that the trend simply implied that state governments now had more loans to waive!

If the loan waivers are specifically for small farmers, the write-offs should not prove a burden. Small and marginal landholdings are only a minuscule part of the total landholdings of cultivators (see graph c). The massive demand for waivers then, raise a poser. Do the loan waivers reach the bonafide beneficiaries?

The real challenge for the state governments will be to sort out the intended beneficiaries from large landholders using legal skulduggery to join the queue for loan waivers. C. L.  Dhadhich, a rural banking expert, formerly with the Reserve Bank of India (RBI) told BW Businessworld, “Every time the government finds itself in a déjà vu situation when it comes to farm loan waivers”. Bharatiya Kisan Sangh’s Madhya Pradesh organisation secretary, Shivakant Dixit said, “Our demands were basically inspired by routine issues of farmers, and conditional loan waiver is one among them.” Farmers have been demanding a varied array of sops, including free electricity.

In the first three years of its tenure, the Union government has reached out to cultivators in many ways. It has allocated Rs 1,64,445 crore for agriculture over the last three years, which is a 57.68 per cent increase over the allocation of the previous government between 2011-12 and 2013-14. The Prime Minister has announced short-term farm loans of up to Rs 3 lakh, repayable at the end of a year, at a reduced interest rate of four per cent from nine per cent earlier.

Timely repayment entitle farmers to a further interest concession, making the loans almost interest-free. Even so, some tasks remain unfulfilled and implementing the Swaminathan Commission report is among them. Union Agriculture and Farmers’ Welfare Minister, Radha Mohan Singh, conceded that flaws did exist in the system, but added that the government was trying to make it more transparent. At the National Association of Agricultural Sciences (NAAS), S. S. Acharya said, “Farming has improved over the years, but a large percentage of farmers, especially the young, are not ready to opt for farming as their profession.” The gap in income of farmers and non-farmers has widened from 1: 3 to 1: 5.

Agriculture’s contribution to the gross domestic product (GDP) has dwindled from Rs 63.84 lakh crore (and 23 per cent) in 2003-04 to Rs 15.90 lakh crore (and 14 per cent) in 2015-16. Acharya pointed out that the rural market and infrastructure and the farmer-market linkage was still very poor. More than 30 per cent of agricultural produce is wasted and value addition to agricultural commodities is less than 10 per cent.

C.L. Dhadhich said, “In recent years the share of gross capital formation (GCF) in agriculture and allied sectors has dwindled to less than eight per cent of the total GCF, from 18 per cent in the early 1980’s. A former member of the Prime Minister’s economic advisory committee said, “Production and protection, investment and subsidy, use of natural resources, linking farmers to markets and asking institutions to train farmers, are the ways to calm down this entire episode.”

Food Security
The country’s agricultural policy has been entirely focussed on food security for India’s vast population and increasing food production. That very success story, the phenomenal rise in agricultural output, is now snipping at the heels of the government, as low returns on farm produce drive farmers out into the streets and some to death.

The minimum support price (MSP) insures cultivators from crashing crop prices and the MSP has been large and generous every year. The National Farmers’ Commission, however, has recommended that the MSP be at least 50 per cent higher than the farmers’ total investment. The farmlands, the food basket of a billion people, have therefore, not been neglected at all, but pampered by successive governments. If food security was the goal of our policymakers, agriculture is a success story, as is evident in the 273 million tonne foodgrain production in 2016-17 (see graph e). Experts describe the achievement as a technology-led growth in farm productivity (see graph e).

Productivity and production has also increased in horticultural products (like fruits, vegetables, spices and flowers). Horticultural produce takes less time to grow and requires less water than traditional crops such as grain. Perishable vegetables, the crashing prices of which have prompted stirs, speeches and much pontification on India’s agriculture policy of late, lead the pack in horticultural production (see graph f ).