S N Chary
India is a country of many mind-boggling contradictions. It is a nation where 15,000 farmers commit suicide every year; this would be quite a conservative figure as the social stigma and the sense of shame associated with it for the family of a dead farmer would prevent people from reporting as such. Farmers commit suicides for debts as small as Rs 50,000 to Rs 1,00,000.
It is a totally preventable situation; infusion of funds to the distressed farmers – in various forms including loan waiver – can save the situation, assuming of course that the funds reach the needy farmers in time. Obviously, that has not happened.
On the other hand, we have a situation where the Non-Performing Assets (NPAs) of all banks in the country were over Rs 3 lakh crore during the year 2014. A huge sum, indeed. Public sector banks are the leaders in NPAs, with a share of Rs 2 lakh crore. These NPAs refer to funds disbursed to the corporates and big private businesses. NPAs involve all kinds of fraud like wilful default, siphoning of funds, diversion of funds, failures due to inefficient operations, and time and cost overruns on projects. Agricultural loan defaults are just 10 per cent of the NPA portfolio of banks.
The corporate sector, which includes manufacturing industries and service companies, seems to be pampered while the farmers are dying due to the unbearable burden of agricultural losses. When the big businesses falter on repayment, banks get into an exercise called “restructuring of the loan” – an innocuous sounding euphemism for providing escape routes for the defaulting companies.
Ultimately, the loans get written off. During the past five years, the total write-off of loans by commercial banks was over Rs 1.6 lakh crore which amounts to almost 1.3 per cent of last year’s GDP of our country.
NPAs of banks are increasing rapidly. The NPAs of the public sector banks in the year 2012 were Rs.1.12 lakh crore which got doubled in two years. The NPAs in 2016 are projected to double the figure for 2014. This is an alarming situation by itself, apart from being a wrong direction of funds.
Let us look at the flow of funds that might have prevented the suicides by farmers. The desperate farmer, who sees no survival possibility for himself and his family, commits suicide for indebtedness of as low a sum as Rs. 50,000. If this loan amount had been waived prior to the death of the farmer, for preventing 15,000 suicides the government may have needed 50,000 X 15,000 = Rs 75 crore per year. Let us assume that if 50 farmers are ‘desperate’, one farmer commits suicide.
The government needs to protect all the ‘desperate’ farmers; this means it needs to disburse loan waivers of Rs 75 crore X 50 = Rs 3,750 crore. This is a small sum of loan waiver as compared to the loan write-offs for industry by public sector banks, which totalled Rs 42,500 crore in the financial year 2013-2014. A single year’s loan write-off for the business could have saved farmers’ lives for over 10 years.
Another source informs that the past five years of loan write-offs by commercial banks would have allowed 15 lakh poorest children to get a university degree from the top private universities in the country with all expenses paid. Indeed, the nation’s priorities seem to have been topsy-turvy. This is not to say that governments are not having farm loan schemes and waiver schemes.
However, these loans and the waiver of defaults are predominantly reaching the large farmers. 80 per cent of our farmers own less than one hectare of land. The ‘agricultural loan’ itself is an unclearly defined term; therefore, loans would get disbursed for schemes that may be only remotely connected to farming and agriculture.
Endemic corruption sees to it that the loan goes more to the persons who can pay a ‘cut’ to the disbursing authority or anyone in authority to control the credit granting operation. For instance, sometimes the village ‘sarpanch’, who may be a political figure, can stand in the way of loan disbursement and the loan receiver. There are leakages in many places.
Wrongly orientated system
While loan waivers for the desperate farmers are a right step, the government needs to do more. The farmers’ distress comes from falling productivity of lands, wrong crop cultivation, unavailability of farmer education on the ground, unavailability of knowledge on irrigation techniques/technologies for different areas, and importantly, also from distorted markets for their produce.
