Monday, March 31, 2008
Wednesday, March 05, 2008
Farmers' debt waiver package: an analysis
On February 29, P Chidambaram, the oh-so-long finance minister of India, presented his fifth consecutive budget. He was second only to Dr. Manmohan Singh, the current prime minister, to present all five budgets of a single government. The media went agog with analyses, discussions, public opinion et al. One interesting headline was "Politically Correct", alluding to the minister's initials! The budget was politically correct.
There was huge waivers for farmers to the tune of 60,000 crore INR. Women and children's development was given high priority.
Health and education was provided with generous funds.
Income tax exemption was raised to 1.5L from the existing 1.10.
cenvat was brought down to 14% from 16%.
Of course, the debt waiver to the farmers was the center-point of the discussions and debate. The farming sector was going through grave crises. The rate of suicide rates among the farmers was alarmingly high. Debt related problems lead may small scale farmers to suicide usually leaving a helpless family behind them. according to official records, there were 1.5lakh farmer suicides in the nine years from 1997 to 2005. Intensity of suicides were the highest in five states: Andhra Pradesh, Madhya Pradesh, Karnataka, Kerala and Maharashtra. In these five states, Maharashtra was the worst hit with it's Vidharba region's cotton farmers took it to killing themselves out of helplessness and frustration. The scene was equally bad in other four states where cash crops were farmed in large scale. Credits taken from higher interested money lenders coupled with a fall in prices and failed crops made the life of the farmers a hell.
Main stream media were by and large oblivious to the plights of farmers. You can't be when you've got more important and newsworthy events like the Lakme Fashion week and of course the bollywood and it's colours. The only probable exception was The Hindu. With it's compassionate and good humoured Rural Affairs Editor, P Sainath, they covered the issue with all due respect and truth. Sainath- a Ramon Magsasay awardee- was passionate, logical in his arguments, lethal in his criticism. Each articles pricked the conscious, attracted passion filled responses from the readers and died off giving space to other issues at hand.
The political aspect was equally iniquitous. Opposition criticised the government incessantly, even the Left parties who are supporting the UPA government criticised the government for not taking any action. But no one did a contionous political campaign by looking at the issue from the right perspective. They couldn't, because each of the criticising parities were having the same negligent attitude in the states being ruled by them! They all tried to cash in on the vast farmer vote banks. The government kept on announcing piece meal packages to contain the crisis, but they all tumbled upon each other. Either because the packages were short sighted or because of the inefficiency in distributing the benefits. Anyways none of the packages convinced the farmers of a better future, and so the rate of suicides went up unabated.
The Budget Game and the Trump card Named Debt Waiver
The last full budget of the UPA government was, for sure, the most awaited event in the country. The pressure to get it right was palpable. More so when verdicts of the recently held state assembly elections in Himachal, Gujarat, Punjab and Uttar Pradesh had given a NO to the UPA lead coalition. Scenario was not differnt in the States were Congress ruled, especially with Maharashtra with it's crises in agriculture and the anti North Indian sentiment that took root in the recent days. The state government was and still is almost proving to be helpless.
And thus came the Budget 2008-2009. The FM stated that this year was to be a year of consolidation. With this statement, which augured a lot of populism in the offing, started the generosity. The trump card was yet to be thrown in. After announcing big packages for health, education, infrastructure development, came the magnanimous waiver package. 60,000 crores was set aside for the waiver package. 40 million farmers were expected to benefit from the package. 50,000 crore was to be used for complete waiver of debts for farmers holding less than 2hectares of land, and the remaining 10,000 crore for a OneTimeSettlement(OTS) for farmers having more than 2hectares but less than 4 hectares of land. The news came through amidst much fan and fare.
The response was mixed. UPA coalition celebrated the move. Left was skeptical of the cause, Opposition, of course with a losing feel that they couldn't claim such a move which will ensure an avalanche of votes, started criticising about the waiver being "too little, too late". Genuine analysts from acroos the spectrum also had a mixes responses too. MS Swaminathan, eminent agriculturist who made the Green Revolution into such a mayhem, said the measure was a "major step in recognising the indebtedness of the country to farm families who are safeguarding national food security and sovereignity". He had also suggested that the criteria to demarcate small farmers from big shoould depend upon whether the area is irrigated or dry.
The analysis
The move, even after being a poll oriented measure, is a positive step towards resolving the crippling crises that has made the agricultural sector's performance abysmal. But there is more to it under the celebrated upper crest. The case of Vidharba for example. Being country's worst hit area in terms of suicides, Vidharba has not got many things to cheer about. The reason being the way "small farmer" is defined. Majority of the farmers there hold more than 2 hectares of land since the crop is largely dependent on monsoon, the relative income these farmers get out of there is smaller than the amount a farmer with 2 hectares in any other part of the country where he/she is provided with irrigation. So even when a Vidharba farmer is hit harder, he/she will not be benefitiing from the waiver package since he falls out of the criteria to be eligible.
The Problem with Money Lenders
Another overlooking aspect is the presence of private money lenders. The waiver is only for the people who have taken loans from Commercial Banks and RRBs. Again a majority of the grief stricken farming families had not borrowed from a bank, they did it from the local money lender who usually charge exorbitant interest rates. Again a large number of farmers will fall out of the waiver criteria. When asked about this, the FM was furious. All he would say was "Which private moneylender do I identify and compensate?” The politics of this response was understandable. The "poll"itics of the budget was clear. The government wanted a feel good budget which fits into everybody's needs. and if you question the prospects and failures about the waiver, you were against the farmer. as the FM himself puts it.."If you’re against the farmer, have the courage to stand up and be counted; don’t duck the issue.” Now that is a real Trump card.
Some Interesting Views
Mr Yoginder K Alagh, economist and former union minister offers an interesting perspective. According to him, there are some other points mentioned in the health and education proposals that will prove to be a greater boon to the agricultural sector.“The Rs 30,000 insurance scheme for unorganised workers, many in the agricultural sector, the 24x7 primary health centres, the schools and colleges in rural areas, particularly for poor children and girls, have great possibilities. Also, the knowledge networks, if scaled to village needs and implemented in a manner that the villages can maintain them, with models already available.” Now that seems to be some kind of a relief and a more pragmatic step towards rescuing the agricultural sector.
We'll have to wait and see how the ambitious project is going to realise and how good it will be in containing the agrarian crisis.
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