India is the world's
second largest food producer with highest number of farmers and farming-dependent
population. This vast section of population has been witnessing ever growing
distress with sagging confidence in farming, largely on account of inept policy
interventions of the post-reforms period, wherein, the agricultural loans have
been diverted to industry and commerce, by deliberate and protracted dilutions
in the definition of agricultural credit for the window-dressing of the government's
achievements. The recent enhancement of the provision for agriculture credit to
Rs. 8.5 lac crores, along with a slew of many other measures in the budget for
2015-16 of the NDA government can indeed alleviate the plight of farmers effectively,
provided the access of the farmers to agricultural credit is again restored.
Deliberate Dilutions: Policy dilutions, leading to financial
exclusion of poor farmers had been initiated as early as in 1993, when Dr.
Manmohan Singh was the finance minister. Till
1993, only direct finance to cultivators was counted as part of the priority
sector lending, for meeting the target of 18 percent bank credit for
agriculture. But, from October 1993, indirect finance was also allowed to
be counted together with the direct finance to cultivators for fulfilling the
priority sector target of 18% loans for agriculture. The government has thereafter,
kept on diluting the definition of 'indirect credit to agriculture' to include even
the corporate borrowings as well as infrastructure project fundings in indirect
agriculture credit. By virtue of this, even the loans given to the
multinational companies like ITC and other contract farming and agri-processing
companies too are now being counted into the quantum of loan extended to
farmers, which amounts to almost up to 50% of farm sector indirect loans in states
like West Bengal etc. Only four of such one
dozen dilutions made by the government are enough to be given hereunder to
expose the tactical deprivation of real farmers from agriculture credit under
the decade long regime of Manmohan, Sonia and Rahul's trio. These dilutions
are:
(i)
The loans given to even power distribution corporations
or companies, emerging out of the bifurcation or restructuring of SEBs as part
of power sector reforms were ordered to be considered as indirect finance to
agriculture from July 2005.
(ii)
The loans to food and agro-based processing units with
investments in plant and machinery up to RS 10 crore (other than the units run by
individual, Self Help Group and cooperatives in rural areas) are also being
considered as indirect finance to agriculture since April 2007.
(iii)
From April 2007 onwards, two-thirds of loans given to
corporates, partnership firms and institutions for agricultural and allied
activities (such as beekeeping, piggery, poultry, fishery and dairy) in excess
of Rs 1 crore in aggregate per borrower have been declared to be considered as
indirect finance to agriculture. The rest of the one-third amount was to be
treated as direct finance.
(iv)
From October 2012 the loans given to corporates,
partnership firms and institutions for agricultural and allied activities in
excess of Rs 2 crore in aggregate per borrower are also defined to be treated
as indirect finance. Even such loans of amount less than Rs 2 crore are being treated
as direct finance.
Indeed,
the indirect loans which were less than 15 percent in 1980s have now crossed
over to 25% of total agri-credits, which are never accessed by the farmers.
Growing
Dominance of Big and Non Cultivating Borrowers: since
2000, the advances of Rs 10 crore and above, and even up to Rs 25 crore are on
increase while no ordinary ordinary farmer can afford to borrow such huge sums.
Table No. 1 clearly shows that the share in total of advances of the loans of
size "less than Rs 2 lakh" have contracted from 82.3 per cent in
1990-91 to 44.7 per cent in 2010-11. On the other hand, the share in total
advances above Rs10 crore increased sharply from 1.2 per cent in 1990-91 to 20
per cent in the year 2010-11. Farmers normally cannot
take a loan of Rs 10 lakh or more. Mostly the cultivators do not take a loan of
more than Rs. 2 lakh. So, probably the increasing share of agri-credit must be
going to the input dealers or agri-business firms or corporate groups involved
in agricultural and allied activities.
Table 1 Amount-wise distribution
of outstanding agricultural advances of scheduled commercial banks.
|
Loan size (Rs)
|
Share of amounts outstanding in various
ranges in %
|
|
|
1990-91
|
2010-11
|
|
|
Less
than 2 lakh
|
82.3
|
44.7
|
|
2
lakh to 10 lakh
|
4.4
|
22.9
|
|
10
lakh to 1 crore
|
7.9
|
6.2
|
|
1
crore to 10 crore
|
4.1
|
6.1
|
|
10
crore to 25 crore
|
1.2
|
2.6
|
|
Above
25 crore
|
17.4
|
|
Urban Centric Loans on Rise: The real farmer is mostly village
dweller, while, there is an increased absorption of agricultural credit from
urban and metropolitan branches, depicting a fall in the share of agricultural
credit in rural areas. (vide table 2). In 2011, about one-third of total
agricultural credit and one-fourth of direct agricultural credit were
outstanding from bank branches located in the urban or metropolitan areas reflecting
continuing diversion of agricultural (indirect) credit towards urban-based
dealers and agricultural (direct) credit to urban-based corporates (as part of
direct credit) and altogether depriving the real farmers based in rural areas.
Table 2 Share of agricultural credit outstanding with rural and urban
branches from 1990-2011
|
Year
|
Share (%) of agricultural credit
outstanding from
|
||||
|
Rural branches
|
Urban or metropolitan branches
|
All branches
|
|||
|
|
Total Agriculture Credit
|
Direct Agriculture Credit
|
Total Agriculture Credit
|
Direct Agriculture Credit
|
|
|
1990
|
85
|
88
|
15
|
11
|
100.0
|
|
2005
|
69
|
84
|
30.7
|
15
|
100.0
|
|
2011
|
67
|
74
|
33
|
25
|
100.0
|
Uneven Disbursement Across the Year: It is most astonishing that over 40-45% of annual agriculture
loans are often disbursed in the last quarter of the financial year by most of
the commercial banks, probably just to meet their targets. Of this fraction
also about one third to half of it is often disbursed in the last month of FY
i.e. March itself. The last quarter of a
financial year or the month of March is not the normal period of borrowing by the
farmers when the sowing is over.
Growing Dependence on Non-Institutional Lenders: Continuons deprivation of real farmers from institutional
credit has been compelling them to depend more upon the exploitative and
non-institutional lenders. Therefore in the All India Debt and Investment
Survey of the National Sample Survey Organisation in the 70th round
reveals that non-institutional agencies played a major role in advancing credit
to the households. Particularly in rural India. The non-institutional agencies
had advanced credit to 19% of rural households, while the institutional
agencies had advanced credit to 17% households.
Prohibitive Pre-Sanction Costs: Since, almost 50% of the farmer are small and marginal
farmers and the agriculture loans are not cost free and the farmer approaching
a bank for a loan of over Rs.1 lakh, has to spend more than Rs 3,000 just for
documentation. This expenditure of 3% of the loan value even before the loan is
disbursed is a prohibitive levy.
Plight of Farmers: In
2013-14 as well as 2014-15 the unseasonal heavy rains, thunder and hailstorms
have ravaged the due-for-harvesting chana, lentils and wheat in Madhya Pradesh,
wheat mustard, cumin and all other crops
in Rajasthan and onions and grapes in Maharashtra. Instead of an expected
bumper harvest on the back of excellent monsoons, farmers reaped only misery.
To conclude,
India needs a better customised and well targetted farm sector loans policy for
the exclusive benefit of real cultivators, including tenant cultivators. Indirect
agricultural loans be altogether be stopped from being reported as agriculture
loans, atleast to arrive at the priority sector lending targets. In addition to
it the insurance outreach for farm sector too needs to be spread fast, as hardly
5-10 percent of the farmers are able too avail crop insurance benefits. Plight
of the ordinary farmers can be well understood from the mere fact that if 3 lac
farmers have committed suicides since 1991 in the country, the remaining 100
million farmers and their families too are surviving in the same socio-economic
circumstances, in which those 3 lacs have committed sucide. Hence, agriculture
needs a 360° approach
for the redressal of their problems to allevite the plight of neo-liberal
economic reforms.
