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Economics and populism: Waiver season is back!

Debt write-offs without addressing underlying income and production cost issues may only worsen farmers’ problems.

Written by Anju Agnihotri Chaba | Jalandhar |
September 15, 2016 1:37:37 am
Punjab elctions, punjab polls, Rahul Gandhi, farm loans, india farmer, Debt Waiver, Debt Relief Scheme, UPA regime, Kisan Mahapadyatra roadshow, Aam Aadmi Party, Arvind Kejriwal, Chhotu Ram Act, india news Farmers at a Aam Aadmi Party rally at Moga in Punjab. (Express Photo: Gurmeet Singh)

First, it was Rahul Gandhi demanding a write-off of farm loans on the lines of the Debt Waiver and Debt Relief Scheme of 2008 implemented by the previous UPA regime. “We waived off Rs 70,000 crore of their loans. Why cannot this government do the same when it can waive loans of big industrialists,” was the central theme of the Congress vice-president’s 2,500 km-long Kisan Mahapadyatra roadshow in poll-bound Uttar Pradesh that was kicked off last week.

On Sunday, the Aam Aadmi Party (AAP) went a step further, releasing a full-fledged ‘Farmers and Farm Labourers Manifesto’ for Punjab even while elections are some months away. Among its 31-point Action Plan is a pledge to make Punjab farmers “debt-free” by December 2018 and not allow any coercive recovery proceedings against them till then. For poor farmers and farm labourers, there will be a total loan waiver. In the case of other farmers, the interest portion would be waived off.

If this were not all, the Delhi chief minister Arvind Kejriwal-headed party has promised the “reenactment” of a Sir Chhotu Ram Act, based on the Punjab Relief of Indebtedness Act of 1934 that the legendary peasant leader pushed as revenue minister of the undivided province. “Under no circumstances will the sum of interest payable exceed the principal amount. All debts where a farmer has paid a sum twice the amount of the principal shall be deemed to be wholly discharged. No indebted farmer shall be dispossessed of his land holdings and house,” the manifesto has stated.

This raising of the pitch for farm debt relief ahead of Assembly elections has brought the focus back on an issue that many believe was key to the UPA’s re-election in the 2009 Lok Sabha polls. The Congress was ruling when the 2008 scheme, which cost the Central exchequer alone around Rs 52,276 crore, was unveiled. Now, in the Opposition, it sees the issue as providing a much-needed opening to revive sagging fortunes.

But here on the ground, the response to the latest efforts to woo the farm vote is largely one of cynicism. The last survey for the 2014-15 agricultural year, conducted by the Punjabi University at Patiala, showed the total outstanding debts of farmers in Punjab at Rs 69,355 crore.

“How can a state government waive off debts of Rs 70,000 crore, that too by December 2018, when the total size of its budget is only Rs 86,387 crore?”, asked Sukhpal Singh, head of the department of economics and sociology at Punjab Agricultural University, Ludhiana. The Rs 69,355 crore outstanding dues include Rs 56,481 crore owed to the institutional sector (mainly commercial and cooperative banks) and the balance Rs 12,874 crore to private moneylenders, arhtiyas (traders/commission agents) and other informal lending sources.

Jagmohan Singh Dakaunda, general secretary of Bhartiya Kisan Union (Dakaunda), welcomed the AAP manifesto’s intent, but questioned its practicality: “How would the state government be able to waive off the loans of commercial banks that are controlled by the Centre? This is more so, when the non-cooperation between the AAP government in Delhi and the Centre is known to all”. According to the Punjabi University survey, commercial banks accounted for 56.68 per cent of the Rs 56,481 crore institutional debts of farmers. In other words, no waiver/relief scheme is possible to implement without Central-state cooperation.



Gian Singh, professor of economics who headed the team that undertook the survey, was equally skeptical about implementation of the ‘Sir Chhotu Ram Act’ relating to loans extended by moneylenders and other private market agents. “Most farmers won’t qualify for any relief on this front, as there is no proper record of loans taken by them from private players,” he pointed out.

The survey led by Singh has revealed that nearly 92 per cent of landless labourers in Punjab accessed loans from non-institutional sources, with this ratio being 40 per cent for marginal and 30 per cent for small farmers. Only 8 per cent of large farmers were reliant on non-institutional credit, which means they stand to benefit more from any scheme that will ultimately address only outstanding dues to commercial or cooperative banks.

Interestingly, the Akali Dal-BJP government has enacted the Punjab Settlement of Agricultural Indebtedness Act that provides for establishment of district-level forums and a state-level tribunal to help farmers reconcile and settle their non-institutional debts.

S S Johl, agricultural economist and chancellor of the Central University of Punjab at Bathinda, was clear that waiving off of debts isn’t going to end the miseries of farmers. “You need to address the problem at its roots. What is the guarantee that the farmer will not become indebted again after a waiver? The real solution to debt lies in increasing the income of farmers, which can come only when there is no mismatch between price realisations and production costs,” he said.

“Indebtedness will end only with the implementation of the M S Swaminathan commission’s recommendation to guarantee at least 50 per cent returns over cost of production while fixing minimum support prices for crops,” added Dakaunda.

Farmers, too, drew a link between their incomes and debt problems. “Till we don’t get good incomes from our fields, we will never come out of debt,” said Jasbir Singh, a six-acre farmer from Kang Sahbu village in Nakodar tehsil of Jalandhar, whose Rs one lakh loan taken a decade ago from a moneylender has now mounted to Rs 3.5 lakh.

“The arhtiyas charge 18-24 per cent interest, as against 11-13 per cent of the banks. But in cases of emergencies, we can rely only on the former, as the latter insist on too much of documentation and other procedures,” observed Ajit Singh, another farmer from Pasla village in Jalandhar’s Rurka Kalan tehsil.

Ravinder Singh Cheema, president of Punjab’s Arhtiya Association, warned political parties against making statements about waiving off farmers’ dues to commission agents: “It will break the trust bond between us and the farmers. Ultimately, it is they who will suffer if we stop lending to them”.

His statement captured the reality of agricultural situation in Punjab and much of India. Today, with crop prices depressed, farmer incomes are under pressure. And that is conducive for debt build-up, which state-imposed waivers can only temporarily fix.

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