The Hindu : National : Maharashtra drops plan for ordinance against usurers

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Sunday, Dec 19, 2004

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National

Maharashtra drops plan for ordinance against usurers

By Mahesh Vijapurkar

MUMBAI, DEC. 18. The Maharashtra Government's plans to relieve farmers of their debts to usurious private moneylenders, though proposed prior to the Assembly elections, have been abandoned. The successor regime headed by Vilasrao Deshmukh has not re-visited this intent.

This was to have been done through an Ordinance by which transactions between farmers and the private lenders are voided. It has no financial implications to the Government unlike with cooperative loans whose burden the Government acquired at some cost just before the elections.

Only estimates of lending by the sharks were available, an official said, adding that it could be equal to the cooperative sector's advances or even more. Cooperatives lent Rs. 10,987 crores in 2002-03. The private lenders' share was equally critical but ruinous to the farmers because of high interest, often 40 per cent per annum.

When interest and loan waivers to farmers for the previous kharif and rabi seasons were discussed by the Cabinet — and later implemented — the issue of a moratorium on private moneylenders too came up. Officials were asked to draft an Ordinance to be converted into an Act later.

A justification to ordain such a law is available in a judgment by Justice Krishna Iyer that any ban on such illegal lending was reasonable. He had pronounced this when a similar ban was enforced in the 70s was challenged. Earlier, bi-lingual Bombay State had also issued a moratorium.

That relief could not be given effect to immediately for at least one reason: the law needed prior Presidential consent. The plan was to specifically exclude the cooperative and commercial banks and primary agricultural societies. Besides, the drafting process needed time.

Though people in the cooperative sector routinely denied this, there had been several occasions when it had used strong-arm tactics to recover dues from the borrowers. Several times, legislators have complained about this sector's insensitivity and tendency to behave like private moneylenders.

Coops' inefficiency

The inefficiency of the cooperatives adds an unbearable load on the farmers' fragile personal economy. More inefficient the primary agricultural credit society (PACS) the more interest it levies. Instead of the ideal interest of nine to 11 per cent, it is often at 15 per cent per annum, a fact officials concede.

Inefficiencies at all levels, from the moment funds are received by the Central Cooperative Bank from the National Bank for Agriculture and Rural Development (NABARD) till it goes down to the 21,000-odd PACS in stages, the interest component increases. Interest rates and levels of outstanding could be indexed to this inefficiency.

Outstanding at end-March, 2003 was Rs. 6,583 crores, higher by 10 per cent over the previous year. At end of 2003-2004 fiscal, it was Rs. 5,800 crores, and the overdue was Rs. 2,800 crores. Generally, only half the loans due for repayment are recovered due to the farmers' inability to pay, building up non-performing assets.

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