The Hindu : Tamil Nadu News : Loan waiver no solution to agrarian crisis, says Sainath

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Tamil Nadu

Loan waiver no solution to agrarian crisis, says Sainath

Special Correspondent

“It has created more problems for the flagging credit system”

P. Sainath

CHENNAI: The Central Government’s loan waiver for indebted farmers has proved no solution to the agrarian crisis in the country. Instead, it has created a fresh crop of problems for the flagging agricultural credit system, according to P. Sainath, Magsaysay Award winner and Rural Affairs Editor, The Hindu.

The promised waiver excludes the significant credit lines provided by moneylenders, which government and media reports show were taken instead of or in addition to bank loans. On top of this, there were significant differences between what was promised in the February 29 budget, and what would reach the farmers, he said, delivering the Nani Palkhivala Memorial lecture here on Saturday.

While loans advanced prior to 1997 were excluded at planning stages, evidence on the ground indicated that authorities were artificially inflating figures by including penal charges, legal and inspection fees and general debt written off in scheduled banks. There was also a move afoot, he said, to include the Rs.7,000-crore debt written off in Tamil Nadu in this figure.

The pattern of waivers was also unfair, he said. No account was taken of whether landholdings were wet or dry. This left out those with large tracts of dry land which yielded less per acre.

Similarly, no account was taken of the effects of the March 31 cut-off, which arbitrarily benefited sugar cane growers with one year extra over cotton farmers because they took loans from April to June, he said.

Furthermore, areas important for votes had got a larger waiver than some of the worst-affected areas. Finally, he noted, non-defaulters felt excluded, with the result that loan recovery had fallen from 53 to 12 per cent in Maharashtra.

The real problem, he reckoned, was lack of rural credit: as on March 31, 2007, it represented just 7.93 per cent of all scheduled commercial loans. Compounding this, the definition of ‘rural’ had been adjusted so that credit was diverted for enterprises and uses other than agriculture, creating illusions about the success of the initiative and reducing the pot for farmers in need.

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