'Input cost sops, better pricing help farmers, not loan waiver'

Measures such as incentives on input costs including power supply, creation of non-farm employment opportunities and better pricing for agricultural produces can be more effective than waiving of farm loans to get farmers out of debt traps, according to a study. Researchers at the National Centre for Agricultural Economics and Policy Research (NCAP) have carried out the study among farmers of Haryana, considered an agriculturally advanced state, more than a year after the UPA government's decision to waive farm loans to the tune of Rs 71,000 crore.

"Majority of the farmers felt that incentives on inputs, availability of power, off-farm employment availability and better price for their produces would help them increase productivity and repay the loans," NCAP, affiliated to the Indian Council of Agricultural Research (ICAR), said in its draft report.

According to the report, the prime cause of non-repayment of agricultural loans is loss of crop owing to natural calamities. So, there is an urgent need to restructure the crop insurance schemes available to farmers in the present form. "Farmers are not happy with the present insurance structure and the methods of disbursing claims. There is a need to develop appropriate insurance products and educate farmers," the report, which covered farmers of three districts-Mahendragarh, Hissar and Karnal, said.

The districts were selected on the basis of agricultural productivity levels. While Mahendergarh represents low-agricultural productivity, Hisar comes under the category of medium yield. Karnal represents higher productivity.

As per the study, the government's loan waiver scheme has an adverse impact on farmers' intention to repay agricultural loans. "Prior to the announcement of the waiver scheme, nearly 90% non-beneficiary farmers intended to repay their loans. But after the announcement, only 3% are interested to repay their future loans," the study titled 'Agricultural Debt Waiver and Debt Relief Scheme 2008: implications on farmers and rural credit institutions' said. NCAP researchers Rajni Jain, SS Raju and PA Lakshmi Prasanna conducted the study. Instead of loan waiver, farmers want interest-free loans for a year provided one is regular in repaying his debts for two years.

The government had announced the debt relief scheme for an estimated 4 crore small and marginal farmers. The scheme was applicable to short-term crop loans and investment credit for allied activities. It announced a complete waiver for small and marginal farmers and one-time settlement scheme with 25% rebate for others.

The NCAP study is in conformity with the R Radhakrishna Committee Report on rural indebtedness. The committee, which submitted its report to the government in 2007, said that more than half of the farm households do not borrow from institutional sources and that they are paying usurious rates of interest to moneylenders. The committee wanted the banks to provide one-time term loans to such farmers to free themselves from clutches of moneylenders. The committee also mooted a Moneylenders Debt Redemption Fund with a corpus of Rs 100 crore to operationalise the scheme.

The Radharkrishna Committee said that people who repay their loans promptly must be rewarded--the very section of farmers who got a raw deal in the farm debt waiver scheme announced last year. The committee also suggested expansion of the institutional sources for farmers.