The numbers are startling. According to a recent report by SBI Research, farm loan waiver announced by the Centre and the State governments in the last 10 years aggregated ₹4.7 lakh crore. This, the report added, was as much as 82 per cent of the industry level bad loans today. Despite writing off so much debt, there seems to be no end to the farm distress. It has actually worsened in the last couple of years. And farmers continue to commit suicide.
It is clear that farm-loan waiver, a politically significant but economically debilitating measure, has had little impact on the plight of the farmers. Its effect so far has been akin to giving a pain killer to a seriously ill patient and ignoring the ailment that is causing the pain in the first place.
Like pain killers, farm-loan waivers have a bad side-effect. It worsens the credit culture among the farmers and in the process hurts the already fragile banking system. Farm loan non-performing assets (NPAs) in 2018-19 have risen to 12.4 per cent of the total bad loans in the banking system, up from 8.16 per cent in 2015-16. Why will a farmer repay a loan when he/she is certain that a waiver will be announced before the next election?
But the irony is that even after so many loan waivers, indebtedness of farmers remains high. This is because a large proportion of farm land (some say it could be as much as two-thirds) is cultivated by tenant farmers who do not own the land and hence are not eligible for any benefits. They, typically, borrow from moneylenders at high rate of interest and struggle to service the loan if their crop fails or gets a poor realisation. Some of them end up repaying the debt with their lives.
The Prime Minister Kisan Samman Nidhi (PM-Kisan) scheme offers an annual direct cash transfer of ₹6,000 to all land-holding farmer families. This ₹89,000-crore scheme has been designed to give financial support to small and marginal farmers. But here again, landless tenant farmers are not eligible for it and that dents the effectiveness of the scheme in mitigating the farm crisis.
The Central government, in response to the rural distress, has increased the outlay for schemes that directly or indirectly benefit the farmers — be it PM-Kisan, fertiliser subsidy, crop insurance, farmer pension and food subsidy (including public procurement) to name a few. It has risen to ₹4.15 lakh crore in 2019-20 from ₹2.19 lakh crore in 2017-18, an increase of 90 per cent.
Higher outlay coupled with periodic farm-loan waivers have not improved the condition of the rural sector which remains grim with a cascading effect on the overall economy. The declining rural demand has slowed India’s GDP growth to below five per cent. A new approach could work.
Prime Minister has made a name for himself for taking decisions which his predecessors dreaded to take like demonetisation (not talking of the implementation part here), roll-out of GST, direct benefit transfer or abrogation of Article 370. It is time for him to re-imagine farmer welfare and get off the beaten path. It is clear that policies followed for the last many decades have failed the farmers. Farming continues to be the riskiest profession in India. Only a bold new vision can change this.
The first step is to change the subsidy from product (fertiliser)-based to process-based. Today, fertiliser subsidy costs the government ₹80,000 crore a year. While fertilisers have played an important role in increasing farm output and saving India from famines, its rampant use over the decades have hurt the soil and consequently, the farm output. Calls for a more sustainable agriculture are growing louder by the day.
Indian agricultural process is imprecise. Right from preparing the land, to sowing the seeds, flood irrigating the soil, applying fertiliser and spraying pesticides, everything is ad hoc in nature. Limited resources and rising demand for food have made these practices unsustainable. It is time to modernise the agricultural practice and that calls for precision farming.
For the poor, uneducated farmers with small landholdings, it is impossible to practice precision farming in the Western way. But India is innovating and farming as a service is taking wings in the country. Farmers need not own equipment to use them any more.
They can hire the best of farm equipment (even sensors, drones, satellite support apart from tractors, harvesters and planters), technologies (AI-based fertigation/crop protection) and other processes for a fee.
They can practice precision farming, which will result in higher output, better quality produce and a more sustainable agriculture without investing capital. The government should subsidise services such as these that modernise farm practices. It should also incentivise companies offering such services.
Take the case of drip irrigation in rice cultivation. It has been proved that it results in almost 50 per cent savings in water (it is grown otherwise by inundating the field consuming 1,400 litres for every kilogram of rice produced), 20-30 per cent higher yield, better fertiliser efficiency and a 78 per cent reduction in methane emission. Despite these obvious benefits, only 25 million hectares of the 44 million hectares of rice is under drip irrigation commercially.
Considering that rice is the staple food for two-thirds of India’s population, the government can subsidise farmers shifting to drip irrigation in rice cultivation and the resultant benefits would be significant.
Also, the government can spend more in agriculture infrastructure like irrigation canals (seven decades after Independence, 52 per cent of India’s cultivable area is still rain-fed), storage and warehousing facilities (will help farmers to store their produce and sell when the price is right) apart from developing rural markets.
The Modi government has shown in the past that when it comes to national interest, it is not afraid to take difficult decisions. India’s farming sector is haemorrhaging and youngsters are deserting it, putting India’s future food security at risk. It is time to reverse this by transforming farmer welfare and the upcoming Budget can be the starting point.