Punjab might top the chart when it comes to rural prosperity. The state might also be considered as the food bowl of the country, but when it comes to indebtedness, Punjab is gradually losing its grip. The last decade has witnessed a five-time increase in the debt-burden of farmers. Farm debt has grown to approximately Rs 30,394.12 crore in 2008 from Rs 5,700.91 crore in 1997 .
A recent study conducted by a well-known economist and director (research), Punjab Development Studies at the Institute for Development & Communication (IDC), Chandigarh, HS Shergill reveals that over these 10 years (1997-2008), farm debt has increased at a faster rate than farm incomes.
The report has also revealed that commission agents and money lenders are the largest players in the farm credit market of the state, followed by commercial banks. The report has thrown light on the collapsing cooperative credit system of the state.
The debt amount has increased to 84% in 2008 from 68% in 1997, of the net farm income generated by the sector. As a proportion of the value of machinery owned by Punjab farmers, the debt amount has gone up from 15% in 1997 to 53% in 2008.
In spite of the steep rise in farm land prices in the state, the amount of farm debt is now equal to 4% of the total value of farm land of the state, compared to 3% in 1997.
On the same lines, the annual interest burden of farm debt has gone up from being 11% (1997) to 14% (2008), of net farm income of the state.
He added that almost two-fifth (60%) of these ?debt trapped? farm households are marginal and small farmers. Among different regions of the state, the highest (Rs 48,154) per operated acre amount of debt was observed in the northern Malwa region, and the lowest (Rs 16,095) in the foothills region.
In the total debt owed by Punjab farmers, the share of commission agents and money lenders is estimated at 43.46% (Rs 13,179.09 crore), of commercial banks 31.78% (Rs 9,659.81 crore), and of cooperative credit institutions 18.91% (Rs 5,748.45 crore).
The remainder is due to friends and relatives (3.16%), government (0.08%), and ?others? (2.71%).
The share of main credit agencies in farm debt has also changed over these 10 years (1997 to 2008), where the share of cooperative credit institutions has declined substantially, by 8.23 percentage points from 27.14% in 1997 to 18.91% in 2008. The share of commission agents and money lenders in farm debt has also declined, but only marginally. This has gone down by 2.96 percentage points from 46.32% in 1997 to 43.36% in 2008.
The commercial banks have registered a big gain in the farm credit market. Their share in farm debt has increased by 12.36% points; to 31.78% in 2008 from 19.42% in 1997 .
Talking to FE, Shergill said, ?The position of commission agents and money lenders as the single largest farm credit agency in the state has not changed. It has been witnessed that the cooperative credit system is falling. We have planned to conduct two studies in the financial year 2010-11, where the whole system of cooperative credit institutions will be studied. We will try to ascertain the causes behind the fall. In another study we will find out why commission agents and money lenders are still being preferred. These studies will focus on causes, consequences and solutions for farm credit.?
