The government must invest in providing better infrastructure, technologies, marketing and other assistance to farmers for enhancing their income instead of providing farm loans waiver, Vijay Paul Sharma, Chairman, Commission for Agricultural Costs and Prices (CACP) on Thursday said.
“Getting access to institutional credit remains a challenge for the farmers in the country and loan waiver may not be an appropriate approach for qualitative improvement in farmers income.,” Sharma said at a meet on ‘farm loan waiver in India’ organized by Bharat Krishak Samaj (BKS).
He said that by providing various support in terms of infrastructure, technologies, seeds and other assistance directly to the farmers, dependence on farm loan could be reduced. He acknowledged that the cost of providing credit from institutional sources to farmers is high because of inherent risk associated with the agricultural sector.
To mitigate the risk of farming, Sharma said that farmers should be provided with adequate infrastructure, support in terms of marketing, supplies of seeds and other inputs.
A joint study initiated by NABARD and BKS recently has stated that the government needs to promote a healthy credit culture and invest in farming and address distortion in the agriculture sector instead of waiving loans of the farmers irrespective of their distress level.
“The production cycle coupled with other factors, makes it impossible for farmers not to be indebted, and the income instability makes it difficult for farmers to come [out of] a cycle of debt,” the study said. It covered farm loan waiver schemes in Punjab, Uttar Pradesh and Maharashtra.
More than 60% of the ‘very high’ and ‘high’ distress small and marginal farmers did not get loan waiver benefits in the last many years.
The decisions of central and state governments in writing off past dues and providing access to fresh credit lead to ‘cyclicality of debt’ as farmers face multiple distortions, making the business of farming volatile and unviable.
Farm loan waiver schemes were aimed at providing relief to farmers during flood and drought, “increasing frequency of waivers and by universalising its distribution that is mostly unconnected to levels of farmer distress”, the NABARD and BKS study stated.
As per the State Bank of India’s recent research report on agriculture, only about half of the intended beneficiaries of farm loan waivers announced by nine States since 2014, have actually received debt write-offs.
“Since 2014, out of approximately 37 million eligible farmers, only around 50% of the farmers received the amount of loan waiver till March 2022,” the SBI report noted.
The SBI report was based on analysis of ten farm loan write-waivers worth about Rs 2.53 trillion announced by nine states – Andhra Pradesh, Telangana, Uttar Pradesh, Maharashtra, Karnataka, Punjab, Madhya Pradesh, Chhattisgarh and Jharkhand since 2014.