We were in Delhi Last week. We includes my Editor Pradeep, me,and my collegue Virupakshi. Purpose of vist was to attend one of the biggest technology events of South Asia, Convergence India Exhibition and Conference 2008 held at Pragathi Maidan, Delhi.
By Saheer
SOCIAL NETWORKING sites like Orkut, Facebook and blogs are part of your personal life, right? Wrong. Lately, India Inc has begun to believe that such "social media" are vital office communication tools.
By P.Sainath"Pleas for ‘low-interest or no-interest loans’ have been ignored. There is no mention of a price stabilisation fund to shield farmers from the volatility of corporate-rigged global prices. Besides, the idea of a five-year repayment cycle has not been touched."
It was around the distress in regions like Vidharbha and Anantapur that the present ‘farm loan waiver’ was conceived. Growing knowledge of that distress, breaking through even the filters of a media unmoved by the crisis in the countryside, made the waiver both thinkable and acceptable. Odd then, that in its present form, it excludes the very regions whose pain brought it into existence.
Millions do indeed get relief from what is a positive step. (Though not quite as ‘unprecedented’ as some believe). Even the colonial raj went in for loan waivers or ‘karza maafi’ more than once. And those waivers addressed private moneylender debt. (There were no nationalised banks in those days.) That’s something the present waiver does not touch — even though usury accounts for the overwhelming share of farm loans. In Vidharbha, money owed to private lenders would account for between two-thirds and three-fourths of all debt. In short, we haven’t begun to resolve the debt crisis of these and millions of other farmers.
Unproductive holdings
The failure to touch moneylender debt is just the first problem. In Vidharbha, the average landholding size is 7.5 acres or 3.03 hectares. Way above the two-hectare cut-off mark for the bank loan waiver. Up to 50 per cent of Vidharbha’s farmers are above this limit. Not because they are big landlords. They tend to have larger holdings as their land is unproductive and unirrigated. Poor adivasis in Yavatmal, for instance, often own over ten acres but get very little from their land. In Anantapur in Andhra Pradesh, too, many farmers will be left out by size or other norms. By contrast the farmers of Western Maharashtra, the Union Agriculture Minister’s stronghold, will benefit greatly. Their holdings are smaller, well-irrigated and more productive.
For those with over two hectares, there is the old deal of “one-time settlement” of their bank loans. In this case, if they repay 75 per cent of the loan, they will be given a rebate of 25 per cent. Only very large farmers will gain from this. If the rest, drowning in debt, could pay 75 per cent of their dues, they wouldn’t be committing suicide. They would pay hundred per cent.
Then, of those farmers falling within the two-hectare limit, only a small group have access to bank credit. So the gainers in this crisis-hit region will be a small percentage of the total number of farmers. It doesn’t end there, though. The few who do qualify, gain much less than farmers in, say, Western Maharashtra. The average crop loan in sugarcane territory is Rs. 13,000 per acre.
Apart from which farmers there get up to Rs. 18,000 per acre for drip irrigation. In Vidharbha’s cotton regions, they get loans of just Rs. 4,400 per acre. So the scale of the write-off will be far greater for the relatively better off farmers. In political terms, this benefits Union Agriculture Minister Sharad Pawar’s base. At the same time, it undermines the farm base of the Congress in Vidharbha. Indeed, the average loan for the grape growers (outside of Vidharbha) is Rs. 80,000 per acre.
The cut-off date of March 31, 2007 works against even the small group of Vidharbha farmers who do benefit. Loans in the cotton regions are taken between April and June. In the cane growing regions, they are taken between January and March. This means the Vidharbha farmer has one less year of loans waived than the others.
Since no distinction has been made between dryland farmers and others, anomalies abound. West Bengal and even the non-crisis regions of Kerala have large numbers of farmers below the two-hectare limit. With agriculture in bad shape, don’t grudge them the windfall the waiver brings. But it is odd the same does not happen for farmers in dryland regions who need it most. What’s more, the farmers of Bengal and Kerala have far more access to bank credit than those in Vidharbha do.
The State government itself reckons that Rs. 9,310 crore of the waiver comes to Maharashtra. That is, almost a sixth of the total. Of this, a fraction goes to Vidharbha, the rest being collared by better off farmers. And what of other dryland farmers across the nation? Those in, say, Rayalaseema or Bundelkhand? What do they get? Is the waiver ‘unprecedented’? Each year, nationalised banks write off thousands of crores of rupees as bad debt. Mostly money owed by small numbers of rich businessmen. And theirs is not a ‘one-time waiver.’ It is a write-off that recurs every year.
Between 2000-04, banks wrote off over Rs. 44,000 crores. Mostly, this favoured a tiny number of wealthy people. One ‘beneficiary’ was a Ketan Parekh group company that saw Rs. 60 crore knocked off. (The Indian Express, May 12, 2005). However, those ‘waivers’ are done quietly. In 2004, last year of the NDA, such write-offs went up by 16 per cent. Such ‘waivers’ have not slowed down since 2004.
Staggering giveaway
And all this is apart from the annual Rs. 40,000 crore ‘giveaway’ to the rich, mainly corporate India. That has been the average in the budget every single year for over a decade. Then there are the straight handouts. No one knows how many thousands of crores are lost by handing out spectrum the way it’s being done. But we know it’s a staggering amount. Tot up the ‘tax holidays,’ exemptions and the rest of it and you’re looking at sums that make the ‘unprecedented’ one-time farm loan waiver look like loose change.
But let us look, for instance, at the millions of farmers owning less than one hectare — the largest group. Some 7.2 million of them have accounts in scheduled commercial banks. And the total outstandings against these accounts is Rs. 20,499 crores. (Reserve Bank of India: Handbook of Statistics on the Indian Economy 2006-07.) As Devidas Tuljapurkar of the All-India Bank Employees Association points out, that’s about the same amount the nationalised banking sector writes off each year as bad debt. Mainly for industry. Those farmers with between one and two hectares hold 5.9 million accounts and owe Rs. 20,758 crores. That is: these 13 million account holders owe less than the Rs. 44,000 crore written off by the banks during just the NDA period for a tiny number of rich people.
The waiver does bring great relief to large numbers of farmers. But it is no solution to even the immediate crisis let alone long-term agrarian problems. Nothing in this budget will raise farm incomes. Which means farmers will be back in debt within two years. Their incomes have long been much lower on average than those in other sectors. And they fall further behind each year. Worse, fresh credit will not come cheap. Pleas for ‘low-interest or no-interest loans’ have been ignored. There is no mention of a price stabilisation fund to shield farmers from the volatility of corporate-rigged global prices. Besides, the idea of a five-year repayment cycle has not been touched. And the highly unjust crop insurance rules that dog regions like Anantapur remain unchanged.
However, there is still a long way to go in the budget session. So these problems can be set right if the government is sincere about helping those worst-hit by the crisis. It could work all these measures into the final document and also adjust the terms for dryland regions.
One funny outcome of the budget is that the media are now talking about farmers. Of course, the ‘analysis’ of what is ‘pro-farmer’ comes from the elite. From CEOs, stockbrokers, business editors, corporate lobbyists and touts in three-piece suits. On budget eve one anchor posed a question to his panel in words to this effect: “Will it be a pro-poor, aam aadmi budget or will Mr. Chidambaram use the opportunity to do something good [for the country] in terms of reforms.”
When the budget rolled out, one anchor said: “And now for the budget bad news. India Inc.’s plea for a cut in corporate tax rates went unheeded.” Isn’t that cute? If a budget is pro-poor, it cannot be good for the country. If it does not give the corporate world more goodies, it is bad. And of course, the elite panellists mostly rued this “gigantic giveaway.”
While gasping at the size of the “write-off” it’s worth asking why the loan waiver comes up now. Why not in 2005, when the demand was already being made? Or in 2006 when the Prime Minister visited Vidharbha and was shaken by the widespread distress. Mr. Pawar has outsmarted his rivals. Had the step been taken then, the credit would have gone entirely to the Congress. No prizes for guessing who opposed it then (when it would have cost much less).
For three years, while the misery and suicides mounted in Vidharbha, there was not even the admission that a loan waiver was possible.
Indeed, it was shot down by those now taking out full page ads claiming credit for it. As they complain in Vidharbha, this is not about karza maafi. It is about seeking voter maafi (voters’ forgiveness) in election year.
(Courtesy:The Hindu)
By Swaminathan S Anklesaria AiyarPolitical ploys initially hailed as master-strokes often end up as flops. I suspect this will happen to the Rs 60,000 crore farm loan waiver announced in the budget. It writes off 100% of overdues of small and marginal farmers holding up to two hectares, and 25% of overdues of larger farmers. Finance minister P Chidambaram has been congratulated both by economists (who think the waiver will relieve rural distress) and Congress colleagues (who think the waiver will win them the next general election). I suspect the waiver will fail in both its economic and political objectives. India has enjoyed 8-9% GDP growth for four years, but the boom has bypassed many rural areas. Farmer distress and suicides have made newspaper headlines. Various attempts to provide relief (employment guarantee scheme, public distribution system) have had little impact, thanks to huge leakages from the government’s lousy delivery systems.
So, many economists think the loan waiver is a worthwhile alternative to provide relief. The aim is worthy, but not the method. The poorest rural folk are landless labourers, who get neither farm loans nor waivers. Half of small and marginal farmers get no loans from banks and depend entirely on moneylenders, and will not benefit. Besides, rural India is full of family holdings rather than individual holdings, and family holdings will typically be much larger than two hectares even for dirt-poor farmers, who will, therefore, be denied the 100% waiver. IRDP loans to the rural poor in the 1980s demonstrated that crooked bank officials demand bribes amounting to maybe one-third the intended benefits. This will surely happen in the new loan waiver too.
After the last farm loan waiver in 1990, many banks went slow on fresh farm loans for some years. Chidambaram’s waiver will similarly slow down fresh loans to deserving farmers. In sum, only a small fraction of deserving farmers will benefit, most will get only a fraction of the promised benefits, and many undeserving defaulters (and crooked bank staff) will be significant gainers. Economist Surjit Bhalla says less than 5% of farmer loans to banks are overdue. If so, then the 95% who have repaid loans will not benefit. They will be angry at being penalised for honesty. The beneficiaries will include some of the truly distressed who merit relief, but will also include cynics who can afford to repay but have not done so, anticipating a waiver.
Chidambaram says the waiver will benefit 40 million farmers. This amounts to almost half of India’s 90 million farm households. But only a fraction of farmers have bank loans, and only 5% of these are overdue, according to Bhalla. Going by this calculation, overdues should exist for only 2.25 million farmers. Overdues to co-operatives may be higher. Yet, it is impossible that half of India’s farmers are defaulters: bank experience is far, far better. So, the budget grossly overestimates the number of beneficiaries. It also underestimates the negative effects of the waiver-encouraging wilful defaults in future, discouraging fresh bank lending for some years. What is the alternative? I have long argued that instead of trying to reach the needy through a plethora of leaky schemes that let very little through, we should transfer cash directly to the needy, using new technology like biometric smart cards and mobile phone bank accounts. This technology is being tried in a pilot project in Bihar. It needs to cover all India. Then benefits can go directly to phone accounts operable only by those with biometric cards, ending the massive leakages of current schemes.
Mobile phones will soon cover almost the whole country, and biometrics are now used in many countries. The political benefits of the loan waiver have been exaggerated no less than the economic ones. If only a small fraction of farm families benefit, and many of these have to pay bribes to get the actual benefit, will the waiver really be a massive vote-winner? All Opposition parties have long been demanding loan waivers, and many will promise to make the waivers deeper and wider if elected. It is actually logical for farmers to vote for Opposition parties, hoping to get more than Chidambaram has promised.
Besides, psychological studies show that people are especially unhappy when their neighbours move ahead of them, the more so if the neighbours have received government favours denied to others. Those who have repaid their loans will be very angry that Chidambaram has forgiven the loans of their dishonest neighbours. Members of joint families will be aggrieved that, despite having less than one hectare per head, their family holding is too large to qualify for the 100% waiver. All finance ministers, of the central or state governments, give away freebies in their last budgets, hoping to win electoral rewards. Yet, four-fifth of all incumbent governments are voted out. This shows that beneficiaries of favours are not notably grateful, while those not so favoured may feel aggrieved, and vote for the Opposition. That seems to be why election budgets constantly fail to win elections in India. I do not think the loan waiver will change that pattern.
(Courtesy:TOI)
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