Can loan waiver help farmers to move out of Crisis?

The increasing costs of cultivations due to shift towards commercial crops and high external inputs and lower incomes have pushed farmers into high borrowings. In a sit- uation where the institutional credit outreach is poor, the farmers have to depend on money lenders and input dealers for interest rates as high as 60% (Rs. 5/Rs. 100 per month). Frequent crop fail- ures in addition are leaving farmers in indebtedness. The 59th round of the NSS survey on farmers’ condition reveals the dis- tressing picture in AP. First, the inci- dence of indebtedness among farmers was the highest in erstwhile undivided State. About 82 per cent of the farmer households are indebted. The proportion of households is more or less same among all so- cial groups. Secondly, the debt liability-asset value ratio is the highest in AP. According to the NSSO survey it was 7.14 for AP, while it was 1.62 for Haryana, 1.72 for Punjab, 2.71 for Gujarat, 3.55for Kerala, 3.71 for Karnataka and 4.48 for Tamil Nadu [NSS 2005b]. The asset value of farmer households in AP (Rs 1.35lakh) was much less than the all-India average (Rs 3.73 lakh). On an average each farmer household in the

state had an out- standing debt of Rs 23,965 [NSS 2005a]. Thirdly, most of the debt was incurred for agricultural expenses (about 62 per cent)and very little on education, health, social ceremonies and consumption.

The deep agrarian crisis in the state of Andhra Pradesh is undeniable. In the last 18 yrs, for which the data is avail- able from the National Crime Records Bureau (NCRB), 11,881 farmers have committed suicide in the thirteen dis- tricts of Andhra Pradesh, out of these 4490 suicides occurred in four districts of Rayalaseema. District wise data is avail- able from 1999 onwards. (Table Table 1: District wise Farmers Suicides in Andhra Pradesh 1999-2012)

Since 2004, there were several committees appointed both by the state government and the central governments’ to address the agrarian crisis. Jayati Gosh Commission at the State level and National Farmers Commission under the Chair- manship of Dr. MS Swaminathan at the Central level are few of them which gave reports asking for a comprehen- sive so- lution for the farm sector. However, the successive govern- ments only focused on quick solutions.

One such quick solution tried was a loan waiver in 2008 by the then UPA government through Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS), 2008. In undi- vided AP, the total number of farmers who benefited from the scheme was 77,55,227 and the total loan waiver and relief given to them was Rs 11,353.75 crore. All over India, the total amount waived was Rs 52,000 crore and the number of ben- eficiaries were 3.45 crore. In spite of conditionalities imposed (annex- ure 1), it was found that gross irregularities occurred during implementation and the Comptroller and Auditor General Re- port in 2013 noted that about Rs. 163 Cr went to Micro Fi- nance Institutions and a sum of Rs 40.76 lakh went

Table 1: district wise farmers Suicides in Andhra Pradesh 1999-2012

E. Godavari4302844424332365368232543920
W. Godavari28296255618611269387713015114199

Source: Accidental and Suicide Deaths, 1999-2012, National Crime Records Bureau and RTI information from the State Crime Records Bureau

Since 2004, there were several committees appointed both by the state government and the

to ineligible beneficiaries (132 accounts) and reimbursement was made for an amount of Rs 26.55 lakh though loans had not been disbursed (96 accounts) (CAG, 2013). The debt waiver didn’t help in reducing the crisis in the state as invest- ments to strengthen agriculture were never made. The crisis in farm sector and the farmer suicides are still continuing. In this context, the political parties again made a prom- ise to waive farm loans. While the Telangana Rashtra Samithi (TRS) promised to waive farm loans below Rs. 1,00,000, Telugu Desam Party announced its decision to waive all loans. The leaders of these political parties also made appeals to the farmers not to repay their pending loans as they will get waived once the parties come to power.

Telugu Desam Party after coming to power has appointed a committee to look into the modalities of loan waive. In this regard we would like bring some statistics to your notice be- fore making our suggestions on the loan wavier for the maxi- mum benefit of the farming committee.

Table 2: Total Agriculture Loans in Andhra Pradesh 2013-14
Agriculture Loans in Andhra Pradesh 2013-14In Rs. Crore
Crop loans during 2013-1434,217.00
Pending crop loans from from previous yrs (approx.)16,000.00
Total pending crop loans50,217.00
Gold loans (approx.)20,102.00
2013-14 short term loans (approx.)4,401.23
2013-14 Allied sector loans (approx.)7,067.07
SHG Loans(approx..)14,204.00

Source: State Level Bankers Committee,

In addition there are pending loans of farmers who are part of Israeli experiment in Kuppam block to a tune of Rs.

6.00 cores.

Tenant Farmers

Tenant farmers who form more than 50% of the total farm- ing community do not have access to the institutional credit. The government of Andhra Pradesh has brought a legislation in 2011 to issue ‘Loan Eligibility Cards’ which facil- itates ac- cess to bank credit. During 2013-14 only 3,84,621 tenant farm- ers among the 25 lakh plus tenants in the Andhra Pradesh state were given loan eligibility cards. However, only 1,36,616 of them got crop loans all put together Rs. 306.59 cr, which means less than 10% of the tenant farmers could access the loans. (Table 3: Tenant farmers, Loan Eligibility Cards and loans disbursed (2013-14))

Distribution of Agriculture Credit across the State

Another major issue is with regard to the highly skewedand uneven nature of the distribution of loans across the state of Andhra Pradesh. As the data for district wise crop loan disbursal is available only for 2012, we are using it as an indi- cator to share the highly unequal distribution of credit across the districts. (Table 4: District wise crop loans during 2012-13)

Similar trend was observed with respect to 2013-14. There were no equitable distribution of crop loans. Districts like East and West Godavari got more loans and districts like Anantapur, Kurnool in Rayalaseema or the Srikakulam, Vijayanagaram and Vishakapatnam got lesser loans. As a result most of the farmers in these regions have to depend on private loans for an higher interest rates and the loan waiver will not help them.

Dr. G.V. Ramanjaneyulu                                                                189

Table 3: Tenant farmers, Loan Eligibility Cards and loans disbursed (2013-14)

DistrictLoan eligibility cards issuedTenant farmers accessed loansTotal Loan received
East Godavari62,14747,69487.42
West Godavari1,22,42052,096132.00

Source: Obtained through RTI from State Level Bankers Committee,

Table 4: District wise crop loans during 2012-13

DistrictCrop loans targetCrop loans% of achivement% to totalNet cropped area% to totalavg loan per ha
V ishakapatnam650.85976.44150.03%3%3730005%26178.02
V ijayanagaram666.711257.18188.56%3%3150004%39910.48
East Godavari2862.445089.93177.82%14%5980008%85115.89
West Godavari3074.455157.56167.76%14%6180008%83455.66
Total2049.0036092.61  7662000  

Source: State Level Bankers Committee, 50765)

Same is the case with Agriculture term loans and Allied sector loans. As the current government is promising to waive these too, it would pose a serious equity challenge between districts. (Crop loans compared to cropped area in Andhra Pradesh (2013-14) Source: State Level Bankers Committee, (Table5: District wise Agriculture loans target during 2013-14) Source:)

The changes made to the norms for crop loans since 1990s make it possible for farmers to take loans anywhere in the state and not necessarily in the district the farm is locat- ed. As a result, the loans given in Hyderabad district could have been taken by land owners from anywhere in the 22 dis- tricts in the erstwhile Andhra Pradesh.

Main demands

As a first measure, the Government must delink the loan waiver proposal from distribution of Kharif loans for the cur- rent agricultural season and should immediately take action to disburse crop loans without delay to all the farmers includ- ing Tenant farmers.

While the farming community is in deep crisis due to in- debtedness, loan waiver is not a solution to end the crisis. The crisis is still continuing even after the debt waiver and re- lief extended during 2008. A comprehensive solution lies in bringing in policy changes related to all aspects of agricul- ture (Credit, input support, extension and marketing) as well as pursuing the land reforms agenda with renewed vigour to bring about a meaningful change in the agriculture sector to help close to 85% ofsmall and marginal farmersto secure and sustain their livelihoods. . A piecemeal, myopic solution to the problem in the form of loan waivers alone is a grossly

Table-5: District wise Agriculture loans target during 2013-14

 Name of the DistrictTotal Cropped areaCrop LoansAgri.Term LoansAgri AlliedTotal Agriculture Loans
  in ha% totalTarget% to totalTarget% to totalTarget% to totalTarget% to total
4.East Godavari598000.008%4765.7313%463.8111%1224.9817%6454.5314%
5.West Godavari618000.008%4374.0812%411.906%1452.0521%6238.0413%
 Total7662000.00 35548.65 4401.23 7067.07 47016.95 

Source: State Level Bankers Committee,

inadequate solution to the larger, complex set of problems ail- ing the farming sector in the State.

Tenant farmers, dalits, tribal and women farmers who re- ceived lands under various land distributionschemes do not have access to institutional credit. They are taking loans from private money lenders, input dealers or Microfinance Institu- tions at a higher interest rate (as high as 60% Rs. 5 per Rs. 100 per month). These farmers are in deep crisis and consti- tute a large chunk of farmers committing suicides. This loan waiver is of no help to them. blode, thentmavoa

Government should make immediate effort to increase access to institutional credit to real cultivators. One of the prob- lems often expressed by the bankers in giving crop loans to these farmers is the lack of a guarantee for repayment. The state government should establish a Credit Guarantee Fund for small and marginal farmers which can give collater- al se- curity to the tenant farmers.

All the real cultivators who are not covered under insti- tutional credit are to be organised into cooperatives and linked to the institutional credit. All their high interest private loans can be swapped with low interest bank loans.

Loans of all farmers who have committed suicides since 1997 have to be waived and their private loans be swapped with no interest bank loans.

Government should introduce special budget for agri- cul- ture with an allocation of atleast 10% of the total budget. Gov- ernment must ensure that the loan waiver does not benefit non- cultivating, absentee land owners who have other major sources of income or livelihood and have taken loans in the name of agriculture. Specific mechanisms must be evolved to identify and eliminate the above categories of landowners from

the purview of the loan waiver scheme. Further, steps must be taken to identify the actual cultivators and update the revenue records accordingly. Government must also actively explore mechanisms (e.g. setting up a separate Committee) for evolv- ing a set of criteria to enable eligible farmers benefit from the loan waiver scheme in a meaningful manner.

Government should also take care that the loan waiver does not apply to ineligible loanees through the following measures

Restricting the loan waiver only to crop loans

In case government decides to waive short term and allied sector loans, it should be restricted to small and mar- ginal farmers only (up to 4 ha in rainfed areas, 2 ha in irrigat- ed areas)

Exempting Hyderabad district from the purview of the loan waiver. A thorough enquiry should be conducted and if need be waiver can be extended in the second phase. Pending this, the crop loan waiver up to one lakh for all farm- ers in the other district should be done immediately.

Government should with stain from any effort to impose additional taxes or issue bonds and transfer the burden on to people or the next government.