Fraud on farmers

Loan waiver scheme

The recent report on the farm loan waiver scheme of the Comptroller and Auditor General (CAG) has once again brought to the fore the government’s lack of seriousness in attending the problems of farmers. The report serves as further evidence to the fact that the so-called support measures for farmers’ welfare have been halfhearted and on many occasions counterproductive.

The CAG has focused on many irregularities in the implementation of the Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS) 2008. The CAG did not and could not verify each and every one of the more than four crore loan accounts that came under the scheme. It was a kind of sample audit. So, what was observed could be just a tip of the iceberg.

But the iceberg itself is horrific. It unfolds manifold irregularities. The eligible farmers (13.6 per cent of the test cases) did not get the benefit. Those who were not eligible under the scheme (8.5 per cent) were conveniently accommodated by the bankers. A private bank helped a microfinance institute to the extent of Rs 164.40 crore.

 Tampering/ overwriting/ alteration of records were noticed denoting the impunity with which  some of the banks were manipulating data. Some of the other entitled benefits under the scheme were not passed on to the eligible farmers (6 per cent cases) while undue benefits were passed on to ineligible persons.

The apathy to the farmers’ problems is further observable in the fact that as many as 34.28 persons were not issued the debt waiver/relief certificates. (Issuing such certificates were mandatory under the scheme.)

These were the flaws found in the implementation. But the entire scheme itself was originally flawed and anomalous. The brief details of the scheme, we may recapitulate here, were: the ADWDRS was announced in the budget 2008-09;it was estimated to benefit 3.69 crore small and marginal farmers and 60 lakh other farmers which means total number of 4.29 crore farmers – big and small together; the cost of scheme was estimated to be Rs 71,680 crore; the debt waiver scheme was to be completed by June 30, 2008 while debt relief was extended up to 30 June 2010; the scheme covered direct agricultural loans; short term production loans for agricultural purposes and investment loans for agriculture and allied activities.

A closer look at the scheme details show that it was not a big relief to the country’s farming community nor was it effective enough to bail the farmers out of the crisis situation, although the government never stopped making gloating claims about its benefits to a  large number of farmers.
Firstly, the scheme was designed only to benefit institutional borrowers. That means it excludes those who had to carry their agricultural operations by borrowing from private sources and their number is not small. As per the National Sample Survey Organisation data, only 27 per cent of the farm households are able to access credit from the institutions. It suggests that a large number farmers,  including those who borrowed money from private sources, those who do not get loans from any source and tenant farmers were outside the scope of the scheme.

Burden on farmers

Secondly, the one time settlement given to other farmers too was not attractive because it entailed a 25 per cent relief to those who repaid the remaining 75 per cent in three installments before a specified date. But the burden was heavy and it was not easy for the farmers to pay so much money; if they could pay 75 per cent they could as well pay 100 per cent without any support. The 25 per cent incentive cannot increase the capacity of the poor farmers to pool in 75 per cent from their own sources in order to pay in installments fixed by the government.

So, it may be said that the benefit of the scheme was very limited and was not to the satisfaction of the farmers. What the CAG has brought to light is that the implementation was bad and therefore it did not allow even that limited benefit to go to the eligible farmers. The government’s claims of helping the farmers unfortunately did not match with ground realities.

The government claims of phenomenally increasing the credit year after year.  In 2004, the government declared to double the farm credit in three years and subsequently claimed that it could achieve the target only in two years.

Enthused with its success, the government went on increasing the credit target in every budget (although budget has nothing to do with the bank credit since it is not out of budgets that the funds for loaning are supplied to the banks ) which has been found to have surpassed every year. In the latest budget of 2013-14, the finance minister declared the fresh target of Rs 7,00,000 crore for the budget year against Rs 5,75,000 crore the previous year.

But these figures do not project the real situation. If this mammoth credit had really been reaching the needy, there would have been no need for the farmers to borrow from private money lenders at exorbitant interest rates and end their lives when unable to repay the loans due to crop failure or insufficient income from their farming operations. We can’t ignore the fact that close to three lakh farmers committed suicide in the past fifteen years.

All this suggests that the small, marginal and landless farmers who are largely excluded from the institutional credit support are unlikely to get the benefits of the waivers and relief as well.  If the real intention is to support farmers and farming, entire policy of farm support should be reworked placing the farmers and their incomes at the centre not as something incidental and peripheral.
Otherwise, the ever increasing credit targets and any number of  eyewash schemes of relief are not going to bailout the agriculture from its ongoing crisis. More schemes without such concerns would bring in much bigger scams on the farm credit front too.

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