iv* Though the difference between Minimum Support Price (MSP) and Wholesale Price (WSP) for essential commodities such as Moong, Urad, Gram, Arhar on an average was around 33% between December 2003 to January 2008, it has gone up beyond 60% in wholesale prices and retail prices in the same period, which shows that farmers and consumers remained hard hit due to huge difference in WSP and retail price, according to The Associated Chambers of Commerce and Industry of India
<!--[if !supportLineBreakNewLine]-->
<!--[endif]-->

v* The recommendations of Alagh Committee to make CACP autonomous is rejected outright to retain Govt’s vice like grip on fixing prices of agri produce and the recommendations of Prof. M.S.Swaminathan Commission and those of Standing Committee on Agriculture on methodology to fix MSPs to defray costs and give 50% over C2 costs are also completely ignored. This has resulted in underpricing of farm produce thus transferring, in part, farmers’ rightful income to non-farm segmants. As a consequence, the disparity in rural and urban incomes widened to unconscionably high levels.

i* “Concentrate on the income of farmers and productivity will take care of itself” Says Prof. M.S.Swminathan, noted Agricultural scientist. He touched at the heart of the solution by saying that the objective of policy-makers and others in the field of agriculture should be to make farming profitable and remunerative rather than focusing on production and productivity alone.

ii* Mr Goriparti Narasimha Raju Yadav, the outstanding farmer from Krishna district (A.P) awarded the Padma Sri, feels that the Government should take steps to ensure remunerative prices to farm produce and need not give sops in the form of loan write-offs or subsidies. “The farmer does not need crumbs from anybody. He needs a fair price for what he has grown,” he said in an interview. “A nation cannot survive without farmers and many farmers nowadays are shifting to other fields as the returns on agriculture are not very encouraging. We will face a food crisis if remedial measures are not taken,” he said. Timely supply of inputs and a fair price for the farm produce should be ensured by the Government.

iii* Studies by the planning commission and others show that while the income ratio between agri workers and non-agri workers during 1951 was 1:1.8, it got widened to 1:2.8 by 1984, it further widened to 1:5.2 by 2004 and it is estimated by the Centre for Development Economics that whereas agricultural sectoral GDP stood at nearly Rs.3 lakh crore in 2002-03, it will rise to no more than Rs.4 lakh crore(+33%) a decade later in 2011-12 at the agricultural growth rate forecast for the Eleventh Plan. Meanwhile, the combined manufacturing and services sectors would have soared from Rs. 9 lakh crore to around Rs. 20 lakh crore(+120%), further widening the gap between the relatively stagnant sectors of the economy and the boom sectors from Rs.6 lakh crore to Rs.16 lakh crore. The disparity between agri and non-agri sectoral GDP is going to increase from 1:3 in 2003 to 1:5 by 2012.
The Eleventh Plan candidly confesses: “GDP per agricultural worker is currently around Rs.2,000 per month, which is only about 75% higher in real terms than in 1950 compared to a four-fold (400%) increase in overall real per capita GDP.” Is this what planned inclusive growth is planning to achieve!

On increasing credit flow to agriculture, the F.M averred that “On June 18, 2004 our Government had announced a package for doubling the flow of credit to agriculture. The credit disbursements have already gone up from Rs 87 thousand crore in 2003-04 to about Rs.2.5 lakh crore in 2007-08 marking a three fold increase.”
This is a padded and window dressed figure.

i* Banks are directed to extend mandatory credit to priority sectors which was initially focused on hitherto needy and neglected sections especially to small land holders and small enterprises. Ever-since reforms have started in 90s the definitions of priority sectors have been periodically widened to include other sections with relatively high credit worthiness and deepened to include big loans. Thus the coverage under priority sector lending has increasingly been diluted, crowding out small borrowers and opening gates for big borrowers.

ii* Observations of NCEUS-Apathy at policy level

In the Report of National Commission for Enterprises in Un-organised Sector- NCEUS-2007, (Chairman: Arjun Sengupta) it is stated that:
‘A close look at RBI guide lines/directives to banks, reveal that apathy either deliberately or by mistake also exists at the top and policy planning level…as the credit system operating under the existing guidelines of RBI. It emerges that small borrowers are competing with large and strong borrowers. The coverage under priority sector lending has increasingly been diluted, enabling big borrower loans at the direct expense of small borrower loans.
As part of the so-called process of” aligning bank credit to the changing needs of the society”, the scope and definition of the priority sector, once dominated by small farm related loans, were fine-tuned by including new items and enhancing credit limits of constituent sub-sectors to more than Rs.40 lakh. Over the years particularly after the mid-nineties, relatively high credit worthy activities like housing, education, transportation and loans to professionals have been included in the priority sector.
This has affected unfavourably the credit flow to the needy sector.’

iii* Doubling of growth in incremental credit in four years since 2004 was perhaps achieved quantitatively but without any increase in credit to small farmers and rural artisans. The extent of revival of credit flow to agriculture in the 2000s would have been far less in the absence of a sharp growth in indirect finance to agriculture. About one-third of the increase in credit flow to agriculture between 2000 and 2008 was on account of the increase in indirect finance. Even this growth did not originate from a growth in the traditional components of indirect finance, such as loans for the supply of inputs, power and credit to agriculture. The sharp growth in indirect finance in the 2000s was mostly a result of changes in definitions effected since late 1990s. These changes broadly involved (a) the addition of new forms of financing commercial, export-oriented and capital-intensive agriculture; and (b) raising the credit limit of many existing forms of indirect financing. Indeed, meeting the task of doubling agricultural credit appears to have become much easier for banks as a result of these definitional changes.

The entire growth of indirect finance to agriculture in the 2000s originated from a major expansion of loans with a credit limit of more than Rs 1 crore, and particularly, more than Rs 10 crore. In the year 2000, indirect finance with credit limit above Rs 25 crore accounted for less than one-third of the total indirect advances to agriculture. However, in 2007, indirect finance with credit limit above Rs 25 crore accounted for nearly 60% per cent of the total indirect advances to agriculture.

iv* There was a major rise in the share of direct advances with credit limits of more than Rs 1 crore between 2000 and 2008. The amount of direct advances with a credit limit of more than Rs 1 crore formed 5 per cent of total direct advances in 2000; the corresponding share in 2008 was 12 per cent. The share of direct advances with credit limits “between Rs 10 crore and Rs 25 crore” as well as “above Rs 25 crore” more than doubled between 2000 and 2008. Further, the most important beneficiaries of the increase in direct advances since the late 1990s were the big borrowers. The share of number of loans outstanding to big borrowers under direct finance increased between the mid-1990s and thereafter, and the loan per account increased phenomenally since the late 1990s.All this happened at the cost of reducing credit to small farmers.

v* Percentage share of small loans of Rs 25000 declined from 50% in 1990 to mere 11% in 2007. And loans of over Rs one crore skyrocketed by more than 400% during the same period. When all these factors are taken in to account the growth in incremental direct agri advances (of loans less than Rs one crore) during 2004-08 was about 150%, where as aggregate incremental credit of banks increased by180% during the same period. This means the rate of growth in direct agri advances was less than the rate of growth in total bank credit. And no special credit can be taken for the same by the government for this lesser rate of growth in agri advances vis-a-vis total bank advances. Rate of increase of Agri loans was less than rate of increase in aggregate loans. Thus the claim of the Government that there was doubling of incremental credit in four years is padded and window dressed.
Inadequacy of farm credit continues to be one of the major bottlenecks hindering the growth in investment and growth in agriculture. The growth of direct finance to agriculture declined in 1990s (12%) as compared to 1980s (14%) and 1970s (around16%). The average share of long term credit also declined from over 38% to around 36%, adversely affecting capital formation in agriculture.

i* The Government announced the very ambitious Debt Relief & Loan Waiver (DRLW) scheme for farmers in Budget 2008-09. But despite the scheme, some 1,154 farmers have committed suicide in Vidarbha alone. The only result of debt waiver scheme is cleansing the balance sheets of the banks at the cost of the taxpayer. Of course it makes farmers eligible for fresh loans, but no fresh loans seem to have been given from this Rs.65,000 crore during khariff season thus defeating the very purpose of loan waiver scheme. Banks in Punjab waived debt of 1.91 lakh small and marginal farmers amounting to Rs 667.43 crore. Moreover, 1.63 lakh farmers got debt relief of Rs 373.67 crore. In fact agri loans declined by Rs 11.000 Crore by Aug 08 compared to Mar 08. During khariff season the benefit to farmers by way of getting fresh loans is zero. The Banks in Punjab waived debt of 1.91 lakh small and marginal farmers amounting to Rs 667.43 crore. Fresh credit was extended to only 12,781 farmers till September 2008, which works out at 7% of farmers benefited under debt waiver scheme, as per the State Level Bankers Committee’s (SLBC) latest report. These farmers were advanced just Rs 95.35 crore, accounting for 14% of total waiver amount. Perhaps the position is the same in other States too. Government should come out with the particulars of fresh loans given to farmers whose loans are waived. Counseling centres should be established to counsel farmers on availing fresh loans. Debt relief scheme objective is to make the farmers whose loans are waived to be eligible fresh loans. If fresh loans are not given to farmers, the very purpose of debt waiver scheme is not achieved. This seems to be so if we go by Punjab experience. Posted by K.R.S.Reddy on 2009-02-25=-fe
More over, the debt waiver scheme does not cover those who repaid loans honestly. Dry land farmers also did not get much benefit as there is no differential definition for eligibility under the scheme for dry land crops. Income from per acre dry land crop is much less than income from per acre irrigated crop. This fact was not taken into account while formulating the scheme. Loans taken from money lenders constituting half of the total farm debt were outside purview of the scheme. Hence the number of farmers who did not benefit from the scheme, though deserving being placed in similar circumstances, is more than those who got the benefit.

ii* The subsidy bill on fertilizers of Rs 96,000 crore, largely goes to the industry, and only indirectly to the farmers, that too for farmers growing irrigated crops using urea. It does not in any way benefit dry land farming which constitutes 60% of the aggregate farmland. So the benefit to dry land farmers who are in majority the benefit of fertilizer subsidy is zero.

Financing of weaker section is at less than mandated credit. Private sector banks are the laggards details of which are given below. Banks are required to extend credit to weaker sections unto 10% of their net bank credit. Weaker sections comprise of SCs/STs, Small and Marginal farmers, Tenant Farmers, Agri. Labourers, Rural artisans, etc.

iii* Aggregate shortfall of all banks, taking each bank’s shortfall into account, works out to about Rs46,000 crore. Finance provided for weaker sections up to March 2008 was only about Rs 1,34.000 crore against a requirement of Rs1,80,000 crore. As many as 15 out of 28 public sector banks and ALL Private sector banks did not achieve the norm of 10% lending to weaker sections and the loaning by Private sector banks was megre at 2%. As many as 14 out of 28 public sector banks and 17 out of 23 private sector banks have not achieved the 18% target of agri credit. Shortfalls in both Agricultural and Weaker Section Loans is estimated at Rs 77,000 crore.

iv* Small and micro enterprises are neglected too in dispensing credit. The National Commission for Enterprises in the Unorganised Sector (NCEUS) has recommended that loans to Small and Micro Enterprises (SME) should be enhanced to 10%. Presently the actual achievement is a mere 4.5% of NBC. The shortfall works out to a huge amount of Rs 102,760 crore. These shortfalls in lendings to Agriculture, Weaker Sections and SME segment together add up to a whopping sum of about Rs 180,000 crore – roughly 8% of non-food credit outstanding as at the end of March 2008.

Of net bank credit, credit extended to small & marginal farmers was only 3.1% and credit to micro enterprises a mere 1.2%.

v* The recovery of loans advanced to weaker sections at 95% is excellent. By March 2009, banks have to extend loans to weaker sections to the tune of Rs 2,20,000 crore. If the present trend continues, there will be huge shortfall 0f Rs 50.000 crore in financing weaker sections resulting in loss of income generation , estimated at Rs 20,000 crore ,to the economically most vulnerable people. The Policy change recently announced by the RBI to deposit the default amount in RIDF makes it easy to avoid lending to weaker sections by banks thus the defeating the purpose of the scheme.

The finance minister rightly quotes Amartya Sen while clubbing ‘down turn with security’ which is meant for providing safety nets that could arise because of market related risks. More importantly, such protective security should also address the poor returns to farmers. Prof.M.S.Swaminathan rightly pointed out that ‘recommendations of the 6th Central Pay Commission, which provide benefit to 4.5 million central government employees and 3.8 million pensioners, were not only accepted but were improved upon by government. I suggest that major political parties should commit themselves to establishing a Farm Income Commission which can go into the totality of the income of farmers from crop and animal husbandry, fisheries, agro-forestry and agro-processing, and suggest ways of ensuring a minimum take home income to farmers.’ He hoped that ‘the recommendations of the National Commission of Farmers on the steps needed for increasing the income of small producers, as well as the need for ensuring minimum support price not only for wheat and rice but for a wide range of millets, pulses, oil seeds and tuber crops will be implemented. Further, provision needs to be made for establishing a national grid of warehouses for grains and cold storage structures for perishable commodities. The prevailing mismatch between production and post-harvest technologies should be ended. The National Policy for Farmers presented in Parliament in November 2007 makes a commitment that government will try to ensure income and work security to farm families.

ii*“Farmers livelihood always under threat and continues to be the riskiest profession”- BL021208: Creation of two crore jobs in the non-farm sector in the rural areas over the next twenty years is necessary to achieve a nutrition secure India, said Dr M.S. Swaminathan. With 60 per cent of people engaged in agriculture, progress in agriculture held the key to prosperity. It remains the single largest private enterprise, in which livelihood is always under threat and continues to be the riskiest profession. Working towards a green revolution, production levels have been raised but hunger has not been banished. Malnutrition glares across all States in the country. Food security is the fundamental responsibility of the Government and many schemes are in place but they have not yielded the desired results.

iii* The next budget should try to address the issue of converting this commitment into well defined programmes and resource allocation. Much has been done during the last five years to revitalise our agriculture and to reduce agrarian distress. Much, however, remains to be done to do justice to the genuine needs of the majority of our population who constitute the farming community.’ Pride of place would have to be given to agriculture and skill development — the first for raising productivity and the second for transferring workforce out of farms and traditional services into industry. These are the basics; India will pay a heavy price if it continues to neglect them.