By Inderjit Singh Jaijee
Auctions of land lost to arthiyas through debt have become a flashpoint in Punjab. Whenever such an auction is scheduled, kisan unions step in to thwart the sale and the situation becomes a confrontation between the farmers and the state government. This is a step forward in that it brings the problem of rural debt into sharp focus and into the media spotlight but these confrontations do not solve the problem. The number of farmers and farm labourers who end their lives under pressure of debt far surpasses the cases of opposition to land auction. Suicides, silent, lonely acts of despair, remain largely ignored.
It is no secret that village land is rapidly passing from the hands of the farmers to the arthiyas. Men whose forefathers tilled the same fields for generations are now forced to sell their land, often to settle “debts” that may be illegal, entirely fraudulent or even non-existent. To the farming families of Punjab, land is livelihood … and more than that, it is life itself. Hundreds of cases can be sited from the recent past wherein debt-trapped farmers, reduced to penury and threatened with the loss of their land, have committed suicide. Their number is rising at an alarming rate.
Lack of Institutional Finance: Apart from the low minimum sale price (MSP) offered to the farmers, rural suicides are, in the main, the direct result of the accumulated burden of usurious interest exacted by the arthiyas year after year. Only about 20 per cent of village credit needs in Punjab are met by institutional finance. The balance 80 per cent is furnished by arthiyas and moneylenders. Until recently their interest rates ranged between 40 and 80 per cent. Only since 2002 has the arthiya lending rate dropped to 28 per cent. In comparison, the interest levied by regulated financial institutions was 16 to 18 per cent.
Failure to Apply the Law: In addition to the high interest rate of non-institutional loaning, it is the fraudulent dealing of the arthiyas that must be exposed and punished. Even for the pettiest loan, the farmer is compelled to sign a blank pro-note. The most common malpractice is the failure of arthiyas to supply their debtors with the mandatory semi-annual itemised account of repayments received and amount outstanding. Under law, either of these failures is sufficient to render the loan illegal. In case after case, the arthiyas make exaggerated demands and the farmers, ignorant of their legal rights and having signed blank pro-notes, are unable to resist. All farmer-arthiya loan-related transactions must be put under the scanner and the Income Tax Department must also demand to see arthiyas’ accounts.
Government Indifference to Suicides by Farmers/Labourers: Rural Punjab in particular, because of its very high agro involvement, and rural India, generally, is facing an unprecedented catastrophe and farmers are committing suicides by the thousands. The situation is deteriorating by the day. Unless immediate and sweeping steps are taken, rural India is heading for a total collapse. The Government’s failure to recognise this ground situation is not only pathetic, it may even be deliberate.
The Movement Against State Repression has sent the state government about 200 documented cases of debt-related suicide, supported by affidavits from the village panchayats, has been sent to the state government. These 200 cases are all from just two blocks, namely Lehra and Andana of Punjab’s Sangrur district, and all these cases date after April 1, 2001. Punjab’s previous Akali Government had promised to pay compensation to suicide victims’ next of kin. (The compensation was limited to suicides committed after March 31, 2001.) From MASR’s list of 200 cases, the state’s magistracy investigated first 29 cases and accepted 26 as resulting from suicides due to economic hardship. Thus 90 per cent of the cases reported were genuine. A recent study by the Agro-economic Research Center (AERC) of Punjab Agricultural University and accepted by the Bangalore-based Agriculture Development and Rural Transformation Unit has found that 86 per cent of the farmers in Punjab are committing suicide due to burden of debt. If 200 people commit suicide from just two out of Punjab’s 138 blocks within a period of two years (figures inconclusive) one does not have to stretch one’s imagination to realize how many debt-related suicides are taking place in rural Punjab annually. Times News Network dated May 26, 2003 quoted the Union Agriculture Minister, saying that the State of Punjab has not even informed the Center about debt-related rural suicides in the state so far.
The present Congress Government has now declined to give compensation even to the kin of the admitted 26 debt related suicides on the plea that it has no money. The government cites two reasons for refusing compensation, apart from claiming lack of funds: first, that the debtor has misutilised some of the loan for consumption purposes rather than agricultural production. Most of the so-called “consumption purposes” are a matter of survival. The second reason cited is that, in some cases, the debtors were addicted to alcohol. In the case of alcoholism, the tax structure instituted by the Central Government makes state governments, wholly dependent on Excise Tax revenue; therefore the state government does everything to promote alcohol consumption. Liquor vends are approved for almost every village lane.
Important recent steps
Kisan Cards: In 2001, the RBI announced its credit card scheme for farmers and promised that cards would be issued to all farmers within three years. Up to the end of 2003 only a small fraction of farmers have received these cards. For this delay the state government is responsible. Institutional finance to the rural sector must be stepped up and issuance of Kisan Cards, (which will decrease dependence on moneylenders) must be expedited.
Village Post Office Banking: The government is also experimenting with creating bank branches at rural post offices, thus reducing the number of handling agencies thereby enabling further reduction of interest and taking credit facilities to the farmers’ doorsteps. Tamilnadu has been selected for the pilot project … this move is well appreciated but in the fitness of things this experiment had deserved to be carried out in Punjab and Haryana – areas that are the epicenter of rural suicides.
Crop Insurance: For the past 50 years farmers have been promised crop insurance. Only last year however, has the Union Ministry of Agriculture taken up crop insurance on experimental basis in one district each of Punjab, Haryana and Himachal Pradesh. Punjab has rightly criticised this scheme as it fails to provide adequate compensation to the farmer for his loss. His loss is assessed not individually but is based on the average loss of a larger area, the block.
Loan waiver: Taken aback by the rising spiral of rural suicides and the clamour for waiver of loans, the Union Finance minister in the Budget speech of 2002-03 offered waiver, not of loans per se but on interest on loans against non-performing assets, not exceeding Rs 50,000 for farmers and Rs 50 lakh for commerce and industry; the offer pertained to loans advanced up to March, 1998. On further representations to the RBI from the agriculture sector, the RBI, in a surprising move, generously increased the Rs 50,000 (a meager amount) to Rs 10 crore for both industrial and agricultural sectors, applicable to all non-performing assets up to March 2000. From the huge jump in the quantum of loan eligible for interest waiver (Rs 50,000 to Rs 10 cr) it is obvious that the RBI was primarily interested in benefiting commerce and industry, By including agriculture loans, which are rarely more than Rs 5 lakh it was attempting to cloak this interest and make it appear as providing equal opportunity to all sectors.
After Independence, through successive land ceiling laws (last being in 1971) rural land holding was limited to 17.5 standard acres. On the other hand urban land holding and income are exempt from ceiling. The ceiling laws have brought down 94 per cent of land holdings in Punjab to less than five acres. It appears that the government planners had decided to limit the upward mobility to the towns-people where most of the upper castes reside. Mahatama Gandhi had said that India lives in the villages and development must begin from the villages.
Srinath Rampal, former Commonwealth Secretary General, speaking on Global Peace and Multilateralism: Challenge and Role for India at a Rotary seminar in New Delhi in mid November, cited the advice of the political analyst Keenan, given 50 years ago: “The USA has 50 per cent of the world’s wealth but only 6.3 per cent of its population. Our job is to maintain this position of disparity.” The Indian ruling class applies this dictum to its own situation and consistently works to maintain their advantage vis a vis the oppressed who are overwhelmingly rural. This sums up the position of the government vis a vis industrial/ urban property and agriculture. Former Prime Minister Deve Gowda has rightly asked the government how much of the nation’s wealth has been pumped into developing the rural sector as compared to industry and the urban sector.
Main causes of farmer distress and remedial measures:
1. Ceiling on agricultural land – but not on urban property or income
Do away with land ceiling with a proviso that only bonafide farmers of the state can buy agricultural land (a practice adopted by some states).
2. Diversion of river waters and hydro-electricity to non-riparian and non basin states Result: dependence on costly thermal power generated tubewell irrigation, depletion of water table and frequent digging of tubewells, salinity due to subsoil water, etc.
(Punjab’s river water was diverted to Rajasthan for free on the premise that Punjab had ample ground water resources that it could utilize. Tribune News service dated January 14, 2003 quoted Co-ordinator for Minister of Environment P.V. Sridharan as saying that out of 138 blocks of Punjab. “Divided to assess groundwater level situation in Punjab, 84 have been declared as dark, as they have exploited their groundwater; 16 are grey blocks and only 38 are white leaving scope for further utilization. Punjab should now demand reversion of Punjab’s river water supply to Rajasthan)
3. Unfavourable price structure, unrealistically low minimum support prices (MSP) and high input costs
Relate minimum support price to the market price index till such time that farmers are able to match import price.
4. High rate of interest: Institutional finance was 14 to 18 per cent but covered only 20 per cent of the rural demand the balance non-institutional loan carried an interest rate 28 to 60 per cent.
The interest rate has since been brought to 12 per cent and the government has now made a further reduction to 9 per cent to farmers but the maximum that the farmer can borrow is a paltry Rs 50,000. While interest on housing loans (for much larger amounts) has dropped to between 8.5 and 6 per cent, interest on agricultural loans in excess of Rs 50,000 is fixed at 12 per cent. Housing may be essential but surely food production is even more so. Bankers know that farmers are excellent credit risks for the simple reason that they cannot take a loan and disappear; they have nowhere else to go. After India’s banking sector was opened to private and international banks, these banks have shown how interest can be brought down. Nationalized banks making agricultural loans should learn from them, Bring down interest to between 5 and 7 per cent as is seen in developed countries and make this interest applicable to all agricultural loans.
5. No direct subsidies to farmers. Provide subsides directly to the farmers.
According to the Union Minister for Agriculture, Som Nath, “ the total volume of subsidies available to farmers in India is just 10% which is peanuts compared to what is available to the agriculturally and industrially advanced countries— 60% of the farmers received no subsidies in any form”. The share of agriculture in Five Year, Eight & Ninth Plans was Rs.367 Crores and 801 Crores respectively. For industry it was a Rs.3608 & 2765 Crores.
6. Lack of crop insurance cover
A viable insurance cover must be provided.
All the above factors are beyond the control of the farmers and the government is directly responsible for the pauperization of rural sector. As Punjab has the highest involvement in agro activity it has suffered the most.
What can be done?
1. Upward revision in the land ceiling.
2. Direct subsides to farmers.
3. MSP related to cost index.
4. Complete waiver of institutional loans.
5. Set up Debt Re-conciliation Boards for non-institutional loans.
6. Open Trade with Pakistan – e.g. Wheat is priced in India at Rs 670 but sells in Pakistan Punjab at Rs 1260.
7. Devolution of power to the States at par with what the provinces enjoyed under British India. This will allow timely and meaningful correctives.
What must be done immediately
1. Institutional loan: Waive all agricultural Institutional loans:
In 1997 agricultural loans stood at Rs. 5,700 crore. Today it is assessed to be around 15,000 crore. Of this 15,000 crore about 80% is non-institutional. And 20% (Rs.3,000 crore) is institutional loan. It is not asking for too much to bail out the farmers of Punjab who contribute 60% to the national grain procurement kitty.
2. Non-institutional loan (arhtiyas and money lenders)
Set up Debt Reconciliation Boards.
In the beginning of the 20th century Punjab’s agricultural debt problem had become acute. Petty farmers who could not repay their loans lost their land to moneylenders. At that time, the Punjab government set up a number of inquiry commissions and brought in a number of acts to save the farmers. As a consequence of these acts, Debt Conciliation Boards were established to bring about amicable settlement between debtors and creditors. Usurious loans were outlawed and so was alienation of agricultural land. The Punjab Government is urged to set up such debt reconciliation boards now to save farmers from dispossession.
January 19, 2005, Chandigarh.