Random Reflections – 8 10.04.2017
Why so much of hue and cry for debt relief to farmers?
There is so much of hue and cry in the press about giving Debt relief to farmers who are under sever crisis. The Madras High Court judges who gave a favourable order are also being questioned as interfering with the Executive.
Debt Relief is not a panacea. Debt relief as political strategy for winning elections is mere corruption in a different form. But is it wrong in helping farmers who give our daily food and are giving up their lives due to the Agriculture Crisis. The RBI Governor has now come out against Debt waiver for farmers calling it a moral hazard. He supported demonetisation which affected every citizen of the country except probably the neo rich. The loss on account of that is not assessed even now.
Let us look at the write offs for the rich first. In 11 years alone Public sector Banks have written off Rs.2.51 lakh crores. Out of this Rs.1.73 lakh crores was written off in the last 4 years alone. There is no hue and cry about it.
Supreme Court judges, Justices M.Y. Iqbal and C. Nagappan had observed as, “RBI is supposed to uphold Public interest and not the interest of the Individual Banks. We have surmised that many financial institutions have resorted to such acts which are neither clean nor transparent. The RBI in association with them has been trying to cover up their acts from public scrutiny”
In 2013, Dr. K.C. Chakraborty, Dy. Governor, RBI lamented that we have written off Rs.1 lakh Crores in 13 years and 95% of them are large loans. But even now no serious action has been taken.
In the Parliament it was informed that there are 9100 wilful defaulters owing Rs.91155 Crores. We will not publish their names and we will write off these loans too.
This financial year alone the Banks have sold Rs.35000 Crores to Asset Reconstruction Companies. They pay only 15% of the debt initially and the rest in the form of bonds which will mature when the loans are repaid by the borrower. Banks also pay 1-2% as service charge for these loans to the ARCs. Is it not helping the large defaulters?
Now RBI is recommending that Banks can invest in Real Estate Investment Trusts and Infra structure Investment Trusts. Why not ask Banks to lend to the small and marginal farmers? That will increase credit off take and help the farmers who are dependent on money lenders.
The legendry agriculture Scientist Dr. M.S. Swaminathan had stated, “Farm Debt Waiver is not a permanent solution to farmers problems. When farmers find it difficult to get credit following the failure of the previous crop, the debt waiver will be useful to get them launched in agriculture again”.
Shri Sharad Joshi, Former MP & Kissan leader had written in Business line in 2008, “If one draws a balance sheet of the amount due from the farmers and the loss caused by the Government to the farmers on account of its policies calculated to depress agriculture prices and impose negative subsidies, the Government is net debtor to the farmers”. The task force on Agriculture 2000-2001 estimated that loss to the farmers on this count between 1980 and 2000 was Rs.3 lakh crore.
Farmers actually do not want waiver of loans. They are not beggars. They want adequate price for the produce. They want water; they want infrastructure; they want storage facilities ; they want processing facilities . They are proud of their land. When the pride is hurt, when they are abused for not paying the loan they commit suicide. Has any rich wilful defaulter ever committed suicide?
Yes. There are issues related to repayment culture affecting Banks. What is needed is waiver of loans to the affected farmers who repaid with great difficulty from other funds, often taken from other family members. The waiver should be for loans given by all Banks as done in 1990 by Shri V.P. Singh and in 2008 by Shri P. Chidambaram. (Though both were inadequate). We have not helped honest borrowers who repaid. We have not helped those farmers who are indebted to money lenders because banks did not give them credit.
We need a total change in Policy for Agriculture; Policy for Agriculture Loans and policy for Integrated Development. For now let us not blame the farmers and those who waived their small loans. Let us honestly look at our own moral.
Franco
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