Farmers loan trap

Farmers committing suicide is causing a political upheaval in many states of the country. Political parties across the spectrum are trying to cash in on the misery of the poor farmer. Do the politicians really care for this hard working community who put food on our plates? Their gullibility is encashed by the politicians for garnering votes.

Tenant farmers are those who cultivate crops by taking land on lease, most of them are economically and socially backward and crop loss will be devastating for their families. Over the years I have seen the struggle the tenant farmers go through to make money on the land they rent. There are too many factors that need to come together to help the tenant farmer make money. Weather, Water, Cost of seeds, Cost of fertilizers, Availability of seeds and fertilizers on time, Cost of labor and machinery, interest rate charged by MFIs or worse the local money lender etc are some of the variables that need to be favorable for the farmer to make a decent return/acre. Last year as a good year with everything falling in place, this year it is excessive rain that is causing the problems. Next year it could be fewer rains that will pain the poor farmer.

In a good year these farmers at best make even. Considering the typical cycle for good farming years is say once in 3/4 years these folks are always behind the curve in terms of getting rid of loans etc. Hence they resort to the extreme.
Government schemes are of no help either, for example data shows that Rs 11,353 crores were waived off by the centre under the farm loan waiver scheme out of which only 130 crore loans of tenant farmers benefitted. This is truly unbelievable and disturbing. The wells of farmers are getting full benefits of such schemes.

Most of the tenant farmers get into the vicious cycle of loans and more borrowings not only for farming purposes but for other purposes like child education, family responsibilities, health care etc. There are many reasons for this financial mess, the local money lenders squeeze their blood out charging interest rates up to 40%, MFIs are no better charging upwards of 25%, government banks do not give loans due to lack of identity and other proofs. Hence most of the time they are catching up with no hope of getting debt free.

The other aspect is there are too many of these farmers trying to cultivate a small land holding which is not viable. The productivity from each acre has to double from the current numbers if they have to make a decent profit (for e.g.: Paddy for a bumper crop one can expect 34-38 bags/acre in a fertile area, even at this rate the tenant farmer may just be breaking even, it has to go to 50 bags/acre for the tenant farmer to make a decent profit). Unscientific cultivation practices are some of the reasons for poor productivity; this is a whole different story.

There are many steps that the government need to take to help the tenant farmers (1) Regulate the tenancy acts to make it win win for both the land owner and farmer (in a bad year both parties should share the pain) (2) Loan trap – introduce regulation on interest rates charged by local money lenders, enable penetration of MFIs (don’t kill this industry, regulate it) they are better than the local money lenders (3) Retrain the young farmers in allied skills and help them get jobs in urban areas, we don’t need so many young people performing farming duties with such low productivity, we need to introduce automation in farming (4) Increase financial inclusivity, get all the farmers open bank accounts ( use the help of UID authority) and transfer cash to their accounts as part of govt grants. (5) Let the PSUs give cheaper loans to help the tenant farmers purchase lands.

I am sure someone in the government has better ideas than the above but I guess is stuck in the maze of policies, red tape and lethargy.Meanwhile the suicides continue to create havoc in the farming community.