Thursday, December 31, 2009

Punjab Farmers Slide Deeper Into Indebtedness
By Devinder Sharma 28 December, 2009 Devinder Sharma Blog
I am at present travelling in Punjab, considered to be the food bowl of the country. Behind the facade of rural prosperity is hidden the sordid saga of growing indebtedness. I have been highlighting the sorry state of farm affairs for quite sometime. But I guess agricultural scientists and policy makers are afraid to acknowledge the prevailing crisis because the needle of suspicion will only point towards them in return.
All these years, the Punjab Agricultural University (PAU) had asked farmers to increase productivity. The higher the productivity, the more the income from farming, we were repeatedly told. This was however not true. The more the productivity, more has been the outstanding debt. Unfortunately, no one had the courage to question the faulty promise being doled out by the PAU, year after year.
While the PAU scientists are rewarded with 6th Pay Commission arrears and increase in monthly salaries, the virile farmers of Punjab have come under huge debt. This is certainly not fair. It is high time, PAU is held responsible for the Punjab farm crisis and some sort of punishment must be spelled out.
Agricultural scientists have blood on their hands. They should not be allowed to go scott free.
Newspapers in Punjab have for the last few days been carrying reports based on a study released by Prof H S Shergill of the Institute for Development and Communication in Chandigarh. The study shows that farm debt has increased five fold in the past ten years. Isn't this a clear pointer to the faulty farming frame that Punjab is being forced to follow year after year? Why can't scientists look beyond the NPK model of farming, and try to restore soil health and rejuvenate the environment. Why can't scientists for once come to rescue of the Punjab farmers instead of indirectly helping the Chemical fertiliser and pesticide companies?
Rising farm debt in Punjab
FARMERS in India have been trapped in debt for ages. Farmers were said to be born under debt and they bequeathed only debt to next generations. Earlier these were money lenders who behaved like sharks, sucked the blood of peasantry, leaving them to nurse their wounds and lead a life of misery.
Relief came in dozes. Now after independence and thanks to Green Revolution that pushed into commercial mode the debt has continued to rise as never before. It is true that the entire indebtedness is not due to farming practices and needs, but major portion is due to that. At times the debt ridden farmer finds no other way bit to commit suicide. During the last one decade, over one lakh and fifty thousand farmers have taken this route which is both cowardly and brutal.
Average debt per farm household is Rs 1.39 lakh. 72 per cent of farm households are more heavily involved in debt. 17 per cent cannot pay back even the interest. 60 per cent of the debts trapped are small or marginal farmers.
Last decade Punjab has witnessed five times increase in the debt burden of the farmers. A study conducted by a well known economist professor Harjinder Singh Shergill of the institute of Development and Communication establishes that Punjab farmers who were in debt amounting to Rs 5,700 crore in 1997, now have a debt liability of over Rs 30,394 crore. This is the latest unofficial estimate based on field survey and other data. Now the per farm household debt has become almost three times over these 10 years - from Rs 52,000 per household in 1997 to Rs 1.39 lakh in 2008.
Further, per acre amount of debt has more than doubled over the same period from Rs 5,721 to Rs 13,062.
Nearly 72 per cent of farm households are more heavily involved in debt. Out of these around 17 per cent are in virtual ‘debt trap’ in the sense that they cannot pay even the annual interest on their loans from their current farm income. Shergill has said there was little chance of their repaying the accumulated debt from the current income. Professor Shergill has concluded that the outstanding debt component has increased at a faster rate (14.13 per cent per year) than total farm debt (8.81 per cent per year) over this period. The mortgage debt, however, has declined over this period and may completely disappear in the near future.
Interestingly, the debt of small and marginal farmers has grown at a slower rate (1.29 per cent per year) than the debt of medium and big farmers (2.71 per cent per year). Almost 60 per cent of these ‘debt trapped’ farm households are marginal and small farmers and most of these ‘debt trapped’ farm households (86 per cent) belong to the Malwa region.
When compared to income generated from the farms, the debt amount has increased from being 68 per cent in 1997 to 84 per cent in 2008. Then as a proportion of the value of machinery owned by Punjab farmers, the debt amount has gone up from being 15 per cent in 1997 to 53 per cent in 2008. Despite steep rise in farmland prices in the state, the amount of farm debt is now (2008) equal to 4 per cent of the total value of farmland of the state, compared to it being 3 per cent in 1997.
Almost 30 per cent of the farm households of the state borrowed some money for long-term, non-productive purposes during the agricultural year 2007-08. The average amount of these loans per borrowing farmer was Rs 1.25 lakh, and the per operated acre amount worked out to Rs 12,826.
Northern Malwa farmers borrowed the highest amount of non-productive loans for reasons such as house construction and repair (44.38 per cent of total amount), marriages and social ceremonies (41.41 per cent of total), and purchase of durable consumer goods (25.41 per cent of total). The main sources of these loans were: commission agents and money lenders (54.48 per cent of total amount) and commercial banks (28.96 per cent of total). The share of Cooperative Credit Institutions in non-productive long-term loans was rather small, being only 3.36 per cent. Interestingly, though not related to the study, but it may be added that the Punjab farmers received only 1.3 per cent of the national debt waiver in the form of relief announced by the union government in its last budget.

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