Historic gaffes called farm loan write-offs

"The future belongs to nations with grains and not guns," M S Swaminathan once wrote. India's most famous agricultural scientist, who relentlessly tried to build a world without hunger, had a decade ago called for fixing minimum support price (MSP) for farm produce to make farmers happy. The recommendation by the National Commission on Farmers (NCF) was later incorporated in BJP's 2014 Parliament election manifesto too. While Swaminathan called for fixing the MSP for crops at levels "at least 50% more than the weighted average cost of production", BJP promised to enhance the profitability in agriculture, by ensuring a minimum of 50% profits over the production cost. Prime minister Narendra Modi then set his target of doubling farm incomes by 2022. The government's pet project, Pradhan Mantri Fasal Bima Yojana, promised to provide farmers with insurance covers against crop loss due to natural calamities, and facilitate the process of taking innovation "from lab to land."

But the reality seems to be a little far away.

Debt-ridden farmers continue to suffer from the volatile market prices, despite 2016 being a year of normal rains. Voices demanding MSP have drowned in the cacophony of loan-waiver demands and the high-decibel debates on what (and who) is spanning farmers' violence. Everyone knows these waivers are as effective as a sand castle built on the seashore. Quickly built between approaching waves, the castle stays only till the next big wave sweeps the shore.

Financially-broke state governments, mostly bust by populist measures such as prohibition, have clearly run out of options. The four states of Uttar Pradesh, Punjab, Karnataka and Maharashtra have collectively written off loans amounting to Rs 1 lakh crore, with Maharashtra joining the top ranks with UP with a Rs 34,000-crore tag. They all now inescapably stare at a swelling fiscal deficit.

Maharashtra chief minister is already slouching under the financial burden. "It's a huge burden and we may have to cut down on some government works," he said. To his credit, he has omitted out elected representatives, traders who are farmers but who paid VAT, big farmers who paid income tax, and government employees who had their names on the 7/12 extracts as farmers from the list of beneficiaries. And he hopes that it would reach out to all genuinely distressed farmers.

But the fact remains that the poor farmers never figure on banks' radar. They end up seeking high-interest carrying loans from local money lenders, who eventually make them bleed to death. Recent farmer suicides have all come from such debt traps. Sadly, the government-sponsored loan waivers only reach the cream of the farmers. But the historic and unprecedented gaffes continue unabated.

Agriculture may be steadily losing its hold over GDP, but it continues to be the leading livelihood industry in India. Swaminathan reminds us it is our duty to safeguard the interest of small farmers who have limited marketable surplus. Setting MSP at cost plus 50% return is also an important strategy to attract and retain youth in farming, bring small farmers out of the poverty trap and ensure sustainable food security for India's population of 1.4 billion, by 2024.

Apart from devastating state coffers and destroying credit discipline of farmers, such loan waivers clearly go against the central government's reform agenda. Strangely, implementing MSP for all crops would have cost the government much less.