Jhansi: Farmers in central India’s Bundelkhand region are not waiting for the loan waiver programme to kick off sometime this week.
They are waiting for the rains.
They have waited for the rains for five years. The ensuing drought has resulted in debts, some of which will be written off by the populist Agricultural Debt Waiver and Debt Relief Scheme, 2008, but if the rains don’t come, the new loans, which the farmers here will become eligible for after the old ones are written off, will end up being unproductive. The farmers will slip deeper into debt and the banks will find that even the new loans have turned bad.
Dry spell: At least 80% of the region’s rural population is dependent on rainfed agriculture and livestock for a living. Photograph: Harikrishna Katragadda / Mint
“This is the fifth year of the drought. The canals are dry and there is nothing called a sowing season. Why are you asking about irrigation and farming when there is no water to drink?” asks Hari Ram of Natthikhera village in Uttar Pradesh’s Lalitpur district.
By 30 June, India would have implemented an ambitious Rs70,000 crore farm loan waiver. Apart from writing off loans of farmers who have been unable to service debt, banks will issue fresh loans to the same farmers. The twin bonanza — freedom from debt and fresh loans — is expected to help clean up the books of banks and provide a fillip to agriculture. Political analysts say the ruling United Progressive Alliance government has come up with the scheme as a way to win votes; five key states go to the polls before the end of the year and elections to the Lok Sabha are scheduled for 2009.
Here in Bundelkhand, though, the loan is far from Ram’s mind. His brothers have migrated out of Natthikhera and become labourers. Ram and others have opted to stay back to earn a living by digging ponds and building roads, under the National Rural Employment Guarantee Scheme (NREGS), a government programme that promises employment to at least one member of poor families.
The land on both sides of the road is dotted with newly dug ponds and wells, waiting for the rains. “I don’t know if this will help, I am only here to dig,” says Ram.
In the Bundelkhand region that is spread across 7.08 million ha and 13 districts — seven in Uttar Pradesh and six in Madhya Pradesh — at least 80% of the rural population is dependent on rainfed agriculture and livestock for a living. The rains haven’t come and irrigation schemes haven’t been efficient.
A recent report by an inter-ministerial team of the Union government, spearheaded by the National Rainfed Area Authority (NRAA), says utilization efficiency of irrigation infrastructure across India is around 50%, and lower in Madhya Pradesh. Out of 31 lift irrigation schemes in the state, only eight worked occasionally and overall utilization ranged between 5% and 10%. In many parts of India, the level of fields is higher than that at which water is available, and the water needs to be “lifted” to irrigate the fields.
In Acharra village in Tikamgarh district of Madhya Pradesh, for instance, the lift irrigation system has been lying defunct for more than three years. Dhani Ram, the village headman, says the irrigation department stopped the supply of water because of non-payment of electricity bills.
The story is the same in Londi tehsil of Chhatarpur district. According to the NRAA report, the system here has been lying idle for the past 12 years even though farmers started defaulting on their bills only in 2000. An official at the state’s irrigation department said they are trying to clear pending bills and restart systems.
Farmers here, though, have a simpler solution: If the government can waive farm loans, why can’t it waive electricity bills? “No one had any money to pay for the electricity. If the Prime Minister can waive the farm loans, why can’t somebody waive electricity bills which only amount to a little more than Rs1 lakh for this scheme?” asks Dhani Ram.
There’s another reason why farmers in Bundelkhand aren’t very keen on the farm loan waiver. Many of them have loans, but mostly with local moneylenders. According to the report by the inter-ministerial team, around 60% of credit in the region is still non-institutional and cooperative banks disbursed just 7% of the loans and primarily to large farmers at that.
“Most agricultural loans we give out are used for consumption. The situation has been quite bad in Bundelkhand and people don’t even have anything to eat. So, agriculturally, I don’t know how much sense the waiver makes,” says Rajhans Singh Chauhan, manager, Triveni Kshetriya Grameen Bank in Uttar Pradesh’s Mohoba district.
According to a survey by IIMS Dataworks, 31% of farmers with incomes below Rs32,500 a year and 23% with incomes above this level have taken loans in the past two years. Moneylenders are the source of these loans in 38% of cases in the first instance and 28.2% in the second. Almost 60% of farmers who have availed loans pay an interest rate of at least 24% a year.
Khuman Banskar, who owned 5 acres of land in Tikamgarh, for instance, borrowed Rs20,000 from the local moneylender, after mortgaging his land. He borrowed not for agriculture but for his daughter’s wedding. “I had hoped to return the money but there was no rain and no crop,” says Banskar. He eventually sold off the land to pay the moneylender.
Chauhan adds that the loan waiver has also incited conflicts between villagers: “Farmers who have taken loans from fellow farmers or moneylenders to pay off their bank loans are now feeling deprived. Whereas people who defaulted for whatever reason are benefiting.”
This could result in people buying into the “waiver” culture and not servicing debt at all, says another bank official. “The attitude has changed after the loan waiver. Farmers, who might have paid off the loans won’t now,” says R.S. Prajapati, agricultural assistant at the State Bank of India branch in Mohoba. The loan recovery rate in the region declined over the past two years, he adds, and that he expects it to be even lower this year. SBI is the largest bank in the district, servicing 115 villages.
Prajapati, Chauhan and other bank officials agree that apart from crop failure, migration is one of the top reasons for defaults, with farmers whose crops have failed consecutively leaving villages for towns and cities where most of them work as labourers feeding the great Indian construction boom.
Others have taken a different route to debt relief. Savitri Devi’s husband killed himself last year because he couldn’t service the loan he had taken to buy a diesel pump. Devi says the pump is useless because there is no water to be pumped into the fields.
Like Hira Ram, she’s waiting for the rains.