Kerala’s alternative to farm loan waivers has lessons for India5 min read . Updated: 27 Dec 2018, 10:43 AM IST
Thanks to the debt relief commission, 11,354 Kerala farmers have benefited from a disbursement of over 11 crore, and there are no farmer suicides in the state
Ernakulam/Bengaluru: Back in 2006, Kerala came face to face with an explosive situation. Ironically in a state dominated by Communist politicians, farming was dominated by export-oriented cash crops such as rubber and pepper, prices of which had plunged in the global market. It led to a spate of farmer suicides, who had defaulted on loans. The hue and cry from rural Kerala reached the national capital, where Booker-winning author Arundhati Roy marched with women whose farmer husbands had killed themselves.
Into this maelstrom walked in a new Communist government led by chief minister V. S. Achuthanandan, a pro-worker activist and tactful politician. Achuthanandan drafted Delhi-based Prabhat Patnaik as his planning board vice chairman, a position that made the left-wing economist the state’s de facto chief economic adviser.
Soon after reaching Kerala, Patnaik recounted, “We had to do something." During a chat, his wife and noted economist Utsa Patnaik pointed to a pre-independence era model that provided a significant relief for farmers in distress, with an almost folksy charm to it: the Sir Chhotu Ram Commission in Punjab, whose members travelled from village to village, taking petitions from debt-ridden farmers, granting them relief.
Patnaik and others studied the initiative from the British period and turned it into a new model, which led to the formation of the Kerala State Farmers’ Debt Relief Commission. The law came into force in January 2007.
In retrospect, the Kerala experiment provides a promising alternative to big-ticket farm loan waivers that have been on the rise (eight states have promised to waive a total of ₹ 1.9 trillion of crop loans since April last year, burning a hole in state coffers), though fraught with delays and the exclusion of deserving farmers. Under the Kerala initiative, a seven-member team of farmers, legal experts, farm economists, political appointees and others goes from village to village, speaks to farmers, screens their loan portfolios and decides on the quantum of relief.
By the time Patnaik started out, about 1,500 cultivators had committed suicide according to farmer unions, though official numbers were lower. The scale of the tragedy was not as large as in Vidarbha in Maharashtra, but the numbers were still alarming.
Immediately after the Debt Relief Commission was set up, the 25-odd staff at the headquarters in Thiruvananthapuram were besieged with petitions from farmers seeking succour. Within two years, farmer suicides had fallen sharply. Now, 11 years on, the problem has nearly disappeared.
Part of the credit goes to the commission, experts say, though other major packages such as the United Progressive Alliance’s mega farm loan waiver in 2008 at a national level, and state-level measures also played an important role.
The relief provided by the commission is not unconditional: the loan should be from the cooperative sector, which provides the bulk of farm loans; the applicant should be a small or marginal farmer, who owns or has taken on lease a crop area of less than five acres; and the applicant’s annual income should not be over ₹ 2 lakh. The commission sits for several days in a village every month and this year alone, 11,354 farmers have benefited from a disbursement of more than ₹ 11 crore.
It is a limited arrangement compared to what relatively larger states may need and also lower than expectations in Kerala. The relief is only up to ₹ 1 lakh for loans higher than ₹ 50,000 and, so far, just about ₹ 213 crore out of the ₹ 355 crore allocated over the years has been spent.
Commission member and farm expert S. Janardhanan said that as the intensity of the farm crisis got subdued in Kerala, the activities of the commission also slowed down. “However, it is still a model worth emulating across the country."
Earlier this year, a team from Rajasthan visited Kerala and studied the model before announcing a waiver, he said.
“Instead of bulk farm loan waivers, this is a continuous engagement. Round the year someone is talking to farmers, trying to understand what they are going through and how the state can help," Janardhan said. “The meetings are informal. We go beyond our mandate and often advise farmers, even if the debt is because of a daughter’s education or medical expenses. Many do not know the benefits they can avail, for example, in cases of crop loss because of natural calamity. We make arrangements for them (in those cases)."
K.R. Chandramohan, who was the chairman of an urban cooperative bank for about 30 years in Kollam district, said the debt relief commission, in practice, also acts like a banker’s debt relief commission. “There are chronic defaulters in every cooperative bank...negotiations between farmers and lenders, with the state as the mediator, help banks solve NPA (non-performing asset) problems."
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This is a model that could be emulated across the country, said Patnaik. “The whole point was to look at the farmer. Agriculture is the livelihood of a peasant. If you do not make enough, you cannot take your child to the hospital."
The debt relief commission is beneficial to most farmers, even though it works at a snail’s pace, said P. V. Rajappan, a rice grower from Kerala’s Palakkad district. Rajappan was hit by a harsh drought in 2008, which led to a default of a ₹ 50,000 loan from a cooperative bank.
“The loan was taken by three of us, all farmers. But with the drought, we could not repay. Eventually, including the dues, we owed the bank ₹ 80,000." That was when he heard of the commission. “We submitted a plea before it in a sitting, and got the bank to halt default proceedings... Just two weeks ago, we got a letter saying all our dues have been waived," he said.
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“Even if a small amount is waived, it is a huge benefit for a farmer. I just wish the process was faster," Rajappan said.