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This new Finance Bill FY09 has presented the unthinkable in populist policy … proposing to write off up to rupees 60,000 crores in farmer 'bad debts' without even a fig leaf of budgetary support.
Writing off farmer 'bad debts', reminds me of an earlier era. During PM Indira Gandhi's time, one of her Ministers: Janardhan Poojari, would go about arranging 'loan melaas' and distribute money (actually loans which were to be treated as ‘grants’), and garner votes. This was considered a great socialist move and praised such that 'Indira became synonymous with India'. She outdid her father the great Jawaharlal who abdicated on 'market compensation' for 'land nationalization'. She is remembered for 'prince purses abdication', bank nationalization', 'collieries nationalization' and the 'emergency'. Lest we forget, all these constitutional amendments were passed by the majority of then parliamentarians. We citizens are still enjoying the fruits of these great deeds. It seems there is no shortage of fools, right from Md. Bin Tuglak's time, who gave away gold coins for copper. These 'gigantic personalities' are revered-reviled, even today.
This single proposal (being already treated as a given), announced by FM P. Chidambaram, has dealt a body blow to financial prudence. Now the farmer will always think that a 'loan' after delinquency becomes a 'grant'. In some ways, this has been going on every few years but in small measure. Note, he has no thought for the farmers who PAID ON TIME or who borrow from money-lenders (India's banking system reaches about 20% of households in the rural areas and only 66 million Kisan Credit Cards have been issued to 127 million Cultivators-2001 census). He has not realised that in Maharashtra where farmer suicides have been going on for some years now, poorer farmers in Vidharba have more than 2 Hectares but are worse off than farmers in Madya-Maharashtra who while having less than 2 hectares make more money due to 'grape' and cash crops. Yet the new proposal gives hand outs to the better off Madhya-Maharashtra farmers and nothing to the desperate Vidharba farmer, due to the land limit of 2 Hectares. How's that for justice?
A prudent policy would have been to reduce interest rates to 1% retroactively, grant a five year period to pay off amount thru EMIs, allow fresh loans to be permitted, again at lower rates. After all farm sector has required a boost for the past ten years. Why was this delayed for so long? The FM could allow 'market' driven economy for farm products, provide supply-delivery chains free of state borders, better seeds and technology free to the marginal farmers, and also tax the rich farmers who earn more than Rs. 3 lakhs per year. Force the 28 states to fall in line, by denying their farmers the above benefits. The marginal farmers are bound by laws of economics to remain marginal for perpetuity and thereby be a major burden on society. So most important, encourage thru fiscal measures, marginal farmers to combine with other littoral one’s so that their joint holdings reach 100 hectares, which will allow economies of scale. Such cooperatives to be like village panchayats, keep all politicians and boffins out of it. Dissolve all politician driven farm cooperatives by denying them tax deductions and subsidies of any kind.
Such reforms are pragmatic and create permanent traditions, yet our FM has no heart for it for the past five years. Giving a fish instead of teaching how to fish, ensures that the target group remains enmeshed in poverty to be then browbeaten every election year. I am certain this FM will join the other 'gigantic personalities' mentioned before and be revered-reviled for ages to come. Jai Hind.
(Abridged version published in 'The Hindustan Times, Mumbai, Mon. 03rd Mar. 2008, page-4).
Writing off farmer 'bad debts', reminds me of an earlier era. During PM Indira Gandhi's time, one of her Ministers: Janardhan Poojari, would go about arranging 'loan melaas' and distribute money (actually loans which were to be treated as ‘grants’), and garner votes. This was considered a great socialist move and praised such that 'Indira became synonymous with India'. She outdid her father the great Jawaharlal who abdicated on 'market compensation' for 'land nationalization'. She is remembered for 'prince purses abdication', bank nationalization', 'collieries nationalization' and the 'emergency'. Lest we forget, all these constitutional amendments were passed by the majority of then parliamentarians. We citizens are still enjoying the fruits of these great deeds. It seems there is no shortage of fools, right from Md. Bin Tuglak's time, who gave away gold coins for copper. These 'gigantic personalities' are revered-reviled, even today.
This single proposal (being already treated as a given), announced by FM P. Chidambaram, has dealt a body blow to financial prudence. Now the farmer will always think that a 'loan' after delinquency becomes a 'grant'. In some ways, this has been going on every few years but in small measure. Note, he has no thought for the farmers who PAID ON TIME or who borrow from money-lenders (India's banking system reaches about 20% of households in the rural areas and only 66 million Kisan Credit Cards have been issued to 127 million Cultivators-2001 census). He has not realised that in Maharashtra where farmer suicides have been going on for some years now, poorer farmers in Vidharba have more than 2 Hectares but are worse off than farmers in Madya-Maharashtra who while having less than 2 hectares make more money due to 'grape' and cash crops. Yet the new proposal gives hand outs to the better off Madhya-Maharashtra farmers and nothing to the desperate Vidharba farmer, due to the land limit of 2 Hectares. How's that for justice?
A prudent policy would have been to reduce interest rates to 1% retroactively, grant a five year period to pay off amount thru EMIs, allow fresh loans to be permitted, again at lower rates. After all farm sector has required a boost for the past ten years. Why was this delayed for so long? The FM could allow 'market' driven economy for farm products, provide supply-delivery chains free of state borders, better seeds and technology free to the marginal farmers, and also tax the rich farmers who earn more than Rs. 3 lakhs per year. Force the 28 states to fall in line, by denying their farmers the above benefits. The marginal farmers are bound by laws of economics to remain marginal for perpetuity and thereby be a major burden on society. So most important, encourage thru fiscal measures, marginal farmers to combine with other littoral one’s so that their joint holdings reach 100 hectares, which will allow economies of scale. Such cooperatives to be like village panchayats, keep all politicians and boffins out of it. Dissolve all politician driven farm cooperatives by denying them tax deductions and subsidies of any kind.
Such reforms are pragmatic and create permanent traditions, yet our FM has no heart for it for the past five years. Giving a fish instead of teaching how to fish, ensures that the target group remains enmeshed in poverty to be then browbeaten every election year. I am certain this FM will join the other 'gigantic personalities' mentioned before and be revered-reviled for ages to come. Jai Hind.
(Abridged version published in 'The Hindustan Times, Mumbai, Mon. 03rd Mar. 2008, page-4).
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