Debating India

From debt to death

V. Sridhar

Friday 2 July 2004, by SRIDHAR*V.

The policies that have come to govern the peasant economy have made the peasant unable to cope with even mild shocks in production, and his plight is aggravated by the state abdicating its role, particularly in extending institutional credit and framing meaningful tenancy laws.

EVEN suicide does not appear to relieve the Andhra Pradesh peasant of his debts. Travelling across Telengana and Coastal Andhra, this correspondent met at least a dozen peasant-families of suicide victims. Not a single case was found in which the death provided deliverance from debt. Barely days after the death, the creditors x moneylenders and dealers of fertilizers, pesticides and seeds and even "friends" and "relatives" x continued to press the hapless families to clear the outstanding debts of the deceased. Despite the grief, the families are cautious in talking about their creditors. Not a word is spoken in rancour. In fact, it appears that they are at the mercy of the lenders like never before.

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Near Macherla in Guntur district, a borewell on the bed of a canal.

Peasants in Andhra Pradesh, particularly the small and marginal ones, are in the grip of a predatory commercialisation of agriculture. This has changed the face of rural indebtedness. In particular, the "withdrawal of the state" either as a facilitator or as a provider of inputs, extension services or credit has been the key element of the pernicious policies that have wrecked the peasant economy. Of course, the "withdrawal" has not happened accidentally.

The policies have not only effected a quantum jump in the cost of crucial inputs such as power, but allowed full play to seed, fertilizer and pesticide dealers. A crucial part of the "package" has been the peasant’s lack of access to credit from institutional sources x nationalised banks, cooperatives and specialised rural banks. Credit from these sources has been virtually frozen in the last few years.

Prices of inputs in Andhra Pradesh are among the highest in the country. That is not difficult to fathom, considering the fact that the input suppliers are also the chief suppliers of credit to farmers. M. Kodandarama Reddy, Associate Professor of Political Science in Osmania University, says that the typical input dealer acts like a "mini-World Bank". "He rarely lends cash. Inputs are supplied and adjusted against the outstanding amounts that the peasant owes him." This means that the borrower has no control over determining the price or quality of the inputs. In parts of Nalgonda district, which has reported 20 suicides since the Congress government assumed office, peasants have dug borewell after borewell in a desperate search for water. The money advanced by private moneylenders is paid directly to the rig operators, enabling them to collude against the peasants.

N. Narasimha Reddy, Nalgonda district president of the Andhra Pradesh Rythu Sangam (APRS) and former Member of the Legislative Assembly representing the Communist Party of India (Marxist), told Frontline that even peasants supposed to be covered by the ayacut of the Nagarjunasagar Left Bank Canal had suffered serious crop losses in the past three years. He observed that an average farmer, with about three acres had struck at least three or four borewells going down to 250-300 feet, each attempt costing him at least Rs.10,000. He observed: "Forget about credit, the State machinery has not even deployed technical personnel such as geologists to help the farmer locate water."

Local residents said "water diviners" had a field day. One technique, apparently a popular one, involves the "diviner" walking around the farm carrying a coconut in his palm. The stalk supposedly stands upright at the spot where the bore is to be drilled. This bizarre technique even stipulates that the blood group of the "diviner" should be O positive.

It is important to situate the ongoing x agrarian crisis in the context of the statistical fact that more than 80 per cent of the landholdings are about five acres (two hectares). Although some have argued that the crisis in agriculture has affected even sections of the middle and rich peasantry in parts of the State, it is obvious that the small and marginal peasant and tenant cultivators have borne the brunt of the crisis, particularly that of the collapse of institutional credit.

It is evident that the advances made by formal sources of credit in the last few years have fallen far below the targets that they set for themselves. The shortfall is obvious particularly in the release of term loans. One of the main components of such advances is meant for enabling the peasant to develop irrigation facilities. A substantial part of this, according to bankers, is meant for digging wells. In 2003-04, the government declared that 451 of the 1,127 mandals were affected by drought. In 2002-03, 1,041 mandals were declared drought-hit and in 2001-02, 941 mandals were affected by drought. The fact that term lending fell short by about 50 per cent of the target in the past three years, when the peasants in the State suffered acute water shortage for crops, highlights the gross failure of the institutional credit mechanism. It is obvious that institutional credit failed the peasantry at the time when it was needed most.

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P.V. Sivakumar At Mushampalle in Nalgonda district, a desperate farmer whose second borewell too did not yield water.

THE plight of Sooramma (about 65 years old) from Thorrur village of Palakurthy mandal in Warangal district illustrates the plight of a small farmer in a desperate search for water. Her son Choppa Venkanna committed suicide in 2000. On May 22, her daughter-in-law also took her own life, unable to bear the insults of moneylenders. Sooramma said that although they own about 3.5 acres, of which 1.5 acres is classified officially as wetland, water is in short supply. In the past six years, the family has attempted to dig six borewells, all of which failed. Venkanna, in his desperate search for water, even built a small check dam on a portion of the field. But the debts mounted to Rs.1.8 lakhs, of which merely Rs.18,000 was extended by the branch of a nationalised bank in a nearby town. Reeling under the pressure of moneylenders in the village, Sooramma sought fresh loans at an interest rate of 30 per cent per annum. "I am even willing to sell my land, but there are no buyers," she said.

Vasudeva Rao, Warangal district secretary of the APRS, observed that the withdrawal of the state in the "fullest sense of the term" had heaped misery on the poor and marginal peasant. He alleged that agricultural cooperative banks in the district had siphoned off credit meant for small borrowers to non-agricultural activities such as weaving, and even as long-term loans to the rich peasants. Narasimha Reddy pointed out that institutional credit for agriculture in Nalgonda amounted to only Rs.170 crores against a requirement of Rs.500 crores. "This huge gap is filled by private moneylenders who charge exorbitant rates of interest."

The condition of a tenant farmer is even more precarious. Having little or no land, he is forced to pay high rents to the absentee landlord, who often supplies also seeds, pesticides, fertilizers and credit. In the Krishna and Godavari delta areas of coastal Andhra Pradesh, where tenancy is as high as 60-80 per cent of the cultivated area, rents take away more than half of the farmer’s produce. Tenancy is entirely based on an oral agreement x mooza vani kowlu. There are no papers or proof to show that the land is cultivated by the peasant. The high rents, coupled with rising input costs and the high cost of informal credit, have made life extremely precarious for poor tenants, many of whom graduated from the ranks of agricultural workers in the last few decades. The commercialisation of agriculture and the high rents mean that tenants are unable to cope with even relatively mild shocks in production. Since they have no documents that recognise their rights as cultivators, the peasants are entirely outside the ambit of the formal credit market. In fact, several peasants in the heartland of the Green Revolution in West Godavari district told Frontline that they were not able even to collect compensation from the government for crops lost owing to cyclones and inundation during the monsoon. They said that the money was pocketed by their landlords because they held the land in their names. Tenancy reforms, to feed the poor peasant’s acute hunger for land, is obviously an urgent requirement. But it is not even on the radar screens of the political class. It is not even a demand that is being articulated by the poor peasant, who is hopelessly marginalised and is in utter despair.

It is well accepted, even in government circles, that the credit institutions indulge in "ever-greening" of their accounts. P.S.M. Rao, an officer in the Nagarjuna Grameen Bank in Nalgonda, told Frontline that a substantial portion of loans advanced by institutions was really not "fresh advances". He explained that the banks or credit cooperatives asked the peasant to clear his old dues including interest, upon which they extended the same amount again as a "fresh" loan to the farmer. "In effect, the bank merely makes a book adjustment, while managing to show an increase in its credit disbursement," he said.

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Institutional credit in Andhra Pradesh

Malla Reddy, general secretary of the APRS, said that he was aware of many cases in which such "adjustments" accounted for 50 per cent of the credit supposed to have been distributed by the primary credit cooperatives in a year. "I know this well because APRS members heading many such cooperatives have come under pressure from the State apex-level bank, the Andhra Pradesh Cooperative Bank, to do this."

Studies of indebtedness among small farmers have shown that the rate of recovery of loans from small and marginal farmers is higher than that for loans made to large farmers.

P.S.M. Rao said that the banks, increasingly under the sway of a liberal financial regime, were discouraged from lending to small farmers. "The policy is oriented to the logic that it is better to lend to a small number of large borrowers than to a large number of small borrowers," he said. "Wilful default by small farmers," he pointed out, "is not a serious problem. They do not evade repayment of their dues. What is needed is a little consideration and an appreciation of his difficulties."

The cliche in elementary textbooks on the Indian economy describe the plight of the Indian peasant thus: He is born in debt, lives in debt and dies in debt.

Maybe it is time that he is described as one who is born in debt, lives in debt and is driven to death by debts.

See online : Frontline


in Frontline, volume 21, Issue 13, Jun. 19 - Jul. 02, 2004.

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