Debating India


The immediate way out


Friday 2 July 2004, by PATNAIK*Utsa

The depth of indebtedness of the farmer and the nature of the agrarian crisis have not been fully realised by the State government. It should take measures on a war-footing to give immediate relief to deeply indebted and starving households.

THE new government in Andhra Pradesh, headed by Y.S. Rajasekhara Reddy, which assumed office less than a month ago, has announced some ad hoc measures to deal with the agrarian distress created by the incorrect economic reform policies pursued by the former Telugu Desam Party government in the past six years. With the price of cotton falling from 1996, and input costs, including power tariffs, increasing, the lakhs of farmers who had shifted from food crops to cotton or other cash crops, availing themselves of mainly high-cost private credit, have faced ruin. Their problems have been compounded by private agents supplying spurious seeds and pesticides, and a decline in public development expenditure, reducing their employment prospects. The measures announced by the new government include free power to farmers, ex-gratia payments to families affected by suicides, and partial waiver of institutional loans. There are proposals to expand institutional credit and step up rural investment.

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K. Ramesh Babu
Chief Minister Y.S. Rajasekhara Reddy signing his first file, promising free power supply to farmers, after being sworn in, in Hyderabad on May 14.

However, the depth of indebtedness and the general nature of the current agrarian crisis has still not been fully appreciated, and the sense of urgency that is required to tackle the problem is lacking. The measures announced are ad hoc and insufficient, and the proposals are medium or long-term ones, which will benefit only those farmers who have time on their side. But what of those thousands of farmers who have already reached the end of their tether? Think of a farmer who has accumulated a total of Rs.1 lakh or more in high-cost loans from private sources over the last five years, whose crop has failed, who has already sold land, who cannot access more credit, who cannot find enough wage-paid work as rural labour to make ends meet, leave alone pay even the interest on earlier loans, and who has no ration card because his family is not categorised as poor. Such farmers are not confined to the small or marginal farmer category alone. Fieldwork interviews carried out by researchers show cases of deeply indebted families with 15 to 20 acres, unable to borrow any more money to raise crops, whose members are trying to survive by working as hired labour but are unable to get enough work since the situation is the same with full-time labourers.

More than 150 cases of suicides by farmers have been reported in the past three weeks, and the trend will continue unless the government takes comprehensive measures on a war-footing to give immediate relief to deeply indebted and starving households. These measures are fairly obvious. The government should immediately launch food-for-work programmes, starting with not only the drought-affected districts but also coastal districts like Guntur, which have recorded high levels of suicide by farmers. This is essential for providing immediate relief to indebted, distressed farmers, as well as rural labourers.

The government should also immediately set up a Farmers’ Debt Relief Commission, headed by a senior administrative officer designated as Debt Relief Commissioner, with provision for enough staff to man offices set up in every taluk and block . The job of the Commissioner would be to invite indebted farmers to apply for relief, with speedy disposal of cases. The relief would be in the form of a sanction letter, which banks should be instructed to honour, allowing the farmer to draw a new loan. These loans, thus guaranteed by the government (a proportion of which could be grants in the case of acute distress) would enable distressed farmers to rollover their existing private debt and prevent them from taking the extreme step of suicide.

All the arbitrary conditions in force at present for issuing Below Poverty Line (BPL) ration cards should be made available to all those who wish to apply. As high as 86 per cent of the rural population of Andhra Pradesh was in poverty in 1999-2000, with an intake of less than 2,400 calories daily, and the situation at present is worse, not better.

However, it is incorrect to say that poverty declined in the 1990s. The policies of the previous government have led to a massive increase in poverty, and the task of restoring purchasing power to the people is formidable. Immediate food-for-work programmes to give relief from rural distress are essential because formulation and implementation of any employment guarantee scheme will take some time. The Planning Commission estimate of rural poverty for Andhra Pradesh in 1999-2000 is 11 per cent of the population only, but this is based on the inappropriate procedure used by all official and most academic estimates, which value the quantities consumed by people 30 years ago (quantities required to give 2,400 calories at that time) and apply a price index to update that old poverty line.

Quite apart from the problem of a base year for amounts consumed, which is far back in time, the very method of applying a price index to an old "poverty line" is bound to give perverse results in recent years, when falling employment and falling output prices have been the major causes of distress. The more prices fall, actual agrarian poverty rises and distress intensifies, the lower is the rise in the price index and the lower the official "poverty line"; hence the greater "poverty reduction", as per the faulty official method. Falling prices do not benefit labourers because their employment decreases and, consequently, earnings decline even faster.

Poverty should be measured by looking directly at the current data on consumption. A direct inspection of such data shows that 86 per cent of the rural population of Andhra Pradesh on average consumed 2,381 calories or less . Thus, the official estimate of 11 per cent excludes 75 per cent of the people, who are actually poor, from those it recognises as the poor, and these huge numbers are being denied BPL ration cards. The official estimate means that the very definition of poverty based on a calorie norm has been silently given up; from the basic data we can calculate that people, who are now officially considered to be "poor" are those whose intake is less than 1,600 calories. The cut off point for the official poverty line for the year concerned was less than Rs.280 a month, while a realistic point should be Rs.600 a month.

At the All-India level, 75 per cent of the rural population is found to have an intake below 2,400 calories. Where the major part of the population is undernourished, targeting makes no sense and a universal Public Distribution System is an essential step for enabling the deprived to access food.

See online : Frontline


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

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