Loan Waivers Show Farming Is Uneconomical, Says Father Of India’s Green Revolution

MS Swaminathan on why farm loan waivers never resolved the agricultural crisis in India.

Farmers work in fields in Upper Shillong, Meghalaya, India (Photographer: Sanjit Das/Bloomberg)  
Farmers work in fields in Upper Shillong, Meghalaya, India (Photographer: Sanjit Das/Bloomberg)  

The spate of farm loan waivers across the country is a clear indication that farming as a profession is uneconomical in India, according to agricultural scientist MS Swaminathan.

He emphasised that striking off farmer loans has never solved the problem. “We should concentrate on making farming more economical, more profitable and more productive rather than purely trying to solve this short-term problem with loan waivers,” Swaminathan told Bloomberg Quint.

Four Indian states have waived farm loans so far. Following up on its election promise, the BJP government in Uttar Pradesh pardoned farm loans worth Rs 36,000 crore in April this year. Maharashtra, Punjab and Karnataka followed with either full or partial waivers. Reserve Bank of India Governor Urjit Patel had earlier warned that waivers pose risks to inflation and credit discipline. Ratings agencies Fitch and Moody’s have both flagged off concerns of undue burden on the states’ exchequer.

Swaminathan, who’d spearheaded India's green revolution in the 1960s by introducing high-yield variety seeds, said the government will have to reiterate its commitment to agriculture. “You need more research, more extension, more training and remunerative marketing,” he said.

Here are edited excerpts from the conversation.

When we spoke a few months ago you said farm loan waivers are a ‘temporary necessity’ seeing the farmer crisis at the time, Now we have reports of farmers receiving a few paise as farm loan waivers in UP to 10 lakh fake farmer accounts in Maharashtra, Do you think the rollout of farm loan waivers is on the right track?

I think the idea behind the loan waiver seems that you make the farmer eligible again for another loan. In that way, the revival of the loan and the earning capacity of the farmer is promoted by loan waivers. But I don’t think this is the resolution because loan waivers have never solved the problem. A loan waiver is an indication that the agriculture profession is uneconomical.

Therefore, we should concentrate on making farming more economical, more profitable and more productive rather than purely trying to solve this short-term problem of loan waivers. Loan waivers have not given any positive results so far.

On the parameters of the waivers we have seen so far, in Maharashtra for example there is a condition that if Rs 1.5 lakh is granted as loans, the remaining amount has to be paid upfront. Do you think this is fair? Is the process becoming more about political action rather than actual results?

Loan waiver is a political action in order to provide temporary relief or comfort to the farmers. But it is really a signal that farming is not very economical. Therefore, it is not going to solve any problems except the very short-term ones. I think it’s high time that we look at the problem of farmers along the lines indicated by the National Commission on Farmers which I chaired.

There is also a demand of waiving all loans farmers take, not just those from scheduled banks. What is the practicality of this demand?

One is the entire credit reform in agriculture. Credit which is farmer friendly and not based upon exploitative rates of interest. This is the essential component for successful farming strategy. That’s why we need some fundamental changes in our approach. One is the credit policy which should be proposed first for small farmers and should not lead to excessive exploitation of farmers. Just the opposite of this kind of thinking is the short-term view of providing relief to the farmers through loan waivers, low interest loans and so on which makes loans unviable. I therefore think that the time has come to revisit the recommendations of the National Commission on Farmers in the areas of credit like procurement, public pricing, public policy, internal public distribution system and import output pricing policy. This are important for the long-time survival of the farming as a successful economic profession.

One of the important recommendations of that Commission was that farmers are paid cost plus 50 percent as fair remuneration. In fact the demand that your Committee recommendations be implemented is routinely made. Have you had any conversation with government on how these can be implemented?

We had extensive consultation, not only with Government, Prices Commission and Chairman of the Prices Commission but also with farmers, State Governments and State Ministers for Agriculture at the political, professional and farmers level, so that our recommendations are really the voices of the farmers. Because we are OF the Farmers Commission, therefore we thought it is our responsibility to serve as voice of farmers. It is not that due to lack of consultation there is a problem. But there is problem in terms of implementation which looks at the problem in very short-term view while the Commission looks at it from a long-term view.

We are seeing state after state announce farm loan waivers even as some farmers say their needs are not met. Going into a phase running up to general elections in 2019, the focus on farm sector is expected to increase. What do you think the government should do at this time?

Government must reiterate its commitment to agriculture, agricultural progress and look at the problem of the agriculture inputs, cost of production, cost of the return structure of farming, the problem emerging from climate change, changes in temperature precipitation. It’s a whole series in which you need more research, more extension, more training, remunerative marketing. Finally, the monsoon and the market which are the two determinants of the farmers well-being. Monsoon is becoming unfavorable. Market is also unfavorable; therefore, we should look at this problems in a more serious way.