"Get the tillers deeper into debt!"

Anumber of suicides of desperately indebted farmers have been reported over the last few years from various parts of the country from Kerala to Punjab that underscore the intensity of the crisis in agriculture and its exacerbation. Suicide incidents of twenty-one poverty-stricken farmers in just 72 hours were reported from Vidarbha as recently as in August 2007. So while "experts" may nit-pick the causes of the suicides to prove that they are not because of farm distress, the facts are stubborn and can be confirmed by any serious investigation of the situation. A study on Agricultural Indebtedness, which report was released in August 2007, has confirmed that the crisis in agriculture is profound and widespread. The study panel, headed by the Director of the Indira Gandhi Institution of Development Research in Mumbai, studying the indebtedness of farmers, endorsed the fact that the root cause of the current crisis is not indebtedness - indebtedness is a symptom.

The root of the crisis lies in the fact that making a livelihood from agriculture is becoming increasingly uncertain and risky for the vast majority of peasants. A majority of peasants have been forced to enter into commercial agriculture to meet their living expenses but are facing increasingly costly input prices, and uncertain outcomes of their investment. Added to the uncertainty of nature are the growing uncertainty of market conditions, and absence of guaranteed procurement and output prices.

On its part, the UPA government has not addressed, in the three years of its tenure, any of these basic issues affecting Indian agriculture and the tillers; on the other hand, it is proposing that the solution is to make institutional credit available to the peasants. The Finance Minister and the Prime Minister have repeatedly expressed their concern over the sluggish growth of institutional credit to agriculture and have been making a lot of noise about banks increasing agricultural lending and also about reversing the decay of the rural financial institutions (RFIs). These RFIs - comprising of the Primary Agricultural Credit Societies, District and State Cooperative Banks - which were set up in the context of the Green Revolution to enable the capitalist growth in agriculture, have all been in a state of decay because their funds (public funds channelled through the nationalized banks) were appropriated by a minority of politically powerful rural elite and their assets milked dry by this section which were closely allied with the ruling parties at the state and Centre. The RFIs had served their purpose then; now there is a move to revive them under the pretext that these will deliver the tillers from their plight.

More recently the World Bank has announced that it will extend US $300 million to strengthen rural credit in India. According to the Bank, the proposed project "supports the Government of India’s (GoI) program to reform and revitalize the country’s rural credit cooperative banks," It claims that such a revival of rural credit will "reduce indebtedness, diversify rural economic activities, increase incomes, and improve livelihoods, thereby supporting broad-based rural growth, poverty reduction and equity!"

There are several explanations for why the bourgeoisie is bullish about rural credit. The main reason is that it makes good financial sense for the banks to lend to agriculture. Lending to the peasantry is not fraught with risks as it is made out to be. Land is one of the most valuable assets and the bourgeoisie is eyeing this most valuable asset in the countryside. The deeper the tiller gets into debt, the more the hold of the financial institution on his assets. It has been reported that indebtedness amongst farm households has almost doubled in the past decade. Moreover, the financial institutions are flush with funds and it is only through lending that profits can be made on this capital. It is also possible that with the push towards liberalization of agricultural marketing and expanding private wholesale operations, the infrastructure is being laid for easy credit in the countryside.

The tiller, from his perspective, simply cannot afford to think of the banks as a safer lender to borrow from than the money lender. The latter charges twice or thrice the bank interest rate, which makes the borrowing very expensive; however, the principal has to be repaid all the same, whichever the source of borrowing. To believe that freeing the peasants from the clutches of the moneylender is sufficient condition to end his woes is to deny the fact that the banks and rural financial institutions are going to extract every rupee of principal and interest from the borrower and attach his land if he defaults. There have been reports from Punjab and other states of banks sending out their musclemen to "collect" dues from the peasant. It is one of degree as far as the impact on the peasant is concerned whether it is bank credit or loan from a moneylender; the peasant remains indebted.

Take the case of the Vidarbha peasants in the current season. It was reported in August 2007 that many of the peasants had taken the drastic step of committing suicide because the local banks refused to give them fresh loans for current sowing; they had already defaulted. In some cases, the sowings were washed away in the current kharif season following incessant rains and they had no money for fresh sowing. It is indeed true that they needed money to sow the fresh crop, but they were already deep in debt and more borrowing would only add to their existing burden. If they did borrow and if the new crop fails due to inclement weather or pests, they would be deeper in debt to the banks for thousands of rupees with no capacity to pay. What they would then face is the confiscation of their land, appropriated by the bank against non-payment of loans.

What the tiller needs immediately is a comprehensive and effective insurance scheme that will protect him from such complete ruination, as he faces now, in the event of a crop failure. The government has only paid lip service to this demand, and several schemes - crop, farm income and rainfall insurance - have been proposed in response to the recommendations of several official committees set up to enquire into peasant distress. However, the only one that has been actually implemented - the crop insurance scheme under the National Agricultural Insurance - is covering barely 10 per cent of the country's cropped area. There is lack of a comprehensive coverage at this point to all peasants.

It is clear that the government cares very little about providing the peasantry a secure livelihood, and all the official response to this growing crisis has been nothing more than empty promises. More than a year ago, when the spate of suicides provoked popular public outrage and there was widespread demand to cancel the debts of the tillers with immediate effect, the UPA government made half-hearted promises in this direction that were soon totally forgotten. The Prime Minister visited Vidarbha district and announced a "Debt Relief" package with much fanfare. But in actual fact there was no debt waiver!

A government that works in the interests of the producers of such an essential good for society would not only provide immediate relief in the face of crop failure and other calamities, but would also implement policy that would secure their life and livelihood in the long term.