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LATEST NEWS UPDATES | Punjab's mounting farmer crisis

Punjab's mounting farmer crisis

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published Published on May 4, 2016   modified Modified on May 4, 2016
-Business Standard

Green revolution pioneer now marked by rising rural despair, with high costs and low incomes pushing a mass of small cultivators into a debt trap

Chandigarh:
Fifty eight and counting…the number of farmers' suicides in Punjab in the past three months due to agrarian distress is alarming.

Maharashtra, Punjab and Telangana top this grim list, the Union government informed Parliament last week. Rainfed states are in a crisis due to two years of drought but Punjab is a largely irrigated state, that pioneered the country's green revolution. Yet, its farmers grapple with mounting debt and dwindling income, despite the government's assured purchase of wheat, paddy and cotton.

Satish Verma, professor at the Centre for Research in Rural and Industrial Development here, did a study which showed a debt to income ratio in Punjab at 96.8 per cent as of end-2013. And, this ratio is the highest among low-income farming families; it decreases with increase in income. A joint study by three universities in the state has calculated the estimated farm debt total at Rs 69,000 crore. The study also incorporates data on farmer suicides between 2000 and 2010; it estimates this at 3,954. Another study for the period after 2010 is on.

While the minimum support price of grains are raised by four to five per cent yearly, on average, the cost of cultivation has been rising by eight to 10 per cent annually -- of labour, diesel, pesticides, deepening of tubewells, etc. This has accelerated the suicide numbers, says G S Kalkat, chairman, Punjab Farmers Commission.
 
Punjab Debt
 
According to National Sample Survey data issued in December 2014, the average debt per household in India is Rs 47,000 a year and at least 60 per cent of rural households are under debt. A survey report by the Indian Council of Social Science Research, issued in January 2016, pegged the average debt per household in Punjab at Rs 552,064. The state average of households under debt, it said, was 85.9 per cent.

The census of 2011 showed the number of small farmers in Punjab (having a holding of five acres or below) dipped from 500,000 in 1991 to 360,000 in 2011. The high cost of cultivation due to mechanisation and the low water table has turned small holdings increasingly unviable for crops. An average income of Rs 3,000 an acre after meeting all expenses is not sufficient for even daily need and the farmer borrows from one source to repay the other, getting into a debt trap, reveal the studies.

Farmers do get interest subvention from nationalised banks but need to repay the principal and interest at the end of the year to be eligible for a loan next year. He borrows at a higher rate (24-36 per cent from commission agents) to repay the bank to maintain a good credit record. One year's income is needed to pay off debt in rural areas but at low income levels, it is almost four times the income, and such households comprise two-third of rural households, says Verma's study. And, the grip of commission agents has become stronger over time.

Farmers in Punjab cannot, in effect, sell their produce in the open market. They are entitled to various state schemes like health insurance only if they produce a ‘J Form’, a receipt of sale of grain to the commission agent. The network of moneylenders and procurement agencies makes it impossible for him to go to the open market for a better price.

To address all this, the state's legislative Assembly recently passed a ‘Punjab Settlement of Agriculture Indebtedness' Bill. The maximum rate of interest, says the bill, would be fixed each year by the government, based on the repo rate of the Reserve Bank of India and interest charged by banks.

Business Standard, 3 May, 2016, http://www.business-standard.com/article/economy-policy/punjab-s-mounting-farmer-crisis-116050201284_1.html


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