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Scrutiny
  
Made a mistake? Make another...
Loan waiver clubbed with fertiliser subsidy proves the point
26/06/2008

A debt waiver of Rs.60,000 crore is being seen as an important step to win over rural hearts, where the major chunk of the vote bank lies. And though this might appear to be a realisation of the farmers agony in the Delhi power circle, the only thing left to be said is that was ‘myopic’! The farmers would have benefited more, had the money been utilised to improve rural infrastructure. The agriculture sector requires revolution, not just reforms. On May 23, 2008 the loan waiver was increased to Rs.716.80 billion from Rs.600 billion. A re-estimate shows the number of beneficiaries have risen from 30 million small and marginal farmers to 36.9 million! But then it’s also no more a hidden truth that most of these farmers are not the real beneficiaries of these schemes as most of them have small or negligible land holdings. And for that matter, these farmers [with small land holdings] have to rely on local moneylenders.

Even India’s fertiliser subsidy has been increased by 135.5% [to Rs. 95,000 crore] this fiscal as the government seeks to shield farmers from rising international prices. A good thought indeed, but then lets understand it from below the surface. The shares of fertiliser firms like Tata Chemicals Ltd, Rashtriya Chemicals and Fertilisers Ltd, National Fertilisers Ltd et al rose by 7% after the announcement. This clearly shows that this increase will do more good to the fertiliser companies rather than to the end users. These subsidies, as always, will never reach the farmers and will be adjusted by the manufacturers & middlemen in the supply-chain. All looks perfect on paper. However, if they are not implemented well, they could produce more adverse effects than anticipated. India badly needs a transparent and a corruption-free implementation of these schemes, especially in the rural areas. Moreover, here the need of the hour is that some of our foreign-educated Ministers need to pick up a lesson from the books of the European system where the credit mechanism works directly between the government & farmers and there is no menace of the middlemen.



The efficiency level is high, and the money is directly and immediately reimbursed once the credit is taken by the farmer. However, appropriate care has to be taken in this regard too as even protectionism has its perils...

In the end, though India is striving to incorporate such strategies and policy mechanisms (the last budget stands proof), powerful defaulters can send the wrong message, which can lead to anarchy and chaos amongst the vulnerable farmers. Frustratingly, Indian politicians need to show more ‘logical’ care than just distribute humanitarian alms.

By:- IIPM Think Tank
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