• Sethu: Indian Govt counters environmental concerns

    Indian Govt counters environmental concerns Hit hard by the flip flop over the

  • Do more for farmers

    Union finance minister's Rs 60,000-crore loan waiver in the Union Budget proposals has won kudos for the government and has to some extent queered the pitch for the Opposition on this score. But a lot more needs to be done if the Congress-led UPA government has to regain the confidence of farmers. Bank loan is just one minor part of the problem and concerns only those farmers who take loans from banks. There are millions of farmers who take loans from moneylenders and commission agents at usurious prices. Maybe the government could issue an ordinance to stop payment on these loans, because in most cases the interest amount is more than double the actual loan. Even in the case of the farmers whose loans with banks have been waived, fresh trouble will begin next season. The crux of the problem which any farmer from Hoshiarpur to Wardha or Warangal will tell you, is remunerative price. Unless he gets remunerative prices, he will be in debt to the banks again. And what about corruption? A farmer from Hoshiarpur, for instance, if he wants to buy a tractor which costs say Rs 5-6 lakhs, has to pledge his four acres of land in addition to the ten per cent interest he pays on the loan. When he pledges his land he has to deal with the patwari and senior revenue officials. He has to bribe them to get his work done. Then he has to look for a middleman and pay him to negotiate to get his loan from the bank and finally at the bank he has to grease the palms of officials sanctioning the loans. On Rs 4 lakhs he pays over Rs 4,000 as bribe, and this is the minimum. The other important issue is cost of production. The government gives the farmer what it calls his cost of production. Perhaps the bureaucrats use their own parameters to arrive at the cost of production, but the farmer needs to survive. The businessman, for instance, adds his profits and perks to the cost of the items he produces. Shouldn't the farmer get a reasonable profit? He and his family work 24 hours, seven days a week, 365 days a year on their farm. In Maharashtra, farmers wait all night for power to run his pumps. And yet his cost of production does not take all this into account. This bias against the farmer must be removed.

  • Congress plans rallies to cash in on farm debt waiver

    Buoyed by the popular reaction to the farm debt waiver and debt relief scheme announced in the budget, the Congress has planned a series of rallies in State capitals and district headquarters. It will begin with a massive show of strength on the Ramlila grounds here on March 9. At the same time, Congress president Sonia Gandhi will meet State-wise all-party MPs from March 3 to 5 in the Parliament House. In a bid to pull out all stops to cash in on the popular sentiment, Ms. Gandhi's meetings with MPs will generally carry the message that the momentum and high ground gained by the party on the farmers' indebtedness issue, should be maintained throughout the year when six States go to the polls, and till the Lok Sabha polls next year. The States going to the polls this year are the ones where farmers would benefit the most from the Rs.60,000-crore debt waiver scheme. These are Karnataka, Rajasthan, Madhya Pradesh, Chaattisgarh, Delhi and Jammu and Kashmir. A senior party leader said that the mood in the party is upbeat and the leadership wants it to be sustained. Central to Ms. Gandhi's meetings with MPs would be the message that the programmes launched by the Congress-led UPA government should be "properly explained' to the people. In particular, the Congress would like to take the credit for the National Rural Employment Guarantee Programme and now the farm debt relief issue, the sources explained. On Monday, Ms. Gandhi will meet MPs from Andhra Pradesh, Assam, Bihar, Manipur, Meghalaya and Arunachal Pradesh. On Tuesday, she is to meet MPs from Jammu and Kashmir, Himachal Pradesh, Delhi, Karnataka, Kerala, Tamil Nadu, Puducherry, Haryana, Punjab, Chandigarh, Uttar Pradesh and Uttarakhand. On Wednesday, the Congress president will meet MPs from Madhya Pradesh, Rajasthan, Gujarat, Goa, Dadar Haveli, Daman and Diu, West Bengal and Andaman and Nicobar. The AICC has planned the rallies keeping in mind the hundreds of Congressmen who want to "thank' the Congress president for the decision on the debt relief scheme.

  • Ending the debt trap & attaining food security

    Finance Minister P. Chidambaram's initiative is a major step in recognising the country's debt to farm families but much more needs to be done. Finance Minister P. Chidambaram's budget 2008-09 has aroused widespread interest in methods of saving our small and marginal farming families from indebtedness and acute economic distress, which lead to occasional suicides. The steps proposed in the budget will give relief to nearly four crore farmers, at an estimated outlay of Rs.60,000 crore. As stressed by Mr. Chidambaram, this is a major step in recognising the indebtedness of the country to farm families who, th rough their toil in sun and rain, are safeguarding national food security and sovereignty. The question arises whether this step will mark the end of farmers' dependence on moneylenders and traders for their credit needs. Some of the following issues need consideration: First, the definition of small and marginal farmers has to be different for irrigated and dry farming areas. The present definition classifies marginal farmers as those owning up to 1 hectare and small farmers as those owning 1-2 hectares. Farmers cultivating crops in rainfed, arid, and semi-arid areas may own 4-5 hectares but their income is uncertain and their agricultural destiny is bound closely to the behaviour of the monsoon. A large number of farming families affected by the agrarian crisis in Vidharbha fall under this category. They will not be eligible for debt waiver and debt relief under the present scheme. A second problem relates to the source from which loans have been taken. The programme announced in the budget covers farmers who have taken loans from scheduled commercial banks, regional rural banks, and cooperative credit institutions. It does not cover farmers indebted to moneylenders and traders. According to the National Sample Survey Organisation (NSSO), 48.6 per cent of the farm households surveyed were indebted; of these 61 per cent had operational holdings below 1 hectare. Of the total outstanding debt, 41.6 per cent was taken for purposes other than farm-related activities, such as healthcare and domestic needs; 57.7 per cent of the outstanding amount was sourced from institutional channels and 42.3 per cent from moneylenders, traders, relatives, and friends. It has been estimated that in 2003, non-institutional debt accounted for Rs.48,000 crore; and out of this, Rs.18,000 crore was at an interest of 30 per cent per annum or more (NSSO 59th Round cited by the Economic Survey 2007-08). The Expert Group on Agriculture Indebtedness chaired by Professor R. Radhakrishna has recommended, in its report of July 2007, the inclusion of the financially excluded, particularly the small borrower households, and the adoption of risk-mitigating measures for agriculture. The concept of financial inclusion is in its early stages of operationalisation. Loan waiver is the price we have to pay for the neglect of rural India during the past several decades, as reflected in a gradual decline in investment in key sectors like irrigation, post-harvest technology (even today, farmers dry the harvested paddy on roads), market, and communication. The four crore farmers who are to be relieved of their debt burden before the end of June 2008 will become eligible once again for institutional credit for their cultivation expenses during kharif 2008. The challenge now is to prevent them from getting into the debt trap again. For this purpose, both Central and State governments should set up immediately an Indebted Farmers' Support Consortium at the district level. This should comprise farm scientists, panchayati raj leaders, input supply agencies, representatives of relevant government departments and financial institutions, rural and women's universities and home science colleges, private sector and media representatives, and others relevant to assisting the farmers relieved of their past debt in improving the productivity and profitability of their farms in an environmentally sustainable manner. This is essential for enabling them to have a higher marketable surplus and thereby more cash income. The smaller the farm, the greater is the need for marketable surplus to avoid indebtedness. Such an Indebted Farmers' Support Consortium should get the four crore farmers the benefits of all the government schemes such as the Rashtriya Krishi Vikas Yojana, the National Food Security Mission, the Accelerated Irrigation Benefit Programme, the National Horticulture Mission, Rural Godown and Warehousing Schemes, and the National Rural Health Mission. If this is done, every farm family released from the debt trap should be able to produce at least an additional half tonne per hectare of food grains or other farm produce. This should help increase food production by about 20 million tonnes during 2008-10. At a time when global and national food stocks are dwindling and prices are rising, this will be an extremely timely gain for our national food and nutrition security system and for the control of inflation. We should ensure that the outcome of debt waiver is enhanced farmers' income and production. The prevailing gap between potential and actual yields in the crops of rainfed areas such as jowar, bajra, millets, pulses, and oilseeds is over 200 per cent even with the technologies on the shelf. The restarting of the agricultural career of four crore resource-poor farmers through loan waiver could mark a new dawn in both agrarian prosperity and national food sovereignty

  • Lack of quality seeds hits prawn production

    During this biting cold what can be better than a dish of black-tiger prawns cooked in oriental style for dinner or just batter fried along with your evening drink. But then, be prepared to shell out a huge sum as black-tiger prawns supply is going down with stagnant production over the past several years. India is the leading producer of black-tiger prawns in the world but today the prawn farmers are faced with the problem of stagnant production due to lack of quality seeds and financial support from the government. According to I.P.R. Mohan Raju, president of the Prawn Farmers Federation of India, "Although India is the leading producer of black-tiger prawns in the world, the production in our country is stagnant for the past few years. The primary reason for the stagnation is the inadequate supply of quality seeds. The hatchery operators depend on the supply of wild brood stock for the production of seeds. The quality and quantity of this wild brood stock has deteriorated over the past few years.' The hatchery operators depended on the supply of wild brood stock for the production of seeds but the quality and quantity of this had deteriorated over the past few years. The federation, the first national platform for prawn farmers constituted by state federations of the 10 maritime states and union territories, would collaborate with the hatchery operators and the government to address this issue, he said. India has over 1,50,000 hectares under prawn cultivation with around 1.2 to 1.4 million hectares potential brackish water area available. More than 91per cent of the 1,00,000 plus farmers are small scale with land holding of less than two hectares. About 6 per cent of the farmers' own land only between two to five hectares and the remaining three percent own land over five hectares. Total production is around 1,35,000 tons with an average production of less than 1000 kg per hectare. Farming methods are mostly extensive or modified extensive with less than 20 per cent of the farms having electricity connections. Black-tiger (Penaeus monodon) is the major species cultivated constituting over 97 per cent of the total production. More than 90 per cent of the 135,000 tons produced and over 94 per cent of the value of exports come from small-scale farmers. Said V. Balasubramaniam, general secretary of the federation, "Lack of institutional finance and insurance coverage is a big deterrent for the growth of the small farmers. More than 90 per cent of the over Rs 3,000 crore invested in prawn farms in India is from the pockets of the small farmers or borrowed from unorganised money lenders. More over, more than 90 per cent of the production cost is financed by credit from the dealers of inputs and companies, since the farmer does not get any type of crop loan from financial institutions. "This drives the cost of production up by 20 to 30 per cent, since credit is involved at various levels in the chain of crop input supplies. If farmers get institutional financing and insurance coverage for their crop, the accrued benefits will make him more competitive in the world market,' he said.

  • Farm loan waiver via cash, bonds

    HERE'S the answer to the most intriguing question about this year's budget

  • The political economy of Budget

    Support for further economic reforms in the context of India's globalisation will be mustered more easily if the deprived sections are assured of some safety net, says M K Venu FINANCE minister P Chidambaram's fifth budget stumped the chattering classes, mostly with incomes of well over Rs 10 lakh a year. The Rs 10-lakh income threshold is relevant because there are less than 300,000 people in India showing a taxable income of Rs 10 lakh and above. But they exercise disproportionate influence on policy. There are many more in the above income category, who do not pay taxes and probably have even greater influence on public policy! The budget also stumped economists, who are also part of the chattering classes. Initially they did not know what to make of a budget that seemed to give everything to everybody. The budget certainly did not lend itself to instant analysis on television channels where many economic pundits were sitting. In the first flush, one economist simply said he was overwhelmed, and didn't know how the numbers would work after so much goodies were handed out by the finance minister. "I am overwhelmed', is what he kept saying. The impatient TV anchor, obviously looking for a one liner, kept pressing, 'Is it good or bad?'. The only reply was,' I am overwhelmed.' It didn't take long for everyone to realise that it is not necessary for numbers to strictly add up in politics. In certain situations, sentiment and psychology can subsume numbers that don't add up. Which is why politics is often described as the art of the possible. While economics parades as an exact science, there are times when economists get lost in their linear frameworks and miss the wood for the trees. Further, what really stunned the chattering classes was someone like Dr Manmohan Singh or P Chidambaram could come up with such a massive loan waiver package. They associated such acts with politicians like the late Devi Lal, Charan Singh or among contemporaries, Prakash Singh Badal and M Karunanidhi. How could Manmohan Singh and Chidambaram do this, was the main question on their lips. However, at the end of the day the budget seemed to have got overwhelming support, if one went by how the vernacular press treated the finance minister's announcements. Politically, it is one of the sharpest statements one has come across in the past decade and a half. Chidambaram's dream budget in 1997 too had a mesmeric impact on the people but this one covers a much wider terrain in its inclusiveness, whatever critics may carp about. It took a while for the immensity of the political statement to sink into the BJP leaders. Initially some leaders tried to attack the Rs 60,000 loan waiver as irresponsible. Later, possibly after deeper consultations within the BJP leadership, it was decided to tone down the attack. The politics of it was visible even in Parliament when Chidambaram said only kulak landlords will oppose loan waivers for small farmers holding up to two hectares of land. The invocation of kulak landlords has an interesting dimension. Politically, it is significant that the Congress is attempting to wean the poorest among the backward caste, scheduled castes and minorities away from regional parties that have established themselves over the years. This would easily rank as among the most audacious attempts by the Congress to upset the present political arithmetic of various strong regional parties. If viewed in this perspective, it becomes easy to understand why considerations such as fiscal profligacy and misplaced budget assumptions do not stand a chance. In any case, of late, a feeling had developed in non-urban India that the country was reaping the riches of globalisation, in terms of mounting forex reserves, high corporate profits, and government revenues doubling in three years. IN SUCH a situation it becomes difficult to convince the other India that fiscal belt tightening is the way to go. Besides, this would be most hypocritical as even anecdotal evidence would suggest that the bulk of the growing government subsidies today are consumed by the urban middle class. Just take the Rs 71,000-crore energy subsidy. Over 80% of it must be going to the urban middle class. The finance minister has also been careful in not going overboard while opening the purse strings. He has kept enough head-room in his fiscal deficit target to ensure that some discipline remains. For instance, he has budgeted fiscal deficit at 2.5% of GDP, when he could have kept a target of 3% as per the FRBM timeline. He can technically spend extra about 0.5% of GDP or Rs 20,000 crore, without violating the FRBM Act. In fact, the expenditure on loan waiver in the first year could be no more than Rs 20,000 crore. Operationally, the waiver of Rs 60,000 crore will occur over three years. More interestingly, much of the write-offs will happen among loans which are already sitting as non-performing assets (NPAs) in banks. So the bank books will get cleaned up to that extent. In lieu of the write-offs, the banks could receive government bonds which they could liquidate in the market or sell to the Reserve Bank of India. True, this may constitute another offbalance sheet borrowing by the government. Even after taking some of the off-balance sheet items, heavens won't fall if the fiscal deficit moves up to 4% of GDP. What is the great sanctity to the 3% figure, one fails to understand. Both oil and food subsidies today are being enjoyed across the board by urban and rural India, and these subsidies have helped to keep food prices under control. It is difficult to imagine the political class surviving if the price of wheat in India were to track international trend. Global wheat prices have doubled in the past year. The price of other mass consumption items such as edible oil too has been maintained at lower than international price. Bad economics, but good for collective survival. So current circumstances in the global economy are exceptional and the budget has done well to admit that there are off-balance sheet subsidies whose value is growing by the day on account of rising global prices. Finally, support for further economic reforms in the context of India's globalisation will be mustered more easily if the deprived sections are assured of some safety net. The benefit of all this will eventually accrue to the growing aspirational middle class. This perspective must not be lost sight of. After all, it is in the interest of the emerging bourgeoisie to keep the present system alive and ticking.

  • Will loan waiver address farm distress?

    It will provide only short-term relief THERE arefour crore small and marginal farmers who are unable to repay their crop loans to the banks. The Rs 60,000-crore budgetary allocation for waiving their loans will now enable a farmer to go back to the same bank, apply for another loan and await either of these two outcomes: a good crop or another loan waiver. While the gesture provides farmers relief in the short term, it would be harmful for the economy, especially the farm economy, in the long run. If we take the risk versus reward incentive out of an economic activity such as agribusiness, the enterprise quotient diminishes and hinders both growth and innovation.These key attributes, along with structural reforms and investment in agri-infrastructure, are needed to raise agricultural productivity and maintain the growth trajectory of the economy. The question we need to ask ourselves is why these farmers have not been able to repay their crop loans. Can Rs 15,000-per-farmer reward help them produce a better crop in the next season? The answer sadly is No. Small farmers face two main challenges: meeting their input needs (seeds, pesticides) and dealing with the weather risks to their crops. Issuance of input coupons for purchase of quality inputs for the next season would have been more beneficial. Bad weather plays havoc with agriculture. Dealing with weather risk calls for appropriate risk management tools such as weather insurance. This requires a network of weather stations at the block level for timely collation of data, a basic requirement for weather insurance products. Establishing a network of weather stations would have required only a fraction of the Rs 60,000 crore outlay. The budget will definitely encourage the creation of rural enterprises such as nurseries and cold chain establishment. The one-time budgetary assistance of Rs 75 crore for setting up mobile soil testing facilities is also a good step. However, the provision of Rs 60,000 crore for loan waiver which can at best provide short-term relief to farmers has robbed them of possible agri-infrastructure projects such as roads, marketing and storage facilities, and irrigation which could have yielded better returns on a sustainable basis. (*Country Head, Food & Agribusiness Strategic Advisory & Research) RAKESH TIKAIT Spokesman, Bhartiya Kissan Union It will not solve the deepening agri crisis THE Union budget 2008-09 is prima facie a pro-farmer budget, with the primary emphasis on writing off the loans of small and marginal farmers. It is a good step to provide instant relief to farmers who are heavily indebted, although it covers only 40% of total farmers. However, the debt relief will not solve the deepening agrarian distress. Nevertheless, we see the announcement of debt waiver as a victory of farmers' union, activists and pro-farmer media. It was a great battle and we are grateful that the finance minister took this step despite corporate pressure. We believe that this measure alone is not enough to address the farmers' problems. It is well known that the basic problem faced by farmers is their inability to get fair price for their produce. The policy makers have said nothing on this count. Nothing has also been said about ensuring better farm gate price for agriculture commodities or making available a price stabilisation fund to help farmers increase their income. The price offered for the commodities produced by them must not only fully cover their cost of production but also ensure livelihood security. Subsidy is another area of concern. Traders and producers are currently getting all the benefits while farmers have to suffer due to scarcity of fertiliser. The budget has also not made any announcement to strengthen the extension services of the ministry of agriculture to make it more relevant for the farmers. As a result, farmers are forced to depend on agents of pesticide and seed companies for technical advice. It seems that the government has made up its mind to hand over this system to the corporate sector. In this context, we are closely watching the Indo-US knowledge agreement and the multinational companies in seed business. In conclusion, although the budget is pro-farmer, the actual need of the Indian farmer is not just the removal of debt and interest. Many other important issues need to be addressed. These include access to market, fair price for produce, timely availability of fertilisers and seeds, direct subsidy and the public sector investment in agriculture business. We hope the government will consider all this in future. And the main need is to keep corporates far from farming business. K CHAKRAVARTHY Country Head* YES BANK

  • Countering global economic crisis

    A GLOBAL economic slowdown is underway. What began as a problem in a single sector in a single economy

  • Farm waiver gets bigger: Rs 65,000cr

    UPA's mega poll sop for farmers has got bigger. The loan waiver for "small and marginal farmers' will now add up to a staggering Rs 65,000 crore even as the government is preparing to enlist banks as primary agents in identifying the scheme's four crore beneficiaries. The figure for the one-time settlement, which will benefit farmers who are willing to make a payment of loans to get a rebate, is yet to be finalized and discussions at the top echelons of government have seen the total write-off range up to Rs 100,000 crore. As of now, the figure has been revised to Rs 65,000 crore. The other key issue of identifying the beneficiaries, crucial to the waiver's success, will be largely entrusted to the banks. Banks to identify beneficiaries New Delhi: A large part of identifying the beneficiaries, crucial for the success of the Rs 60,000-crore loan waiver to farmers, will be entrusted to banks. It is felt that this would be the best option for the government as banks are expected to have records of persons they have given loans to, and in the case of farmers, would also have the size of their holdings. Having set 2 hectares or 5 acres as the size of holdings for the waiver's beneficiaries, the government has the mammoth task of getting accurate lists ready so as to facilitate a complete rollout by the June 30 deadline. Commercial and rural banks and cooperatives would have an incentive to draw up lists as they would be paid money for loans which had suffered defaults. Official sources pointed out that most of the loans being targeted were anyway "basket cases' for the banks. With little hope of recovery, the banks should be more than willing to divert resources to identify farmers who can benefit from UPA's largesse. In this way, the government would not have to depend on land and revenue records, which were not always well maintained and could be open to manipulation as well. Though payment to the banks will be staggered, in the first year, the banks will be given Rs 40,000 crore. Agriculture minister Sharad Pawar told the media that in the next three years, the figure would be Rs 8,800 crore for 2008-09 and 2009-10 while the final amount to be paid in 2010-11 was expected to be Rs 2,400 crore. While the effectiveness of the loan waiver, and its potential political benefit, is being discussed, the Congress leadership is in an upbeat mood. Scenes of farmers celebrating and dancing have helped waiver enthusiasts argue that the Budget announcement was a popular hit. The massive giveaway, along with the pro-middle class decision to raise incometax exemption limits, could deliver a formidable advantage to the ruling combine. Those who feel somewhat differently point out that most of the really distressed farmers were engaged in dry-land farming. In normal circumstances, they were not eligible for high loan amounts and in contrast, farmers in irrigated areas, with holdings of similar size, would get larger loans. Dry-land farmers had to depend on private money lenders and these debts were outside the waiver. On the other hand, farmers in irrigated areas would now benefit from the waiver while also being in a position to raise regular loans from banks.

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