Monday, March 10, 2008
60000 cr. budget waiver- for the good or for the worse??
well the budget was announced on 29th feb and the FM came up witha much expected 60000cr.waiver on the loans taken from the banks by the farmers.it has come as a relief for a lakhs of farmers but is it as an article in the hindu mentioned a karza maafi(loan forgiveness) measure or a voter maafi (voter forgiveness measure)?
some recently read facts have left me thinking as to ,whether the loan waivers are really that effective or is the indian farmer getting into a trap where its only their hope of a much positive future carrying them through rather than solid scientific or progressive measures.a recent article on the budget waiver in the indian express left me pretty startled but i forgot the valid facts and am trying to get my hands on the article,which i hope i will get soon.
well todays article i read in the hindu also exposed a lot about the euphemistic'waivers'that the UPA govt has given.the problems mentioned are as follows
1.MONEY LENDER V/S THE BANKS
more than half of the loans taken by the farmers are from money lenders and especially in a region like vidharbha where the farmers need the most support ,there are far less banks and financial institutions than any other place and the only resort for the hapless farmer is the usurping money lender who charges exorbiantly high rates of intrest.well chidambaram conceeded in an interview that there is no method that they can calculate how many money lenders are there or as to who all have taken loans from them .well shrugging of that responsibility is certainly not the way to go.yes its almost impossible to get a proper list of these money lenders but then someone has to come up with a certain measure some time or the other,or else we will still face this situation over and over again without doubt.
under the waiver terms it is mentioned that those having land less than 2 hectares will get a 100% waiver on their loans.it is to be noted that vidharba is one of the most affected farm regions in the country and the suicide rates there are the reasons why such measures of waivers have been taken.but it is surprising to find that the average land under a household in vidharba is 3.03 hectares ,that makes them unable to get a 100 per cent waiver.upto 50% percent of the farmers have more than 2 hectares in vidharba.the larger land holdings dont generally translate into more income oppurtunities as most of the land can be dry land ,waste land or simpy put uncultivable land that is of no practical use ,whatsoever.
many farmers in the distressed areas of andhra pradesh too get affected by this size conundrum.whereas on the other hand there will be many farmers in the rich belt areas,who without having any problem will get a waiver.
another very interesting thing i read in the artisle by P.Sainath in the hindu today was that for those having more than 2 hectares of land ,the waiver formula is like,if they pay 75% of the loans then they get a 25 % waiver.well this again is very interesting because if the farmers could pay back 75per cent ,then they might as well could pay the rest too.in short,they wouldnt have commited suicide if they had the ability to pay 75 per cent of their loans.
it is pretty clear by the reports that have poured in till now about the farmers that farmers in particular those who have cotton yields are the one suffering the greatest losses.it is interesting to note that the average loan given to the farmers having a sugar cane yield is about rs.13000 per acre and that of the cotton is just rs.4400 per acre.so who is the one who is benefitting the most?the one who needs the waiver badly or the person who at the right time and the right palce has defaulted.well,the option is clear.
it is noted that the loan for cotton areas is taken largely during the monthss of spril to june whereas for the sugar cane it is taken from january to march.however the cut off date of loan consideration is march 31 ,2007.that clearly gives an extra edge to those having cane fields as it gives them one nore extra year.
5.WHY SUCH HULLABALOO ON THE WAIVER?
there are myriad oppurtunities or instances the where the govt loses revenue or an opputunity cost is created that is far far higher than the 40000crore waiver.yearly lots of industry debts are also handed over as bad debts and written off annualy.the tax exemptions on sectors to boost them also causes huge revenue gap.but then the returns all the sectors gives back to the economical growth is considerable becuse of which it can be argued that these tax exemptions are encouraging.not that i am aginst giving these exemptions but the revenue gap it creates is considerable as compared to the 40000 cr waiver.
most recent example will be the delay in giving away telecom spectrums.according to a report the per day loss to the economy because of delayed apectrum allocation is around 800 crores!!yes,eight hundred crores,and all this in one day.
The asssumption is based on the fact that an investment of nearly Rs 34,021 crore (slightly over Rs 90 crore a day) has contributed to an increase of Rs 5,71,874 crore (over Rs 1,500 crore a day) to the GDP in fiscal 2006-07, according to a new report by Frost & Sullivan)
giving a waiver is certainly not the only step that could have been taken.the problem could have been nipped at the bud itself had the govt. taken care of the situation right from the time they were sworn in 2005?the PM even visited vidharba in 2006,why wasnt something specific taken into account that time?would they have adopted the same approach on the waiver if the elections were not anyway close?what surety can the govt give that these farmers wont fall into another debt trap as they are eligible to take loans again.
To end poverty ,one doesnt kill all the poor people.similarly the waiver is no strong measure.it rather shows out the gross incompetence of the givt to tackle the situtaion head on and adopt the easiest method possible.
well,populist or not.if the waiver does help the farmer ,intentionally or not,then well and good.the waiver is not as important as the follow up measures that would have to be taken to educate the farmer as to how he/she can change the scenario,head over heels.and sadly ,i have heard nothing regarding the follow up measures.hopefully they do get sorted out and it should be made by people who not only have enough knowledge about finance and planning but people who really care for the farmer.it would be wonderful if the follow up measures are taken into confidence by discussing with the real farmer on the grass root level.people like the ramon magsaysay award winner and palagummi sainath who have dedicated their life for the upliftment of the farmers should constitute the board that is taking decisions.something that needs to be seen is also if the successive govt if not by the UPA,would continue the reforms or additional steps.well,hope and belief is what keeps all of us moving all the time.so lets hope and believe that the worst is over and visualise the indian farmer in a typical yellow field with sun gently shining over him/her and there is faint tune of some happy hindi music playing in the background,one who has no debts but is confused over where to put the surplus cash.a picture where they contribute a lot to the GDP and a place where the children of the farmers are much more educated and look at farming with pride and innovate everyday and face all the challenges head on ,where suicide is not even an option for avoiding burdens.amen!!