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Modi's harebrained loan waiver plan will leave UP farmers in ruin

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Moin Qazi
Moin QaziFeb 24, 2017 | 20:00

Modi's harebrained loan waiver plan will leave UP farmers in ruin

Prime Minister Narendra Modi has finally played the most magical card politicians can use for getting farmers on board - waiver of loans. Modi has promised to bring a loan waiver scheme for farmers in Uttar Pradesh, if the BJP is voted to power in the Assembly elections.

It appears the temptation to make a political killing was irresistible for Modi. It may make good electoral sense but such band aids in the past have crippled Indian farming and helped governments avoid uncomfortable reforms.  

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Indebtedness is a problem that is most acute among small and marginal famers. But their borrowings are mainly from moneylenders and hence a loan waiver is not going to make any sense for them. It is the bigger farmers who are the real beneficiaries of such populist polices. 

The problems of small farmers are complex and require steely political will to address them. They have landholdings below the threshold that is economically viable. The result is cyclical appearance of bad loans and poor rainfall. Loan waivers have little to do with ending the conditions that lead to such problems.

In a sense, it’s also a story of unfinished reforms in India. The question should be why almost 55 per cent of the population is producing only 17 per cent of output. Unless this huge swathe of the population is empowered, loan waivers will remain a constant feature of the landscape.

Small farmers have little access to technology, and insecure access to irrigation, making them one of the most vulnerable groups. Farming for them is grinding physical work, largely parceled by family - threshing and bundling and separating grains by hand - into increasingly smaller plots of land, and planted, picked, harvested, and hauled by hand.

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Years of market-oriented reforms have unleashed a wave of capital and entrepreneurship across India. But despite high-end sectors such as information technology making impressive strides and adulatory   portrayals of India at home and abroad as an economic juggernaut, the benefits of reform have yet to extend to the hundreds of millions who toil on the land.

The government has slashed or phased out subsidies for some crops, shredding a key safety net. The result is a growing social crisis. Crushing debt because of buying transgenic seeds, failing crops on account of abuse of soil by fertilisers, squeezing of prices by big multinationals - and government indifference – has forced farmers to trek to cities, where an equally cruel fate awaits them but they are saved the shame of humiliation in the eyes of their own fellow villagers.

A sense of deep despair runs through the lives of farmers. They have lost all hope - and also the will to fight. Many are taking a permanent escape from this physical and emotional pain by ingesting deadly pesticides.

The Green Revolution was a success. But it came at a heavy price. It relied on high-yielding seeds, irrigation, fossil fuels for fertilisers, modern methods of plant breeding and massive use of pesticides and equipment to increase agricultural productivity, but depleted the soil and consumed far too much water. 

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Many small farmers lost everything when they invested in seed grain and were unable to sell their harvest at a profit. States in India that were the frontrunners during the Green Revolution now suffer from soil degradation, ground water depletion and contamination and declining yields.

A decade ago, the government embraced the global marketplace and began cutting farm subsidies as it liberalised the managed socialist economy. The farmers' costs rose as the tariffs that had protected their products were lowered. Many farmers switched to new genetically engineered cotton seeds which produced higher yields and healthier crops with less use of pesticides. 

Bt seeds are resistant to boll worms, a deadly pest. The seeds can be more productive and became standard in much of Maharashtra but can be three times more expensive to maintain than traditional seeds.

Moreover, they have one flaw for the small farmer: new seeds must be purchased each year, at a high price. Counting seeds and fertiliser, the cost of starting each year's crop has jumped from zero to hundreds of dollars.

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It appears the temptation to make a political killing was irresistible for PM Narendra Modi. 

The small farms, combined with the intensive, soil-exhausting farming techniques that promise great rewards at enormous risk have made farming an ill-fated pursuit for small families. The new farming methods have reduced their annual yields, in many cases, to one-tenth the level they saw a decade ago.

MS Swaminathan, who pioneered the Green Revolution, and other nutrition experts are calling for a dramatic shift in our approach to agriculture. They argue that instead of industrial-scale, high-tech agriculture, farming should become closer to nature - and involve intelligent plant breeding and a return to old varieties.

"Formerly, the farmers were depending on 200 to 300 crops for food and health security," says Swaminathan, "but gradually we have come to the stage of four or five important crops, wheat, corn, rice and soy bean."

"The Green Revolution," says the scientist, “did not eliminate hunger and malnutrition." He now speaks of an "evergreen revolution”, which combines the best of both environmentally sound and high-tech agricultural practices.

Vandana Shiva, a prominent opponent of modern agricultural engineering, is calling for a return to diversity in fields. "Most of our traditional crops are full of nutrients," she explains. Farmers, who have made the switch to modern corporatised agriculture, she explains, give up their traditional seed and are then forced to buy the commercial varieties, which often come with license fees, in perpetuity.

She recommends field crop-rotation, and the fostering of vegetable and fruit gardens and small family farms primarily geared toward nutrition instead of maximised profit. Crop rotation techniques ensure that no single family (botanical family) has predominance in the rotation; hence pests do not build up, since pests are family specific also. 

Economic reforms and the opening of Indian agriculture to the global market over the past two decades have made small farmers vulnerable to unusual changes and fluctuations. The small farmers have now to compete with the larger ones who are well endowed with capital, irrigation and supplementary businesses to buffer them against any adverse shocks. 

As fallout, the farmers are facing what has been called a “scissors crisis”, which is driven by the rising cost of inputs without a commensurate increase in output price.

A crop failure, an unexpected health expense or the marriage of a daughter are perilous to the livelihood of these farmers. An adverse weather change, for example, can lead to a drastic decline in output, and the farmer may not be able to recoup input costs, leave alone the ability to repay loans.

Sometimes farmers have to plant several batches of seeds because they may go waste by delayed rains or even excess rains. The problem has dragged down yields and rural consumption nationwide - a heavy economic drag on a nation where two-thirds of people live in the countryside.

Small and marginal farmers also do not have access to institutional credit. Most of them depend on village traders, who are also moneylenders, giving them crop loans and pre-harvest consumption loans. Credit histories and collateral may serve to qualify middle-class customers for loans, but most rural smallholder farmers have neither. 

According to the National Sample Survey Office (NSSO), during the last decade the bloated debt of Indian agricultural households has increased almost 400 per cent while their undersized monthly income plummeted by 300 per cent. Even the number of heavily indebted households steeply increased during this period.

Most farmers have become victims of the endemic phenomenon of a downward climb along the social ladder, by which the farmer became a sharecropper, and then a peasant without land, then an agricultural labourer, then is eventually forced into exile. It was no use dreaming of climbing the rung in the reverse direction.

A prudent and effective strategy for small famers is to form clusters for mutual self-help where those growing the same crops come together in organised groups to receive joint training, buy inputs in bulk and start to sell as a single body. Smallholder farmer-producer groups are a key component of creating true scale because of the confidence, support and buyer/seller power they provide. This also enables a greater scale of transformation in terms of individuals and communities.

The government needs to revamp its extension services. In the past Doordarshan, the official TV, regularly ran how-to videos, but they weren't specific to the vast cultural and ethnic differences within India. The one-size-fits-all approach does not translate into workable models across different farming communities.

The agricultural universities must be involved for creating tailored educational programmes that serve the diverse needs of India's huge rural population. Small farmers need to learn how to work with limited land areas in a productive and environmentally friendly way. They need not only better plant species, but also up-to-date guidance on growing them.

They don't need high-tech tractors controlled by satellites, but they do need access to regional databases that provide information on soil quality. They need access to affordable capital so that they don’t pile up unmanageable loads of debt.

Efforts to improve soil health can reduce the excessive spend on fertilisers and chemicals. Certified seed can ensure that no money is lost buying fakes trolling the market. There will be no need for expensive diesel gensets or tubewells if drip irrigation and better water management is promoted.

Farmers need to be trained on how they can increase use of organic methods and keep soil fertile. The government should provide proper storage, so that crops don't end up rotting before they reach the market. And they need fair terms once they do reach the market.

In a post on his Gates Notes blog, Bill Gates said it was critical to protect small farmers in the world’s poorest countries - because they produce a large and growing share of the world’s food supply and because they face even greater risks because of climate change.

“For the world’s poorest farmers, life is a high-wire act - without safety nets. They don’t have access to improved seeds, fertilisers, irrigation systems and other beneficial technologies, as farmers in rich countries do,” he wrote.

Last updated: February 24, 2017 | 20:00
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