Even as the head-count of persons who are poor is coming down, there has been a spurt in the number of undernourished persons across all farming classes.” This is just one of the grim findings of the expert group on agricultural indebtedness. The panel, set up by Prime Minister Manmohan Singh last year, while criticising the design and implementation of the Prime Minister’s agrarian relief package for 31 farmer-suicide afflicted districts, has called for extension of the package to 100 agriculturally-less developed and distressed districts.The panel has also asked the Government to earmark Rs 10,000 crore (to begin with) for farm development programmes in these 100 districts.Terming the non-institutional credit market as exploitative — 36 per cent of their loans being at interest rates of 20 to 25 per cent and 38 per cent of outstanding loans at interest rates of over 30 per cent — the panel has also called for a one-time measure of providing long-term loans to farmers so that they can repay the moneylenders. The measure is especially important for small and marginal farmers who form 80 per cent of indebted farm households but depend much more (50 per cent) on non-institutional, high-interest credit sources such as moneylenders and traders than large farmers (who only rely on them for a third of their credit).“Panchayati Raj institutions and farmers’ collectives should strive to negotiate settlements with the lenders and a Moneylenders’ Debt Redemption Fund, with contributions from the States and the Centre and an initial corpus of Rs 100 crore, should be set up to operationalise this scheme in distressed districts,” the panel has mooted. Institutional sources such as regional rural banks, co-operative and commercial banks account for 60 per cent of farmers’ debt - mostly at interest rates in the range of 12 - 20 per cent, the group pointed out.Interestingly, the group found the incidence of indebtedness and the average amount of debt was the lowest for the most deprived group, the Scheduled Tribes. However, the incidence of indebtedness was higher than the all-India average (of 48.6 per cent) among the Scheduled Castes (50.2 per cent) and Other Backward Classes (51.4 per cent). However, as the panel warns, though only about half the country’s farm households are indebted to institutional or non-institutional sources, a large proportion of the rest may simply be “financially excluded”.Headed by Indira Gandhi Institute of Development Research Director Dr R Radhakrishna, the expert group (that included NABARD Chairman Y P S Thorat, former Union Agriculture Secretary P V Shenoi and former Syndicate Bank Chairman and Managing Director N Kantha Kumar) has stressed that “the less developed states must get top priority”. A “strikingly regional phenomenon”, the panel found indebtedness levels low in less developed states and high in agriculturally developed states. Moreover, “large regional variations in bank credit disbursal” were also found. So while South India with less than 20 per cent of the country’s farm households gets 33 per cent of bank credit, Bihar with 8 per cent of farm households gets only 2.4 per cent (the entire eastern region gets much lower credit than its share in farm households).Key credit-related recommendations• Legalise tenancy with due protection to small and marginal farmers; crop loans should be extended to tenant farmers on the basis of tenancy records• Farmers, especially small and marginal ones, should be organised through collectives like farmer federations for better access to credit, farm technology, marketing, etc • Convert the Kisan Credit Card into a full-featured smart Bharat Kisan Card on mission mode - details of land, building, other assets, credit facilities, etc must be put on the card• Remove procedural complexities in mortgage creation — a declaration supported by revenue land records should be sufficient to create mortgages that banks can lend against • Set up at least one credit counselling center in each block• Urgent steps to set up mobile branches of banks in rural areas to ensure farmers are served at the doorstep • Create a sound system of incentives for prompt repayment• Restructure subsidies towards facilities that are needed more by small and marginal farmers
