Sunday, July 13, 2008

Loan Waiver: A Harvest for Non-farmers

Finally, the much awaited list of beneficiaries of the farmer’s loan waiver scheme has been out in Kerala. The scheme is initiated and sponsored by the Indian government. In fact, it was one of the proposals that applied the cosmetic of “people friendly” to the otherwise dull and unattractive budget. The beneficiaries in my area (that is, in and around Attingal in Thiruvananthapuram district) include a pharmacist in a private hospital who had attempted some spectacularly failed businesses, a local money lender, a gulf returnee who has been trying to become a local strongman ever since, an incorrigible alcoholic who is said to be in the brink of suicide and, not the one to be left behind in such matters, a local leftist politician. One thing is common among all these people: None of them are farmers. Not a single one is likely to distinguish between the seeds of beans and brinjal.

Right from the time of announcement there have been concerns and reservations about the benefits of the scheme reaching the deserving farmers. In fact, there were no clear guidelines to identify the deserving candidates. Nationalized banks like SBT and primary co-operative societies in Kerala mainly considered the ‘time’ factor for choosing the beneficiaries. Whoever had taken agriculture loan between December 1997 and December 2006 are eligible for the scheme. Only thing they should do is, err, do nothing about the loan. If any of them made the mistake of repaying a part of the loan amount or interest, thanks, but no loan waiver for them.

The problem lies in distributing agriculture loans. Most of the nationalized banks distribute gold loans under the guise of agricultural loans. Normally, the rate of interest of gold loans varies from 9% to 12%. But the rate of interest of agriculture loans is a mere 7%. So what these banks do in an inspired procedural maneuver is that they convert gold loans into agricultural loans accepting gold as security. By this way, banks can easily attain their yearly target of agriculture loans, and they have easily recoverable security in gold. The customers also will be happy as they need to pay less money as interest. Only thing they need to provide other than the gold and identity proof is a receipt of land tax payment issued by the village office. Many non-farmers who availed this kind of agriculture gold loans benefited from the so-called election gimmick of the finance minister. Millions of rupees of tax payer’s money have been given to undeserving people by the government and its agencies in the name of providing relief to farmers. It was reported in The Hindu by Mr. P. Sainath that the notorious stock broker Kethan Parekh was a beneficiary of the previous loan waiver bonanza in the 1990s. Going by the list of beneficiaries this year, it appears that no steps have been taken to prevent such incidents.

Tail piece: The central government had printed a letter to the beneficiaries of the loan waiver scheme signed by Prime Minister Mr. Manmohan Singh. It states that the farmers are the backbone of the country, the government is committed to support farmers in any crisis, and the usual blah blah. The authorities of the primary co-operative societies run by LDF-led panel cleverly dumped this letter, saying that “they [the Congress] should not get election mileage out of this.”