But hang on a minute. Didn’t we miss out on something? Of the list of expenses, where was the term agriculture? After all, it is agriculture credit that we are talking about, isn’t it? Herein lies the problem with rural agriculture credit, and the UPA government’s tall claims that it has managed to increase rural credit flows by several times since it came to power in May 2004, and improve the lives of the rural and ailing farmers.
Although 25% of KCC credit limit is allowed for personal consumption purposes, at least 60%-75% is being used for the same by the farmers, with little or no expenditure on agriculture. In a way, it’s logical too. Farmers, or any human beings, seek to first satisfy consumption-related needs (Maslow’s hierarchy), and all the other requirements take a back seat. Since private money lenders, who used to finance consumption in the past charge interest rates as high as 60% per annum, bank credit offers farmers with a cheaper credit option.
While bank credit is available at cheaper rates, in some cases, it is also unsecured. Even big farmers use bank credit for purchasing land and creating new assets. And what do the bankers have to say about the alleged misuse of credit? “The disbursal has to be in the form of cash; once it is disbursed, banks have no control over the usage. To prevent misuse, we should have a system whereby banks directly pay money to suppliers (through a demand draft or cheque). But that would restrict farmers’ bargaining powers to get a better deal,” adds the PNB manager in the Khanpur branch.
“Low yields per unit area across crops have become a regular feature of agriculture,” stated the Economic Survey of 2006-07. “Besides, farming is not what it used to be. Fertilisers prices are up, irrigation costs are up, land prices are up, and the end result is that productivity is down,” explains Karam Singh. For example, take the case of sugarcane growers. “The main culprit is the sugarcane payment, which is delayed by 10-12 months. The cane payment of last April is being given now. If we have timely payment, there will comparatively less problem for us. Besides, the ongoing tussle between the mill owner and the state regarding the price has made us miserable,” explains Singh.
Although 25% of KCC credit limit is allowed for personal consumption purposes, at least 60%-75% is being used for the same by the farmers, with little or no expenditure on agriculture. In a way, it’s logical too. Farmers, or any human beings, seek to first satisfy consumption-related needs (Maslow’s hierarchy), and all the other requirements take a back seat. Since private money lenders, who used to finance consumption in the past charge interest rates as high as 60% per annum, bank credit offers farmers with a cheaper credit option.
While bank credit is available at cheaper rates, in some cases, it is also unsecured. Even big farmers use bank credit for purchasing land and creating new assets. And what do the bankers have to say about the alleged misuse of credit? “The disbursal has to be in the form of cash; once it is disbursed, banks have no control over the usage. To prevent misuse, we should have a system whereby banks directly pay money to suppliers (through a demand draft or cheque). But that would restrict farmers’ bargaining powers to get a better deal,” adds the PNB manager in the Khanpur branch.
“Low yields per unit area across crops have become a regular feature of agriculture,” stated the Economic Survey of 2006-07. “Besides, farming is not what it used to be. Fertilisers prices are up, irrigation costs are up, land prices are up, and the end result is that productivity is down,” explains Karam Singh. For example, take the case of sugarcane growers. “The main culprit is the sugarcane payment, which is delayed by 10-12 months. The cane payment of last April is being given now. If we have timely payment, there will comparatively less problem for us. Besides, the ongoing tussle between the mill owner and the state regarding the price has made us miserable,” explains Singh.
Not to forget that the Indian farmer is plagued with several problems. His remuneration for his produce is low, he’s still under the control of middlemen, his debt burden is high, and many still committ suicides. and farming for most villagers is unviable as a profession. So, while the intermediaries like the banks are doing a good job to provide credit, there are no checks and balances to ensure proper usage of the funds. In addition, it is still too small and the farmers still go to the local baniyas to meet their requirements. So, timely and adequate credit with a transparent monitoring system is the need of the hour.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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