In the moneylenders grip

Published : Mar 28, 2008 00:00 IST

A farmer who grows wheat and sugarcane, in his field in western Uttar Pradesh. By failing to address the moneylender issue, the farm loan waiver has not really touched the persistent problems of the Uttar Pradesh farmer.-SANDEEP SAXEBA

A farmer who grows wheat and sugarcane, in his field in western Uttar Pradesh. By failing to address the moneylender issue, the farm loan waiver has not really touched the persistent problems of the Uttar Pradesh farmer.-SANDEEP SAXEBA

WHILE announcing the Rs.60,000-crore debt relief for farmers, it was clear that Finance Minister P. Chidambaram overlooked a crucial aspect of the debt phenomenon, the debt peasants owed to private moneylenders. Talking to mediapersons in the days that followed, he reiterated this oversight. His argument was that it was impossible for the Finance Ministry to quantify the money borrowed by the farmer from the private moneylender.

What can I do about that? Can anyone quantify how much he has taken? The point is we can do what is doable. Theres no point picking the undoable against the doable and then saying dont do the doable. Thats a very strange argument, he said in an interview to The Hindu.

Political parties such as the Communist Party of India (Marxist) and farmers organisations such as the Sharad Joshi-led Shetkari Sanghatana pointed out that the debt owed to private moneylenders was estimated to be more than two-thirds of the total farm debt, and if that was not addressed, no real benefit would accrue from the Budgets proclamation of relief.

The 2003 report of the National Sample Survey Organisation (NSSO) had said that 76 per cent of rural households took loans from moneylenders. A specific study of farmers indebtedness in NSSO 2003 had also pointed out that eight out of 10 farming households in India had two hectares of land or less and 50 per cent of these households had an average debt of Rs.9,000 to non-institutional agencies, the majority of which are private moneylenders.

Even as Chidambaram kept on admitting that he had not been able to propose any special measures to address farmers indebtedness to moneylenders, Agriculture Minister Sharad Pawar stepped in with his own solution.

His contention was that farmers need not repay loans taken from people who are doing moneylending business illegally.

According to Pawar, the large majority of moneylenders who are operating in rural areas do not have licence to do the business, and since they are indulging in an illegal activity, farmers are under no legal or moral obligation to repay these illegal loans. Pawar added that he was going to write to all State governments asking them to provide protection to farmers if they were coerced by moneylenders to repay their loans.

In fact, State governments should create a separate machinery to look into farmers complaints of forced recovery of loans at the taluk level, he said. He also exhorted workers of political parties to organise local campaigns to protect farmers from moneylenders.

Pawars arguments were obviously based on the laws aimed at regulating and controlling private moneylending. The laws exist in various States and many of these have had their origins in enactments made in pre-independence India.

Uttar Pradesh, with a large rural population of farmers, has had laws trying to regulate moneylending as far back as 1918.

The Usurious Loans Act, 1918, was one of the first in this genre. The U.P. Temporary Postponement of Execution of Decrees Act, 1937, which followed, had the specific objective of freeing village people from the clutches of fraudulent decrees obtained by certain moneylenders. The U.P. Regulation of Agricultural Credit Act, 1940, and the U.P. Agriculturists Relief Act, 1945, had provisions to regulate private moneylenders.

After Independence, the State had three enactments addressing private moneylending. These were the U.P. Landless Agricultural Labourers Debt Relief Act, 1975, the U.P. Rural Weaker Sections (Moratorium on Recovery of Debts) Act, 1975, and the Uttar Pradesh Regulation of Money-Lending Act, 1976. The latter enactment sought to regulate the business of moneylending and provided for registration of the business. It was stipulated that legal moneylending could be done only by those who got themselves registered with the government.

The Act also stipulated that the government would prescribe specific interest rates that can be charged by the moneylenders and that those who exceed this limit would be punished through fines and imprisonment.

Nearly three decades after the enactment, the law is perceived to be largely ineffective in regulating private moneylending. According to Indra Bhushan Singh, a senior lawyer in the Allahabad High Court (Lucknow Bench), the law has become totally useless over the years.

The government does not even seek to prescribe interest rates nor does the moneylender register himself with the Finance Department, he said. He added that there must be only a handful of cases under the law in all the subordinate and higher courts of Uttar Pradesh.

He pointed out that the government had no effective executive mechanism to control private moneylenders, and in many parts of the State moneylenders virtually dictated the local economy.

Political analyst Hariraj Singh Tyagi supplemented Indra Bhushan Singhs point of view. According to him, studies conducted by both governmental and non-governmental agencies have shown that in large parts of Uttar Pradesh, particularly in Bundelkhand and eastern Uttar Pradesh, instruments of formal credit delivery such as government-owned and cooperative banks hardly ever lend money to small or marginal farmers.

In such a situation, these farmers have no alternative but to take loans from individual lenders by agreeing to pay usurious rates sometimes as high as 100 per cent a year. A couple of farmers Frontline met in the Ramnagar area of Barabanki district in central Uttar Pradesh corroborated the point put forth by Tyagi.

Kallu, the father of Mansaram, a farmer who committed suicide in 2006 because he was unable to repay a bank loan, told Frontline that a large number of farmers in the region had taken loans from private moneylenders. Kallu welcomed the waiver of bank loans, but felt that it provided only partial relief.

Another farmer, Ram Bahadur, told Frontline that following the waiver, some bank officials had approached farmers with offers to take over the debt accruing to moneylenders and convert them into bank loans. Bahadur said he was inclined to take this offer because the interest at least would be lower.

Local activists of the opposition Samajwadi Party (S.P.) said that small and marginal farmers got indebted to moneylenders in almost all districts of Uttar Pradesh and they virtually suffered an extortion regime after that. These activists, however, were not sure whether political activists could build up resistance against moneylenders as suggested by Sharad Pawar.

The poor farmers have to continue to live here even after we have organised a resistance and given them temporary relief. It may not be possible to run a long-term campaign, said a local S.P. leader on condition of anonymity.

Clearly, addressing the problem of farmer indebtedness comprehensively is a long-drawn-out affair that calls for planning and implementation of a variety of specific programmes at multiple levels of society and the economic structure.

Loan waivers such as the one announced in Budget 2008 may provide temporary relief, but in the final analysis they remain exactly that temporary.

Venkitesh Ramakrishnanin Lucknow
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