Borrowing solutions

As the monsoon arrives, farmers work in their fields, in Koynanagar in Satara district in Maharashtra. What benefits the governments proposed investment in agriculture will ultimately bring and how much it will improve the beleaguered lives of farmers will only be known in the next couple of years.-PTI

THE New Year brought welcome news from the Maharashtra government when it announced its plan to invest Rs.2,000 crore in agriculture in the State. But the elation faded when it came to be known that the money would reach farmers in an indirect way, via agricultural infrastructure, and that it had been borrowed from three international agencies the International Fund for Agricultural Development (IFAD), the World Bank and the Asian Development Bank (ADB). This is the largest ever loan taken by the State for agriculture.

Of the total amount, Rs.600 crore is from the IFAD, Rs.650 crore from the World Bank and Rs.750 crore from the ADB. The State has 25 to 35 years to pay back the money at different interest rates. Fifty per cent of the World Bank loan is to be paid back at 4.54 per cent interest and the remaining at 0.75 per cent. While the terms of the ADB loan are yet to be decided, the IFAD loan comes at 0.25 per cent interest. Each agency will concentrate on specific areas. The IFAD will work solely in the six suicide-affected districts of Vidarbha and concentrate on the convergence of agricultural intervention in which private companies will take on end-to-end projects, that is, they will be involved from the farm to the market. It is essentially an anti-poverty project.

The World Bank will work to introduce competition in markets. Dr S.K. Goel, Principal Secretary, Cooperation and Marketing, Government of Maharashtra, said this would ensure that Agricultural Produce Marketing Committees (APMC) did not act as a monopoly, farmers would be provided with a multiplicity of marketing channels, and the corporate sector would also be a part of the process. The ADB will focus on agri-business infrastructure development.

All the agencies will coordinate with the Departments of Agriculture, Horticulture, Animal Husbandry, Dairy and Fisheries. The projects are expected to be completed in about eight years. Goel explained that the ultimate aim was to address the three main areas of concern in agriculture today adequate food production, greater access to markets for the produce, and good marketing options for growers.

But, getting to the core of the issue, Dr Ashok Dhawale, vice-president of the Maharashtra Kisan Sabha and State secretary of the Communist Party of India (Marxist), said, If resources had been properly mobilised in the last 50 years this loan would not have been required.

His views are substantiated by a former State Planning Board member, who said: To a great extent the announcement is an acceptance that the state has failed its farmers. I would like to look at the brighter side and say it is money coming in, but I fear that farmers may remain in the debt trap. How the government uses this loan and what strings these agencies will attach is to be seen. Dhawale, who has worked with farmers and on agricultural issues for more than 15 years, said the most shocking aspect of the agricultural crisis was the suicide by farmers. [Some] 40,000 farmers have died in Maharashtra it is the highest in the country. Any such loan should tackle this. Farmers essentially need three things remunerative prices for their produce, irrigation and subsidies.

According to Goel, the goals formulated are in keeping with the aims of the agricultural reforms of 2006-07. But Dhawale differs. Right from 1991, the policy has been skewed. It is borne out by the fact that the National Crime Records Bureau shows that in the decade from 1997 to 2007, about 1,82,000 farmers killed themselves. All the suicides started from 1995-96. This didnt happen even during the British rule or in the first 40 years of Independence. This so-called reform is targeted at decimating farmers. SEZs [special economic zones] are a component of this reform. How is it agricultural reform if you take away land from farmers? It is nothing but the government shedding its responsibility, he said.

Dr Ratnakar Mahajan of the Nationalist Congress Party (NCP) and until recently the Executive Chairman of the Maharashtra State Planning Board also disputes the belief that the reforms should be corporate-centric. Any investment in agriculture should take care of the delivery of inputs to farmers at affordable rates and giving them market support which would enhance the familys income. That is the meaning of reform in agriculture. Reforms need to be farmer-centric and not corporate-centric. But so deeply entrenched is the governments belief in private investment in agriculture that even agricultural research has been farmed out to private companies. At the same time government expenditure on agriculture has been decreasing and this, Dhawale says, is the reason for the agricultural crisis.

Goel is firm that farmers needs with the private sector are huge and though Maharashtra has nine private markets and has 100,000 hectares of land under contract farming, private enterprise is wary of investing in agriculture. He explained this by saying that corporates see agriculture as uncharted, politically sensitive territory.

Though in favour of corporate involvement in agriculture, Goel feels that contract farming is not the way to help the States farmers. The solution, he says, lies in partnerships. At the grass-roots level, farmers want to form their own groups. At the next level, they need help in terms of cold storage facilities and transportation to markets. And at the final level, growers want assistance from the corporate sector because corporates have a brand and that gives the consumer confidence and helps in sales. What may sound like a simple three-tiered process is, Goel says, not happening in reality. The sticking point seems to be the second level of the partnership, and the Maharashtra government has a new plan to involve non-governmental organisations (NGOs). In the IFAD project, 34 facilitating NGOs have already been identified. Their mandate is to be the link between the farmer and the private player. The NGOs will have to first organise farmers into groups in much the same way that is being done in Kerala by centres that organise fruit and vegetable processing at the village level. Dhawale, however, believes that a better way would be to mobilise local government bodies such as the gram panchayat or farmers groups themselves.

One success story is about three particular groups of farmers in western Maharashtra who cultivate exotic vegetables. Weary of waiting for government intervention in marketing, they took the initiative some years ago to sell their produce directly to bulk consumers and hoteliers. When these groups from Pune, Ahmednagar and Solapur made a success of their direct marketing venture they caught the attention of the World Bank, which was interested in exploring alternative marketing techniques for agricultural produce. To the Banks query as to what they required, the farmers, who had been beseeching the government for a long time, replied: Provide us access to finance, cold storage facilities and markets. Goel says they asked for further reforms in terms of more transparency in the working of the APMCs and more involvement of private sector players.

While the lending agencies seem to tailor the loan to the requirements of the farmer, Dhawale says it is just carrot on a stick. Their strategy has always been to give loans so that they can drive agriculture in a certain way and that way is privatisation of electricity, of irrigation, of infrastructure and finally of agriculture. This is their development trajectory. Once the private sector buys up land how can a small farmer be expected to compete with him?

An area of concern is that the huge loan is meant to benefit only about 30 lakh of the States farmers. A lot depends on the short-listed NGOs who will be organising farmers into groups. Since irrigation is a completely separate department and is not involved in this project in situ, soil and water conservation will be a point of focus. The farmers will also have to make a financial contribution.

Any infrastructure development greenhouses, cold storage, transport will only be subsidised by 25 per cent. The beneficiaries will have to raise the rest. In case of a drought or a failure of the monsoon, Goel says there is a risk mitigation strategy consisting of a pledge loan scheme in which farmers will have to pledge their harvest.

This seems to be the big snag in the scheme. How many small farmers will be able to afford the 75 per cent contribution? Only rich farmers will be able to afford this. The scheme is nothing but a change for the already fortified to further fortify themselves, said Dhawale.

Drawing on past experience, Dhawale said loans were often a way of making the rich richer. He said that a lions share of the agricultural infrastructure was likely to go to areas in western Maharashtra. It has usually happened that the rich farmers channel all benefits their way. Even in the case of the loan waiver by the Central government, all those who had taken loans in western Maharashtra benefited the most. The poor farmers in the rest of the State were excluded because the terms of the waiver excluded those who had more than five acres of land.

The incongruity arose because rich and poor came to be defined solely by the amount of land owned and not by the quality of the land or access to irrigation. Western Maharashtra is almost totally irrigated and so farming on less than five acres is profitable whereas farmers in the rest of the State have practically no irrigation. These dryland farmers need more acreage to make a profit out of farming. Though their need was greater they were excluded from the loan waiver scheme.

It is facts like this that cast a pall over such schemes, according to the former Planning Board member. Eighty per cent of the State depends on agriculture. How can the State government come to a pass where it has to borrow money to look after three-fourths of its people? Why have they been ignored so far? And nothing is coming free to the farmers. They have to borrow money from banks to build their infrastructure. To say that they will get loans easily because they are part of a World Bank project does not solve their problem of paying back the loan. And ultimately the State also has to pay back these agencies. Where will all this money come from?

What benefits this vast investment will ultimately bring and how it will improve the beleaguered lives of farmers will only be known in the next couple of years. For the moment, the Rs.2,000-crore investment, which could have been the light at the end of an exceptionally dark tunnel for Maharashtras 1.3 crore farming families, is termed by Dhawale as a very dangerous type of new landlordism one which comes in through the back door under the garb of liberalisation.