Settlement of agricultural debt in Punjab: Rhetoric versus reality
The burgeoning farm debt in Punjab is a concern not only for economists and sociologists but also for the central and state governments. Political parties tend to make considerable noise about this issue, especially in the build-up to the Vidhan Sabha elections. The fragmented farmer and agricultural labour organisations have been sporadically protesting but the subject has paled into insignificance after the farmers’ ongoing agitation against the three central farm laws.
The latest official figure from Nabard is ₹71,305 crore of farm debt from the organised sector alone is in the hands of about 15 lakh families. This does not include the debt from the unorganised sector, more particularly the arhtiyas (commission agents-cum-moneylenders), the amount of which is estimated to be around ₹30,000 crore.
Sensing the public pulse in an election year, the Akali-BJP government had enacted the Punjab Settlement of Agricultural Indebtedness Act, 2016. The widespread expectation was that this law would effectively extinguish the usurious debt on the head of the Punjabi farmers, piled by the greedy moneylenders. On the other hand, the Congress, which was seeking to wrest power in the state after being in political wilderness for a decade, promised an absolute and unconditional waiver of all farm debt.
This March, the Punjab finance minister announced that the state had cumulatively waived loans amounting to ₹5,810 crore, covering 6.96 lakh small and marginal farmers.
Recently, Punjab waived loans worth ₹590 crore outstanding in the accounts of landless famers and agricultural labour, including ₹520 crore in the hands of 2,85,325 members of various co-operative societies. Thus, not more than 9% of the outstanding loan from the public-sector institutions has actually been waived.
2016 Act more of instrument in lender’s hands
The Punjab Settlement of Agricultural Indebtedness Act, 2016, has turned out to be a disappointment for the poor and marginalised Punjabi farmers and agricultural labourers though it might have provided significant relief to the then beleaguered arhtiya community. A plain reading of this enactment would reveal that no straight-forward extinguishing of any usurious loan is mandated therein (section 3). It merely contains enabling provisions to set up district-level forums for an arithmetical evaluation of the outstanding amount, subject to the provisions of the instant 2016 law. In 2018, the district forums were converted into divisional-level forums, through an amendment, making the access for the poor debtor even more difficult.
The Act itself did not stipulate a specific, maximum rate of interest, which was to be subsequently notified under Section 4 by the state government. It was accordingly notified on September 6, 2016, as the sum of the extant base lending rate of SBI plus the lending rate of Nabard to the co-operative societies. On the date of the notification, it was 9.3%+2.5%= 11.8%, and would currently be around 10.4%, the interest being simple interest.
The Act of 2016 is more of an instrument in the hands of the lender/creditor – both private and public sector – to effect summary recovery of the loan rather than a protective legal device to provide any relief to the debt-ridden farmer. There
are no figures in the public domain regarding the number of cases settled by such forums – our estimate is that these would be only in double digits. A lender (arhtiya) rarely allows the loan to go bad, because he invariably deducts the principal and the interest, while disbursing the payment received from agencies in respect of the farmers’ agricultural produce.
Friction between farmers and arhtiyas persists
The united front put up by the farmers and arhtiyas in the ongoing agitation protest against the farm laws may create an impression that they are working as harmonious units in the rural, agricultural socio-economic society. However, the subterranean stresses continue to persist. The relatively large number of deaths related farmer suicides in Punjab bears a testimony to the potentially horrible dimension of this disaster looming large on the state.
It is easy for any political party to make promises, but with the state debt already hovering in excess of ₹3.2 lakh crore, the state exchequer will just not have the resources to waive this debt in totality. The answer would necessarily lie in diversification, remunerative MSP mechanism for other agricultural produce, promoting agro-based and agro-processing industries, scientific storage facilities and cold chains and perhaps the resurrection and refurbishment of the Punjab Relief of Indebtedness Act, 1934, the Punjab Debtor’s Protection Act of 1936, popularly called the Sir Chhotu Ram laws.
Ironically, the former has been repealed by the Punjab law of 2016. These two laws, much talked about but rarely invoked, not only capped the maximum rate of simple interest chargeable but also provided relief to the distressed, indebted landowners against sale of their land and attachment of the standing crops, in execution of the civil court decrees.
Perhaps what is required in case of Punjab are provisions similar to the one that Indira Gandhi incorporated in the Bonded Labour System (Abolition) Act, 1976, which not only rendered bonded labour contracts and customs are null and void, but also extinguished the bonded labour debt and barred any suits for recovery. Till such bold legal-cum-political initiative sees the light of the day, we will continue to see cosmetic tinkering with a disease that requires, not sweet medicines, but immediate surgery.
THE ANSWER WOULD LIE IN DIVERSIFICATION, REMUNERATIVE MSP, PROMOTING AGRO-BASED AND AGROPROCESSING INDUSTRIES, SCIENTIFIC STORAGE FACILITIES AND COLD CHAINS