DAILY EDITORIAL (UPSC) |25 Jan 2021| RaghukulCS

In agri-­credit, small farmers are still outside the fence

Source: The Hindu

Written by: A.S. Mittal [Vice Chairman (cabinet minister rank), Punjab State Planning Board and Sonalika Group, and Chairman-ASSOCHAM (Northern Council).]

Topic in syllabus: Economy ,Agriculture (GS-3)

Analysis about: This editorial talks about Issues faced by Indian agriculture despite of having subsidised credits.

Introduction:
  • Farmers on the warpath would mean that agriculture reforms have again occupied centre stage not just in the minds of the politicians but also policymakers.
  • To enable small farmers to diversify their crops or improve their income they must have access to credit at reasonable rates of interest.
  • This has been an agenda of the triad of the Centre, the States and the Reserve Bank of India (RBI) for decades.
  • Unfortunately, while the volume of credit has improved over the decades, its quality and impact on agriculture has only deteriorated. Agricultural credit has subsided efficient in delivering agricultural growth.
What are the issues & concerns?
  • Per annum, the central government announces a rise within the target of subsidised agriculture credit limit and banks surpass the target.
  • In 2011-12, the target was ₹4.75¬lakh crore; now, agri-credit has reached the target of ₹15 lakh crore in 2020-21 with an allocated subsidy of ₹21,175 crores. The question is: where is the credit and subsidy going and are they really benefiting the farmers?
  • within the last 10 years, agriculture credit increased by 500% but has not reached even 20% of the 12.56 crore small and marginal farmers.
  • The central bank, the RBI, has also questioned agricultural households with the lowest land holding (up to two hectares) getting only about 15% of the subsidised outstanding loan from bank, co-operative society etc.
  • A loose definition of agri-credit has led to the leakage of loans at subsidised rates to large companies in agri-business.
  • Though the RBI had set a cap that out of a bank’s overall adjusted net bank credit, 18% must go to the agriculture sector, and within this, 8% must go to small and marginal farmers and 4.5% for indirect loans, bank advances routinely breach the limit.
  • In 2017, 53% of the agriculture credit that the commercial bank for Agriculture and Rural Development (NABARD) provided to Maharashtra was allocated to Mumbai city and suburbs, where there are no agriculturists, only agri-business.
  • It made indirect loans to dealers and sellers of fertilizers, pesticides, seeds and agricultural implements undertaking work for farmers.
  • A review by the RBI’s internal working group in 2019 found various inconsistencies. It found that in some States, credit disbursal to the farm sector was above their agriculture gross domestic product (GDP) and therefore the ratio of crop loans disbursed to input requirement was very unevenly distributed.
  • Subsidised credit should be the cause for viable agriculture but, unfortunately, the agriculture sector’s performance has not been commensurate with the subsidised credit that it’s received’.
  • Even new farm laws haven’t addressed the reform within the agriculture system. The way forward is to empower small and marginal farmers by ‘giving them direct income support on a per hectare basis rather than hugely subsidising credit. Streamlining the agri-credit system to facilitate higher crop loans to farmer producer organisations, or the FPOs of small farmers against commodity stocks are often a win-win model to spur agriculture growth’.
What are the solutions?
  • With mobile phone penetration among agricultural households in India being as high as 89.1%, the prospects of aggressive effort to improve institutional credit delivery through technology driven solutions can reduce the extent of the financial exclusion of agricultural households.
  • Farmers are ready to avail themselves of loans through mobile apps, says a media report. These apps use satellite imagery reports which capture the extent of land owned by farmers in States where land records are digitised and that they grow the crop to increase the Kisan Credit Card loans digitally.
  • Other steps are reforming the land leasing framework and creating a national level agency to create consensus among States and therefore the Centre concerning agriculture credit reforms to fill the gap and reach out to the most number of small and marginal farmers.

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