Solutions beyond farm loan waivers

Solutions beyond farm loan waivers

Article:

1. Nilanjan and Manorma, a Professor of Economics has discussed about the in-effectiveness of loan waiver schemes.

Important Analysis:

2. Research conducted by Tata Trust in Rajasthan has revealed that loan waiver schemes are extremely expensive with limited impact.
3. Issues associated with loan waiver scheme:

• Scheme is available only to 15 % of marginal farmers who have taken formal loans.
• Marginally poor farmers without any formal loans are neglected.
• After loan waiver scheme, banks reduce credit support to small farmers during next loan cycle.
• Small farmers use money saved from loan waiver for domestic consumption instead of agriculture. Leading to low agriculture productivity.
• Very less impact against the money spent. Which further curtails the limit of allocated credit in the subsequent year

4. Challenges faced by the poor farmers:

• Due to unavailability to formal loans, they are forced to attract informal loans which is costly.
• Inadequate storage facility discourages small farmers to grow perishable items on which profit is more.
• And even if they do grow, they often sell their produce to the person from whom they may have taken the loan.

5. Report has recommended better remedies for farm distress

• Spend money on building canals and warehouses
• Advanced storage facility – will reduce waste of perishable produce.
• Efficient E-Markets – Could ensure better prices to farmers.
• Rural Electrification.

6. Though, there are e-Markets and regulated markets to control the farm distress, some issues are still associated with regulated markets such as:

• Lower and fragmented market size.
• Lack of price incentive due to presence of buyer’s cartel.
• Lack of information on product standard.

7. Benefits of e-Mandi:

• Provide direct market access to Farmers by excluding middleman.
• Symmetry in data would provide better price mechanism to poor farmers.
• e-Mandis has benefited Rajasthan