GS Advance Program for UPSC Mains 2025, Cohort - 1 Starts from 24th October 2024 Click Here for more information
Solutions beyond farm loan waivers
Article:
- Nilanjan and Manorma, a Professor of Economics has discussed about the in-effectiveness of loan waiver schemes.
Important Analysis:
- Research conducted by Tata Trust in Rajasthan has revealed that loan waiver schemes are extremely expensive with limited impact.
- 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
- 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.
- 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.
- 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.
- 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