A stitch in time saves nine

The Financial Express, February 25, 2008

By Siddhartha Mitra

Rumour mills are agog with word of a cess to be levied by the government to write off debts of suicide prone farmers. After several insignificant attempts at farmer welfare, the government has come up with this populist idea just before general elections. It is not populism in itself that needs to be criticised, though. After all, incumbent political parties are in the business of offering sops to win elections. However, once a sop decision has been made, it is advisable to be imaginative in its provision and allocation of benefits.

Very often, populist measures that gift large amounts of money to the poor fail to reach the targeted population, resulting instead in inflationary pressure that erodes the popularity of an incumbent government.

Indebtedness has been touted as a major reason for the incidence of suicides, especially among the cotton growers of Vidarbha. However, to solve the problem, we need to address the roots of indebtedness. By just “waving off debts”, as thank-you banners put it, the government would only relieve symptoms of a deeper malaise.

What is the root of the problem in Vidarbha? Lack of irrigation water. Farmers have been undertaking the hazardous task of cotton cultivation on unirrigated soil. While India’s progressive integration with the global free trade regime has led to a decline in prices of many crops, including cotton, no corresponding increase in farm productivity has happened in Vidarbha that can neutralise the effect. With the cost of cultivation also rising, as prices of pesticides, seeds and labour go up, unirrigated cotton farming has been rendered unviable.

Vidarbha has had other problems, too, notably the alleged stepmotherly treatment accorded to this region by the state government ever since Maharashtra came into being. The sugarcane districts around Kolhapur, which cover only about 5% of the cropped area, receive a lion’s share of the irrigation water supplied in the state, while cotton, with a much greater coverage, is almost denied any. It is still not too late to enhance irrigation facilities for cotton through better conservation and efficiency in other uses.

Levying a cess to rectify matters may be justifiable. However, what the government proposes to do with the funds raised belongs to the realm of myopic policymaking. It would have been more advisable to spend the sum raised through this cess on both debt financing and investment expenditure. I propose that only some part of the money raised be used to write off debt payments for the next five years or any such period. But at least 50% of the money should be spent on investments to benefit cotton farmers: irrigation projects, marketing infrastructure, warehouses and so on. Here, one must realise that monitoring delivery systems is an important part of the investment process. Facilities provided on paper must actually be made available. A disturbing aspect of India’s rural infrastructure is that very little survives the long chain of command, and there is no accountability along the way. So, a direct system of proper feedback from the intended beneficiaries and monitoring of investment benefits needs to be put in place for the proposed project.

If the government does not do away with the primary reason for farmers’ suicides—the unavailability of irrigation facilities for cotton—it would have to engage in fire-fighting measures at regular intervals by waiving debts. As a one-off, it might work. With debt payments written off over the next five years or so, suicide-prone farmers would be able to breathe easy for some time.

Five years should be enough time for the proposed public investment in agriculture to help turn farming more productive (as the saying goes, it is always better to teach a person to fish than to give him fish). Above all, remember that sudden injections of large amounts of liquidity into the economy can be inflationary. A bout of inflation might wipe off some of the benefits of the original transfer. I would advise a good hard think.

The author is Director Research, CUTS International, a leading research, advocacy and networking group and can be reached at sm2@cuts.org

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