Here’s why we must decode a farmer’s balance sheet and focus on innovations to improve his financial health

posted on 7th February 2019

The high dependence of a farmer on debt along with low savings rate (driven by poor profitability) make the balance sheet fragile and, at times, unsustainable.

Budget 2019 brought along a relief package for small holder farmers with direct income support of Rs 6,000 per year. This was a much-awaited announcement, given the current state of farm distress, and the government must be complimented for its initiatives towards farmer welfare. However, the challenge continues to be in making farming remunerative to Indian farmers. The lack of predictability in farm incomes and volatility in farm gate prices is adding to farmers’ woes. The government has set a target to double farmer income by 2022. The intent is right and praiseworthy, but the approach needs some tweaks and refinements.
farmer

This article attempts to decode a farmer’s balance sheet, cost of capital, P&L account, and the role of innovations in improving a farmer’s financial health. A disclaimer on the numbers presented in this article – the numbers are “directional” and not accurate to the tee because of lack of an adequate number of data points needed for constructing a farmer’s financial statements.

Constructing a farmer’s balance sheet

A farmer is an entrepreneur; farming is his enterprise. Like for any other business enterprise, return on capital employed (ROCE) in farming should be attractive enough for a farmer to remain invested in the business of farming. A holistic approach to improving a farmer’s financial situation requires dual focus – improving his income and ROCE. However, it is a paradox that there are not enough data points to construct a balance sheet for farming as a business activity.
In the absence of, data particularly on the value of fixed and long-term assets (such as land, cattle, agri machinery etc.), a representative balance sheet is attempted on the basis of current assets and current liabilities, not an ideal or financially correct approach, but good enough to assess the financial health.
Some of the data points are taken from Nabard’s All India Financial Inclusion Survey -2016-17 (NAFIS), which covered more than 40,000 rural households in 245 districts in 29 states. NAFIS is probably one of the most exhaustive surveys of rural households in recent times. We need more such surveys for obtaining data on the financial health of rural households on a continuous basis.

The survey has useful data points for constructing a farmer’s balance sheet and P&L account (with some interpretations and assumptions plugged in). The survey covers both – agricultural and non-agricultural households. For the purpose of constructing a farming balance sheet, the data for “agricultural household” is taken into consideration.

The balance sheet for a farmer with average ownership of about one hectare of land is represented below taking (only) current assets and current liabilities into consideration.

Table: Balance sheet for a farmer with ownership of one hectare of land

	% of Agricultural Households	Amount (INR)	Weighted Average INR)	Source / Assumption
Liabilities
Equity (retained earnings)	55%	9,657	5,311	NAFIS (taken as savings for last one year)
Debt	52.5%	1,04,602	54,916	NAFIS (most likely this represents debt is towards crop loan which is outstanding for the current and previous crop seasons)
Total			60,227
Assets
Physical and financial assets	10.5%	62,734	6,524	NAFIS (investment in physical and financial assets in last one year)
Current assets			53,703	Balancing figure (This is likely to be inventory of inputs, output for sale / self-consumption and value of the crop in the field)
Total			60,227

The striking part of the balance sheet is high leverage (debt:-equity ratio in excess of 10). The high dependence of a farmer on debt along with low savings rate (driven by poor profitability) make the balance sheet fragile and, at times, unsustainable (which leads to a need for loan waivers or restructuring).
It is interesting that only 53 percent of households reported having taken a loan as per NAFIS survey. It means the balance 47 percent households either do not need debt or do not have access to debt. There is a high probability that it is more of an access issue, reflecting low levels of financial inclusion among a large section of the farming community.
Only about 10 percent of agricultural households reported investments in physical and financial assets, implying limited or negative surplus with farmers, leaving little money to invest in productive assets. A farmer’s limited ability to make investment builds a strong case for substantially increasing level of public and private investment in the sector. The current assets figure is derived to balance the balance sheet. Current assets are most likely to include an inventory of inputs, output, and the value of WIP crop in the field.
The balance sheet presented above is for a farmer with about one hectare of landholding. The balance sheet health is likely to be healthier for farmers with larger land holdings and worse for smaller hand holdings. There are about 70 percent farmers (approximately 6.5 crores) with farms smaller than one hectare and there are about 2 crores tenant farmers in India with no land ownership, so one can imagine the balance sheet health of about 8.5 crore farmers (with < 1 hectare land or no land). This calls for a surgical approach to improve the situation.

What is the cost of capital to a farmer?

Like for any other business, it is important to understand the cost of capital in the farming business and whether a farmer is making enough profit to beat the cost of capital. The weighted average cost of capital (WACC) in farming business comes out to be 18 percent with the following assumptions.

Table: Weighted average cost of capital

Cost of Capital	Share	Cost	Assumption
Equity
Risk-free rate		8%	Long-term savings rate
Beta		2.00	High risk because of lack of market linkage and dependence on monsoons
Market returns		15%	Long-term market returns
Cost of Equity		22%
Debt
Institutional sources	65%	7%	Interest rate on Kisan Credit Card
Non-institutional sources	35%	36%	Interest rate on unsecured loans from non-institutional sources
Cost of Debt		17%
Weighted average cost of capital
Share of Equity	8%	22%	D:E ratio as per the balance sheet above
Share of Debt	92%	17%
Weighted average cost of capital (WACC)		18%

Its not a surprise that cost of capital for a farmer is higher because of higher cost of equity (due to inherent risk including lack of market access, monsoon dependence etc.) and high cost of debt (due to continued dependence on informal credit with steep interest rate – varying from 24 to 48 percent per year). To beat the WACC of 18 percent, a farmer should have ROCE in excess of this figure, let’s say at least 20 percent. However, this is not the case as we look at the P&L account in the following section.

Farmer’s P&L account: how much money does he make?

A farmer’s P&L account is constructed with data from NAFIS on income and household expenditure. Occupational expenditure is assumed on the conservative side.
It is interesting to note that only about one-third of a farmer’s income comes from cultivation; the rest is contributed by income from wage labour, livestock, other business, and jobs. With the assumptions tabulated below, for an average of 1 hectare land holding, the return on capital employed is about 11 percent, much less than the cost of capital which is about 18 percent.
EBIDTA (Earnings before interest, depreciation and tax) is positive, but is not good enough to serve the interest; that’s why there is always a concern of default on loan payment. Although non-institutional debt is unsecured, the lender (usually local money lender) has the first right on the sale of farm produce so he is able to recover principal and interest through the sale of produce. It is quite a contrast that unsecured loans in the farming business seem to be more secure than a secured loan from institutional sources.

Table: Farming P&L account for a farmer with a farm of about 1 hectare

Income	Income/expenditure per month (INR)	Income/expenditure per year (INR)	Source
Cultivation	3,140	37,680	Income and household expenditure data points from NAFIS
Livestock rearing	711	8,532
Other enterprise	489	5,868
Wage labour	3,025	36,300
Govt / private service	1,444	17,328
Other sources	122	1,464
Total	8,931	1,07,172
Expenses
Household expenditure	7,152	85,824
Occupational expenses		15,000	Expenses assumed for agricultural inputs per hectare of land excluding labour, irrigation

EBIDTA		6,348
Depreciation		0	Assumed zero, as few farmers have fixed depreciable assets
EBIT		6,348
Interest		9,444	Weighted average interest paid on credit from institutional and non-institutional sources
PBT		-3096
Tax		0	No income tax on agricultural income
PAT		-3096
ROCE (EBIT / Capital employed)		11%

It will be good to research further on the size of land holding at which ROCE becomes higher than the cost of capital. My guess is that inflection point may occur between 3 and 5 hectares. Even if inflection point is at 3 hectares, only about 10 percent of the farming population is likely to have ROCE higher than the cost of capital.

Improving balance sheet health for a small-holder farmer

The numbers shared in the financial statement, as I said earlier, are “directional”. They can be debated, challenged, and further refined with better availability of data, but the message is clear that a farmer’s balance sheet is in deep red and needs to turn green for agriculture to remain a sustainable occupation.
Farmers are not growing food just to feed the billion-plus population but to make money to sustain, survive, and grow like any other business enterprise. It is paradoxical that on one hand, food demand is growing steadily with consumers willing to pay price for good food and, on the other hand, the producers of food are bleeding with little motivation to continue farming.
How do we solve a problem of this magnitude? For me, the priority areas to improve farmer’s balance sheet health include the following, in the order mentioned below:

Improve access to intuitional credit
Enable access to market and diversification of income sources
Optimisation in the cost of inputs

Innovations will play a key role in achieving these three goals. Let me summarise how innovations can catalyse the three interventions.
D.1 Access to institutional credit
As discussed above, a significant part of the farming community does not have access to credit. About one-third of credit (among those who borrowed) continues to be from non-institutional sources with steep interest rates. Such high-interest cost depresses the bottom line and has a negative indirect impact on the top line as well since the lenders do not allow farmers to sell farm produce at a time and place to maximise price.
Innovations can go a long way in improving the credit access in the following manner:
I) Building an Agristack: Agristack essentially means linking “farm id” to “farmer id”, and can be a game changer in improving banker’s access to farmers. Farm id is nothing but the location and size of the farm. Many startups, including CropIn, Satsure, Agnext, AgRisk, Farmguide, and Harvesting, have demonstrated success at scale in identifying and marking farm boundaries using satellite imagery, which is necessary to build farm id. However, the challenge lies in linking farm id to farmer’s id, and the government has a key role to play.
Another option to satellite imagery is the use of drones, which can capture a much higher resolution of farm images. In my estimate, the cost of flying drones with cameras to capture images over 200 million hectares of gross cropped area and processing them will cost about Rs 3,200 crore, which is a small investment in the context of potential usability of this data by government, bankers, insurers, and many other supply chain members.

The priority sector lending target for 2017-18 was about Rs 11.65 lakh crores (approximately $170 billion). Investment into building an Agristack in context of this target is worth pursuing. It can enable bankers to lend, monitor, and democratise the access of credit, particularly to smallholder farmers.

II) Linking credit to input sales: The agricultural inputs market (including seeds, fertilizers, agrochemicals and machinery) is worth approximately Rs 200,000 crore (approximately $30 billion). Farmer purchase of inputs is a good indicator of his income potential, which can be used in building algorithms and credit scoring models for farmers. The input sale data can be captured at the point of sale or with the assistance of local partners. There are a few startups, including Jai-Kisan, FarMart, and PayAgri, who are piloting such solutions.
In my estimate, access to institutional credit has the potential to reduce a farmer’s interest burden by Rs 4,000 to Rs 8,000 on a per hectare basis.
D.2 Access to markets and diversification of income sources
Farming in India is one of the few businesses where the product is being manufactured (as in growing crops) on faith and optimism, not on the basis of nature and pattern of market demand. Till we get to a stage of availability of accurate and real-time demand supply data (it may take another decade for this to happen at a pan-India level), the only other way we can solve demand-supply asymmetry is by having credible and reliable farm produce aggregators to link farmers with markets.
The likes of Ninjacart, Waycool, Kamatan, Crofarm, Loop, DeHaat, Gram Unnati, Agrowave, Farm Taaza, Our Foods, Jumbotail, Superzop, Shopkirana, Krishihub, Krishilok, Freshokartz, and Ergos are trying to solve this problem by building tech-enabled linkages between farmer and consumer to align supply with demand. Given the stage of development of these new-age supply chain organisers, the volumes are relatively small relative to conventional channels (all farm-to-fork startups put together aggregate less than 2,000 tonnes per day in a market which is estimated at 1.5 million tonnes per day at a pan-India level for fresh produce and staples).
However, even at the current rate, it is clear that farmers benefit in terms of better and more predictable prices in closed-loop models. Farmers have reported an increase in income by 20-50 percent while working with these startups, which means additional Rs 5,000-15,000 in the farmer’s pocket. Also, market inclusion can play a pivotal role in driving financial inclusion as bankers can draw comfort with buyback arrangements in place before lending. Samunnati Finance, one of the most successful NBFCs in the agricultural space, has built its book by enabling financial inclusion through establishing market linkages.
These startups are trying to organise fresh produce and staples supply chain, similar to what Amul and NDDB did in the last few decades in organising the milk supply chain. While milk cooperatives had government support, these startups lack that kind of support. One way the government can play a catalytic role in driving organisation of the supply chain is by accelerating the scaling of Farmer Produce Organisations (FPOs).

Theoretically, India needs about 200,000 FPOs (assuming membership of 700 farmers per FPO and 14 crores total number of farmers) to organise the entire farming community. We have only about 30,00 FPOs with few of them operational on the ground. Another big advantage of FPOs is they can also bring many tenant farmers into formal credit structure, which they are deprived of because of lack of land ownership.

Diversification of income source also needs to be targeted to boost and de-risk farmer’s revenue. Indian farmers have been able to survive in the last few decades on the back of three decisive movements – green, white, and horticultural revolution. Dairy and horticultural are the two biggest diversifications Indian agriculture has seen in the past few decades; they not only helped the farmer to earn more but also improved his working capital cycle (both milk and vegetables can be sold on a daily basis unlike field crops).
What next? There are plenty of diversification opportunities for farmers like beekeeping, sericulture, aquaculture, herbs, silage production etc, which are waiting to happen at scale. Each of these opportunities is worth billions of dollars. The growth of poultry (both broiler and layer) in the last decade or so has demonstrated that farmers are open to diversification into newer areas. My guess is that diversification into newer areas will be driven by market players willing to backwards integrate (as demonstrated in poultry by Suguna, Venky’s, Godrej). Diversification of income sources can help a farmer earn a few thousand rupees extra and further reduce his dependence on cultivation income.
D.3 Optimisation of farm input applications
The current input applications by farmers need to become more scientific. For example, flood irrigation is the norm in most areas because a majority of farmers do not measure soil moisture and end up feeding crops with more water than needed. Similarly, in many places, urea application is disproportionately higher and much more relative to other vital nutrients (urea continues to be out of nutrient-based subsidy so is relatively cheaper than other fertilisers on per unit basis). Measurement of soil nutrition is needed to correct sub-optimal applications of fertilisers, critical for improving soil health.
Many startups building factory-to-farm models for input sales such as Agrostar, BigHaat, Unnati, Gramophone, Behtar Zindagi, Agroy, and Salesbee are integrating advisory services for customised applications of inputs with the help of technology. Technology is evolving fast for real-time and affordable measurement of soil moisture, pH, nutrients, local weather parameters, early detection of pest attack etc. It is now possible to templatise the data collection and reporting formats so as to develop a customised input application plan for each farm. Scientific, data-driven customised application of inputs can reduce costs by 10 to 30 percent. This can result in savings of about Rs 2,000 to 5000 per hectare.

The objective of this article is not to be conclusive, but to build a discussion platform on possible ways to integrate innovations in Indian farming and improve a farmer’s balance sheet. The three interventions discussed in the article can potentially benefit farmers with a surplus in the range of Rs 15,000-30,000 per hectare, per year basis – a handsome amount to address financial distress.

In addition to the focus on improving farmer’s income, we also need to work towards improving ROCE to at least 20 percent and simultaneously bringing down the cost of capital to a single digit for farming business. The improvement in the health of a farmer’s balance sheet is critical to keep him motivated to pursue agriculture as a business enterprise.
Innovations in output, input, and data, anchored by digital tech, ae the way forward. Fortunately, we are blessed to have about 1,000-plus agritech startups in the country now and quite a few committed investors who can drive scaling of these innovations. Progressive and long-term policy framework from the government can further accelerate the integration of innovations in the supply chain to benefit farmers.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)

Authors

Hemendra Mathur

Hemendra Mathur is an investor, mentor, and board
member with many agritech start-ups in India. He works
as Venture Partner with Bharat Innovation Fund and is C…

https://yourstory.com/2019/02/farmer-balance-sheet-innovations-finance

Pradhan Mantri KIsan SAmman Nidhi (PM-KISAN)

PM Kisan : Under this programme, vulnerable landholding farmer families, having cultivable land up to 2 hectares, will be provided direct income support at the rate of `6,000 per year.

This income support will be transferred directly into the bank accounts of beneficiary farmers, in three equal instalments of ` 2,000 each.
Around 12 crore small and marginal farmer families are expected to benefit from this.
The programme would be made effective from 1 st December 2018 and the first instalment for the period up to 31st March 2019 would be paid during this year itself.
This programme will entail an annual expenditure of ` 75,000 crores.

[wpdm_package id=’108′]

AgCensus 2015-16: Categorisation of farmers

Press Information Bureau
Government of India
Ministry of Agriculture & Farmers Welfare
05-February-2019 16:26 IST

Categorisation of Farmers
https://pib.gov.in/newsite/PrintRelease.aspx?relid=188051

In agriculture Census, the operational holdings are categorised in five size classes as follows:-

Sl. No.	Category	Size-Class
	Marginal	Below 1.00 hectare
	Small	1.00-2.00 hectare
	Semi- Medium	2.00-4.00 hectare
	Medium	4.00-10.00 hectare
	Large	10.00 hectare and above

The operational holdings are also classified in three social groups, viz., Scheduled Castes, Scheduled Tribes and Others.
As per the results (provisional) of latest Agriculture Census 2015-16, the State-wise average size of operational holdings in the country is given at Annexure.
To improve production/productivity of various agricultural crops, the Government is promoting adoption of modern technologies and practices like multiple cropping, intercropping and integrated farming systems etc.
In the “India Rural Development Report 2012-13” prepared by the IDFC Rural Development Network, it has been observed that Small farms are more efficient, especially in cultivating labour-intensive crops or tending livestock, but land holdings are too small to generate sufficient household income.
With a view to improve the condition of Small and Marginal farmers and to double the income of farmers by 2022, Government is realigning its interventions from production-centric approach to farmers’ income-centric initiatives, with focus on better and new technological solutions. These include implementation of schemes like, Pradhan Mantri Krishi Sinchai Yojana (PMKSY), Paramparagat Krishi Vikas Yojana (PKVY), Soil Health Card, Neem Coated Urea, Rainfed Area Development under National Mission for Sustainable Agriculture (NMSA), Pradhan Mantri Fasal Bima Yojana (PMFBY), National Agriculture Market scheme (e-NAM), National Food Security Mission (NFSM), National Mission on Oilseeds & Oilpalm (NMOOP), Mission for Integrated Development of Horticulture (MIDH), Rashtriya Krishi Vikas Yojana (RKVY), National Mission on Agriculture Extension & Technology (NMAET) etc. In addition, farmers are provided information through Focused Publicity Campaigns, Kisan Call Centres (KCCs), Agri-Clinics and Agri-Business Centres (ACABC) of entrepreneurs, Agri Fairs and exhibitions, Kisan SMS Portal etc.
This information was given by Minister of State for Ministry of Agriculture & Farmers Welfare, Shri Gajendra Singh Shekhawat in Lok Sabha today.
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APS/RCS

Telangana is Proof Farm Loan Waivers Aren’t a Long-Term Solution

The government has to evolve policies suitable to a particular state and fine-tune them according to local needs.

Representative image of a farmer working in his sugarcane field. Credit: Reuters/Amit Dave/File photo

Siraj Hussain

27/DEC/2018

‘Nothing succeeds like success,’ first written by Sir Arthur Helps in Realmah in 1868, is going to guide political parties while they draft manifestos for the next parliamentary election. It seems that the Rythu Bandhu (RB) scheme – also known as the Telangana model of direct investment support (DIS) to farmers – has caught the imagination of our politicians. Odisha and Jharkhand have already announced a modified and improved version of this scheme while teams from various states have been visiting Telangana to study the RB model – a welfare programme to support farmer’s investment for two crops a year.

But did the RB model alone help the Telangana Rashtriya Samiti (TRS) sweep the recent assembly elections?
Farm loan waiver
In its manifesto, the TRS promised to waive farm loans of up to Rs 1 lakh. In fact, in the 2014 assembly elections also, the party had made a similar promise. The outstanding crop loans in 2013-14 were about Rs 14,897 crore. Initially, the government did not want to include loans taken against gold or gold jewellery, post-harvest loans and the ones to tobacco and sugarcane farmers.

However, due to widespread protest by farmers, all these were included in the write-offs and finally, the government paid Rs 16,124 crore to fulfil its promise. This is estimated to have benefitted nearly 36 lakh farmers. But due to budgetary constraints, the loan waiver was done in four instalments spread over 2017-18.

The fresh promise of loan waiver, made in the 2018 TRS manifesto in Telangana, is estimated to cost the state Rs 24,000 crore. So it is not Rythu Bandhu alone which likely influenced rural voters to side with the TRS.

A question thus arises: why could the Rs 16,124-crore waiver not achieve its objective of making farmers debt free? Also, how will a waiver of another Rs 24,000 crore make their farming viable?
Rythu Bandhu scheme
The state government undertook a massive exercise of updating land records for the implementation of the Rythu Bandhu scheme. Teams of officers from the revenue and agriculture departments visited over 10,800 villages and verified 72.13 lakh land titles in order to free them from litigation. As part of the scheme, the state spent a total of Rs 12,000 crore during Kharif and Rabi seasons – Rs 4,000 per acre was given to land-owning farmers for each cropping season, irrespective the of size of land holding.
Refusing to learn from Punjab’s water crisis – which was aggravated due to free electricity – the Telangana government also announced that free power would be made available to farmers starting January 1, 2018.
The effectiveness of four years of loan waivers and one year of Rythu Bandhu in Telangana would be known only once data on over dues of farm loans and farmer incomes is released by NABARD, RBI and NSSO. The first two will do well to release detailed data on loan waivers so that the country gets to know the impact of frequent loan waivers on repayment behaviour of borrowers, and the benefit it brought to various crops grown by farmers.
Procurement of agricultural produce
Direct investment support on the lines of Rythu Bandhu is surely a better model than physical procurement of agricultural produce (except wheat and rice, which are required for PDS) or price deficiency payment, both a part of the Pradhan Mantri Annadata Aay SanraksHan Abhiyan. Price deficiency payment scheme was tried in Madhya Pradesh in Kharif 2018, but it failed in its objective because extensive paperwork and monitoring of mandis was required to make it effective. Moreover, traders’ collusion artificially depressed the mandi prices in Madhya Pradesh.

Telangana chief minister K. Chandrashekar Rao. Credit: Twitter

It does not, however, mean that states with a robust procurement infrastructure (like Punjab, Haryana, parts of UP, MP, AP, Odisha and Chhattisgarh) should immediately abandon procurement of paddy and wheat and take to DIS in lieu of procurement. This will result in an immediate crash in prices as the arrivals in mandis is concentrated over a short period of 3-4 weeks. DIS cannot compensate for this price crash and the farmers in these states, accustomed as they are to selling at MSP, are not going to accept such a situation.
Also read: Fact Check: Has the BJP Really Fulfilled Its MSP Promise as It Claims?
State-wise policies
So, the government has to evolve policies suitable to a particular state and fine tune them to local needs. In the last three years, especially after demonetisation, farmers have been hit hard due to the crash of prices in mandis. Neither loan waiver nor DIS addresses this problem sufficiently. Sustained reform of marketing of agricultural produce in mandis is necessary in order to free agricultural trade from the clutches of middlemen who decide the price a farmer gets at a mandi.
Several years ago, the National Egg Coordination Committee created a demand for eggs by highlighting its nutritional benefits. A similar campaign for processed and refrigerated food may create a demand for fruits and vegetables frozen through individually quick frozen (IQF) items. In a glut market, perishable produce can be bought by processors to be used for IQF. The country is now used to buying frozen peas and there is no reason why similarly processed vegetables and fruits cannot succeed in the market.
While repeated farm loan waivers will surely destroy the repayment culture, even a blanket DIS is unlikely to succeed in alleviating the distress of farmers if manipulation of mandi prices continues unchecked.

Ironically the solution to farm distress has to come from the non-farm sector which can absorb surplus manpower and reduce the burden on agriculture.

Siraj Hussain has worked as secretary of agriculture and food processing to the government of India. Presently he is visiting senior fellow at ICRIER.

Punjab farmers find no solace in farm loan waiver

https://www.livemint.com/Politics/8SzF3qtBCbJWo6DboaXRNK/Punjab-farmers-find-no-solace-in-farm-loan-waiver.html
The farm loan waiver terms make little sense in Punjab where average landholding is over three times the national average.
Punjab farmers find no solace in farm loan waiver
The farm loan waiver terms make little sense in Punjab where average landholding is over three times the national average
Mon, Dec 24 2018. 09 47 AM IST
href=”https://www.livemint.com/Search/Link/Author/Sayantan%20Bera”>Sayantan Bera

Jagdeep Singh with a photo of his father, who committed suicide on 11 December, at Sangatpura village in Patiala. Photo: Sayantan Bera/Mint
Patiala/New Delhi: All that Jagdeep Singh wants is a few hours of peaceful sleep. The 24-year-old from Sangatpura village in Punjab’s Patiala district had no clue that the morning of 11 December would change his life forever. At six in the morning that day, he woke up to the sudden death of his 45-year-old father, a farmer and village head, who drank pesticide while his mother was getting the tea ready. The father had run up a debt of ₹40 lakh following several years of losses in farming and dairy businesses, and a failed attempt to find Singh a job in Dubai, which cost nearly ₹14 lakh.

Singh, who holds a master’s degree in history, returned from Dubai after a 11-month wait to find a driver’s job and took to farming. He now gets up at four in the morning. The nights go by worrying how the family land mortgaged to banks can be freed. After a hard day’s work tending to the cattle and the wheat crop, his eyes swell up by evening. Singh repeatedly grasps his hair while speaking. “I am hoping my (younger) brother will find a job… but that may not be enough to pay back the arthiya(commission agents in wholesale markets who advance credit to farmers).”

Since April last year, eight state governments, including Punjab, have announced a staggering ₹1.9 trillion in farm loan waivers. However, no relief has reached the Singh family so far. In June 2017, the newly elected Punjab government led by Amarinder Singh of the Congress approved a farm loan waiver packageestimated to cost ₹10,000 crore. However, a year and a half later, just a fraction of farmers has benefited because of the strict conditions put up by the state.

Exactly a week after the death of Singh’s father, on 18 December, Congress president Rahul Gandhi upped the ante against Prime Minister Narendra Modi. Gandhi said he would not let Modi sleep till the centre announced a nationwide farm loan waiver. Gandhi cited the example of newly-elected state governments led by the Congress in Madhya Pradesh and Chhattisgarh, which signed on farm loan waiver schemes within hours of taking charge, in line with the party’s pre-poll promise, and said that the Congress would announce a national farm loan waiver scheme if the party were voted to power in the 2019 Lok Sabha elections.

The Punjab experience, however, does not inspire confidence. Till date, ₹3,500 crore loans of 428,000 farmers have been waived, according to Jasbir Singh Bains, director of agriculture in the state government. The farm loan waiver has covered less than a fifth of the 2.6 million farmers in Punjab. The total disbursal is just 35% of the promised ₹10,000 crore.

Though Jagtar Singh and Jaswant Singh of Namana village fulfil the condition for debt relief set by the Punjab government, they are still waiting for their loans to be waived.
“During the election campaign, Amarinder Singh promised to waive loans of all farmers, but a set of conditions imposed during the rollout ensured that most were left out,” said Jagmohan Singh, state general secretary of the Bhartiya Kisan Union, Dakaunda, a farmers’ group.

The conditions for availing the farm loan waiver make little sense in a state like Punjab where the average landholding is more than three times the national average. For instance, according to the agriculture census released this year, the average landholding in Punjab is 3.6 hectares (ha), but the state government decided to waive loans up to ₹2 lakh for only small and marginal farmers, who own up to 2ha. This ensured that farmers like Jagdeep Singh, whose family owns 2.4ha, were excluded.

There’s more. The conditions say that only those loans taken by small farmers (who own between 1-2ha) will be waived where the principal and interest overdue did not exceed ₹2 lakh. This meant that a 1.5ha farmer, who owed banks even a rupee over ₹2 lakh, was excluded.

During the Punjab election campaign, Captain Amarinder Singh promised to waive loans of all farmers, but a set of conditions imposed during the rollout ensured that most were left out. Photo: PTI

“With costs of farming going up and returns plunging, a waiver of ₹2 lakh means little to us; we will be back to where we are in no time,” said Nirmal Singh, a farmer from Narmana village in Patiala’s Nabha block. “But this farm loan waiver is more a formality and less a reality… it’s like luring a hungry child with a toffee and then taking it back,” he smirked.

A crowd of farmers gathered around Nirmal Singh complained that as most families did not divide their land between members (say, a 3ha farm is still shared by the father and an adult son and his family), the waiver has eluded them.

In retrospect, the Punjab farm loan waiver scheme appears skilfully designed to exclude more farmers than those included, driven by the lack of fiscal space to deliver on the poll promise (in August last year, the chief minister requested the centre that it be allowed a one-time exemption from the Fiscal Responsibility and Budget Management Act, 2013, which restricts its borrowing to a maximum of 3% of state gross domestic product or just ₹12,819 crore, so that it can implement the debt relief scheme).

Congress would announce a national farm loan waiver scheme if the party were voted to power in the 2019 Lok Sabha elections, party president Rahul Gandhi has said.

For the once-prosperous farmer in Punjab, the cradle of India’s Green Revolution, a debt of ₹15-20 lakh is common and debts of more than ₹40 lakh in a single family are not unheard of. While part of this is driven by the need to keep up with societal pressures—such as spending ₹25 lakh on a daughter’s marriage—the debt crisis deepened as a result of commercial banks flushing farmers with credit to meet their lending targets. Desperate for a solution, the government is now contemplating an Act that places a limit on the number of guests attending a marriage and a forensic audit of the agriculture credit portfolio of commercial banks.

Data from the draft state farmers’ policy released earlier this year shows that Punjab’s requirement of crop loans is around ₹24,000 crore per season, while outstanding loans advanced by banks is ₹60,000 crore.

“There are around 26 lakh (2.6 million) farmers in the state, but banks have issued more than 40 lakh (4 million) Kisan Credit Cards. Over a period of 11 years (2004-05 to 2015-16) the credit offtake has increased by around eight times, while the value of production rose just three times,” said Ajay Vir Jakhar, chairman of the state farmers’ commission.

The 23-year-old Kiranjit Kaur of Mansa district, whose father committed suicide in 2016, adds yet another dimension to the crisis. “I have seen scores of families losing everything to pay for private education and health emergencies… More than loan waivers, we need better public health facilities and schools,” said Kaur, who now helps families, in which farmer suicides have taken place, receive state compensation.

First Published: Mon, Dec 24 2018. 09 46 AM IST

Odisha new initiative KALIA

KRUSHAK ASSISTANCE FOR LIVELIHOOD AND INCOME AUGMENTATION (KALIA) NOTIFICATION PUT OUT BY ODISHA GOVERNMENT….
Notification on KALIA scheme
1. Rs. 5000 per family per season, starting from this season itself – 5 cropping seasons are being committed to for comprehensive coverage of 30.2 lakh small and marginal farmer households. This is being called support to cultivators for cultivation. Rs. 3016 crores as outlay for this.
2. Then there is livelihood support to 10 lakh landless households under agriculture and allied activities – Rs.12,500/- per household. Rs.1250 crores as outlay for this.
3. Financial assistance to vulnerable cultivators/landless agricultural labourers – lumpsum Rs. 10,000 per family. 10 lakh such beneficiaries. Rs.500 crores outlay.
4. Life Insurance cover of 2 lakhs for 57 lakh beneficiaries with outlay of 85 crores. This also has a personal accident insurance cover.
5. interest free crop loan – down to 0% from 1% – interest subvention cost is expected to 110 crores to the state government.

MP government waives Farmers Loans

The new Chief Minister of Madhya Pradesh Mr. Kamal Nath signed file waiving of farm loans up to 2 lakhs for all farmers. All this would be one time waiver. It is expected to cost about Rs. 56,000 cr.

How to do Farm Loan Waivers Right

Rishab Mehta who was involved in the process of loan waiver in Maharashtra writes about how to do Farm Loan Waiver right! read the article here

Why Telangana election might become a proxy battle between TRS and farmers

https://m.economictimes.com/news/elections/telangana-assembly-elections/why-telangana-election-might-just-become-a-proxy-battle-between-trs-and-farmers/articleshow/66898051.cms
ET
Why Telangana election might just become a proxy battle between TRS and farmers
By CR Sukumar, ET Bureau | Dec 01, 2018, 11.00 PM IST
Agriculture is a major economic activity in the state, where about 41.75 lakh hectares or 37.25% of land is under cultivation.
Telangana Chief Minister K Chandrashekar Rao (KCR) seems to be on a damage-control mode. With assembly polls due on December 7, he has been on a whirlwind tour of the state to ensure that a scheme his government launched to help farmers does not backfire.
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Rythu Bandhu, the farmers’ investment support scheme announced in February, offer cash benefit of Rs 8,000 an acre (Rs 4,000 each in kharif and rabi seasons) annually to agricultural landowners. The scheme, however, excluded “tenant farmers”, or those who till the land but have no legal ownership on it.
The government issued “pattadar passbooks” to beneficiaries, the landowners, while deleting the column on tenants from the passbooks. The government said the idea was to clean up land records and help identify owners of the land. The state, which has earmarked Rs 12,000 crore for the scheme in 2018-19, said if the passbooks are not linked with Aadhaar, the land concerned could be considered benami.
Civil society activists and farmers’ union representatives, however, say it is a deathblow to tenant and tribal farmers in the state as they will not get any money despite being the cultivators. A sister scheme called Rythu Bheema offers group life insurance.
Telangana has 57 lakh agricultural landowners, according to government records. But there are no official records on the number of tenant farmers; estimates, however, say a large number of farmers are tenants.
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Agriculture is a major economic activity in the state, where about 41.75 lakh hectares or 37.25% of land is under cultivation. In the 1980s and ’90s, thousands of landlords, mostly in the northern region of the state, had left their villages due to Naxal violence. The rebels distributed lakhs of acres owned by these landlords to poor and landless farm labourers. But these marginal farmers do not have the title to the land.
The tenant farmers pay the landowners rent or give them a share of the produce. The cultivator bears the risk of crop failure. With the fire of discontent due to Rythu Bandhu threatening to spread across the state, the KCR-led Telangana Rashtra Samithi has promised alleviating measures.
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The party’s manifesto committee chief K Keshava Rao says the issues being faced by the poor farmers will be addressed. The final manifesto that will be released by December 2 will take care of the small and marginal farmers, he says.
KCR has promised to address the issues of tribal farmers and give passbooks to them, too, within six months of coming to power. He continues to be silent over the fate of tenant farmers. Downplaying the issue, TRS’ deputy floor leader in Parliament B Vinod Kumar says the government has after a deep and careful study decided to delete the “possession” column from the pattadar passbooks. This column was deleted to clean up land records and because the column was also leading to disputes between landowners and tenant farmers, he says.
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“The government will extend the Rythu Bandhu and Rythu Bheema benefits to tenant farmers provided there is a formal tenancy agreement with landowners.” To matters worse for tenant farmers, banks disqualify them from loans if their names are not on the passbooks. Having the government-issued loan eligibility cards is another way for these people to get credit access.
“The KCR government’s move has taken away the limited privileges that tenant farmer had for decades,” says Kanneganti Ravi, a member at the Centre for Sustainable Agriculture and convenor of the Telangana Rythu Joint Action Committee. “Forget about getting Rythu Bandhu money, now these tenant farmers cannot even claim any government benefits or relief measures. They cannot access bank loans either.”
Almost all political parties are promising to extend the scheme to other sections of farmers and also increasing the sop to Rs 10,000 a year from Rs 8,000 now. However, an association of the scheme’s beneficiaries, Rythu Bandhu and Rythu Bheema Labdidarula Samakhya, has raised objections.
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L Pandu Ranga Reddy, president of the body, says it will be difficult to identify tenant farmers as the column in the passbooks pertaining to tillers has been removed. “No landowner would give in writing to a tenant that the land has been leased.”
In June, the TRS government said new passbooks were being issued to some 57.24 lakh farmers and cheques have been issuedto 52.64 lakh farmers who have linked their passbooks with Aadhaar. About 90% of the beneficiaries have been covered and the balance 10% would be covered as soon as some technical errors were sorted out, it said.
The state has released Rs 6,000 crore in the first round. The second round of Rythu Bandhu cheques have also been disbursed but details of the number of farmers and amount aren’t available. The scheme has only helped rich landowners get financial assistance running into lakhs, says Bhutham Veeraiah, general secretary of the Telangana Rythu Kooli Sangam, an affiliate body of CPI-ML. During the first tranche of Rythu Bandhu cash disbursals, in May, there were several news reports of rich farmers coming to their villages in high-end cars to receive the cash benefit.
“The Rythu Bandhu scheme has benefited the absentee landlords more than the cultivating farmers,” says Veeraiah. Nearly 80% of agricultural land in villages are being cultivated by tenant farmers, he said, though government records show otherwise. A large number of tenant farmers have plots up to three acres to cultivate.
“The scheme was not made applicable to tribal farmers either — this section cultivates on about seven lakh acres of forestlands. Similarly, tenant farmers cultivating around 1.5 lakh acres of endowment lands and waqf lands were also denied the scheme.”
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In a state that comes second in farmer suicides, after Maharashtra, says Ravi, tenant farmers bear the brunt all the time. Land revenue officials had even stopped recording the names of tenant farmers for several years now, he says.
A study by his non-government organisation, Rythu Swarajya Vedika, and Tata Institute of Social Sciences showed more than 75% of the farmers in Telangana who killed themselves between June 2014 and April 2018 were tenant farmers, and 94% were marginal, small and landless farmers. The study also found that most farmers who killed themselves had no access to bank loans and were heavily dependent on moneylenders. Nearly half of these farmers had no outstanding bank loans but had an average of Rs 4 lakh per head of private loans.
“Our study showed that most of these tenant farmers couldn’t benefit from the loan waiver schemes often announced by governments as they were denied formal bank loans. Though the Andhra Pradesh Land Licensed Cultivators Act-2011 provided loan eligibility cards to tenant farmers, it was not implemented effectively. In some instances, thanks to certain proactive district collectors, a few thousand tenant farmers were granted loan eligibility cards.”
Referring to the body blow from the TRS government, Ravi says, “Some 20 lakh tenant farmers across the state are now frustrated that they have been denied Rythu Bandhu support, bank loans and loan waivers.” Rythu Bandhu has made landlords return to villages. They are threatening the tenant farmers tilling their land, says Veeraiah of CPI-ML.
“In many instances, the absentee landlords, now back in control as their names are on the pattadar passbooks, have forced the tenant farmers to buy their land.” He says the distress is high in the districts of Karimnagar, Warangal, Komuram Bheem-Asifabad, Adilabad, Khammam, Bhadrachalam-Kothagudem, and Jayashankar-Bhoolapalli, and some parts of Mahabubnagar and Medak. The situation has started getting more politicised now.
In its election manifesto, the Congress led coalition, People’s Front, has promised to extend the benefits of Rythu Bandhu to tenant and tribal farmers. “There has been widespread discontent among the farmers in Telangana since the TRS government’s land regularisation scheme recognised the rights of historical owners of the land rather than the tenant farmers, who account for over a third of the farmers in the state,” says Mallu Bhatti Vikramarka, chairman of Telangana Pradesh Congress Committee’s Campaign Committee.
Land rights were always central to many critical movements in the region, including the peasant rebellion of the late 1940s and the Naxal movement in 1960s and 1970s.
“The ensuing elections in Telangana will be a fight between the common people and feudal forces,” adds Vikramarka. In a communique dated October 13 that was distributed in the affected areas, state secretary of Communist Party of India (Maoist) Haribhushan said: “The TRS government has retrieved land from Dalits, tribals and downtrodden communities in the guise of land resurvey and handed the lands back to the landlords. The Rythu Bandhu and Rythu Bheema schemes were actually aimed at benefiting the rich farmers and landlords. These schemes have hurt the poor farmers.” Echoing similar views, Telangana Jana Samithi President M Kodandaram says thousands of farmers across the state have lost their rights because of the government’s programme.
“In many cases, farmers weren’t issued passbooks. They could not get Rythu Bandhu money or bank loans. The state’s farm sector is under severe distress today as agriculture products are not getting remunerative prices. The loan waiver promised by TRS is yet to come.”
Another factor has added to the farm distress. Tenant farmers who agree to pay landlords higher upfront rent to grow commercial crops such as cotton and chillis ended up with huge losses as market prices were unremunerated, says Veeraiah. Adverse feedback from lawmakers and ruling party cadre on the growing distress at the ground level may have made the chief minister rethink on denying benefits to tenant and tribal farmers, says political analyst Manchala Srinivasa Rao.
“For the first time, KCR has acknowledged the issues facing tribal farmers. At public meetings in north Telangana, which has a high population of tribal farmers, he was seen repeatedly promising them that he would soon confer them with rights to the forestlands that they have been cultivating on for decades,” adds Rao.
The farmer discontent comes even as the state is yet to address the woes of at least 50,000 farmers who lost their lands to government projects — especially the Kaleshwaram irrigation project and Singareni Coal Collieries’ open cast mining — but have not received compensation according to the Land Acquisition Act 2013, says Rachna Reddy
Bollu, the advocate who has fought dozens of farmer cases in various courts. Going by the turmoil in rural Telangana, the forthcoming elections might well turn into a battle over cultivating rights of agricultural land, and, therefore, a proxy battle between the KCR-led TRS and distressed farmers.

To What Extent Are India's Farmers Indebted?

https://thewire.in/agriculture/dimensions-of-farmers-indebtedness-the-extent-of-indebtedness

A farming household in 2013 had more than 630% higher debt to asset ratio than one in 1992.

To What Extent Are India's Farmers Indebted?

Representational photo. credit: Flickr/Michael Foley (CC BY-NC-ND 2.0)

Sandeep Kandikuppa

30/NOV/2018

This is the final part of a two-part series exploring the phenomenon of farmers’ indebtedness in India. Read the first here.

One of the key indicators NSSO uses in order to measure indebtedness is the debt-to-asset ratio, or the ratio of total outstanding loans to total assets as on the date of survey. Essentially it tells us how much money a household owes to others, for every Rs 100 worth of assets that it owns. According to the website Investopedia, a DAR of under 40% is considered to be ideal, and if it is over 60%, it is considered to be alarming.

In this section, I look at the mean debt to asset ratio, who is likely to have a higher DAR, and who is likely to have a DAR in excess of 60%, i.e., be over-indebted. Before I proceed, I would like to point that this the above criterion for being over-indebted seems to have been drawn with urban populations in mind; nevertheless, I felt that this might be a good starting point to gain some perspective into farmers’ indebtedness.
Debt to asset ratio among farmers
Debt to asset ratio among farmer households is less than that of the non-farmer households. However, households that have casual labour as their primary occupation (based on net income earned from the occupation) are likely to have a significantly higher DAR than the other rural households.
Also read: Dimensions of Farmers’ Indebtedness: Who is Indebted?
SC households were likely to have 8.5% higher DAR than households belonging to the general category; and OBC households were likely to have 7.7% higher DAR than general category households. Among farmer households, SC households were likely to have 15.2% higher DAR and OBC households 7.8% higher DAR than those belonging to the general category.
In short, from the data, indebtedness is likely to be higher among farmer households belonging to SC and OBC categories than among those belonging to the general category. Farmer households for whom casual labor is the principal occupation, i.e., households which have farming operations but derive their primary income from casual labor, are likely to have a significantly higher number of standing loans than the other households among the rural population.

Mean Debt to Asset Ratio Among Rural Households (%) All figures are percentages. Source: NSSO 1992, 2003, and 2013

Perhaps the clearest sign for the rising indebtedness among farmers is when we look at DAR over time. A farming household in 2003 was likely to have 17% higher DAR than a farmer household in 1992; and one in 2013 more than 630% higher (this is not a typo) than one in 1992. This is an astounding figure that begs an explanation.
What accounts for this giant leap?
One possible explanation could be that borrowing among farmers has grown exponentially while the value of their assets remained stagnant or at least not growing as fast as the liabilities are piling up. If the value of assets is way below that of the liabilities, what prompts lenders to extend credit to the farmers? During my conversations in Anantapur, Andhra Pradesh and Sangareddy, Telangana, I was told that lenders often assessed the value of the land before extending credit to the farmers. Now in rural areas, land has the highest proportion in the total asset value. Seemingly, rising prices of land assure the lender of its value as security against loan.
That being the case, it might point to the possibility of debt being the current day tool for primitive accumulation. But then the question is, if the value of land has been increasing is it not adequately captured in NSSO? Could it be possible that the method of valuing land by NSSO underreports the actual value of land?
NSSO values land as per its “normative/guideline values,” when in reality the value of the land might be significantly higher, in no small measure owing to speculation over it. So, would the debt to asset ratio be lower, at least in places like Sangareddy and Anantapur, which are closer to major urban centres (Hyderabad and Anantapur town respectively) if the real value of land were taken into account by NSSO?
It may. But it still does not explain the skyrocketing debt to asset ratio over the two decades between 1992 and 2013. Nor does it take anything away from the fact that over a period of time, farmers find themselves with one loan too many, and are forced to juggle them by borrowing from one source to pay off another. They find themselves in an inexorable debt trap, and when they reach a tipping point, drastic measures like suicides ensue. These are mere possibilities and it is beyond my modest knowledge to fully explain the startling growth in the debt to asset ratio among farmers.

Among the states, farmers in Andhra Pradesh, Rajasthan, and Tamil Nadu are likely to have a significantly higher DAR than those in other states. It seems almost uncanny that farmers from these states have been protesting and demanding relief from the growing debt burden.

A related aspect that I look at is the kind of households that are likely to be in the ‘over-indebted’ category, i.e., have a DAR in excess of 60%. A farmer household is about two percentage points less likely to be in this category. To rephrase, a farmer household is almost as likely to be in the over-indebted category as a non-farming one. A farmer household in 2003 was 3.52 percentage points more likely to be over-indebted, in relation to 1992; while a farmer in 2013 was nearly 9 percentage points more likely to be in this category. A farmer from Andhra Pradesh was more likely to be in over-indebted than any other state in the country.

Negative correlates to over-indebtedness
Being dependent on debt to a high extent can prove to be physically, mentally, economically, and environmentally detrimental to the households themselves and to rural communities at large. There is scholarly work which shows that those who are in debt tend to show poorer psychological health indicators than those who are not. In rural India, being unable to clear one’s debt is negatively correlated with social status.
During my conversations with a farmers’ family in Sangareddy district, Telangana, I was told of an instance where a farmer was looking to borrow some money so that he could repay another loan that he had taken from a public sector bank. However, the moneylender he regularly depended on refused to lend him any further amount until he had cleared an outstanding loan. Despite pleas, the moneylender did not relent. Fearing a loss of face, this farmer committed suicide.
Instances of informal moneylenders or representatives of micro-finance institutions publicly shaming people who are unable to pay their monthly instalments; or of public sector banks seizing assets like livestock in lieu of unpaid loans are also not unheard of. From my conversations with farmers in both Telangana and Andhra Pradesh, such incidents are seen by farmers as bringing shame to them and can push them to take drastic steps.
Another consequence of high debt is that farmer households are forced to work under increasingly stressful conditions for meagre pay. A recent article in The Wire mentions how farmers migrated from Odisha to Sangareddy, Telangana to work in brick kilns for extremely meagre pay, so they could clear their loans back home. Such stories are heard even in Andhra Pradesh and Telangana. Farmers in Anantapur narrated that if the rains were sub-par even in one season they would have to migrate to either Bangalore, Tirupati or even Kerala, in search of daily labor so that they can keep servicing their loans back in their village.
In many cases, the moneylenders determine what crops are to be grown, how they are grown, what inputs are to be used, and where those inputs have to be procured from (mostly from the moneylender himself). This forces the farmer to cede her agency over farming decisions. What also became apparent to me was that mounting debt exacerbates the unviability of agriculture as an economic activity and pushes farmers into a seemingly endless spiral of debt.
Farmers need credit to access the other means of agricultural production, viz. seeds, fertilisers, draught power and so on. In a place like Anantapur where rainfall has becoming unpredictable and where chances of a cropping season failing are high, farmers tend to depend on debt not only to fund agricultural inputs but also their daily needs like food or monthly groceries. This piles on already high debt burdens. And as the debt burden mounts, farmers are forced to resort to more intensive agricultural practices which in turn forces them to depend on debt to fuel such practices.
As I conclude I am reminded of a phrase in Telugu that often cropped up during my conversations with farmers in Anantapur: “appe teerchaalana, thinde tinaalana” – literally translating to “with the limited money that we have, should we feed ourselves or spend it clearing our loans?” This statement encapsulates the frustration that farmers experience – of having to make hard choices between servicing a loan and saving face, and the future prospects of getting another loan or surviving and meeting family expenses.
In the process of trying to find the balance between these competing demands, farmer households often find that their horizons of planning have shrunk and they are forced to deal with the here and now, disregarding future costs and consequences. Many times, this results in them making decisions like having their children drop out of schools, giving up agriculture altogether, leaving their families behind and migrating to cities to work on a construction site under hazardous conditions, or taking one’s own life. This shrinking of choices is perhaps the most tragic outcome of indebtedness.
The author would like to thank members of All India Kisan Sabha, Anantapur and Sangareddy, and to Rahul M. of PARI.

Sandeep Kandikuppa is a Doctoral student at the University of North Carolina, Chapel Hill.

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