March 16, 2008 / 3:04 PM / in 10 years

Farm bonanza fails to save India's dying farmers

PIMPARKHUTI, India (Reuters) - Just before India’s finance minister was announcing a massive farm bonanza last month, Narendra Totaram Chauhan quietly slipped into his cotton fields, opened a bottle of pesticide and drank it.

By the time the minister finished announcing a $15 billion loan waiver to give a new lease of life to millions of indebted farmers, the poison had snuffed the life out of Chauhan.

Over the next few days, while experts debated the efficacy of the staggering relief package, 60 farmers killed themselves, adding to a morbid official statistic: more than 150,000 Indian farmers committed suicide since 1997 unable to repay crop loans.

Though the crisis has been building for years, it presents a grave challenge for Prime Minister Manmohan Singh ahead of national polls next year. Farm distress and soaring prices helped turf out the previous government in 2004 and put Singh in power.

So, Singh’s government came up with a plan in the 2008-09 budget: cancel debts of small farmers with loans overdue on December 31, 2007, and which remained unpaid up to February 29.

The write-off came with riders. Beneficiaries can own up to two hectares (five acres) and only bank loans will be cancelled.

This has meant nearly a quarter of 40 million targeted farmers will not benefit because most borrowed from rapacious moneylenders or they own larger tracts of land.

“It’s a lose-lose proposition. This will not relieve farmers’ distress,” said Kishor Tiwari, who leads a campaign against farmers’ suicides across the arid plateaus of central India.

A map of the region, known as Vidarbha, hangs on Tiwari’s office wall. Its most prominent markings are a profusion of black skulls, forming a grim diagram of death.

Here, across the black cotton-bearing soil of Vidarbha, far from the gleaming malls that symbolize India’s economic boom, three million desperately poor farmers are fighting for survival.

SUICIDE EPICENTRE

More than 30,000 farmers have killed themselves in the region alone since 1997, making it the epicenter of India’s grimmest agrarian crisis in recent memory.

But relief is still a distant dream for a majority of farmers here because their average holding is just above two hectares. And small and marginal farmers will not benefit because most of them borrowed from moneylenders and relatives.

Its the same story in the northern Punjab state, considered India’s food bowl where rising cultivation costs are distressing farmers and leading many to commit suicide or to abandon farming.

As in Vidarbha, the southern states of Andhra Pradesh and Karnataka, which have reported thousands of farmers’ suicides, have dry croplands where large holdings are unviable for a farmer with limited access to irrigation and loans.

The National Sample Survey Organisation says almost half of India’s 100 million farming families are in debt.

India’s stunning urban-centric economic growth has bypassed the farm sector where growth is estimated to have slowed to 2.6 percent in the year ending March 2008, from 3.8 percent the year before.

Even though farming supports 60 percent of India’s 1.1 billion people, it contributes only a fifth of gross domestic product and accounts for only around 15 percent of bank credit.

Economic liberalization since 1991 has not helped either, with duties being gradually phased out and farmers facing tough competition from heavily subsidized European or American growers.

In the past, farmers used to sell to the government at a price fixed in advance, but that safety net was removed for cotton growers in 2005, leaving them at the mercy of middlemen who often browbeat them into unprofitable sales.

DEBT CYCLE

Bad weather and falling prices only compound debts.

Farmers are often underfinanced by banks, forcing them to turn to private lenders whose usurious interest rates bind them to a never-ending cycle of debt. Many also borrow unwisely to fund lavish spending or to pay for weddings.

Unable to get credit, Kisan Vithalrao Rahate used a plastic rope to hang himself from a tree at the threshold of his mud house in this Vidarbha village this month.

Rahate lost two batches of seed to a bad monsoon. Last year the crop was good, but still not good enough to pay off his debts and then subsist with his family of six until the next harvest.

“We fought over money but he never threatened to kill himself,” Kunda Kisanrao, his widow, told Reuters, squatting on a mud courtyard fenced with twigs and thorny shrubs.

Rahate carried two debts at the time of his death: a $350 bank loan and $1,250 borrowed privately to buy expensive genetically modified seeds and fertilizers to stay competitive.

A 2006 study by the Mumbai-based Indira Gandhi Institute of Development Research, found that 86.5 percent of farmers who took their own lives were indebted -- their average debt was about $835 -- and 40 percent had suffered a crop failure.

But Prime Minister Singh is defending his scheme.

“It will allow the fresh flow of institutional credit to farmers, it will clean up bankers’ balance sheets, it will stimulate economic activity in rural areas, and I don’t make any apologies on this,” he told the parliament this month.

The scheme will benefit farmers in the states of West Bengal in the east and Kerala in the south where sweeping land reforms left farmers with smaller holdings.

Agricultural scientists say state support for agriculture is imperative, calling for help with soil and water management, timely credit and subsidized seeds and fertilizers.

“In the name of liberalization state support was withdrawn completely and the vacant space has been occupied by the private sector in an unregulated manner,” said K. Nagaraj of the Madras Institute of Development studies.

In Pimparkhuti village, Rahate’s wife cares little for the hair-splitting debates. For her, it’s a struggle to survive with her two daughters and a 2-year-old son.

“My mind is blank, I don’t know what to do,” she said, staring at the tree her husband hanged himself from.

“He escaped his misery. Now what do we do?”

Editing by Simon Denyer

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