The State government’s scheme for waiver of crop loans extended by cooperative societies has triggered a debate on the efficacy of such credit.
This assumes relevance as the Reserve Bank of India, in a study during 2019, hinted that Tamil Nadu was among those States where the possibility of diversion of credit for non-agricultural purposes existed. The bank made the assessment, using the data for 2015-2017 which revealed that in Tamil Nadu, the ratio of total agricultural credit outstanding in relation to its agricultural gross domestic product (GDP) was about 170% -180% . Again, using the data for 2014-16, the bank concluded that Tamil Nadu got the credit four times the value of input cost requirement.
Another finding was that contrary to the trend of Kisan Credit Cards (KCC) emerging as a preferred credit instrument all over the country, 88% of crop loans was disbursed in the State outside the scheme, which meant that not all the loans were lent against the production of land documents. The general practice has been to issue the loans against the pledge of gold jewellery.
Normally, the cooperative institutions account for 10% of the total amount of crop loans given to agriculturists every year. Considering the disbursal of around ₹9,700 crore through primary agricultural credit cooperative societies (PACCS) this financial year, it is estimated that about ₹1 lakh crore would have been issued to the farmers, mostly through commercial banks.
If repaid within the stipulated period, usually a year, the loans carry nil interest rate in respect of the cooperative societies and 4% in the case of banks.
Officials, who are observing the pattern of farm credit over the years, acknowledge that a substantial portion of the crop loans given by all kinds of financial institutions is being used as “consumption or personal loans”. An unintended positive effect of this practice is that this keeps the rural economy going. However, as the purpose behind giving the loans is not getting served, it would be better to provide financial assistance directly to all farmers, regardless of the size of landholding. In other words, there can be an improved version of the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), an income support scheme.
P. R. Pandian, a farmer-leader based in Mannargudi, concedes that the existing credit arrangement benefits more “non-farmers,” who own farmlands but are not dependent upon the farm sector for livelihood, than small and marginal farmers. It is due to the “exclusion of small and marginal farmers” that the agri GDP is far below the loan outstanding.
Arupathy P. Kalyanam, national organiser of the Self-Sufficient Green Village Movement, suggests that funds allocated under the PM-KISAN scheme and those provided by the Centre and States for the crop insurance scheme be merged with one another. An enhanced amount of support, which will be the minimum assistance in the case of insured farmers, can be given to the farmers.
Notwithstanding the criticism about the working of the cooperative sector, Seeniappan, a farmer of Dharmapuri district and M. Duraisamy of Namakkal, say that these days, the societies give the loans after ensuring that loanees have the KCCs.
Both have taken crop loans from their respective PACCS and have been covered under the State government’s waiver scheme. They also assert that the incidence of “under-serving but well-connected” persons getting the loans through the societies in general is negligible.