Only 50% farmers benefitted from farm loan waivers since 2014: Report

Despite much hype and political patronage, farm loan waivers by States have failed to bring respite to intended subjects, sabotaging credit discipline in select geographies and making banks/FIs (financial institutions) wary of further lending, says a report by SBI.

The report also says that simplifying the norms for 'Review/Renewal' mechanism with repayment of interest alone should thus be the top agenda of the regulator.

Since 2014, out of 3.7 crore eligible farmers, only 50 per cent of farmers received the amount of loan waiver (till March), though in some of the States more than 90 per cent of farmers received the debt waiver amount. Essentially, a 'self-goal' inflicted by the State on its subjects!

Kisan credit cards (KCC) scheme, continuously improved and revamped by GoI has been instrumental in bringing a large number of farmers under the ambit of formal credit mechanism at subsidized rate of interest from institutional players (presently 7.37 crore active KCCs).

However, current regulatory norms allow KCC renewal every year with full repayment of principal and interest unlike other CC/OD loans where interest servicing is sufficient for renewal. The renewal for KCC loans with repayment of both principal and interest only makes the farmer eligible for interest subvention and an enhancement of 10 per cent in the limit every year. Given that each review could take up to 45 minutes, juxtaposing it for 7.37 crore KCC implies banks may have to spend a cumulative 23 lakh man days to complete this process every year that otherwise could have been used for fresh lending to agriculture.

Thus simplifying the norms for 'review/renewal' mechanism with repayment of interest alone should thus be the top agenda of the regulator, as also deepening use of technology by banks (using satellite imagery data for real-time monitoring of crops, or utilizing third party approved agents for submitting field inspection reports through video-calling facility and separating the review from the Core Banking System, making it app based through digital channels) to ensure speedy 'review and renewal' practices.

The agrarian economy, central to country's aspirations to carve a niche place in a changing world order, has undergone some tectonic shifts of late, emerging as the anchor for broader economy during the tumultuous days of pandemic.

Growth in the Agriculture sector was positive in FY21 even as all other sectors recorded negative growth. This trend has continued in FY22 (PE) too. This has, in turn, led to a higher share of agriculture in the country's GDP since March 2019.

Promoted through right policy prisms, agri exports zoomed upwards of $50 billion in FY22 and look all set to stake claim to a sizeable opportunity even as the country aims for $1 trillion merchandise goods export by 2030.

The eating habits and nutritional focus by different population groups are undergoing changes buoyed by shifting socio economic-cultural patterns, thereby ensuring upgradation/rotation in cropping pattern across the country even as food security becomes central to a growing population imbibing varied demographics.

SBI group's internal economic research group's study based on primary data of SBI agri portfolio across States containing granular data of various crops from agri-intensive branches analyses the change in income of farmers over the last five years.

In principle, SBI has used a well-spread, well-represented, and probabilistic sample to estimate the change in income from FY18 to FY22 for all segments of farmers, large to small to marginal ones. Its statistical inferences using 't-test' and 'F-test' as also 'Lorenz Curve' probing increase in average income and diminution in inequality provide validity to their key findings.

Farmers' income doubled in FY22 as compared to FY18 for certain crops in some States (like Soyabean in Maharashtra and Cotton in Karnataka) while in all other cases it rose in the range of 1.3 -1.7 times. Interestingly, increase in farmers' income engaged in cash crops has been more prominent compared to such farmers growing non-cash crops. Also, allied/non-farm income showed significant increase of 1.4 -1.8 times in majority of States in tandem with farm income during the same period. This substantiates the trend as per the 77th National Sample Survey that source of farmer income has become increasingly diverse apart from crops.

SHGs, crucial in imbibing an entrepreneurial spirit among farmers at the lower band of spectrum, in particular women have a high concentration in select States and within those states also they remain confined to certain districts though their performance in Aspirational Districts of NITI Aayog has been noticeable of late. Launched by Prime Minister in January 2018, the Aspirational Districts programme aims to quickly and effectively transform 124 most under-developed districts across the country.

"We believe that this programme has been a huge success in just a period of four years at least in respect of SHG financing. Of the total SHG financing in the country, 18 per cent outstanding belongs to these 124 aspirational districts with share in excess of 30 per cent in select districts," says Soumya Kanti Ghosh, SBI group's chief economic advisor.

Minimum Support Price (MSP), increasingly aligned with market linked pricing and increasing by 1.5-2.3 times since 2014, has been pivotal in ensuring passage of better prices to farmers and has led to optimal price discovery, setting 'floor price benchmark' for multiple crop varieties (23 as on date), also encouraging farmers to gradually move over to crop varieties that have better yield/value.

A Livelihood Credit Card (LCC) encompassing a multi-purpose loan covering a rural household's entire activities for ease of doing KCC: At least targeting a million farmers to start with further reinvigorating rural demand.

Forming a comprehensive omnibus Credit Guarantee Fund Trust-Agri & Allied Sectors (CGFT-AAS) will act as a credit accelerator and ensure coverage of all fresh Agri loans including AVCF. Our estimates show that a properly operational CGFT-AAS scheme could usher in an additional Rs 5.25 lakh crore agri credit with only an additional capital requirement of Rs 11,320 crore and a minimal fiscal support of Rs 6,450 crore for the 5-year period ending 2027! Myriad government welfare schemes may be brought under a single roof for real-time monitoring, with participation from Digital Agri mitras (BC network and Digital Didis can be source points for this) to proliferate them. Technology, satellite imagery, weather prediction, crop insurance, start-ups participation can bring desired innovation going ahead.