• The decision of the newly elected Congress-led governments in Chhattisgarh, Madhya Pradesh and Rajasthan to implement the party manifesto’s promise to waive farm debt has set off a controversy. 
• Opposition parties including the Bhartiya Janata Party (BJP) are opposing the farm loan waivers in Chhattisgarh, Madhya Pradesh and Rajasthan.
• On one hand political parties are saying that the decision not being implemented in a fair and effective manner, on the other side advocates of neoliberalism, paint this decision as the road to ruin.    

Misplaced Judgement

• Even though the decision of waiving farm debts is facing heat, but criticism is misplaced and everybody is missing the picture of farm distress which traps farmers into the vicious debt trap.
• Thus, before turning to the grounds cited for the debt waiver opposition, it is best to flag what these critics ignore or perhaps do not recognise.

Root causes of farmers distress

• First of all, in post-liberalisation euphoria since the 1990s, economic policy has been characterised by an overwhelming urban bias.
• The neglect of agriculture, which is a corollary, was visible on a number of fronts. Public investment in agriculture has been in long-term decline. 
• The extension system aimed at reaching new agricultural technologies and information on better farming practices to India’s agriculturists has either been dismantled or allowed to degenerate.
• Agricultural research, which served India well during the Green Revolution years, has been given inadequate attention and resources.
• Moreover, a “reform”-induced combination of trade liberalisation and domestic deregulation raised costs while inadequately compensating farmers with remunerative prices, damaging the viability of crop production and increasing farmer exposure to income volatility.
• More concerning is the fact that demands of agitating farmers are higher procurement prices that not only offer a margin of 50 per cent over costs but are also based on a definition of costs that include besides paid-out cost, the imputed costs of family labour, and imputed rent on land and the cost of capital. But the actual price which farmers are receiving is way too low.
• Disappointingly, even that price has not been on offer to farmers at large because of shortfalls in procurement, forcing farmers to often sell their produce at prices below the MSP.
• To sum up the Underlying the current crisis is a combination of rising costs, inadequate increases in MSPs and limited coverage of government procurement. 

Problem with the Debt waiver

• Biggest problem with the debt waiver is that we fail understand the objective of a debt waiver is not the resolution of the agrarian crisis but relieving distress. 
• Second problem is that not all farmers, especially the small and marginal ones, would benefit because they depend on moneylenders for credit and are excluded from an official waiver.

The right approach

• Farm debt waivers needs to be accompanied by measures to resolve the crisis, with public expenditure and investment, with incentives for productivity enhancing cultivation practices, and with stable and remunerative prices for farmers. The reason for today’s distress is that such measures were inadequately implemented or absent in the not-too-distant past.
• To help the small and marginal farmers an emergency debt relief commission that could examine the debt exposure of individual farmers and decide on which debt and how much of it would be cleared through a transfer to the creditor. This has been used with much effect in the past in this country as elsewhere.
• To mobilise the funds for farming sector government can garner additional resources by reducing implicit subsidies to rich taxpayers and corporations.
•  Additional revenues can also be generated with new or higher taxes on a range of targets, as for example on the huge wealth in the country, 77 per cent of which, according to Credit Suisse, is held by the richest 10 per cent. Given this potential for generating additional resources, borrowing, too, is an option since the servicing of that debt can be financed with new taxes.

Keynotes/keywords

• The article presents a fresh perspective over farm loan waivers.
• Please try to understand the theme of the article as a whole.
• Also, note down the facts like 77% of wealth of the country is held by richest 10%.
• From now on please whenever you give suggestions of setting up emergency debt relief commission.