Debt Relief for Farmers

The Union government is set to unveil a debt relief package for farmers, according to sources in the Agriculture Ministry.

The scheme envisages writing off the unpaid loans of the small and marginal farmers and a big relief for the big farmers over four years.

As reported in today's issue of The Hindu. The total write-off is expected to come to around 30,000 crore. Compare this figure with the projected annual cost of the NREGP after full scale-up of around 40,000 crore.

If this money was actually going to go to the "small and marginal farmers" I would be all for it. "Marginal farmers" don't get bank loans though. (The article reports that the debt relief will be restricted to farmers with two hectares or less of land but I'm skeptical that this will be adhered to.) Ironically, the current farmer debt crisis this plan is a response to is largely the result of the government's priority sector lending policy, which dictates that 13.5% of banks' net credit must be in the form of "direct agricultural loans" (i.e. -- loans made directly to farmers). So now, after mandating that banks shovel credit onto farmers they are bemoaning the excessive debt levels of these same farmers and calling for relief.

At least they're not without a sense of humour.