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| AGRICULTURE TRIBUNE | Monday, April 28, 2003, Chandigarh, India |
Cheap farm credit distant dream P.P.S. Gill THE Punjab Government is in a dilemma. While it is conscious of the high rate of interest at which the Punjab State Co-operative Bank and the Punjab State Co-operative Agricultural Development Bank advance credit to the agriculture sector, it is not able to do much about the high cost of management of these banks. And unless the cost is cut, the rate of interest cannot be reduced on loans given to farmers. Staff cost is the drain Kangra tea exports get cold Bt cotton: Monsanto responds Customised
farming knowledge |
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Cheap farm credit distant dream THE Punjab Government is in a dilemma. While it is conscious of the high rate of interest at which the Punjab State Co-operative Bank and the Punjab State Co-operative Agricultural Development Bank advance credit to the agriculture sector, it is not able to do much about the high cost of management of these banks. And unless the cost is cut, the rate of interest cannot be reduced on loans given to farmers. It is estimated by a Panjab University economist, Prof H.S. Shergill, that the present rural indebtedness is around Rs 9,000 crore, as compared to Rs 5,700 crore in 1995-96. Of this, the share of commission agents is around Rs 5,500 crore, though they also give loans at a still higher rate of interest. Thus, farmers remain deep in debt. As per the co-operative philosophy and law, technically, farmers are "owners" of co-operative banks. Yet, farmers’ financial "exploitation" goes on, given their illiteracy and indebtedness. Caught as they are in a Catch-22 situation, the clutch of co-operative banks and commission agents is making them restive. This situation may lead to social tension in rural Punjab. It is in view of this that the rate of interest on co-operative loans must be reduced. Farmers are still being swayed from co-operative banks to private moneylenders, mostly commission agents. The two have had a symbiotic relationship for generations, though that, too, is now weakening. Despite commission agents charging a much higher rate, farmers still prefer them. This is corroborated by Nabard officials, who say that in the crop loan category the share of co-operative banks is at present down to 56 per cent from the 67 per cent in 1999. Even in the long-term investment category, the share of co-operative agricultural development banks is down to 4 per cent from 7.5 per cent in 1999. This has resulted in lower credit off-take from co-operatives. Insiders admit that even the human resource in co-operatives banks is poor as compared to commercial and private banks, resulting in poor credit appraisal and low-quality credit. Also, at least 70 per cent of the managerial-level officers in co-operative banks are simple matriculates. Against a rate of interest of 13.5 per cent on crop loans charged from farmers by the co-operative banks, commercial and regional rural banks make advances at 10 to 11 per cent. Similarly, for tractors, co-operative loans are available at 12.5 per cent while commercial banks charge 10.75 per cent. Unlike in commercial banks, a farmer has to keep funds in co-operative banks equal to 3 to 5 per cent of the loan amount in the form of share capital, on which he rarely gets any dividend. If the cost of such funds invested by a farmer in a co-operative bank is also considered, the rate of interest on loans would increase by 0.5 to 1 per cent. This is so in spite of the fact that Nabard gives cheap loans at 6 per cent to 7 per cent to co-operative banks for advancement to farmers. Thus, the benefit of huge sums of money available in the co-operative banks at cheap rate of interest is negated by the high cost of management, which is unwittingly borne by the farmers. This situation, say Nabard officials, has had a telling impact upon the off-take of credit from co-operative banks. It has also affected recovery, which is declining every year. Recovery in primary agricultural development banks is now down to 40 per cent (from 80 per cent in 1996), while in commercial banks it is more than 70 per cent. This is despite the fact that co-operative banks have at their disposal all the "coercive" methods to effect recovery under the Punjab Co-operative Societies Act, 1961. Like commercial banks,
co-operative banks also have non-performing assets (NPA). Countrywide,
it is estimated, the co-operative banks have NPAs worth Rs 6,000
crore. In Punjab, the NPA net of co-operative banks is around Rs 280
crore. The Centre had given away Rs 18,000 crore to commercial banks
to clear their non-performing assets. But it is dragging its feet on
giving similar concessions to co-operative banks. Thus, the high cost
of management in co-operative banks has to be drastically reduced to
lower the rate of interest on credit to farmers. The government
promises to do so. Can it, given the well-paid employees backed by a
strong union? |
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Staff cost is the drain THE government has decided to bring on a par the pay scales of the co-operative bank employees with the government employees. This is only half a step. The proposed parity will not affect the present employees, who will continue to draw their salaries, allowances, perks, etc., as per the existing scales. Yet, the bank unions, which rule the roost, are opposing this decision. As a protest, employees are already wearing black badges. This, despite the fact that their counterparts in boards and corporations have already faced a cut in salary and allowances, when the government brought about parity in their pay scales with its own employees. Future recruitment in co-operative banks is on the hold. Therefore, the need is as much to right-size these banks—which have about 7,600 employees in 885 branches—as to reduce the pay scales of an employee on promotion. Such a step will show results only over a period of time.
The cost of management in co-operative banks is more than 3 per cent, as against less than 2 per cent in commercial banks and around 2 per cent in private sector banks. In fact, ignorant of ground realities, elected representatives (farmers) on the Board of Directors of these banks have opposed the government directive on parity in pay scales, while the government nominees gave their dissenting notes. Consequently, the decision to effect parity in pay scales was circulated by the Registrar, Co-operatives. Most of the present mess is the creation of the government itself, which it now intends to clear. Since the mid-80s, the government had adopted a "soft" attitude on this issue and successive Registrars had adopted a policy of appeasement whenever confronted by strong unions. Thus, despite the best of intentions of the government, the rate of interest on loans to farmers may not be lowered. However, if the pay scales are brought on a par with government employees, it could bring down the rate by 1 to 1.5 per cent, say insiders. As it stands, it is the farmer who foots the employees’ fat salary bill and in return gets sucked into debt trap. The employees of the
Punjab co-operative banks are the highest paid in the country (See
table). Even the rate of increment for employees of co-operative banks
is almost double that of government employees. The co-operative
employees also get paid Rs 7,500 every year as ex-gratia, besides
other allowances and special pay that the government gives to its own
employees. Also, under the Payment of Gratuity Act, 1970, for the
government employees the upper limit is of Rs 3.5 lakh, while in the
case of co-operative banks there is no limit. The co-operative bank
employees also have another advantage over commercial banks and
government employees. They are entitled to 20 days’ casual leave per
year in addition to Saturday being counted as only half-day leave,
thereby, increasing their causal leave to 40 days, if availed on
Saturdays. For employees of the government and commercial banks, there
is only 12 days’ casual leave, without the allowance of counting
Saturday’s casual leave as half-day leave. PPS |
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Kangra tea exports get cold NOTWITHSTANDING the fact that there is a bumper tea crop in Kangra valley this year, there is no buyer for it in the international market at Kolkata. Over 5 lakh kg of tea has piled up in the valley and with brokers in Kolkata over the past year. A leading broker from Kolkata says tea from Kangra under the trademark of "Himalayan Teas" was put up for sale in open auction several times but it failed to attract buyers. The fall in the demand for Kangra tea has not only caused concern among the tea growers but also affected the financial health of four cooperative tea factories at Palampur, Baijnath, Bir and Sidhwari. Out of these, three have already been closed for want of working capital. Only the one at Palampur is working, which has also suffered losses of over Rs 3 crore in the past three years. Whatever capital the state government had provided to these units has been exhausted. Tea growers blame the discontinuation of various incentives being given by the government. Earlier the marketing and development of the tea industry was being looked after by the State Industries Department. However, the last government attached tea cultivation to the agricultural department, which failed to deliver. Subsidies on fertiliser, implements and other inputs were also curtailed. Mr Kunj Behari Lal Butail, a leading tea grower of the valley, says the industry received two major setbacks in the past three years. One, the Government of India signed a pact with the WTO and tea was included in it. Two, the state government discontinued the assistance being given to the growers for the past 20 years. Under such circumstances it has become very difficult for tea growers to maintain their gardens, he explains. In the absence of sale, no payments have been made to the growers by the cooperative tea factories. In many parts of the district, tea growers are have been left with no alternative but to stop tea cultivation. In the case of many small growers, tea cultivation has been replaced by various kinds of grasses, which have proved more profitable, while bigger growers have sold their holdings for non-tea plantation purposes. In certain areas tea gardens have been converted into concrete jungles with housing colonies coming up. Mr Butail points out
that the cost of production of tea is much higher in India as compared
to African countries and Sri Lanka, which is also a reason for India
losing out in the international market. However, quality wise Indian
tea is much superior. He says the government should impose heavy
import duty on tea and give incentives like waiver of excise duty,
sales tax and road tax. |
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Bt cotton: Monsanto responds THIS refers to the article "Don’t go in for Bt headlong" by Gursharan Singh Kainth, published on this page on April 21. A comment such as "Multinational companies are not the most ethical organisations in the world" is discriminatory. In all its operations, Monsanto adheres strictly to the government norms laid down in individual countries. We are proud of our strict code of ethics and have pledged to maintain integrity in all our dealings. Some of the elements of our pledge are dialogue, transparency, respect and sharing. The comment that approval was hurried and "all scientific norms were thrown to wind" is unacceptable because Mahyco went through a long and laborious process before receiving commercial approval. Ours are among the most stringent guidelines in the world for any GM crop to gain commercial approval. Any company applying for approval for a GM product has to conduct rigorous bio-safety, nutritional, food and environmental safety studies. There has to be a detailed agronomic evaluation of the crop. Small-scale and large-scale field trials have to be conducted across various locations under various climatic conditions. The data generated from these trials and studies has then to be submitted to the Indian regulatory authorities, who then further conduct their own studies and tests. This process typically takes about five years. Monsanto has licensed its Bt cotton technology to Mahyco (Maharashtra Hybrids Seeds Company). Mahyco introduced the Bt gene into its own Indian germplasm and modified the hybrids best suited for Indian geographies. Mahyco had applied to the Government of India for Bt cotton approval; they have worked over the last six years, in compliance with the regulatory requirements stipulated by the authorities to bring the benefits of Bt cotton technology to farmers in India. The three hybrids that have received clearance from the government are not limited by any geographical restriction. The reason they are being sold in India’s central and southern cotton growing states is because these hybrids are optimal for those states. As for the refuge seed being provided as a "marketing scheme," the author has failed to do his homework. Refuge planting is a government requirement and Mahyco Monsanto Biotech (MMB) is required to supply 120 gm of conventional hybrid seed along with every pack of Bollgard seed. Refuge planting is part of insect resistance management and the process was explained to Bt cotton farmers in an education process, using audiocassettes, video and print media and also through personal interface. Even detractors of this technology admit that more that 90 per cent of the farmers who have used this product have followed the refuge requirement. Clearly, this is a size-neutral technology, which is built into the seed and can benefit even India’s small landholders. We have found that farmers are enthusiastic about Bollgard cotton because of its performance against bollworm, fewer sprays and the much bigger yields, and, therefore, much greater incomes than with the conventional varieties. A survey conducted across Maharashtra, Karnataka, Andhra Pradesh, Gujarat and Madhya Pradesh after the first year of commercialisation of Bt cotton revealed that Bt cotton-growing farmers experienced a yield increase of 30 per cent, a 65-70 per cent reduction in the use of pesticides and an increase in income of about Rs 7,000 per acre. Ranjana Smetacek,
Director, public affairs, Monsanto,
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Customised farming knowledge TO help the farmer meet the challenges of the new competitive agriculture, education through awareness camps, training, demonstrations, radio talks, etc., is being undertaken for skill improvement. However, a majority of farmers, owing to one reason or the other, are not able to follow the recommended practices. The introduction of new cropping systems, like the cultivation of aromatic and medicinal plants or other high-value cash crops, in place of traditional crops, has made farmers spend more time learning than practising their trade. A new concept may help the situation. Dubbed "custom-hire services," it is the hiring of services of specialised personnel on payment for specific agricultural operations. A simple example may be hiring a tractor, maize sheller or mechanical harvester for agricultural operations on payment. This process needs to be evolved by involving unemployed educated rural youth, who can better feel the changing scenario of agriculture. For custom-hire services, rural youth can be trained on a number of agriculture-based activities like selection and arrangement of suitable seed/planting materials, handling and spray schedules of agro-chemicals, crop nutrient management, information regarding market fluctuations and post-harvest management. Krishi Vigyan Kendras provide specialised training to farmers and rural youth. Registering these trained youth for custom-hire services by government or non-government agencies will lead to more scientific intervention along with increasing employment avenues. Establishing plant clinics thereafter could improve agriculture-based activities. If promoted, such custom-hire services may become an efficient tool for popularising contract farming. Sanjeev Sandal, B.B.
Kanwar and Ashok Thakur |
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