M A I N   N E W S

Punjab’s farm debt up five times in a decade
Naveen S Garewal
Tribune News Service

Debt Trap n Average debt per farm household is Rs 1.39 lakh n 72 per cent of farm households are more heavily involved in debt n 17 per cent cannot pay back even the interest n 60 per cent of the debt trapped are small or marginal farmers

Chandigarh, December 2
Despite tall claims by successive governments of going out of their way to help the farmers in Punjab, farm debt in the state has increased five times over the last decade. Translated into numbers, Punjab farmers who were in debt amounting to Rs 5,700 crore in 1997, today have a debt liability of over Rs 30,394 crore.

According to a recently released study conducted by Prof HS Shergill, Director (Research), Punjab Development Studies at the Institute for Development and Communication (IDC), Chandigarh, the per farm household debt has become almost three times over these 10 years - from Rs 52,000 per household in 1997 to Rs 1.39 lakh in 2008. Further, per acre amount of debt has more than doubled over the same period from Rs 5,721 to Rs 13,062.

Nearly 72 per cent of farm households are more heavily involved in debt. Out of these around 17 per cent are in virtual ‘debt trap’ in the sense that they cannot pay even the annual interest on their loans from their current farm income. Shergill has said there was little chance of their repaying the accumulated debt from the current income.

Shergill a well-known economist and a former colleague of Prime Minister Dr Manmohan Singh, has concluded that the outstanding debt component has increased at a faster rate (14.13 per cent per year) than total farm debt (8.81 per cent per year) over this period. The mortgage debt, however, has declined over this period and may completely disappear in the near future. Interestingly, the debt of small and marginal farmers has grown at a slower rate (1.29 per cent per year) than the debt of medium and big farmers (2.71 per cent per year).

Almost 60 per cent of these ‘debt trapped’ farm households are marginal and small farmers and most of these ‘debt trapped’ farm households (86 per cent) belong to the Malwa region.

When compared to income generated from the farms, the debt amount has increased from being 68 per cent in 1997 to 84 per cent in 2008. Then as a proportion of the value of machinery owned by Punjab farmers, the debt amount has gone up from being 15 per cent in 1997 to 53 per cent in 2008. Despite steep rise in farmland prices in the state, the amount of farm debt is now (2008) equal to 4 per cent of the total value of farmland of the state, compared to it being 3 per cent in 1997.

Almost 30 per cent of the farm households of the state borrowed some money for long-term, non-productive purposes during the agricultural year 2007-08. The average amount of these loans per borrowing farmer was Rs 1.25 lakh, and the per operated acre amount worked out to Rs 12,826.

Northern Malwa farmers borrowed the highest amount of non-productive loans for reasons such as house construction and repair (44.38 per cent of total amount), marriages and social ceremonies (41.41 per cent of total), and purchase of durable consumer goods (25.41 per cent of total). The main sources of these loans were: commission agents and money lenders (54.48 per cent of total amount) and commercial banks (28.96 per cent of total). The share of Cooperative Credit Institutions in non-productive long-term loans was rather small, being only 3.36 per cent.

Interestingly, though not related to the study, but it may be added that the Punjab farmers received only 1.3 per cent of the national debt waiver in the form of relief announced by the union government in its last Budget.