The Maharashtra government’s much-publicised loan restructuring scheme for farmers in the state, which it claimed would be a big step in allowing drought-affected farmers to access credit for the kharif season this year, has turned out to be a damp squib.
In March, several ministers were quoted in the media as saying that because of drought in several areas in Maharashtra, farmers who took crop loans since 2013-’14 and found themselves unable to repay them, would be permitted to restructure their loans. This would allow these farmers to get fresh loans for the upcoming sowing season, which started in June. Media reports from April and May also suggested the government was restructuring loans for three years.
However, the government resolution dated April 26, mentioned that only crop loans from one year – 2015-’16 – would be eligible for restructuring.
The defaulter taint
There are thousands of farmers in Maharashtra who have defaulted on loan repayments since 2013 thanks to consecutive years of drought. Thus, this season, in places like Marathwada farmers don’t have the cash required to sow new crops. Given that several indebted farmers sold off cattle, gold and jewellery to tide them over during past drought years, fresh loans are often the only way farmers can sow new crops. It doesn’t help that sowing costs have risen due to inflation.
Apparao Chinchole from Osmanabad district’s Khudawadi village had taken a Rs 2 lakh crop loan from the State Bank of India for the 2013 kharif season.
Chinchole paid the interest for that loan that year and got the loan account renewed in 2014-’15, as is common practice in these parts.
Farmers do this on occasions when they can’t repay the principal amount. This allows them to keep the account running so that they avoid being listed as defaulters. A running account makes farmers eligible for a fresh crop loan; defaulters don’t get fresh loans.
However, in 2015-’16, Chinchole could not afford even the interest, and he was marked as a defaulter.
“The moment we go to the bank, the officials heckle us, telling us we are defaulters and they will not give us any loan,” said Chinchole.
Some bank branches have even issued written statements expressing their inability to grant crop loans.
Low demand for restructuring
According to data available with the divisional commissioner’s office in Aurangabad, although 7.8 lakh farmers are eligible for loan restructuring, very few applications have come in and just 1.40 lakh applications have been processed across eight districts. In fact, restructuring is complete in only 18% of cases.
An official in the Latur District Cooperative Central Bank said only 11 farmers from across the district have applied to restructure their loans.
Farmers are loath to restructure their loans because of the crippling interest they have to then repay.
In Maharashtra, farmers do not have to pay interest for crop loans up to Rs 1 lakh. Thus, the majority of farmers avail of these interest-free loans, which are usually given for a year.
“Restructuring is a loss-making exercise for the farmer,” said Annasaheb Patil in Latur’s Wadwal village.
This is because restructuring loans means converting the principal of a no-interest crop loan into the principal for a five-year high-interest loan. This puts a heavy burden on farmers, who would rather do without it.
“I had taken a loan in 2013 for sugarcane,” said Chinchole. “Then, credit available for the crop was around Rs 32,000 for 1 hectare [2.5 acres]. Today, even if I take a loan on my entire seven acre plot for soyabean, I will not get more than Rs 20,000-25,000. Plus the restructuring will mean I will have to pay higher interest for the next four years.”
VB Chandak, chief officer (administration and accounts), at the District Central Cooperative Bank in Osmanabad, displayed empathy rarely seen among bank officials and bureaucrats with regard to the plight of drought-hit farmers.
“The person who was unable to pay 0%-2% interest [on the original loan] will just not be able to pay 6%-7% interest [on the restructured loan],” said Chandak.
His awareness of the stress the four-year long drought has placed on the average farmer can perhaps be attributed to the fact that he is from a farming family and himself works on the family farm during weekends.
Banks being difficult
Strangely, eligible farmers willing to restructure their loans are also finding it difficult to get fresh ones. These farmers accuse banks of delaying the restructuring process.
“They say I can’t get a loan unless my previous loan is restructured,” Prasad Gogave told this correspondent at a tea stall in Osmanabad district’s Naldurga village. “I gave in my application for restructuring one and a half months ago. But every time I go to the bank, they say the process isn’t complete yet. And they continue denying me a fresh loan.”
In further evidence that the Devendra Fadnavis government isn’t really serious about providing relief to farmers, in May, the state government issued a government resolution that extended the deadline within which banks were required to complete the loan restructuring process. From April 30, the deadline was shifted to July 31.
The sowing window for the kharif season in Maharashtra lasts till mid-July, at the most the third week of July, which is already upon us.
Thus, this government order effectively gave banks an additional reason to keep denying loans to farmers, possibly till the need for credit was over which coincides with the end of the sowing season.
Moneylenders move in
The denial of loans is pushing farmers into the arms of private moneylenders, micro-finance institutions and non-banking financial institutions that operate without regulations.
Incidentally, scores of such institutions offering easy loans have opened shop in district headquarters in Marathwada the last two to three years. Some have even reached the taluka level.
Last heard, they were all extracting a steep interest for easy credit: land, vehicle, house, tractor – anything on mortgage.
The writer is principal correspondent with The Statesman and a PhD scholar at the Centre for Studies in Social Sciences, Calcutta.