Rs 600 Billion Bailout for Farmers in India?

Yesterday the Finance Minister of India P Chidambaram in his Budget speech announced the single largest bailout for the farmer community in India's history. Of the Rs 600 billion which was earmarked for the bailout, about Rs 500 billion of that would go towards waiving out all the loans ,taken from scheduled, commercial and cooperative banks, by small and marginal farmers holding less then 2 hecters of land. The other Rs 100 billion would go towards a one time settlement (OTS) for all other farmers, where a 25% rebate will be given on the loan if the farmer agrees to pays off the other 75% in full.
On the surface, this seems like a very good idea that would help address and perhaps ease the financial distressing situation that many farmers are in which has led many of them to commit suicides. But the real question is will this bailout effect the farmers who are most in need.
In an after budget press conference when asked about how the loan waiver would affect the farmers who have taken out loans from private money lenders instead of banks, the FM himself was unequivocal when he said "It doesn't". And here lies the crux of the whole issue. According to some estimates, two third of all farm debt is not with commercial banks but with private money lenders. So does the bailout impact only one third of the farmers and ignore the rest. According to the experts, most of the distressed farmers are in the latter two thirds shackled in a revolving debt trap with private money lenders. If the bailout does ignore the majority two thirds, how far will it go in addressing the issue at the heart of the matter. Also what is to prevent the corrupt babus and well connected so called super rich farmers i.e. film stars from milking the system to further their ends.
As Rajiv Gandhi ones famously put it, "Out of every Rs 1 announced in a welfare scheme, only 15 paisa reaches the intended recipient". According to the FM, about 40 million farmers will benefit from this scheme. If what Rajiv Gandhi said still holds true, then each of these farmers will get on average of about Rs 2250. Forget about the majority two third, even the minority one third will get a tenth of what an average software developer makes in a month. So where is the bailout Mr Finance Minister?

Also Read:
Outlook India has a very good article on the same issue.