When Sharad Pawar, the Honorable Union Agriculture Minister was asked in the post budget press conference, what would happen to farmers who have borrowed money from private money lenders, his response was “I appreciate the media’s concern about the fate of farmers who have taken loan from private moneylenders. According to our information, most of the moneylenders operating in rural areas don’t have the licence for the same, hence their moneylending business is illegal and farmers are under no legal or moral obligation to repay these illegal loans.”
Most of the farmers who borrow from these private money lenders are small and marginal farmers who are not always eligible for loans from private and co-operative banks. So their only source of readily available cash to buy necessary materials, be it seeds for planting or farming equipment, are these private money lenders. And most of the times when these farmers borrow money, they borrow it against a collateral which many times will be the very land they are tilling. So if the farmer follows the advise of the Honorable Union minister and does not pay the lender back, wouldn't the lender take possession of this collateral. What is to stop the lender from doing this. Also wouldn't it make the situation worse now that the farmer has lost his only source of livelihood, his land.
To solve the problem of the private money lenders, paying them not back would be counter productive and just worsen the situation. It would dry up the only source of credit that these farmers have right now. Instead increasing the sources of credit availability,and making credit available on affordable terms with private players involvement would bringg a sense of legitimacy to the whole process and be beneficial to the parties involved in the long run. This would be the ideal first step.
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I am surprised how a veteran politician like Sharad Pawar can make a statement that is so far removed from reality. Its as if he is oblivious to the microlending field in agribusiness.
ReplyDeleteLike you pointed out, the government ought to start recognizing these small time moneylenders and bring them under an umbrella of legitimacy. But these folks wouldn't be amenable to govt regulation coz they would risk the lucrative interest rates that they are able to currently fleece out of the poor farmers. The solution to this problem??
The government ought to get into microlending. I am sure that they are already doing this but I would like to see them expand their services to force the private lenders to reduce their interest rates. The govt can simultaneously make it easier for private moneylenders to obtain a license or whatever is required to get "legal" in Sharad Pawar's eyes!!
I don't know if you can tell, but I am getting my inspiration from the case of the Indian cellphone industry. THe govt (MTNL) stepped into the cellphone market and that was the end of the Rs 4/min call. Now as everyone knows, incoming calls are free in India!! hooray for govt interference!!
I do agree that the cell phone rates have come down, but I do not think it is because of government managed MTNL. It is more because the government opened up the telecom sector to "private enterprises". Competition between different private enterprises has brought down the prices. This is a perfect example of free market at work.
ReplyDeleteRemember the days when people had to wait months to get a regular land line. Competition from private players has also forced the government to be more efficient. Now you will probably will get a phone connection within a few days.