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23 Jan 2019·
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Farm Sector is Safe in Naveen’s Hand

KALIA: Odisha CM Tries to Revive Rural Economy by Propelling Farm Sector

Bhubaneswar: The plight of the farmer always finds itself at the center stage in the run up to any election in India. Politicians of every stripe make promises of farm loan waivers ahead of every election. But barely heard are promises to usher in long term agrarian reforms. Proving all these wrong, the Odisha Chief Minister Naveen Patnaik has shown the new path of agrarian reforms to enhance the productivity of the farm sector and revive the rural economy.

Krushak Assistance for Livelihood and Income Augmentation - KALIA Naveen Patnaik has taken a historic step which will further accelerate agricultural prosperity in the state and reduce poverty. The Odisha CM introduced a farming assistance scheme worth more than Rs 10,000 crore on December 21. Believed by many to be a measure to counter the larger political rhetoric around farm loan waivers set off by the Congress, the Biju Janata Dal government projected the scheme as a long term step to address rural distress, as against one-time relief. The scheme, if successfully implemented, will benefit 92% of the total farming population or around 74 lakh households in the state. The amount will be distributed over a period of three years, following which it will be reviewed for improvements. Under the scheme, every farming household will get an annual financial assistance of Rs 10,000 (distributed in two instalments for rabi and kharif seasons), life insurance cover of Rs 2 lakh and an additional accident cover of Rs 2 lakh. Apart from small and medium farmers, the benefits will also be extended to sharecroppers, who are the actual cultivators, and landless agricultural labourers – an aspect unique to the scheme.

Family loan waiving Vs KALIA Farm loan waivers may act like an immediate relief for the financially distressed, debt-ridden farmers. But it's not an optimal solution in the long run. Money is transferred from tax payers to the borrowers. This will obviously cut down the allowances for education, health care, infrastructure, etc. Moreover, loan waivers cause a moral hazard and disincentive repayment of loans and interests. Just think how a farmer who has paid the loan will feel when a loan waiver is announced. This will have adverse bearings on credit discipline. In case of KALIA the financial assistance will also cover those who had to give up farming due to old age, disability or some disease.

In long run it will create either a large deficit in government’s budget or it will highly impact the government’s social scheme. Each government has limited income which it collects from taxation and other resources. The loan amount is so humongous that it will drive away a huge share from the government’s budget. The government will either have to cut expenditure on other projects or will have to go for huge fiscal deficit Evidently driving money from these schemes to meet the loan waive will have two fold impact. The other option of fiscal deficit will also have a long term impact as then government will have to issue bonds or take loan, both of which will increase the already due amounts to be paid and increase the burden of interest payable.

KALIA is not merely a farming assistance programme, but a comprehensive method to revive the rural economy. Ten lakh landless households will be supported with a unit cost of Rs 12,500 to take up activities like goat rearing units, mini layer units, duck units, fishery kits for fishermen and women, mushroom cultivation and bee keeping. Loan-waivers are not designed to solve the low income problem. If governments are unable to ensure that rural incomes go up, rural indebtedness could soon be back at the same level where it stands now. Loan waivers will be necessary once again, and the cycle will be repeated. There are about 32 lakh cultivators in the state. Of these, about 20 lakh have availed of crop loans. Of the 20 lakh loanee farmers, about 60% have regularly repaid loans. What wrong have the 60% done in repaying the loans. While stressing the near-universal nature of KALIA., he also said that the amount will be distributed during cropping seasons to meet the initial input cosl. Patnaik, too, is credited to have introduced a range of creative welfare measures in Odisha, which is believed to be behind his consecutive wins.