Loan waiver clubbed with fertiliser subsidy proves the point
A debt waiver of Rs.60,000 crore is being seen as an important step to win over rural hearts, where the major chunk of the vote bank lies. And though this might appear to be a realisation of the farmers agony in the Delhi power circle, the only thing left to be said is that was ‘myopic’! The farmers would have benefited more, had the money been utilised to improve rural infrastructure. The agriculture sector requires revolution, not just reforms. On May 23, 2008 the loan waiver was increased to Rs.716.80 billion from Rs.600 billion. A re-estimate shows the number of beneficiaries have risen from 30 million small and marginal farmers to 36.9 million! But then it’s also no more a hidden truth that most of these farmers are not the real beneficiaries of these schemes as most of them have small or negligible land holdings. And for that matter, these farmers [with small land holdings] have to rely on local moneylenders.
Even India’s fertiliser subsidy has been increased by 135.5% [to Rs. 95,000 crore] this fiscal as the government seeks to shield farmers from rising international prices. A good thought indeed, but then lets understand it from below the surface. The shares of fertiliser firms like Tata Chemicals Ltd, Rashtriya Chemicals and Fertilisers Ltd, National Fertilisers Ltd et al rose by 7% after the announcement. This clearly shows that this increase will do more good to the fertiliser companies rather than to the end users. These subsidies, as always, will never reach the farmers and will be adjusted by the manufacturers & middlemen in the supply-chain. All looks perfect on paper. However, if they are not implemented well, they could produce more adverse effects than anticipated.
A debt waiver of Rs.60,000 crore is being seen as an important step to win over rural hearts, where the major chunk of the vote bank lies. And though this might appear to be a realisation of the farmers agony in the Delhi power circle, the only thing left to be said is that was ‘myopic’! The farmers would have benefited more, had the money been utilised to improve rural infrastructure. The agriculture sector requires revolution, not just reforms. On May 23, 2008 the loan waiver was increased to Rs.716.80 billion from Rs.600 billion. A re-estimate shows the number of beneficiaries have risen from 30 million small and marginal farmers to 36.9 million! But then it’s also no more a hidden truth that most of these farmers are not the real beneficiaries of these schemes as most of them have small or negligible land holdings. And for that matter, these farmers [with small land holdings] have to rely on local moneylenders.
Even India’s fertiliser subsidy has been increased by 135.5% [to Rs. 95,000 crore] this fiscal as the government seeks to shield farmers from rising international prices. A good thought indeed, but then lets understand it from below the surface. The shares of fertiliser firms like Tata Chemicals Ltd, Rashtriya Chemicals and Fertilisers Ltd, National Fertilisers Ltd et al rose by 7% after the announcement. This clearly shows that this increase will do more good to the fertiliser companies rather than to the end users. These subsidies, as always, will never reach the farmers and will be adjusted by the manufacturers & middlemen in the supply-chain. All looks perfect on paper. However, if they are not implemented well, they could produce more adverse effects than anticipated.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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