The current food crisis is the result of our inability to solve the problems related to agriculture that occur every time the monsoon fails – where we choose to forget gravity once a correction occurs in the weather conditions. With almost 60 to 70 percent of kharif production dependent on rainfall, it is not surprising that farmers face challenges when the monsoon is below normal.
The problems of agriculture are numerous and begin from the time of planting to delivery to the market. These include the availability of high-quality seeds, inputs such as water and fertilizer, pre-harvest and post-harvest finance levels, freight logistics, and finally the marketing where they are sold to consumers. The fact that agriculture is disorganized means that there are several levels of intermediaries that can range to 6-8 depending on crop and location. Gaps in all parts of the value chain tend to be exacerbated when farmers’ incomes are affected without declining. This is well known, but it hit the headlines when there are debates about exceptions to the loan.
The development of Maharashtra and Madhya Pradesh highlight these problems. Loan waivers are the latest controversy on the farm, especially during the upcoming elections where it was a major win point. This was followed in Maharashtra and will continue to expand to other states as well. The problem is double disclaimers. The first is that if it is not invoked, the whole community suffers, creating social problems, including farmers’ suicides. Moreover, eliminating loans, creating a moral hazard in those dealing with your debt are penalized and encouraged not to repay the loans in the future. Banks have always been against such schemes, for this reason, because the probability of non-performing assets (NPA) increase as farmers choose to faint payments. At present, with a high level of NPA, banks are not able to forgive such loans, but the question raised is whether corporate borrowing can be adjusted, why non-farm loans in which the reasons are more convincing . The route should be the government such provisions should be made in the budget. This becomes an enigma for states because agriculture is a state issue and it is unlikely that the central finance the cost of the Union budget. States have a problem in their hands because of the fiscal responsibility and budget management rules in 2003 (FRBMA) that limit the level of deficit or tax debt they can undertake. The ratio is set at 3 percent of gross domestic product (GSDP) and, therefore, if states are working close to this number, they will not extend this benefit. This is the puzzle that explains part of the controversy that arose in Maharashtra, where farmers require such exceptions. The other problem that is very relevant again in relation to farmers’ incomes. It was noted that agricultural prices tend to be unstable when increased and decreased depending on supplies. While higher prices are useful when accident prices cause distress when income decreases.