Farmers in Kerala were fighting the worst drought in 115 years last year when the Centre announced demonetisation of high-value notes in November.

Caught already in the midst of a severe crisis from successive droughts, they did not either know what demonetisation meant nor were they aware of its implications.

Migrant labour

“We came to know for ourselves a few days later. Sudden drying up of liquidity/notes in a highly cash-driven economy, long queues at banks and ATMs, no cash to pay workers or buy essentials,” said Manoharan, a marginal farmer based in Chirayinkeezhu, in the outskirts of Thiruvananthapuram.

“I had a tough time retaining my sole farm hand, a migrant from Bengal, who wanted to flee home with savings since he was not paid anything for three days.” In fact, panic-stricken migrant workers had marched in their droves to fill railway stations seeking at least a foot to hold on outbound, long-distance trains.

Banks’ attitude

But, all this was not enough to convince banks to be lenient with respect to farm loans which Manoharan and his ilk had defaulted on due to a crisis from failed monsoons.

“Maybe the banks were engaged in their own fight to put their offices in order dealing with rush of customers post-demonetisation.”

Their attitudes have not changed much, save in the case of honourable exceptions. This is despite the government volunteering to intervene more than once to help the farmers’ case.

Banks levy a compound interest on defaulted loans, said Sasidharan, another farmer. This is unjustified since defaults are inevitable and beyond farmer’s control. An amount between ₹30,000 and ₹50,000 is loaned per acre of agricultural land which has a market value of up to ₹10 lakh. “What the bank offers is peanuts,” Sasidharan says, which drives farmers to private money lenders for other needs such as children’s education and marriage.

Economic review

According to the State Economic Review, credit plays a significant role in the context of agriculture due to predominance of cash crops, which are highly credit-intensive requiring regular doses of capital at regular intervals.

Additionally, cultivation is labour-intensive and needs hired labour. Fragmented nature of holdings too demands input-intensive practices.

This, in turn, warrant sustained infusion of capital, leading to high rural indebtedness, notes the Review.

Extreme variabilities in commodities prices have swung in both directions in recent times. Lately, in the case of rubber, they are seeking a new low.

These built-in frailties, worsened severely erratic weather, had forced successive governments to frame helpful policy measures before and after demonetisation.

The tryst with weather had turned vexatious from as early as from 2015 when the South-West monsoon failed spectacularly with a deficit of 26 per cent.

Deficit monsoon

The North-East monsoon that followed appeared to compensate with a surplus of 27 per cent, only to be completely undone by the poor South-West monsoon in 2016.

It recorded a massive 34 per cent deficit, but what followed was a nightmarish North-East monsoon that left a cataclysmic 62 per cent deficit.

And, demonetisation was announced in between in November, the first full month of the North-East monsoon season. The rest is history that farmers would love to hate.

To the credit of the then government, in March 2014 itself, it had cleared seen signs of an impending drought situation and had decided to act. It put on hold until June 30 that year all revenue recovery proceedings on agriculture and education loans drawn from cooperative banks.

Drought-hit districts

Public sector and scheduled banks were directed to stop attachment proceedings for loans up to ₹5 lakh. The next big announcement came from the present government in October last year (2016), just ahead of demonetisation.

In an unprecedented step, it declared drought in all the 14 districts of the state after the South-West monsoon left behind the big deficit.

Later in December, in view of the serious crisis caused by hostile weather and demonetisation, a moratorium was declared on attachment proceedings on loans taken from financial institutions under the state government.

The latest in the series saw the State Assembly in August this year urging the Centre to exempt plots not exceeding five cents with house from recovery under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.

The State government said it mulled exempting farm land to the extent of 50 cents in cities and one acre in rural areas from recovery of loans of up to ₹5 lakh.

Sarfaesi Act

A resolution passed by the Assembly said that lakhs of economically weak families faced severe hardships from the threat of recovery under SARFAESI Act due to loan defaults.

Hence, exemption should be extended to lands not exceeding five cents with houses of less than 1,000 square-feet by amending the Act.

In between, in October, State Bank of India (SBI) and the state government worked out an arrangement by means of which agriculture loans which turned NPAs in 2016 would be written off, provided the farmer paid 50 per cent of the outstanding.

This targeted one-time settlement is expected to benefit 36,000 farmers in the State. Thirty days after the settlement, SBI would give loans to the same farmers.

It was also decided to broad-base the issue of Kisan Credit Cards and provide loans up to ₹3 lakh for vegetable farming at four per cent.

This is the ninth in a series of Farm Distress. The first report appeared on November 16. the previous article in the series appeared on November 24, on the slow progress of eNAM.

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