The Hindu - Indian Newspapers in English Language from eight editions.

The Hindu - Indian Newspapers in English Language from eight editions.

Debt Remission: A Kerala initiative

S. GOPAKUMAR

Petitions from farmers piled up at the office of the debt relief commission in Thiruvananthapuram. A June 2007 picture.

The applicants are mother and son, having two acres of land. They availed a loan of Rs.30,000 on November 7, 2002. They were regularly making payments. But recently due to distress, repayment could not be made. Now an amount of Rs.20,117 is due. According to the [North Malabar Gramin] bank, this being a regular account, no scheme is available for settlement. But the applicants, being distressed farmers, deserve help. Accordingly, the head office of the bank is directed to consider closure of loan account receiving Rs.20,000 by March 30, 2009. The result of consideration shall be intimated to the applicant within two months.

Final Order on Application No. 2007 issued by the Kerala State Farmers’ Debt Relief Commission at Kalpatta in Wayanad district on November 7, 2007.

Placed against the mother of all farm loan waivers announced in the Union Budget, this recommendation to waive a mere Rs.117 and grant a two-year extension of deadline to repay the loan would not seem to be a grand gesture of help to the peasant family.

But it was such seemingly unimpressive incremental actions of the Kerala State Farmers’ Debt Relief Commission, besides its very presence, that generated respite, hope and interest in an otherwise grim rural milieu and perhaps even played a crucial role in ending farmers’ suicides in Kerala by mid-2007.

The Left Democratic Front (LDF) government, which came to power in May 2006, established the statutory commission in March 2007, a unique experiment in the country, against the backdrop of a severe economic crisis and continuing distress in the farm sector because of drought, destruction of crops, mounting indebtedness and a growing number of suicides by farmers.

Between mid-2004 and May 2007, amid crop damage, falling prices and mounting debt, Kerala reported nearly 2,000 peasant suicides, the majority of them in the hill districts of Wayanad and Idukki.

The LDF government responded with the debt relief commission on the basis of its “alternative view” that the way out of the agrarian crisis must be through deliberate state interventions to protect farmers and farm labourers from the baneful consequences of integration with global capitalism and the policies of liberalisation. The commission, with the powers of a civil court and headed by a retired High Court Judge, was primarily meant to provide relief to farmers (owning up to four hectares and having an annual income of up to Rs.2 lakh) and farm labourers from the indebtedness they had incurred up to December 2006, the date of commencement of the Kerala Farmers’ Debt Relief Commission Act.

The commission had the power to negotiate with creditors for loan waiver, interest rate relief, loan rescheduling or moratorium; ask the government to take over the debt of an indebted farmer entirely or partially; and recommend to the government the extent and manner in which debt relief should be granted to farmers.

It was not just crop loans that came under the commission’s ambit but also loans taken for “agricultural allied commercial purposes”, which meant debts incurred for medical treatment, education, marriage and so on. One of the most significant provisions of the Act was the inclusion of private moneylenders in the list of creditors the commission could deal with. The commission had powers to declare a region, particular crop/s or individual farmers or farm labourers “distress affected”.

It could keep in abeyance the repayment of all the debts of farmers for a period of one to three years, fix a “fair rate of interest” and an “appropriate level of debt” to be payable by a farmer to his creditor; undertake conciliation for settlement of disputes between indebted farmers and creditors: and adjudicate disputes between farmers and creditors and pass awards, which would be binding on both the parties.

(Debt relief announced by the commission was, however, not to exceed 75 per cent if the debt was Rs.50,000 or less, and 50 per cent if the debt exceeded Rs.50,000 after settlement, or Rs.1 lakh, whichever was less.)

The commission had tried to justify its mandate, but, in retrospect, perhaps its interventions and the government’s response to them were dwarfed by the demand it generated. Soon after the commission was constituted on March 19, 2007, it was overwhelmed by petitions from farmers from all over Kerala. But the initial enthusiasm the commission generated as it effectively deferred eviction proceedings began to wane when the anticipated loan waiver or debt transfer to the government did not happen. The commissions ‘orders’ proved to be mere ‘recommendations’ to banks to reschedule loans, at best, among other, less attractive, measures.

Of the nearly six lakh applications the commission received, it was able to consider only about 6,000 on a case by case basis as of March 2008. For several months it worked without a proper office, staff, or funds. In June 2007, at a press conference convened by the commission, Agriculture Minister Mullakkara Ratnakaran walked out in protest against the commission chairman’s outburst against the government.

Thousands of petitions remain unopened in the commission’s new office, which it occupied in late February 2008. In August 2007 the government accepted the commission’s recommendation, made in June, that the entire Wayanad district be declared distress–affected and that the government take over loans of up to Rs.25,000 given by cooperative credit institutions until June 30, 2006, to small farmers owning up to one acre. Though the government issued orders sanctioning nearly Rs.50 crore for this measure, which would have helped nearly 70,000 of over a lakh or more of petitioners from Wayanad, the money has not been disbursed so far.

Importantly, the commission’s mandate was confined mostly to adjudicating disputes involving mostly cooperative banks but not nationalised or scheduled banks, even though the definition of “debt” in the law included “any sum payable to” the State Bank of India and its subsidiaries. The commission could issue directions in cases where nationalised banks were involved, but these were not binding on the banks.

“Surely, when the commission started its work, a ray of hope finally dawned on the farmers, who were increasingly seeking death rather than creditors at their door. The commission offered them respite and protection against eviction. But soon they began to wonder what more could the commission do?” said Fr Antony Kozhuvanal, national general secretary of the Indian Farmers’ Movement (INFAM), a church-led pressure group active in the hill districts.

The most disappointing result was the commission’s experience regarding debt owed by farmers to private moneylenders. Commission chairman Justice (retired) K.A. Abdul Gafoor told Frontline that so far only two cases involving private moneylenders had come before the commission. “In one case the parties came to their own private settlement, and in the other the commission is still trying for an amicable settlement,” he said. There was no clear explanation to this strange but important outcome.

According to Fr Antony, it could be because the debtors had no evidence to show for such transactions as all the documentary evidence remained with the moneylenders. There could be several reasons, in addition, according to Justice Gafoor. For example, many people in Wayanad used loans from moneylenders to cultivate ginger and turmeric in neighbouring Karnataka and hence could not approach the commission for relief.

A.C. Varkey, representative of the Wayanad-based Farmers’ Relief Forum, said most of the moneylenders in his district were mafia elements or members of prominent political parties, against whom the poor would hesitate to seek justice. An Agriculture Department official said it could be because farmers were not sure how long the government initiative would last and did not want to spoil their long-term relationship with private moneylenders “who, despite their greed, help them in times of crisis”.

A year after it came into being and just as the commission was beginning to streamline its functioning with a new office and more staff and some funds, the Union Budget announcement of farm loan waiver has put a question mark over its continuation.

“To my mind, the response to the commission’s mediation was obvious relief, hope about the future, and the sense of security and defence that it brought to the distressed peasants vis-a-vis their creditors at a time of crisis. Finally, there was somebody to speak for them and negotiate on their behalf, and that certainly has made a big difference to the peasants in distress,” Justice Gafoor said. Several people consider this the most important achievement of the commission, and not the “amount it has disbursed” – so far nothing.

A senior government official told Frontline: “It will be a mistake to debunk the commission in the context of the Central government’s one-time largesse that may wipe out temporarily the accumulated burden of farmers. But distress is bound to recur and we need an institution that monitors it effectively and suggest timely remedial measures. But it cannot be a cash-doling holy cow that will lead the State to bankruptcy.”
R. Krishnakumar