"Whether one-time settlement of loans will improve the situation of distressed farmers?".

"Whether one-time settlement of loans will improve the situation of distressed farmers?".

A majority of credit to distressed farmers would be non institutional and a debt waiver for the banking and financial systems would help score political brownie points but would not do much beyond that for the farmers but could end up making the managers running banking and financial system in the rural areas even more insensitive to the poor given the forced periodic dole outs. Secondly the stability of the financial system would be affected if these amounts become significant once the clamour for the same treatment escalates to all the regions of the country.

The following actions would help relieve distress:
1. Enact a law to give relief to farmers and tighten regulations on money lending, especially by private persons. Like tribals, there should be a blanket ban on transfer of land owned by BPL families.
2. Innovative use of MORD Schemes: For farmers in distress who owe money to moneylenders must be able to approach local banks (co-operative, private rural or nationalized) to get short term loans to pay off money lenders which can be set off against the amounts payable to such families under the NREGA
NREGA funds could be used for asset creation like in AP where they will be used for Jatropha plantations by BPL families. The skill development programmes of MORD which have had considerable success need to be driven down the the level of villages.
3. Medium Term Solutions for Credit: The central govt must instruct all PSU and large private banks them to create 5000 odd Micro Finance Institutions under their tutelage at every tehsil in the country for lending to BPL families.This should be accompanied by creation of SHG and SHG federations on the lines of the work done successfully in AP for ensuring linkages to markets and livelihood opportunities coupled with economies of scale in buying and selling of goods and services for and from the communities.
4. In the long run distress will be alleviated by huge public investments in irrigation, watershed, better quality inputs especially seeds, extension and farm advisory services, , livestock up-gradation and forest regeneration.

SunilKhairnar