Call it a teesri fasl - third crop. What was meant to be an aid for farmers has proved to be a bonanza for the government babus and contractors - a feast in breakfast and supper. The Rs.5075-crores special relief packages announced a few years back by the chief minister and prime minister for beleaguered Vidarbha farmers have flopped, expectedly.

The CAG's performance audit of farmers' packages finds that not only were the packages tardy in implementation, but also mindless in conceptualisation and "inconsistent with local needs." Result: The money did not help mitigate the gargantuan agrarian crisis or even reduce farmers' suicides.

The CAG report trashes the claims of the government that the packages were highly successful in mitigating the agrarian crisis. Contrarily, it finds holes in it.

The Government of Maharashtra tabled the report on the last day of the budget session of the legislature on 27 April 27 skirting any debate on the failure.


 •  Final note on farm credit
 •  Give us a price, not package

The Government of Maharashtra tabled the report on the last day of the budget session of the legislature on 27 April 27 skirting any debate on the failure.

Most importantly, the CAG found that the return on investment (RoI) of a typical crisis-ridden farmer in Vidarbha was minus two per cent before the implementation of packages. A farmer was in loss the day he went for sowing. The RoI shot up to seven per cent in the first year, dwindled to five in the second year and stands at two per cent in the third year of its implementation. The positive RoI was on account of moratorium on loan and interest recovery.

What it means is that effectively, a farmer was in losses before packages and remains so all through the package-implementation years - a reflection of which would be seen this year when the moratorium is lifted.

That, say sources, is the real face of the crisis - the abysmal income of farmers if one compares these with the per capita income of the rest of the state.

In CAG's evaluation, "the possibility that agrarian distress essentially caused by un-remunerative agriculture would start rising again in the closing years of the package (2008-09)." It warns that distress could increase significantly after the expiry of the moratorium on loan recovery, which is June 2008.

"Farmers' suicides shot up dramatically even when the two packages were in vogue," the report acknowledges.

One of the important deficiencies of the packages, as the CAG found out, was the fact that the funds spent did not improve agricultural support prices. In its observation, the implementation of recommendations of the Fact Finding Committee (of Planning Commission of India) could have helped in reduction of farmers' distress and the consequent suicides.

The Committee had recommended in March 2006, over two years ago, shortly after its visits to the region, that the minimum support price for agriculture crops should carry appropriate variation for the region so that it reflected the actual input cost and was not an estimated figure.

Despite this, observes the CAG, the MSP for the four major crops of the region - cotton, soybean, pulses and paddy - declared by the Government of India during the years 2003-06 was 29-38 per cent less than the MSPs proposed by the state agriculture price committee (SAPC) of Maharashtra Government. During 2006-07, the MSP was 31 to 40 per cent less than that proposed by the SAPC.

Banks no different than shylocks

While there is much brouhaha over shylockian moneylenders exploiting the beleaguered farmers in Vidarbha, the CAG audit report finds cooperative and nationalised banks are no different.

Castigating the cooperative and nationalised banks for levying huge interests on crop loans, the CAG report found that the banks not only levied interest more than the principle amount to the tune of Rs.29 crores, but also wrongly claimed it in waiver in six affected districts.

For instance, the seven branches of district central cooperative (DCC) bank test-checked by CAG's surveyors had levied an interest of Rs.5.13 crores as against principal of Rs.3.19 crores, resulting in excess claim of Rs.1.94 crores.

That's not all. The CAG found that the DCC banks and rural cooperative societies charged an interest at the rate of 17 per cent per annum instead of 14 per cent in over four lakh accounts involving principal amount of Rs 514.64 crores. The excess claim of interest of three per cent per annum works out to Rs 15.44 crores, it says.

Importantly, the CAG says farmers did not benefit from interest waiver. For, their incomes did not augment in any way.

The state government had in its Rs.1075-crores package in 2005 December waived interest on crop loans up to Rs.25,000 taken by farmers of six districts from all DCC, national and rural banks. The government only considered outstanding loans as on 30 November 2005. These were to be rescheduled at 9 per cent interest repayable in three equal annual installments with a two-year moratorium period. The moratorium period ended with the 2007 fiscal year.

Coming next, the PM's package had waived interest on all agricultural loans overdue as on June 2006 and rescheduled the loans.

Banks then claimed a total interest waiver of Rs 824.99 crores, with the state's share being Rs.356 crores.

Also in 2006, 9.29 lakh farmers (out of 17.64 lakh) got institutional credit, up from around 4 lakh farmers the previous year. The banks processed interest waivers for farmers in those many bank accounts as part of relief. But when it came to extending fresh loans, they did this only to 48 per cent of the 9.29 loan accounts. The CAG pointed this out, and said that the banks should have extended loans to all these farmers, which was intended in the PM's relief package, but that was not followed by the banks.

So the actual loan outlay in rupee terms too declined with the number of farmers getting formal credit. The CAG noted that fresh crop loan disbursement actually dipped to Rs.673.88 crores (4.84 lakh cases) in 2007 from Rs.1369.85 crore (to 9.29 lakh farmers) in 2006, when prime minister Manmohan Singh announced the package in Nagpur.

The CAG report curiously quotes the Principal Secretary, Cooperation, without recording the name of official, as having replied to a query pertaining to decline in the number of fresh loan cases. While the official said that 1,92,745 borrowers were landless farm workers who did not require any crop loan, the CAG says that for these farmers, the banks faultily extended them crop loans.

Also, in a number of other cases, the CAG found the extension of the loan relief package was unnecessary and not in keeping with the terms of relief -- 26,400 borrowers had died, 25,129 farmers had sold their land (in that year), 21,125 had left villages and 30,715 did not require any loan. The 62,807 cases were marred by disputes of lack of essential documents while in 85,975 cases the farmers had long-term loans.

Furthermore, the CAG report states that the government's ban on illegal money lending did not stand before the High Court in October 2006. The government neither appealed against these orders (in the Supreme Court) nor took any remedial action like amendment of the relevant Acts, such as the Bombay Money Lending Act. Consequently, the affected farmers, who had lost their lands to the moneylenders, did not get any benefit. The money-lending law may be re-examined in the light of decisions by High Court, the CAG has recommended.

Micro-irrigation compliance issues could worsen crisis

The CAG report found serious problems with the micro-irrigation and assured irrigation projects worth over Rs.2300 crores in the packages. The PM's package has a component of Rs.2177 crores to create irrigation potential for 1.6 lakh hectares in six suicide-prone districts. Of this, Rs.2085.38 crores was to fund eight major, nine medium and 65 minor irrigation projects as grant from the Centre.

However, in December 2006, the Government of India revised the eligibility criteria for funding. According to this, if the state government fails to comply with the agreed date of completion, the amount released would be treated as loan and recovered as per usual terms of central loan recovery.

The CAG report states that the possibility of completion of projects within the stipulated time is remote. "This presents the risk of Rs 2085.38 crore (or 56 per cent of total package amount) becoming loan instead of grant."