New Delhi, June 18: Manmohan Singh’s government took two economic decisions today — announcing a package for farmers, which many of its predecessors had done, and declining politely requests from allies to roll back the recent petroleum price increase.
Taking off from the promises made in the common minimum programme, it said credit flow to farmers would be raised to Rs 1,05,000 crore.
The package for farmers addressed issues raised by Left leaders today for inclusion in the budget. They also asked the government to roll back the hike in petroleum prices.
The Prime Minister rejected the demand. Manmohan Singh said: “Before taking a final decision, we had laboured hard. We exercised all options. We have passed only minimum burden to the consumers. We distributed the entire burden among three segments — the government, the public sector oil companies and the consumer. This is the best we could do in the given situation. Had we shifted the entire burden to the common people the hike would have been steep.”
CPI general secretary A.B. Bardhan later said the Left was prepared to let go on petrol and diesel, but the government should at least spare cooking gas.
Petroleum minister Mani Shanker Aiyar, however, said: “Ours is not a rollback government.” Asked to comment on the Left’s opposition, he said: “I have no problem with mild criticism.” Aiyar pointed out that the criticism had been “muted”.
Announcing the package for agriculture, the government said debt-ridden farmers could now hope to restructure their old bank loans by taking five more years to pay back the money or work out a negotiated one-time settlement. Farmers who had borrowed from moneylenders will be allowed to swap their high-cost loans with cheaper credit from banks.
“We want to make farming profitable,” said finance minister P. Chidambaram.
The government made it clear there would be no loan write-offs, as in the past, and banks would follow their regular norms while lending to farmers.
Economists reacted to the announcement with scepticism. Former Planning Commission member S.P. Gupta said: “There is no targeting (of loans). Big farmers from a few states will corner most of the money. Poor farmers will not see a pie.”
Under the plan, commercial banks are expected to lend Rs 57,000 crore, regional rural banks Rs 8,500 crore and co-operatives another Rs 39,000 crore.
Forced lending by banks to farmers through the 1980s created a huge pool of bad loans for banks which was made worse by a write-off in 1989 by the then Janata Dal-led government.
Many fear a repeat. B.B. Bhattacharya, the director of the Institute of Economic Growth, said: “The crux of the problem of farmers committing suicide or falling into a debt trap is not lack of loans; it is a global crash in prices of cash crops, even as costs of farming have gone up steeply.”
Chidambaram, however, thinks: “Agriculture could be a Cinderella. The government believes that agriculture is a profitable area for banks.”