Has the increase in short-term crop loans between 2003 and 2012 led to a proportionate increase in agricultural productivity in Andhra Pradesh and Telangana?
Apparently not, contend officials, pointing out that despite crop loans running into thousands of crores under priority sector lending to farmers, there was hardly any capital infusion into the farm sector in real terms.
For instance, the short-term crop loans in 2003-04 that accounted for 15 per cent of GSDP in the combined State, rose to 36 per cent in 2011-12 and of this, the share of ‘agricultural gold loans’ had climbed up significantly. Yet, there was no proportionate increase in agricultural productivity.
Statistics released by the RBI itself and available in the public domain revealed that long-term loans declined from 37 per cent to 22 per cent between 2003-04 to 2011-12 while that of short-term crop loans increased from 63 per cent to 78 per cent, thanks to gold loans. The huge rise in the quantum of agricultural gold loans apparently was the factor for the RBI withdrawing gold loans under priority sector lending for 2014-15.
This anomaly was discussed during the recent meeting between RBI Governor Raghuram Rajan and the Andhra Pradesh Government. The sensitive subject of how crop loans extended to farmers each year were becoming mere book adjustments, also apparently figured at the meeting.
The announcements by Andhra Pradesh and Telangana governments on debt relief and crop loan waiver schemes made it imperative for officials to take a hard look at several lacunae that crept into crop loaning, sources said.
While inclusion of gold loans for crop purposes helped the banks to meet their priority sector lending target, it actually did not lead to capitalisation of the farm sector. Several such gold loans allegedly went into speculative investments in real estate and non-agricultural activities, they maintained.
The trend adversely hit needy and genuine farmers as the banks stopped lending after reaching the target. As a result, the poor had no option but to borrow from private money-lenders and ended up in huge debt traps.
AP officials explained to the RBI Governor that the State had opted for Farmers Empowerment Corporation to implement debt redemption scheme for farmers in phases as a solution to plug the loopholes in the system and ensure that crop loans reached genuine farmers by linking to Aadhaar card and land holding.
