Amid a spate of suicides by farmers due to alleged loan burden in Orissa, a noted farm scientist has suggested formulation of an agriculture credit policy with thrust on rain fed areas, user friendly insurance instruments and spread of institutional arrangements.

“There is urgent need for an agriculture credit policy with emphasis on rain fed areas. Flow of credit to marginal and small farmers in rain fed areas must be increased,” said Dibakar Naik, Head of Agricultural Economics in Orissa University of Agriculture and Technology (OUAT).

Describing debt trap as a major cause for sucide by farmers, he said since most peasants depend on money lenders and non-institutional credit, steps should be taken to extend institutional credit to marginal and small farmers with proper monitoring mechanism for productive use of loans.

“Availability of credit to farmers should be made easy and at low cost. Frequent visits of farmers to credit agencies should be reduced,” Mr. Naik said adding new credit products like pledge financing, credit for marketing, loan against ware-house receipts and export credit should be extended.

Credit should be extended on specific project basis by linking farming process to nearest agricultural experts for proper technical advice and final product to market, he said.

He said the issue of farm credit assumed significance in view of allegation of suicide by about 50 farmers in the State during last 3 months due to crop loss and indebtedness.

The State government has also asked the newly formed Farmer Commission to look into the matter.

Stating that the State government and State Agricultural University should have joint responsibility towards improving the credit absorption capacity of farmers, Mr. Naik said though crop loan in Orissa rose ten times from Rs.252 crore in 1995-96 to Rs. 2493.68 crore in ten years, its impact in the field was negligible.

“Perhaps due to lack of absorptive capacity, the impact of credit on productivity was marginal”, he said adding productivity of rice and foodgrains in 1995-96 was 13.75 quintals per hectare and 11.01 quintals per hectare respectively.

Productivity of rice and foodgrains had increased to the level of 15.57 quintal and 12.13 quintal per hectare respectively in 2006-07, recording a rise of 13.24 per cent for paddy and 10.17 per cent for foodgrains with 100 per cent increase in crop loan during the period, Mr. Naik said.

Since agriculture was a high risk economic activity, credit without insurance is hazardous. Farmers need user friendly insurance instruments covering production, right from sowing to post-harvest operation and also market risks, he said suggesting steps to raise credit and insurance literacy.

Stating that crop insurance policy should cover both irrigated and rain fed areas with varies premium amount based on yield potential of crops, Mr. Naik said Self Help Groups (SHG) could provide linkage to reach farmers who do not have access to financial institutions.

Mr. Naik’s suggestions were made to the State government in a paper titled “Problems of Farmers’ Indebtedness: Issues and Action Programme”, a copy of which was made available to the press here on Saturday.