Structural solutions

Dealing with any kind of crisis is a two-pronged affair. Immediate relief needs to be provided to the victims so as to ensure survival. But, beyond that, systemic changes need to be implemented to address the cause of the crisis itself. As many as 1,600 farmer suicides cannot be symptomatic of anything other than a deep crisis in Vidarbha. The Prime Minister's two-day visit to the region and his direct interactions with some of the bereaved families culminated in the announcement of a relief package worth Rs 3,750 crore, supplementing a Rs 1,000 crore package already being implemented by the state government. The main thrust of the central government's package is debt relief, involving the waiver of interest dues and the eligibility for continuing flows of credit for farmers who were not able to repay previous borrowings. Both of these should provide immediate relief and therefore meet the first criterion of a successful crisis management strategy. But whether the problem can be tackled so that it does not recur, is the more important question.

At the end of his visit, Dr Singh stated that indebtedness was the most critical problem for rural households across the country. Simplistically, it would seem that extracting the farmer from the clutches of moneylenders by rapidly expanding access to bank credit is the answer. The UPA government certainly thinks so, given its emphasis on doubling agricultural credit over its first three years in office. But Dr Singh's professional training and experience will surely tell him that not only is expanding credit not sufficient to solve the problem, pursuing this approach in the absence of many complementary requirements being met may compound the problem rather than redress it.

Simply put, the Indian farmer, whether in Vidarbha or in any other part of the country, operates in an environment fraught with distorted signals and unmitigated risks. His choice of crops is based on government commitments to buy his output, and inputs, whose prices are set by the government, at least on paper. Both these distortions tend to skew his decision in favour of crops that are less well-suited to the intrinsic conditions of cultivation. The most significant vulnerability flowing from this skewed choice is with respect to water. Water-intensive crops are increasingly being cultivated in water-scarce areas because water and electricity are not being priced correctly. But, under-pricing water (and power) does not guarantee its availability. Crop risk increases dramatically as a consequence. At the core of farmer suicides is the absence of any mechanism to protect the farmer against the risk of his inherently sub-optimal choice of crop.

Getting the farmer to cultivate crops that offer him the best return-risk proposition for his specific agro-climatic conditions is at the heart of a long-term solution to the crisis. To the extent that the proposition can improve as a result of better irrigation and infrastructure, so be it. However, if it cannot, other channels of employment must be wide enough to absorb people who get alienated from their land because of unviable cultivation. On both these fronts, the UPA government has unfortunately been sitting on its hands. Surely, the Prime Minister cannot expect banks to endlessly pour money down this drain even as they are subject to increasingly stringent prudential regulation? If the package remains confined to immediate relief, the country will not have to wait very long for the next wave of suicides.