The Hindu Business Line : Improve credit delivery to farmers: PM

TACKLING DEBT ISSUE: The Prime Minister, Dr Manmohan Singh, in conversation with the Food and Agriculture Minister, Mr Sharad Pawar, at the Agriculture Summit 2006 in the Capital on Wednesday. — Ramesh Sharma

New Delhi , Oct. 18

The Prime Minister, Dr Manmohan Singh, on Wednesday mooted the idea of bringing in moneylenders "under some form of regulation" as a means of improving credit delivery to farmers.

"What do our farmers need - a lower rate of interest or reliable access to credit at reasonable rates? Is our existing institutional framework adequate for meeting the requirements of our farmers who are such a diverse lot? Do we need to bring in moneylenders under some form of regulation?" Dr Singh said in his inaugural address at the Agriculture Summit 2006 here, organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Union Agriculture Ministry.

Farmers' suicides

The Prime Minister's observations are seen as important in view of farmer suicides taking place in many parts of the country. These have largely been ascribed to their contracting debt at usurious interest rates from extortionate moneylenders.

The Government's response till now has been to induce commercial banks to step up agricultural credit and simultaneously pare interest rates charged to farmers. In fact, it has already implemented the 2006-07 Union Budget announcement to provide refinance to enable commercial banks to extend short-term credit at seven per cent. The National Commission on Farmers has recommended a further lowering to four per cent.

Credit access

However, Dr Singh sought to "raise some questions" over the emphasis on lowering interest rates as against providing reliable credit access at "reasonable rates". He also questioned whether the present institutional framework was adequate to cover the country's vast and diverse farming population.

In this context, he mooted the idea of involving not just self-help groups and micro-finance institutions, but also bringing in moneylenders into the mainstream, subject to their coming "under some form of regulation".

The Prime Minister was also blunt about the consumers possibly having to pay more for food items, in order to boost real incomes of farmers. "This we cannot grudge the farming community. We need to recognise that they need better returns for their efforts. This may hurt the middle class to a small extent, but it benefits the farmers," he added.

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