As one, who was inside RBI when the Agriculture and Rural Debt Relief Scheme (ARDRS),1990 was introduced and implemented, I am able to appreciate the anxieties and worries expressed by RBI Governor in the context of the present demand for more debt waiver schemes. Major component of banks’ resources is public deposits and government is dependent on taxpayers’ contribution for meeting financial commitments. Mentioned this to highlight that both banks and government have trusteeship responsibilities in regard to the funds they handle. When crops fail or natural calamities wash off assets of entrepreneurs, there has to be a transparent support system which will help those who suffer loss. If nation needs products including agricultural produce growing/manufacturing which is not commercially viable, subsidizing costs of production and marketing them becomes necessary. The present support system which works through subsidies(front-end and back-end), various tax concessions at different levels and write-offs and waivers of debt is neither transparent nor scientific. A review and revision of the entire system, factoring in the following aspects(list not exhaustive) has become overdue: (i) In agricultural sector, there is need for a comprehensive and compulsory crop insurance scheme. Those farmers who do not avail bank credit also should be encouraged to participate. May be an appropriate disincentive scheme denying any government support in case of crop loss may be necessary to ensure 100 per cent participation. Initially, the scheme should get financial support from central and state governments and banks(as a percentage of agricultural credit provided by the bank) (ii) Rationalise subsidies including interest subsidy. At present, at least in some states, interest subsidy is working as a disincentive for improving productivity. (iii) Life insurance and insurance of crops and investments up to a bench mark level compulsory for all bank loans.
- M G Warrier, Mumbai
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