Budget 2008 may have rehab cess for stressed farmers With a spate of assembly elections scheduled during this year, the United Progressive Alliance (upa) government has finally decided to address an issue that could become a political albatross around its neck. With mounting farmers' suicides continuing to grip the attention of the nation, particularly the political class, the ruling coalition has come under a pincer attack from the BJP-led National Democratic Alliance and the fledgling United National Progressive Alliance (unpa) or the so-called Third Front. Maharashtra, Andhra Pradesh, Karnataka and Madhya Pradesh top the list of states, where these suicides have been rampant. According to a study done in the Madras Institute of Development Studies, one farmer committed suicide in these states every 57 minutes between 1997 and 2005. These are the states where the Congress and its allies have crucial stakes. The upa, in fact, recently upped the ante at a farmers' rally in Vidharbha, where former UP chief minister Mulayam Singh Yadav announced that the entire loans of farmers would be waived, if the grouping got a chance to rule the country. In June 2004, shortly after coming to power, the upa announced doubling of credit delivery to agriculture in three years. The ruling coalition claims that this was achieved in two years. Besides, a special package, valued at Rsl6,979 crore, was implemented in 31 districts worst affected by farmers' suicides. A special package for livestock and fisheries for these districts was also announced. But these measures have failed to have the desired impact. It is now being conceded that the problem is far bigger than imagined: an estimated 30 million farmers had gone out of the institutional credit system due to defaults. The upa is now getting set to unveil a debt relief package for farmers, taking vital inputs from the National Commission on Farmers, headed by M.S. Swaminathan. Chidambaram was accused of ignoring the commission's recommendations in his last budget. He had argued that the government needed time to study the recommendations. But the fm jacked up the farm credit target to Rs225,000 crore, with the intention of bringing 50 lakh farmers into the banking fold. The scheme, set to be unveiled, envisages writing off the unpaid loans of the small and marginal farmers and a big relief for the big farmers over four years. Agriculture minister Sharad Pawar and Chidambaram have had several rounds of meeting and agreed on the broad contours of the policy. The package involves a total outgo over next four years of almost Rs70,000 crore, according to sources. Chidambaram and Pawar will now sit down with Prime Minister Man-mohan Sinah to decide whether the funds needed should be raised by levying a "farmers' rehabilitation cess or surcharge" or through a budgetary provision by diverting resources. Orj its part, the agriculture ministry has! proposed imposition of a 1 per cent cess on direct taxes and 2 per cent on indirect taxes. This is expected to] yield about Rs8,500 crore per annum. Sourcing the funds A credit risk fund, called the National Agriculture Stabilisation Fund, will be set up to cover the risk of future default due to reasons beyond the farmers' control. Under the package to be announced in the budget proposals, the ministry has proposed the waiver of the entire overdues from the small and marginal farmers owning land up to two hectares, entailing an outgo of about Rs25,000 crore. According to one survey, 70 per cent of the farmers who had availed themselves of loans come under this category. For the rest, there will be a one-time settlement scheme. It will be shared among the government, farmers and banks over four years. Those given debt relief will be eligible for fresh credit. It is estimated that the total overdue in the case of direct agriculture advances will be to the tune of Rs91,200 crore. Of this, the non-performing assets is estimated at Rs31,200 crore, the overdue above one year at about Rs30,000 crore and the less-than-one-year overdue at Rs30,000 crore. The agriculture ministry has also proposed that those paying back their loans regularly should be given a 3 per cent interest subvention, such as bringing down the rate of interest from 7 per cent to 4 per cent. This will be in line with the recommendation of the National Commission on Farmers. ? RAKESH