Marathwada Drought Crisis: How Underdeveloped Banking System Ruined Farmer Lives

Titu Bardhan

The history of postcolonial India is remarkably entrenched in the agricultural dependent economy. The need for this emphasis was due to the outrageous drain of wealth created by the colonial masters. The 1990s brought a major change in this economy. the support system of this change is created long back during the tenure of Indira Gandhi who Nationalised banks for the help and assistance of the common people. This is the same decade which brought desolation to the people of Marathwada.

The banking sector which was established in this region has always been controlled and moderated by landowners and the liberalization had a static effect on it. The liberalization of the economy created loads of opportunities for the people to get jobs in the service sector, the banks in Marathwada disregarded this transition. Precisely at this juncture, the markings of agrarian crisis begin but before we delve into the crisis the knowledge about the area and its features are necessary to be taken into consideration. A democratic system introduced before a major industrial upheaval had empowered the rural countryside of India. A politically strengthened system was provided to the agriculturalists in the early years of free India, economy though wasn’t confident about sustaining this support. The self-limitation of Indian agriculture hindered its rural empowerment [1].

The state of Maharashtra has been one of the most industrialized states of India. The financial capital of the country is also the capital of the state. In terms of population and production, Maharashtra ranks in the top 10 among all Indian states. The area geographically contains black Deccan soil which is considered highly rich in minerals supporting many crops. One of the most grown crops in Maharashtra is cotton. In respect to this crop, we come to the zone of this paper called Marathwada. The Marathwada region is situated in the extreme Eastern corner of the state of Maharashtra sharing boundaries with Andhra Pradesh Tamil Nadu and Karnataka simultaneously. Though the area has been famous for cotton production historically, the last few years has made it famous, rather infamous for the high rates of farmer suicides in the region. The reasons for the steady growth of dying farmers has been due to yearly droughts, crop failures leading to non-repayment of loans taken for agriculture. Families after families have lost both the male and female members in the villages due to the agrarian crisis. 

Banking sector being underdeveloped profusely has been the main driving force behind these deaths. An underdeveloped banking sector untenable of meeting the needs of a drought-hit region leading to exploitation by money lenders and agents has contributed majorly to the high rate of farmer suicides in Marathwada. The primary condition therefore which has caused this major bloodbath is the banking system failure. Marathwada is a microcosmic example of how banking in rural India has failed to deliver its developmental restructuring goal.

Role of Banking in Marathwada Crisis

In understanding the agrarian crisis of Marathwada the banking sector of rural India is to be of primordial importance. Regional Rural Banks (RRB) was established under the provisions of an ordinance promulgated on the 26th September 1975 and the RRB Act, 1976 with an objective to ensure sufficient institutional credit for agriculture and other rural sectors. The RRBs mobilize financial resources from rural / semi-urban areas and grant loans and advances mostly to small and marginal farmers, agricultural laborers and rural artisans. The area of operation of RRBs is limited to the area as notified by Government of India (GoI) covering one or more districts in the State.

In terms of their sheer size and spread of operations, formal-sector financial institutions dominate the rural finance landscape: Commercial banks, mostly public-sector banks (but also some private- sector banks) and regional rural banks (RRBs) together have more than 32,000 rural branches India also has a vast network of rural cooperative banks, with a three-tiered structure at the state, district, and village levels. There are some 14,000 branches of rural cooperative banks and more than 98,000 grassroots retail outlets of Primary Agricultural Credit Societies (PACS), which are used by the cooperative system as channels for fund flows [2].

Being a rural area Marathwada has both formal and informal banking institutions. Money lending as a system works both from government RRB’s and Mahajan of the village. The classical case of the Indian banking sector has always shown its weakness in the rural sector. The age-old system of personal money lending from the propertied classes in a village has been the prevalent form of monetary exchange for farmers in distress. Marathwada shows no change in this structure [3]. 

If the condition of farmers of Marathwada is taken into consideration with the agrarian output of last one decade it can be assumed that post globalization Marathwada has faced more banking disasters than any other place in India [4].

After changes in worldwide policies in 1991, privatization and free economy have changed banking practices. Banks are not very eager to give loans to farmers [5]. The poor and marginal farmers thus fall into the clutches of moneylenders, who charge higher rates of interest, which the farmers are unable to repay. With no guarantee of a good crop even during the next season within the limitations they have to face, the farmers continue to borrow from money lenders as they get money on demand. Getting loans from banks and cooperatives often takes longer and they had to go through agents at times, who demand commissions. 

This in a way has led to private moneylenders becoming a major source of loans across the region, and with the collapse of banking in rural areas, their role has only grown. Most district cooperative banks, which farmers have traditionally counted on, have gone defunct in Marathwada due to corruption and the banks’ inability to take on influential defaulters. Private banks, which a farmer might then have turned to, have magnified the interest rates on farm loans by merging crop loans and term loans, thereby making it even more difficult for the debt to be repaid. The loan waiver promised by the state government has not materialized either, making farmers ineligible for new loans [6]. Without these credit avenues, farmers are compelled to approach private moneylenders, who readily disburse loans, but at interest rates that vary between 3-7% per month or 40-85% per annum. With such exorbitant rates, even a modest sum can end up digging a farmer’s grave, because the interest soon surpasses the principal amount. Alternatively, Mahajans lend money against mortgaged land – and when a farmer defaults, he loses his land. The farmer suicide rates in Marathwada in 2001 were drastically different from whole of the country [7]. Loan repayment schemes by the government have been non-productive in halting the crisis in Marathwada. The Government of Maharashtra had announced various loan waiver schemes in the year 2008, 2011 and 2012 of which latest is 2017. Non- responsive banking institutions and done oppressive non-banking informal money lending system have slowly and steadily ruined the societal structure of farmers in Marathwada which has been escalated by deficient rainfall and subsequent famines. The majorly affected area regarding banking disaster in Marathwada is the area called Beed. The agricultural and finance ministry of Maharashtra in a report in 2011 states that banks in an attempt to collect deficit revenue from farmers have taken illegal methods and have taken recourse to unlawful means in Beed. The then Chief Minister of the state of Maharashtra Mr. Ashok Chavan promised to take stringent actions against such banks, ground reality was drastically different and financial pressures combined with societal stigma of being indebted to banks and money lenders created situation of palpable insecurity and helplessness among the farmers leading to suicide mainly by means of consuming pesticides which were ironically bought for farming through loans. Marathwada has two kinds of banks full stop the aforementioned banks are of commercial character but there also exists cooperative banks which have been lenient in loan repayment schemes for the farmers full stop a problem arises when these commercial banks and officers non-institutional structures giving loans come together under single agenda of maximizing profit out of the mystery of the farmers full stop the nexus between commercial banks and village money lenders have created a situation in which banks use muscle man of the money lenders to not only oppress but abet farmers to give up their lives due to social harassment done on a public level [8].

Source: P. Sainath” Bank Gandhigiri, Cashless Hara-kiri in Marathwada.” Economic and political weekly (2016):1-2. 

The Agrarian Crisis

In the year 2016, the Maharashtra government had declared drought in 11,962 villages in Vidarbha region, taking the total number of villages to be declared drought-hit to 27,723, nearly half of the 43,000 villages in the state. Of the 11,962 villages, 5,810 are in the cotton-growing Amravati division, which also reported the bulk of farm suicides in Vidarbha. The demonetization drive by the central government made matters worse as banks threatened 20000 farmers in Marathwada for loans amounting to Rs 180 crores with public humiliation and illegal extortion [9]. 

2013 to 2016 statistics show that the monsoon season has been arriving late in Maharashtra. But the farmers in the State continue to sow seeds that are not drought resistant. If the monsoon is delayed again, the vicious cycle of drought and crop failure will continue.

Per capita income levels have dwindled considerably if the comparison of Maharashtra as a state is taken in perspective with Marathwada.

The situation has turned to such dangerous levels that the state government of Maharashtra had to impose section 144 of the Indian penal code to safeguard water tankers from the distraught people to avoid scuffles. The situation in Marathwada has transformed from a problem of natural calamity to a full-fledged human-induced disaster due to the oppressive, profiteering and negligent attitude of the government as well as the banks [10]. 

If the geographical connotation of Maharashtra is to be taken into consideration, then the dichotomy of agriculture and the underlying disaster mechanism can be fathomed clearly. The parts in and around the districts of Marathwada are rich sugarcane belts controlled by sugarcane barons of Maharashtra who singlehandedly control a major portion of the Indian sugar industry. As a crop, sugarcane requires extensive use of water and setting up mills require capital investment in larger amounts. The same banks which humiliated farmers of Beed and abetted a large number of farmer suicides in Vidarbha and Marathwada for loans have kept a distance from these sugar barons and their subsequent higher loans in comparison to the farmers. Speculations regarding diversion of routes of tankers meant for Marathwada to sugarcane fields have been doing the rounds since the relief package by the government in 2013. The figure of loans for the sugar barons and the time frame of non-repayment eclipses that of the Marathwada farmers but action on ground is contradictory to the rules of banking loan appropriation. Even the government provided these barons a Rs 4400 crore interest-free loaning mechanism to expand mills and buy machinery. The siding of the government with the sugar barons of Maharashtra shows a terrifying trend for agriculture in India as well as Marathwada. The nexus of the capitalist class which is hand in glove with the government is slowly and steadily eating up the resources meant for the poorer strata [11]. Marathwada and its agrarian crisis is a big example of how constitutional functionaries in lieu with financial institutions work to alleviate the capitalist class by perpetually deteriorating the lives of the poor specifically the agrarian poor.

The political class is equally at fault in this desolate condition of the farmers. Prior to the economic liberalization, the farmer lobby among the political parties especially in the state of Maharashtra was very strong and influential bringing in farm loan waivers at regular intervals. Political considerations were put to great use in appeasement of the farming class. The refracted view of the political class began with a changed stance towards the service sector. A new bourgeois class that grew out of the mercantile revolution brought about by the liberalization of economy was the new class that needed the appeasement according to the political class [12]. The one on one correspondence between the rural and political class broke up and instead of achieving best outcome scenarios from this liberalization, worst case scenarios were being averted. In such a situation the profiteering class galloped its way to prosperity, the downtrodden agriculturalists were unable to catch up and the target areas of such created disasters became the affluent states of Maharashtra, and subsequently the area of Marathwada.

The Curious Case of Banks and Dead farmers

The banking sector responded in the same way. The tendency to provide loans to industries by the banks grew as governmental limitations were eased, in the newly found free sphere of the market. Big investments into industries required big capital and the banks answered to this call. Amidst all this, the biggest hit was received by the agricultural sector. The urban-rural divide explosion starts at this point precisely. Marathwada is one of the best-known examples of this explosion which ruined an entire area. While the government has always been banking upon its relief measures to support drought-affected farmers, the reality stands in stark contrast to the promises. This again is due to the hand in glove profiteering if local administrators and bank officials. For example, in 2016, 49-year-old Arun Jadhav took his own life by drinking pesticide he had bought for cultivating his fields with loan money. Due to the severe drought, his crops failed and in turn applied for the government initiative of crop insurance. The crop insurance money never arrived from the bank which was harassing it for the loan he had taken. The bank later claimed that he had received the crop insurance on time and his suicide was not related to the loan or insurance. Ironically the bank statement of the release of funds regarding crop insurance shows that Arun Jadhav received the money a day after his death [13]. The compensation for death hasn’t arrived yet according to his widow. The case of Arun Jadhav isn’t an isolated incident as the same case is seen in many families in the district of Beed and other places where farmers received crop insurance money after their deaths and that also with receipts being signed by themselves according to bank statements [14]. Another extreme measure or so-called bureaucratic loophole in escalating this disaster is that the state government doesn’t recognize farmers who have taken loans from private moneylenders eligible for relief packages or loan insurance measures. The weak banking sector which forces people to resort to money lenders from the village makes it a high-risk measure considering the exorbitant interest rates charged.

Source: Ram B. Singh. “Agrarian Crisis in India”. IJARIE-ISSN(O)-2395-4396. 

Conclusion

All this shows the deep rot that has eaten away the credibility of the Indian banking sector in rural areas, which has made a mockery of the aspirations of the people indulged in providing food to the country, who dreamt of support from the Indian banking sector. The banking sector which was created and then nationalized for the benefit of the most downtrodden had turned into the same machinery the colonial masters used it for, only this time the skin color and nationality of the master and machinery resembled that of the oppressed. The dwindling up of agriculturalists and rising of rural labor shows a dangerous trend in stating that the rural sector is slowly turning into a death-trap for the farmers and the only way forward is moving out to the urban centers.

India ‘s rural poor are overwhelmingly dependent on agriculture as their primary source of income; the majority is marginal or small farmers, and the poor holds are landless. The financial needs of India ‘s rural poor reflect the volatile, uncertain, and irregular income streams and expenditure patterns of these households. The banking sector must become more responsive to the demands of this strata as these are the people for whom modern India became strong. We must acknowledge what American politician Samuel Sharon Farr famously quoted on the importance of agriculture and safeguarding agriculturalist –

“To make agriculture sustainable, the grower has got to be able to make a profit”

References 

1. Ashutosh Varshney, “Democracy, Development and Countryside: Urban-Rural Struggles in India” Cambridge University Press, (1995).

2. Dileep S. and G.V. Kesava Rao, “A Study on Indian Rural Banking Industry-Issues and Challenges” Asia Pacific Journal of Research. (2013), Volume No: 2 Issue: 4 ISSN 2320-5504.

3. Hari P. Wangarwar, “An Empirical Study of Economic Distress Among Suicide Victim Farmers of Marathwada region of Maharashtra.” Epitome: International Journal of Multidisciplinary Research (2017) 3-4.

4. Harsha Vadlamani,” Drought in Marathwada”, http://sriharsha.in/marathwada-drought/ (2017) Accessed on 1st October 2017.

5. Khairnar, Dilip R. Madhurani J. Bhonsale and Mahadev A. Jadhav. “Lack of Irrigation Facilities, Draught Conditions and Farmer Suicides in Marathwada Region, India.” American Journal of Rural Development 3, no.3 (2015):74-78.

6. Megha Sood, “Maharashtra sugar factory scam: ‘Dead’ farmers apply for 328 crore loans” http://www.hindustantimes.com/mumbai-news/maharashtra-sugar-factory-scam-dead-farmers-apply-for-328-crore-loans/story-82Dye1HTTSe07yNKlY8pOI.html (2017) Accessed on 4th October 2017.

7. P. Sainath” Bank Gandhigiri, Cashless Hara-kiri in Marathwada.” Economic and political weekly (2016):1-2.

8. P. Sainath” Bank Gandhigiri, Cashless Hara-kiri in Marathwada.” Economic and political weekly, 5.

9. Parth M.N, “The Dynamics of ‘Sahucars’ and Farmers in Maharashtra’s Villages” (2017) https://thewire.in/176675/dynamics-sahucars-farmers-villages/ Accessed on 30th September 2017.

10. Saurabh Gupta, “In Drought-Hit Marathwada, Farmers Say Government Relief Schemes Fails Them”,https://www.ndtv.com/india-news/in-drought-hit-marathwada-farmers-say-crop-insurance-scheme-has-failed-them-1284603 (2016) Accessed on 4th October 2017.

11. V. Kelkar, “Report of the High-Level Committee on Balanced Regional Development Issues of Maharashtra” Government of Maharashtra Planning Department (2013).

12. V. Vakulabharanam: “Growth and Distress in South Indian Peasant Economy During the Era of Economic Liberalization “. The Journal of Developmental Studies,41(6), (2007) 971-997.

13. Varsha Torgalkar, “ Marathwada in the Grip of a Drought-like situation”

(2015). http://downtoearth.org.in/news/marathwada-in-the-grip-of-drought-like-situation-

51012. 

14. Vidyasagar, and Chandra “Debt trap or Suicide Trap”.

http://wwwcountercurrents.org/gloshiva050404.htm (2007). Accessed on 28 September 2017.