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Re: Farm policy



On Sun, 31 May 1998, Rozario wrote:

> 1. Make low interest loans available to needy farmers through development
> banks

These things (development banks) are already in place and they can never
serve the purpose, for reasons outlined earlier. I can give detailed
reasons if you like, based on personal experience of directly being
involved in this exercise for 2 1/2 years as a Project Director, DRDA.

Essentially, the rents created out of this "low interest" thing are almost
completely wiped out through inefficiencies, transaction costs, and
corruption. Therefore the farmer does not get a low interest rate in the
end, but gets a much higher one, and at the same time, black markets for
loans (local money lenders) get a great boost. 

Either you need a private group of borrowers themselves (like Grameen or a
coop society or a credit union), or small (regulated) private banks. There
are 5000 banks in the USA, actually many thousands more if you add NBFIs.
India can have 20000 banks, and a small but very intelligent government
can very strictly regulate them. That will bring interest rates to the
lowest possible level which can be sustained in the long run. 

> 2. Ban illegel sources of private lending.

Bans are not worth the paper they are printed on, particularly when it
comes to economic activity. These only make the corrupt richer, whether
the corrupt are within the government or outside. Black markets love these
things called bans. I hate bans on economic activity (except maybe for
banning illegal drugs, where huge enforcement machineries need to be
established).

> 3. Ensure that no group or company holds a monopoly on fertilisers.
> Encourage competition.

Great point. Already in the manifesto.

> 4. Random checks on fertilisers using chemical analysis ie. quality control

Great point. Also raised by Prem. Since government focuses on doing things
by itself rather than letting others do things, and it simply
control/regulate, our quality control, weights and measures, etc.,
machinery is virtually defunct. We need to shift resources into these
activities in a very big way. Regulation, standardization, and quality
control. That is an essential task of government which of course we cannot
do today since we are busy producing plastic, cloth and electricity. Will
be included in manifesto.

> 5. Prosecuting and blacklisting companies found faking fertilisers.

Same point as above: part of the quality control responsibilities. 

> 6. Upgrade the skills of farmers through NGO's.

This is a tough point. Please let us think some more.

> 7. Encourage Indian scientists to engineer a  genetically hardier version
> of the cotton plant.

That is another place where private research can come in provided IPRs are
in place.

One critical point which one must add:

Financial markets:
-----------------
Apart from insurance markets, there is a great need for futures markets at
local levels. Farmers should be able to buy specific contracts to sell
their crops the moment they sow the crop. That is how the farmers
eliminate risk in the developed countries. The problem is that our farmers
are illiterate, small and we don't have any futures markets for crops. 

We need to innovate here and make micro-futures exchanges at the district
level. This has to be an entirely private effort, strongly regulated by
government. 

Sanjeev