Avoiding the Punjab’s Farm Debt Crisis

The Punjab Farm Debt Settlement Act 2016 – recently notified – once again highlighted the issue of farmer insolvency and bankruptcy in India’s grain bowl. The debt situation in Punjab is dire. Recent data shows the state’s farmers owe 70,000 crore in debt, the size of the largest nuclear missile deal India has signed with Russia.

To add to this, the widespread phenomenon of farmer suicides, confined to the less developed agricultural regions of the country, has now spread its tentacles in the Punjab, which recorded the highest number of suicides in 2015, after Maharashtra.

The law, which had been gathering dust for 15 years, was finally passed in the run-up to the legislative elections scheduled for 2017. Strategically, it appears as a political tool to win the peasant electorate. However, the crux of the debate lies in whether it offers anything of value amid already existing laws.

Law, and voila!

Multiple state debt reduction laws reveal that the system is nothing more than a chaotic patchwork of laws. The Punjab Debt Relief Act, 1934, provides a mechanism for amicable settlement between creditors and debtors (which specifically includes farmers) of unorganized debts not exceeding 10,000 by conciliation boards of debt, which are quasi-judicial bodies.

In addition, decreeing a debt for an amount greater than double the principal is prohibited in certain cases. This was followed by the Punjab Debtor Protection Act of 1936, which prohibits the seizure and sale of certain land, including agricultural land, in execution of an unorganized debt payment decree.

In reality, this law is not followed. The Punjab Restoration of Mortgaged Lands Act, 1938 provides for statutory extinction of the agricultural land mortgage, once the mortgagor has paid an amount equal to or greater than double the principal amount.

Similarly, the Punjab’s Agricultural Debt Relief (Relief) Act 1975 provides for the discharge of farmers’ debt and the release of mortgaged property if an amount exceeding or equivalent to one and a half times the amount. principal of the debt has been paid. , however, judicial evidence shows that this act was hardly mentioned.

Additionally, there are laws governing money lenders and the rate of interest they can charge. It is obvious that the principle enshrined in all laws has not changed over the years, and it seems to fail, as debts seem to be piling up.

The insensitive approach to studying the root of the problem and the unwillingness to find an innovative solution seem to be the reasons why a law, which says nothing new to address the chronic problem of farm debt, is being pushed. .

Need for global changes

The real solution to the land debt crisis in Punjab lies in solving systemic problems in agriculture such as unpredictable rains, pest attacks, stagnant minimum support prices, declining agricultural exports, poor incomes, poor water supplies and falling prices for agricultural products.

Some of these solutions go beyond the framework of the legislation, others, although possible, are not envisaged by the Law.

It is obvious that the Act is a damage control measure undertaken by the government. However, this seems like a half-hearted effort as it is a reminder of existing state laws dating from the 1930s. Relief in the form of debt forgiveness and release of mortgaged property, in return for payment of an amount equivalent to double the debt was provided for by law, this time through special forums at district and state level, to which all cases of agricultural debt would be transferred.

The challenge posed to this infrastructural environment is obvious. They risk being overloaded from the start. As for their functioning, conflict is imminent when the forum is made up of one representative each from the agricultural community and the community of money lenders.

Moreover, a decision of the forum is binding even when a member is vacant, which implies that decisions binding on the farmer can be taken even if the farmer’s representative is absent.

The glaring absence of provisions prohibiting the seizure and auctioning of farmers’ property and the failure to set the interest rate payable on the debt are major loopholes in the law that do not appear to be justified.

In addition, a large part of the debts usually incurred by farmers are exempt from its scope, including institutional debts, debts incurred for trade, debts related to rent, etc., making the law a little pointless. Unfortunately, the law somehow ensures a double return to lenders for the money loaned.

A perhaps better substitute for the law would be the fresh start process under the Insolvency and Bankruptcy Code, 2016, albeit with revised monetary thresholds, which was recently passed by the Rajya Sabha.

A needy person, including a farmer in difficulty, can apply for a court debt relief order for unorganized or unsecured institutional debt incurred for any purpose, and not just for agricultural purposes, at an early stage. of his insolvency itself – at any time after three months of incurring the debt, if he is unable to pay his debt for a valid reason.

The waiver is not automatic as legal proceedings are contemplated, but the futility of waiting until a person is besieged by money lenders or has paid twice the amount of the debt with interest rates. exorbitant interest is waived.

act now

This mechanism is much more user-friendly as it provides for a moratorium on all debt collection actions by creditors until the debt cancellation order is granted and is also a healthier alternative to cancellation programs. one-time politically motivated debt distributed by the government, as it is a permanent mechanism run by the courts. As part of a central law on a subject on the concurrent list, it will be applicable to all states in India.

The law superficially tries to solve the problem of agricultural debt, because it erases under the carpet the real concerns which plague the situation of agrarian distress. Not much thought has been given to turning the Fa into a tangible solution. Instead, it ended up being a simple voice-gathering tactic.

With a timeline of more than a decade, much more could have been done in terms of drafting innovative law that allows people in distress to seek redress at an early stage, protect their property and avoid harassment from others. money lenders.

Unfortunately, none of these concerns have been effectively addressed by the law. Being a simple repetition of the old law, any hope of improving the condition of poor farmers in Punjab seems to be fading.

The writer is a researcher at the Vidhi Center for Legal Policy

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