JULY RELIEF PACKAGE NOT ENOUGH, FARMER SUICIDES CONTINUE IN

UNCLAS SECTION 01 OF 02 MUMBAI 002054

SIPDIS

SENSITIVE

SIPDIS
DOC FOR 4530/MAC/AMESA/ASO/LDROKER/ASTERN
USDA FOR FAS'ITP/TPOMMEROW/JFLEMINGS/MFORD

E.O. 12958: N/A
TAGS: EAGR ECON EAID PREL IN
SUBJECT: JULY RELIEF PACKAGE NOT ENOUGH, FARMER SUICIDES CONTINUE IN
RURAL MAHARASHTRA

REF: MUMBAI 1266

Summary
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1. (SBU) Farmer suicides have continued in the drought affected
Vidarbha region of Eastern Maharashtra in spite of Prime
Minister Manmohan Singh's debt relief package announced in early
July. Over 900 farmer suicides have been reported in Vidarbha
this year, 300 of which occurred after the July announcement.
Under the debt relief package, full interest on debts is to be
waived in highly affected areas and loans rescheduled over a
three to five year period. However, according to our contacts
the ongoing suicides indicate: 1) that debt relief is not
reaching those who need it most; and, 2) that inability to repay
loans is symptomatic of larger, underlying issues such as
drought, lack of crop diversification, poor infrastructure, and
ill-conceived state economic policies. Local media and
opposition party politicians sometimes blame free-market forces
and globalization for Vidarbha's farmer suicides, but it is
precisely the lack of market liberalization and corporate
farming, and the continuation of subsidies and interference by
government buying offices, that have been largely responsible
for this tragedy. End summary.

Debt relief package failing
--------------


2. (U) Farmer suicides have continued unabated in the drought
affected Vidarbha region of Eastern Maharashtra, despite a $830
million debt relief package targeting farmers that Prime
Minister Manmohan Singh announced during a visit to the area in
early July (reftel). Of the over 900 farmer suicides reported
this year in Maharashtra, 300 have occurred after the July
announcement. Suicides are concentrated in Vidarbha at higher
levels than other agricultural producing regions, experts
contend, because cotton is the area's single crop, and
Vidarbha's cotton farmers have suffered weather-driven crop
failures and spiraling debt since 2004. A recent study by a
Maharashtra journalist noted that 86 percent of the local
farmers who committed suicide were debt ridden, 66 percent
primarily grew cotton, and all were paying between 48 and 60
percent interest to "unofficial" moneylenders.


3. (SBU) The Prime Minister's debt relief package provided a
number of emergency assistance measures including full interest
waivers on overdue loans in the six affected districts of
Vidarbha, $260 million in immediately available new loans, and
extended rescheduling of delinquent loans (reftel). Critics
complain, however, that many of the region's farmers do not
participate in the formal banking sector and, therefore, have
not benefited from the relief. Kishore Tiwari, head of local
civil society group Vidarbha Janandolan Samiti, estimated that
approximately 90 percent of small and tenant farmers' debts were
with private moneylenders. Since there is little regulation of
private moneylenders, these farmers continued to languish under
prohibitively high lending rates, some requiring payment of
approximately $1 interest every four months on every $2
borrowed. Tiwari accused state officials of not taking matters
seriously and claimed that he and other social activists were
trying to raise awareness among the farmers about their rights
in an effort to prevent suicides.


4. (SBU) Due to lack of transparency and poor regulation of
these private moneylenders, debt package relief often has not
gone where it is needed most, we heard. Dr. Deshpande at the
Maharashtra Economic Development Council also noted the lack of
coordination among the different government bodies involved.
The IGIDR report recommended that time taken for scrutiny and
receipt of compensation should be streamlined and minimized in
order to reach those in need quickly.

Debt: symptom or disease?
--------------


5. (SBU) The continued high rate of farmer suicides in Vidarbha
indicates that inability to repay loans is symptomatic of
larger, underlying issues such as lack of crop diversification,
poor infrastructure, recent deterioration in regional climate
and soil conditions, and inadequate local investment, Dr. A.
Deshpande at the Maharashtra Economic Development Council told
us. Deshpande and other observers claimed that, while the state
government couldn't do much about the weather, its poor economic
policies, including specifically cotton price supports, and
inefficient administration of public programs (reftel),have
exacerbated the situation. Instead of investing state revenues

MUMBAI 00002054 002 OF 002


in irrigation systems, storage facilities, roads, and
farmer-oriented information technology, like real-time
commodities pricing, the GOM has propped-up cotton prices almost
exclusively to the benefit of the region's ubiquitous
agricultural traders and middle-men.


6. (SBU) One GOM policy, in effect since December 2002, may even
encourage suicide, our contacts worry. The GOM grants over
$2200 to family members of farmers who kill themselves.
(Comment: Of course, it is a sad indication of just how low
agriculture incomes are in India that farmers might contemplate
suicide for such a sum. End comment.)


7. (U) Studies by the Tata Institute of Social Sciences and the
Indira Gandhi Institute of Development Research point to
additional pressures, such as few alternative off-farm jobs,
inadequate social support networks, and psychological issues
related to the stigma of these farmers' heavy indebtedness and
low social position, and the weighty consequences this creates
in India's highly stratified cultural superstructure.
Culturally, for instance, it is important to participate
financially in local festivals and provide lavish weddings for
daughters and sisters, and many of Vidarbha's farmers have been
unable to meet these familial obligations. While some of these
factors are universal to farming communities world-wide, they
have hit Vidarbha hard, the study observes.

Comment
--------------


8. (SBU) Farmer suicides continue to be a politically sensitive
issue in Indian society. Local media and opposition party
politicians sometimes blame free-market forces and globalization
for Vidarbha's plight, but it is precisely the lack of market
liberalization and corporate farming, and the continuation of
subsidies and interference by government buying offices, that
have been largely responsible for this tragedy. There are more
responsible and effective ways for the state to support the
affected region's farmers than through distorting measures that
do not give farmers the incentive to adapt to changing market
conditions and cushion their and their families' transition to
new market realities. Although the Prime Minister's debt
relief package -- if corrected -- might become an important
first step in assisting affected farmers, the creation of social
safety nets, bankruptcy protection, drought assistance, crop
insurance, and other risk-mitigating instruments also might
prove helpful in curbing farmer suicide in Vidarbha and
elsewhere. End comment.
OWEN