500,000 File for Insolvency in Maharashtra State : India Farmers Fight Debt Repayment

Half a million indebted Indian farmers have filed for insolvency in an unprecedented campaign to publicize their plight.

The “freedom from debt” movement started in April in western Maharashtra state and farmers’ leaders say it is spreading across the country.

“We want the farmers to have the moral courage to say that they cannot repay the loans they have taken from banks and cooperatives,” said Sharad Joshi, founder and leader of Shetkari Sanghatana (Farmers’ Movement).

According to Joshi, the number of insolvency suits filed by the farmers--most from small farms and poor--has reached 500,000 in Maharashtra and is expected to double by year’s end.

“A million suits, highlighting the farmers’ perpetual indebtedness, will force the powers that be to sit up and think and find a lasting solution,” Joshi said.

Accumulated Debt

According to the group, the accumulated debt of farmers in Maharashtra is about $435 million out of a total of $8 billion for India’s entire farming community.

Sanghatana has been fighting for farmers’ rights since it was founded in 1978 by Joshi, 54, who gave up a well-paid government job to become a farmer.

Since it launched its first protests in 1980, Sanghatana has secured higher prices for farm produce such as onions, sugar cane, cotton and tobacco.

As more and more farmers filed insolvency applications in Maharashtra, the state government last month tried to preempt Joshi’s movement by waiving agricultural loans totaling $145 million.

Bank Offers Warning

This brought a stiff warning from the Reserve Bank of India, the country’s central bank.

“Generalized write-off of dues encourages willful defaulters to the detriment of the large body of borrowers,” bank Governor R.N. Malhotra said in Bombay, the capital of Maharashtra.

Surprisingly, Joshi supported the central bank’s stand.

“I am against the writing-off of loans because it affects the sanctity of credit and contract between lenders and borrowers,” Joshi said.

“What we are trying to do is to find a solution within the system by taking recourse to the Insolvency Act.”

The act, passed during British rule of India, which ended in 1947, protects the debtor from attempts by creditors to recover loans by seizure of property or land.

The movement attracted nationwide notice last month when more than 200,000 farmers gathered at Kolhapur, a small town in Maharashtra, to file insolvency petitions and publicly declare themselves bankrupt.

Spreads to Other States

Joshi said the “freedom from debt” movement was also spreading in other states and by the end of next year about 10 million farmers would have filed insolvency suits.

“With about 10 million insolvency petitions filed in courts across India, the government cannot afford to continue with its anti-farmer policies,” Joshi said.

“The prices of agricultural inputs and produce are fixed by the government and the cost of production is far higher than the returns for most agricultural commodities,” he said.

Most farmers believe their fight in the courts will be a drawn-out affair but are convinced that there is no alternative.

Ramrao Hambarde, 68, one of those who filed at Kolhapur, rues the day he took a loan from a cooperative bank. Six years later, he has been able to repay only $265 out of the $670 he borrowed.

Tulsiram Bobde, 75, who also declared himself insolvent, summed up the farmers’ plight: “When there is a drought, which is frequent, there are no crops. When there are good crops after good rains, there are few takers and prices are too low.”