GoI spins a ‘no, I really do love you!’ to Cooperative Banks as a relief to farmers

The demonetization drive made a whole lot of cash, (80+% of the total cash in circulation actually) flow into the nationalized banks and severely affected the balance sheets of cooperative banks. A friend flagged a Deccan Herald news report asking for my opinion. And I stumbled upon how the GoI spins a ‘no, I really do love you!’ to Cooperative Banks as a relief to farmers.

Apparently, the GoI decided in its cabinet meeting on 24th Jan that interest for the 2 months of Nov-Dec. would be waived on short term crop loans taken by farmers in the Q1 & Q2 of FY16-17 and allocated Rs. 660 Cr. towards that. The original press release from Cabinet Secretariat can be found in item # 5 of Cabinet decisions in Jan 2017.

As stated in the last paragraph of the press release the Rs. 660 cr. is to cover the interest subvention and administrative cost incurred by NABARD on additional short term borrowing of Rs. 20,000 crore for on-lending to Cooperatives Banks in the current financial year. 3% cost of the interest subvention scheme and 1% of that towards administrative costs(which seems reasonable) matches up with this number. This additional Rs. 20,000 Cr. credit made available is communicated through item #1 in of Cabinet decisions in Jan 2017 with the following explanation:

In the light of good monsoon and expectation of increased credit demand and in order to boost agricultural production, the farmers need to be supported through Cooperative Banks, which purvey credit at their doorstep, to enable them to scale up their agricultural operation.

The approval will ensure increased availability of short term crop loans to farmers through Cooperative banks at reduced rate of interest.

BTW, DH news report got the numbers mixed up: of the announced Rs. 1060.5 Cr., the amount left for the waiver of (2 months) interest on the short term crop loans would be 400 Cr. This would be sufficient to cover the cost of the interest waiver (@ the post income subvention scheme rate of 4%) on a sum total of Rs. 6,000 Cr.

PS: I did not search out what was the total short term crop loans disbursed in Q1 & Q2 of FY16-17. The DH news report does note that Rs. 7.56 lakh crore was the total credit disbursed by the banks for this period under the agricultural credit category. But note that this includes not just short term crop loans but other categories of agricultural credit too.

Wow, if we are to trust this number in the DH news report, then all of 0.8% of the total agricultural credit disbursed in Q1 & Q2 of FY16-17 were as short term crop loans? This really needs some digging and verification. I suspected it would be small but this is way too small a slice of the pie !

Tech Fixes – The unique ID project in India

I have major concerns about this whole Unique Identification Number project, recently in the news in India, on three grounds :

• who is doing it?
• which problem are they trying to fix? and
• how will the proposed solution solve the stated problem?

Who is doing it?

As I posted in the comments section on Ashwin’s article at India Together, the primary issue I have with the UIDA is that is an “Authority”. One that is not directly accountable to the people.

The establishment of more and more ‘Authorities’ is very unnerving. Cities are no longer governed by elected representatives, services like water, sewage, electricity are being either contracted to fully private entities or carted out as PPPs. In spite of CAG reports that indicate that these entities are as corrupt and inefficient as the govt., we seem to be heading towards creating more such bodies to decide on a bigger slice of the ever shrinking pie of resources.

Technological solutions to governance issues are like pain killers, good till you are popping the pills. Good governance can be realized and sustained only through an aware and participative citizenry.

Which problem are they trying to fix?

According to media reports, the objectives of having a UID range from national security to govt. programs to law enforcement to access to medical records to ‘having a homogenized identification’ – something that doesn’t show one’s caste, class, religion, region, etc. The last reason being the most disturbing. It will take ages before we have a citizenry that is aware and participates in civic issues. So we might as well use technology to show that we are trying to ensure citizen rights. Especially when we are talking about contracts worth thousands of crores !

How will the proposed solution solve the stated problem?

Almost every one going ga-ga on this seem to think the challenge is purely technological and that this challenge can be easily overcome by The Great Indian IT Prowess. Well, storing a billion numbers and running a few lakh simultaneous compare operations is only one part of the challenge. One needs to look at (if and) how this solution would reach a jawan patrolling in Kashmir, or a ration shop contractor in a village in rural India let alone the lakhs of other places where we use identification.

As I see it, like the interlinking of rivers, this is yet another mega-mega project that is intended to show that we are fixing the problem. The lack of an informed and public debate on this and the structures being used do not reflect well on our much proclaimed democratic ethoes. Running after such solutions, we are loosing focus of the problem and the root causes will lie unaddressed that much longer.

http://mnic.nic.in/ is the under construction web site of the agency set up to translate the UIDAI’s UID to a card. The wikipedia page on this has some background information though it is more than a year old.