M K Shukla & Rakesh Ranjan Will the FY19 budget target of disbursing Rs 11 lakh crore of agriculture loans rekindle the magic of massive farmers' support to PM Narendra Modi in the 2019 National Election as was the case in 2014? Will his failed but renewed promised contract with farmers -MSP plus 50% over cost - earn him the precious votes that he would desperately need to compensate for the loss of votes of the mercantile class? Throwing bones to a dog may be a good policy, but throwing bones to voters could be as disastrous as disaster could be. So, maybe, it's time the gloss from FY19 budgetary provisions on agriculture was removed and one faced the reality: if the so-called rise in credit, as well as increase in MSPs, could avert agrarian crisis, previous governments, particularly UPA-2 regime, would have had scored a thumping success and would have continued its hold on power in perpetuity. The stark reality is that the increase in agriculture credit from Rs 96,000 crores in 2004 to Rs 10 lakh crores last year and the massive rise in MSPs during 2004-2014 have only added to the unending suffering of the rural masses. While outstanding bank advances to agriculture and allied activities have risen from about 13% of GDP originating in agriculture and allied activities in 2000-01 to 53% in 2016-17, the growth of the primary sector has remained stagnant. That means every rupee increase in credit has not done what it ought to have done. This should have rung alarm bells even for a deaf and dumb. But our governing classes are far more physically and mentally challenged. Several official reports including those from the RBI have repeatedly highlighted the weak links in the allocation of credit to agriculture. For one, the government's interest subvention for short-term crop loans hasn't helped in prompt repayment. On the contrary, NPAs in agriculture loans have been rising sharply over the years. That's because farmers are unable to recover even the cost price on their produce. So from about 2.5% five years back, agri NPAs are now over 5 %. From Rs10,500 crore in 2009-10, they increased to Rs 60,200 crore in 2016-17 even as the gross credit increased substantially. Bankers say that most of the farmers have become overleveraged over a period of time due to restructuring and doling out of additional funding. Hence, just as in corporate accounts, here too, the debt has to be split into sustainable and non-sustainable portions. As a one-time exercise, the unsustainable portion has to be written off. Notwithstanding this, the Centre has been doling out the subsidy for such loans. In fact, the subsidy payout under the interest subvention scheme has gone up over nine times since 2009-10. This year, the allocation is pegged at Rs15,000 crore. Besides NPAs, there is a greater scandal taking place right under the nose of the government - both central and state. Tata Institute of Social Sciences' (TISS) Agro Economist R Ramakumar has worked out that as much as 25% of agricultural loans are diverted from needy farmers to new Sultans of democracy. His analysis shows that even as the flow of agricultural credit increased from Rs 96,000 crore in 2004 to Rs 10 lakh crore FY18 and about 18,000 new rural branches of PSBs were established , one-fourth of the direct agriculture finance given to farmers is through urban/metro branches because of definitional delusions that facilitate the dive