How to cite this journal: Author, Date of the post, WMO Conflict Insight, Title of the post, ISSN: 2628 6998, https://worldmediation.org/journal/
ABSTRACT *
This article argues for a shift in Indian agricultural policy from farm debt waiver schemes toward institutionalised farm debt mediation. The author situates the proposal against the scale of the farm debt crisis in an agrarian nation where some seventy percent of the population depends on agriculture, citing National Crime Records Bureau figures on farmer suicides linked to unpaid loans and the compounding pressures of climate change, policy shifts, rising input costs, monsoon failure and mental health. Debt waiver schemes are criticised as self defeating, since they raise problems of beneficiary selection, damage farmers’ repayment credibility and ultimately constrict the flow of credit to the farm sector. As an alternative model the author points to Australian practice, including the Queensland Farm Finance Strategy and Farm Debt Mediation Scheme of 2008 and the Farm Debt Mediation Act 2011 of Victoria, modelled on New South Wales legislation, under which lenders must offer third party mediation before enforcement proceedings and where reported settlement rates approach ninety five percent. The paper proposes a Farm Debt Mediation and Settlement Act for Indian states, a platform built jointly by farmer associations, the banking and finance sector and non governmental organisations, a panel of accredited mediators with rural finance expertise, and a National Foundation for Farm Debt Mediation cum Arbitration operating on a tripartite basis with government participation to enable restructuring through subsidy, extended tenure, reduced instalments and incentives for prompt repayment.
KEYWORDS *
Farm debt mediation, agricultural credit, India, debt waiver, debt restructuring, farmer suicides, Australia, Farm Debt Mediation Act, tripartite mediation, arbitration, rural finance, creditor debtor disputes
INTRODUCTION
Farm Debt Mediation enables the Farmers to mediate their disputes with creditors, and the mediation process provides the farmers an opportunity to explain what is or has wedged on their capacity to repay debts and to seek mediation facilities for an outcome that enables and empowers farmers to face the creditor for a structured negotiated deal and to avoid the risk of legal proceedings.
MAIN CORPUS
Farm Debt Crisis and suicides
India being an agrarian nation with 70% of the population depending on agriculture, farm debt crisis happen so regularly, due to climate change, policy change, input cost surge, monsoon failure, and mental health issues. Over 12000 suicides were reported due to the same every year since 2013. Of the total suicides, 10% are from the farming communities. NCRB data points out that 2474 suicides out of 3000 farmer’s suicides in 2015 are the victims of unpaid loans from local banks in India.
Farm Debt Waiver
Farm Debt Waiver schemes do benefit the farmers, but it often ends with severe issues including a selection of beneficiaries and impact on creditors. Farm Debt Waiver schemes are self-defeating, as it destroys the credibility of farmers and their repayment history. In the end, such schemes affected the flow of credit to the farming sector and demolished the credit market in the farm segment of India.
Farm Debt Mediation – A solution!
The significant argument of this article is for a policy change from Farm Debt waiver to Farm Debt Mediation. Rising farm debt in Australia enabled them to initiate Farm Debt Mediation is an indicator towards the future for farming communities in any nation. In 2008, in Queensland, various rural groups and a number of banks executed a public agreement referred to as Queensland Farm Finance Strategy and Farm Debt Mediation Scheme which are similar to the Farm Debt Mediation Act 2011 of the Victoria, modeled on New South Wales legislation. In Victoria, over 180 Mediations have taken place with 95% of those Mediations resulting in a settlement agreement between parties. The Farm Debt Mediations require the banks to initiate third-party mediation prior to the commencing and enforcement of proceedings against farmers in default of loan facilities.
New Legislation is advocated: – Farm Debt Mediation & Settlement Act
The Farmer Associations in India and the Banking and Finance Consortium, in association with NGOs, can take a lead role in the creation of a platform for Farm Debt Mediations in India. Accredited Mediators with exposure to Farm lending and Rural Finance can be empaneled with the platform, and affordable professional services can be offered at various centers is advocated. This can be facilitated by appropriate legislation by the concerned state governments, considering the geographical situation and financial profile of the farming community and the banking institutions. We can invite recommendations for the suggested: – Farm Debt Mediation & Settlement Act for the states in India.
SUMMARY *
The author’s case rests on a simple contrast. Debt waivers relieve a balance sheet once, at political discretion, while leaving the farmer’s creditworthiness damaged and the rural credit market weakened. Mediation, by contrast, addresses each individual situation on its facts, gives the farmer a protected forum in which to explain why repayment failed, and produces a restructured arrangement that both sides have agreed and can therefore sustain. The Australian experience, where lenders must offer mediation before enforcement and the large majority of cases settle, demonstrates that the approach works at scale, and the author proposes the legislative and institutional architecture needed to replicate it across Indian states.
CONCLUSION
Conclusion
Farm Debt Waiver schemes should give way to Farm Debt Restructuring by creating a National Foundation for Farm Debt Mediation cum Arbitration. The proposed Farm Debt Mediation & Settlement Act ideally defines what a Farm Debt is and shall form a National Foundation for Farm Debt Mediation cum Arbitration. The Mediation cum Arbitration envisioned is tripartite including the appropriate government representative to facilitate the process of Debt restructuring by subsidizing the Farmer debt, increasing the tenure, or by reducing the monthly installments due and incentives to prompt Farmers in the reschedule agreement reached in the process of recommendations and submissions to the Mediation cum Arbitration. This in fact can help the government machinery to do away from the traditional methods of Farm Debt Waiver schemes which are based on political considerations rather than on scientific economic principles and dispute resolution methods. The proposed process can not only help the farming communities to save money and time from the traditional litigation but also get empowered and satisfied in the self–determined and government-assisted tripartite Mediation cum Arbitration process with the creditors.
POTENTIAL SOLUTION *
The author’s proposal is sound in principle; what follows is an outline of how it could be built so that it protects the party who arrives at the table with the least power. In farm debt the imbalance is stark: an institutional lender with legal departments and repeat experience faces an individual farmer, often in acute distress, negotiating perhaps once in a lifetime. A mediation framework that ignores this simply formalises the outcome the creditor would have obtained anyway.
First, make the mediation offer a condition of enforcement, not a courtesy. The decisive element of the Australian model is procedural: a lender may not proceed to enforcement against agricultural land without a certificate confirming that mediation was genuinely offered and attempted. This costs the lender little, since enforcement remains available afterwards, but it guarantees the farmer one protected conversation before the machinery of recovery begins.
Second, equip the farmer before the session, not during it. A mediation in which one side does not understand its own figures is a negotiation in name only. Independent, publicly funded farm financial counselling, preparing a realistic cash flow and viability assessment ahead of the mediation, is what converts the farmer from a supplicant into a negotiating party. The Australian schemes pair mediation with exactly this service, and it is the component most easily omitted and most costly to omit.
Third, keep the mediation and the arbitration distinct. The proposed mediation cum arbitration institution risks a familiar difficulty: a farmer who confides weaknesses to a neutral who may later decide the matter will confide nothing. If binding determination is to be available, it should be conducted by a different person under a separate agreement, entered only after mediation has been tried and only with the consent of both parties.
Fourth, structure the government’s tripartite role transparently. Public participation is valuable precisely because a state contribution, through interest subvention, guarantee or tenure extension, can make viable a restructuring that neither party could reach alone. To avoid recreating the political discretion that discredited waivers, the terms of public support should be defined by published, uniform criteria applied to every case, not negotiated case by case.
Fifth, build in dignity and safety. Given the mental health dimension the article rightly raises, mediators in this field should be trained to recognise acute distress and should have referral pathways to counselling and crisis support, with authority to adjourn where a farmer cannot negotiate freely. And where restructuring genuinely cannot succeed, the process should be able to deliver an orderly, dignified exit with debt relief and transition assistance, because the purpose of the system is to protect farming families, not merely to preserve loans.
* Added by the WMO Editorial Team
REFERENCES *
- Farm Debt Mediation Act 1994 (New South Wales), Australia.
- Farm Debt Mediation Act 2011 (Victoria), Australia.
- Queensland Farm Finance Strategy and Farm Debt Mediation Scheme, 2008, Queensland, Australia.
- National Farm Debt Mediation Bill and the National Principles for Farm Debt Mediation, Commonwealth of Australia.
- National Crime Records Bureau (2015 and subsequent years). Accidental Deaths and Suicides in India, Ministry of Home Affairs, New Delhi.
- Reserve Bank of India. Master Directions on Relief Measures by Banks in Areas Affected by Natural Calamities, and guidelines on restructuring of agricultural advances, Mumbai.
- Government of India (2007). Report of the Expert Group on Agricultural Indebtedness (Radhakrishna Committee), Ministry of Finance, New Delhi.
- National Commission on Farmers (2006). Serving Farmers and Saving Farming (Swaminathan Committee reports), Ministry of Agriculture, New Delhi.
- The Mediation Act, 2023 (Act No. 32 of 2023), India.
- The Arbitration and Conciliation Act, 1996 (Act No. 26 of 1996), India.
- The Legal Services Authorities Act, 1987, India (Lok Adalat provisions relevant to debt settlement).
- Rural Financial Counselling Service, program documentation, Australia.