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Abstract
The study pertains to the economic issues of risk and uncertainties
associated with financing hill agriculture from the twin angles of risk of
farmers to utilize the credit and of bankers to disburse the agricultural
loan. The issues discussed are: first, why the financial institutions are
reluctant to lend agricultural advances? Second, whether the farm income
or rate of return on equity and non-equity capital is sufficient to repay the
loan? Third, what are the major sources and the magnitude of risks and
uncertainties associated with hill farming? Fourth, nature of agricultural
marketing situation and how it affects the farm income in this region and
finally, the possibilities have been explored, where and how the agricultural
lending can be stepped up with positive economic return? The study has
revealed that agricultural farming in north-east region of India is severely
constrained by high risk and uncertainty arising out from various factors.
Under the prevailing condition the expectation of a steady and assured
income from agriculture is quite limited; hence, the hill farming fails to
attract considerable private investment. The prevailing risk and uncertainty
situation compels them to operate at low-input and low-output subsistence
farming with low volume of marketable surplus. It has been found that the
financial institutions face difficulty in financing the hill agriculture in view
of low repayment performance and increasing non-performing assets for
agricultural loan. Also, the absence/poor performance of crop insurance
scheme (presently only Meghalaya and Sikkim are implementing the
National Agricultural Insurance Scheme) increases the risk of hill farming
considerably. Non-availability of reliable agricultural database (time series as well as cross section) on area, production and yield, cost of cultivation
has been found the major impediments for implementing the crop insurance
scheme efficiently. The agricultural situation in this region is highly
heterogeneous; variability is extremely high even within a few kilometres
of area. It has been suggested that suitable methodologies followed by a
wide database be developed to estimate the yield and cost of production
of horticultural crops which will help policymakers to formulate right policy
to protect the interest of farmers as well as smooth functioning of all
stakeholders — entrepreneurs, private investors, bankers and crop
insurance implementing agencies.