As the General Elections are few months away, the Central Government has begun crunching the numbers in preparation for a comprehensive programme to help farmers tide over challenges posed by a dip in prices and dwindling incomes.
Now the government is keen on a more substantive intervention than a loan waiver at the central level to alleviate agrarian distress besides stepping up investments in the sector, having concluded that writing off debt doesn’t help address underlying problems.
The government is also considering further changes in the minimum support price (MSP) regime to make it more effective and also a direct income transfer to make up for low income from farms.
According to a government official, “The second option (direct income transfer) entails large numbers and it also needs to be seen how the benefits can be targeted to reach poor farmers who need the support.”
The Centre announced a tweaked MSP programme in September 2018 but a more liberal scheme under which a farmer can get the difference between prevailing market rates and the support price is also being looked at.
Policymakers are more inclined towards a targeted scheme that can immediately provide some relief to farmers and this would also spur the investment cycle in the farm economy.
According to some people in the government, an income transfer scheme for poor farmers based on the Socio Economic and Caste Census (SECC) that has already mapped household deprivation can be the best answer.
It can also be politically more acceptable after the ruling BJP recently lost assembly elections in three north Indian states to Congress. That was followed by farm loan waivers announced by Congress-ruled and other states.
Fiscal Deficit:
A central scheme focusing on income transfer may put pressure on the government’s finances, forcing it to change the fiscal glide path to meet funding requirements.
The fiscal deficit is projected at 3.3% of GDP this year and the medium-term goal is to reach 3% by FY21. The Centre is now looking at all possible scenarios, like sharing costs of such a programme with the states.
In a note last month, SBI Research had suggested payments of Rs 12,000 per family per year in two a for 216 million small and marginal farmers. The total outgo was seen at Rs 50,000 crore, which is almost equal to the amount the government spends on the rural employment guarantee scheme.
State Schemes:
The income transfer scheme could be on the lines of Telangana’s Rythu Bandhu scheme, which offers 4,000 per acre to all land-owning farmers.
Jharkhand and Odisha have followed in its footsteps even as debate rages on the best form of assistance for farmers. Odisha has launched the Kalia scheme that will provide 10,000 to about 3 million small and marginal farmers for the rabi and Kharif crops. Jharkhand has announced a 5,000-per-acre payment to 2.3 m medium and marginal farmers from the next financial year.
West Bengal has announced two new schemes for farmers and farm labourers in the state. It entails a payment of 5,000 per acre every year in two installments besides 2 lakh to the kin of farmers who die due to any reason, like suicide.
PM Narendra Modi described the loan waivers by Congress state governments as “political stunts”. PM said in an interview that most farmers don’t benefit from them as only a few take loans from banks and most borrow from money lenders.
