Lower fiscal deficit may allow govt to offer more relief for rain-hit farmers

With the lower fiscal deficit giving it more headroom, the Centre is set to announce new relief measures for farmers affected by unseasonal rains and hailstorms, which may include more monetary compensation, besides assistance for irrigation and seeds among other things.

“The reduction in fiscal deficit has given some room for the new measures. The Finance Ministry has given some suggestions. These will be considered once the Prime Minister is back from his three-nation tour,” a senior government official told BusinessLine . The Prime Minister is scheduled to return on midnight Tuesday/Wednesday.

On Sunday, the Finance Ministry announced that it has managed to beat its own fiscal deficit target. Now, fiscal deficit for 2014-15 stands around ₹5.02 lakh crore, against the revised estimate of ₹5.13 lakh crore, which means the government will have a little over ₹10,700 crore as cash surplus for spending on various initiatives during the current fiscal. This is the amount that can be used for some more relief measures for the farmers.

Of late, the government has been facing Opposition flak, especially by Congress Vice-President Rahul Gandhi, who has been campaigning against its “anti-farmer and pro-corporate” policies during his visit to some States.

The Modi government’s new measures are likely to be part of its first year celebrations, another senior official said, adding that “this will help the government in two ways. First, these will be strong reply to Opposition’s criticism over neglect of farmers and, second, these will add more positivity in the first year celebrations.”

These will be the second round of measures for farmers. On April 8, the Prime Minister had announced a reduction in the criteria for crop damage for compensation to affected farmers from 50 per cent to 33 per cent. Also, the amount of compensation was hiked from ₹1 lakh to ₹1.5 lakh.

It is estimated that around 18.98 million hectares of wheat, potato, mustard and other Rabi crops were damaged by unseasonal rains and hailstorms between end-February and early-April. Also, overall foodgrain production for the 2014-15 crop year is likely to fall by 5.5 per cent to 251.12 million tonnes from 265.04 mt in 2013-14.

In addition, there is apprehension about ‘below normal’ rainfall in the current year, which may also affect the Kharif crop. The new measures will also help farmers in case of poor monsoon, the official said.

Meanwhile, experts feel that the new relief measures should not include higher minimum support price or one-time bonus.

“Increase in MSP or bonus payment will affect the prices which, in turn, will impact inflation. It will be better if the government uses the direct benefit transfer mechanisms to give monetary relief to farmers,” said DK Pant, Chief Economist with India Ratings.

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