Challenges aplenty in enabling DBT in farm sector: NITI Aayog

Richa Mishra/T V Jayan New Delhi | Updated on March 04, 2018

Ramesh Chand, member, NITI Aayog

Thinktank grapples with complexities in framework

Direct benefit transfer (DBT) cannot be a panacea for the agricultural sector’s many problems, given the multiple layers of subsidies from both the Centre and the States, said a top official of NITI Aayog.

As NITI Aayog’s internal committee sets out to explore a method to implement DBT, Ramesh Chand, a thinktank member who chairs the committee, believes that given the complexities involved, the task may not be easy.

“We had a meeting a few days ago. When I started looking at it, I found it quite complex. It’s not as easy as it appears on the surface: you can’t just do DBT (in agriculture) like you did with gas connections and other subsidies,” he told BusinessLine.

Income support model

One strand of opinion within the government favours direct income support rather than input subsidies. The Economic Survey 2017-18 made a pitch for just such an approach. The Survey prepared, by Chief Economic Advisor Arvind Subramanian and his team, iterated the need for ushering in direct income support in place of farm subsidies for power and fertiliser.

But according to Chand, one of the major complexities is in differentiating between subsidy support and income support. “These are two different things. Subsidy, by definition, means charging less than the price and is always related to use of input, whereas income support is linked to output. So, how will it be worked out is a challenge,” Chand said. He, however, emphasised that there is a need to bring some rationality to subsidies as they are imposing a serious strain on resources.

The basic purpose of subsidy is to promote the use of a particular input, he said, adding that “subsidy is specific whereas income support is very general.”

The Committee, which will submit its report in three months, will also look at whether there is a case for DBT in this sector or whether the subsidy money can be given in the form of income to the farmers on a per-acre basis.

Chand agreed that agriculture was a sensitive issue and that the Committee would have to look at all the options and possibilities before coming out with a mechanism to give the subsidy in the form of DBT or on area basis.

Another question that could come up is: who will get the support? Some States — Andhra Pradesh, for instance — have a large number of absentee landlords. Tenant farmers in Andhra cultivate 60 per cent of the land there; in Bihar, it is about 30 per cent. How can it be ensured that it is these farmers — and not the landlords — who benefit from the income support mechanism?

Asked if a similar method can be adopted as was done with DBT for LPG, Chand said, “You are giving DBT for LPG only to those who are connection holders. In the case of agriculture, if you say we will give DBT on fertiliser, how will you establish whether the farmer is the user of fertiliser? And, therefore, you are reduced to giving this subsidy to all farmers, whose number is not small.”

Subsidy calculation

Besides, in the case of gas, it is easy calculate the subsidy: it can be anchored to the number of cylinders one buys. But what will be the anchor in the case of fertiliser subsidy, asked the NITI Aayog member.

“One way of anchoring it could be to give it to those who are buying fertilisers. But we need to clarify that if we are talking about DBT in inputs, we will be giving DBT to only those who are buying these inputs,” he said.

On the Telangana model of giving ₹4,000 per acre per season to farmers, Chand said, “One is not sure whether what Telangana is doing can actually be called DBT. It is going on a per-acre basis. If you do it on a per-acre basis, you are giving it to someone who doesn’t even intend to use that input. Is there any justification for this? Besides, you also end up giving much less to those who need to use them.”

Different subsidies

The Committee, said Chand, has an open mind. “Another challenge is the different subsidies being given. Some subsidy (for example, on fertiliser) is given by the Centre, some by States (for instance, power and canal irrigation) and some by both (in the case of seed). When you are talking of pooling the subsidy, will States be willing to do?,” he wondered.

Another challenge will be to sort out the credit issue, particularly interest subventions. “So a question emerges: will you give subsidy to those farmers who do not have insurance and will you also give to farmers who never borrow? In fact, the credit structure is already like DBT. Then there is issue of drip irrigation: will you be giving it to rain-fed farms? There are many questions to be answered,” said Chand.

Published on March 04, 2018

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