State governments should work with the Centre to think more towards Direct Benefit Transfer in agriculture than just minimum support prices and procurement, according to Arvind Subramanian, Chief Economic Advisor, Government of India.

Interacting with industry leaders and diplomats at ‘Breakfast with BusinessLine’, an event organised organised by BusinessLine here on Monday, he said his preferred approach to supporting farmers is through DBT. Subramanian said he will also discuss such a proposal with the Telangana Chief Minister K Chandrashekar Rao. Telangana is the first State that is implementing a DBT scheme in agriculture, he pointed out.

Cooperative federalism is the way forward in increasing DBT in agriculture which is a State subject. But many subsidies, such as for fertiliser and food, are driven by the Centre. DBT is also a variant of the Universal Basic Income envisaged in the previous Budget, Subramanian said.

Minimum Support Prices primarily benefit cereal farmers and, in the last couple of years, those in pulses cultivation. But others benefit less. Another option is the price risk support being tried in Madhya Pradesh. But both these mechanisms pose specific challenges such as the need for elaborate infrastructure for procurement and in the case of price support, the possibility of collusion in prices, he said.

Delayed payments

Responding to a question from A Vellayan, former Chairman, Murugappa Group, he acknowledged that in the pilot scheme tried out for DBT in fertiliser subsidy, payments to companies were delayed. He was open to suggestions on the issue, he said.

Vellayan pointed out that nearly ₹70,000 crore has been provided in the Budget towards fertiliser subsidy, including 80 per cent subsidy for urea and 30 per cent for phosphatics. The whole process was set out over seven months ago but subsidy had been delayed.

Connectivity, which is being provided by NIC, is a major issue that has handicapped the process. There is also a GST mismatch in input and output and the net effect is that over ₹10,000 crore is stuck and could make the industry sick by the end of the kharif season. Vellayan suggested that an alternative banking system be created till the DBT issues are resolved. If not cash flow will be hit, he said.