A poor cousin of Rythu Bandhu

There is no doubt that that there is plenty of political and popular focus on agrarian distress and the rural sector due to the pressure created by farmer bodies and NGOs.

The NDA government had raised the expectations of farmers by promising higher MSP (minimum support price) and doubling of farmer incomes over five years (2017-22). Therefore, it was expected that there would be attempts in the Budget to please farmers and rural voters by a set of measures, both productive and non-productive.

The only three ways to raise farmer income are by: increasing yields, reducing cost of production, and helping farmers realise better prices. Since the first two measures cannot be taken in the short term, the only short-term measure of some significance was to raise MSPs which, of course, cover only a few crops and a small percentage of farmers in some States only. But, the past policy shows that the MSP route was not likely to be taken any further.

A cash subsidy scheme

The interim Budget provides ₹75,000 crore for the present and the next year for giving DBT (direct benefit transfer) of ₹6,000 per year for marginal and small farmers under the new PM Kisan Samman Nidhi for meeting supposedly farm input and other costs during the crop season, and it would be fully funded by the Union Government.

The programme would be made effective retrospectively from December 1, 2018, with a provision for ₹20,000 crore for 2018-19 and the first instalment for the period up to March 31, 2019, would be paid during 2019 which shows the political urgency of the scheme.

But assuming that there are three seasons and, therefore, ₹2,000 per season per farmer would be given fails to take into account the fact that most of the marginal and small farmers in India, especially the rain-fed regions, do not grow even two crops a year. Therefore, it is clearly not an investment support but just a direct cash subsidy.

It is a poor cousin of the Rythu Bandhu scheme in Telangana (₹8,000 per year per acre), which also leaves out tenants and landless households. The support under the Rythu Bandhu scheme, though it is called farm investment scheme, is being given for two seasons when the crops being grown in the State, on an average, are only about 1.5 per year as it is a dry State. So, it is partly being given for even not producing anything.

The KALIA scheme in Odisha is much better than Rythu Bandhu as it is more equitable and widespread in its reach, covering all rural households, including the landless, and provides substantial support per household. That is similar to Universal Basic Income (UBI) in some sense so far as rural Odisha is concerned.

It would have better if the PM Kisan scheme had taken the good aspects of the two schemes and made it more inclusive and fairer by not only including tenants and farm workers, but also giving higher support per small/marginal farmer or per acre of land cultivated.

Sadly, it has poorly copied the faulty scheme from Telangana. Further, since it is an interim Budget, a new government may always re-examine it as the Madhya Pradesh government has done with the Bhavantar Bhugtaan Yojana (Deficiency Price Payment) scheme recently.

Some inclusive steps

The extension of interest subvention (up to 5 per cent, including 3 per cent for timely repayment) on animal husbandry and fisheries under the KCC (Kisan Credit Card) scheme brought in last year is a welcome move and inclusive in nature as many of these households are landless and don’t benefit from farm loan waivers or other farm-related benefits.

However, what is needed is better access to institutional credit for small, marginal and tenant cultivators and animal rearing and fishing households to not just lower the cost of borrowing but also to get them out of the interlocking of credit and produce markets which is playing havoc with farmers’ lives in terms of over-pricing of inputs and under-pricing of output and leading to indebtedness. Collateral-free lending up to a minimum amount for such households would have been welcome.

The extension of additional 3 per cent interest subvention on rescheduled farm loans for timely repayment is also welcome to give relief from indebtedness and agrarian distress in situations of natural calamity. This is, in fact, an acknowledgement of the relative failure of the Pradhan Mantri Fasal Bima Yojana to make a dent in the sector and reach affected farmers effectively.

The writer is a professor at IIM Ahmedabad

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