Small and marginal farmers in India rarely manage to secure a fair price for their produce due to two constraints. One, they lack the resources to warehouse produce, so that sales can be timed to favourable demand conditions, and two, they are unable to secure loans by pledging their output and so sell in haste to realise cash. The Agriculture Ministry’s new concept paper for PM Kisan Bhai (Bhandaran Incentive) Scheme offers viable solutions to these problems.

It suggests a government-funded Warehouse Rental Subsidy (WRS) to help farmers bear storage costs and a Prompt Repayment Incentive (PRI) to help them raise loans against stored produce at concessional rates. While both ideas can genuinely empower the farmer, the many terms and conditions may restrict their utility. On warehouse rental subsidy, a monthly sum of ₹4 per quintal of produce is proposed to be given to all small and marginal farmers (with less than 2 hectares of land) storing produce in a warehouse and selling it through e-NAM or other licensed electronic platforms. This limits the scope of the scheme to 1.76 crore of the 12.6 crore small and marginal farmers who are on e-NAM. But even assuming the subsidy prompts more farmers to explore e-NAM, they are likely to reap limited monetary benefits.

The scheme proposes to pay subsidies only to farmers who store their produce for a minimum of 15 days and for a maximum period of three months. It will also be paid only for two crops in a year, based on 75 per cent of government estimates of productivity from two hectares of land. Illustrations suggest that a farmer can avail of WRS on a maximum of 53 quintals of wheat, 45 quintals of rice, 38 quintals of other cereals, etc., per year. The maximum annual subsidy per farmer will thus range from ₹420 to ₹1,176. Whether this sum is sufficient to nudge farmers into exploring warehousing or e-NAM trades is moot.. The PRI scheme will offer loans to all farmers at 3 per cent lower interest for three months on stocking their produce with registered warehouses. PRI will only be offered to farmers availing finance via Kisan Credit Cards against electronic warehouse receipts and trading on eNAM/ electronic platforms. The lender must be compulsorily empanelled with the Warehouse Development and Regulatory Authority, to receive the subsidy.

To top it off, both schemes can only be implemented in States which have amended their APMC Acts to declare warehouses as deemed market yards and permit electronic trading of farm produce. Given these factors, the government itself seems to expect only a slow take-off in the scheme, as it has budgeted just ₹170 crore towards the pilot in seven States for three years starting FY24. The complex design of the scheme suggests that the Centre may have to spend substantial time and effort in creating awareness about it among individual farmers.