A farm worker cuts wheat by hand during a crop harvest in Sonepat, Haryana, India. (Photographer: Prashanth Vishwanathanan/Bloomberg)

#BQDebates–Budget 2019: How Helpful Will Modi’s Farm Income Support Be?

Prime Minister Narendra Modi’s government announced a direct income transfer scheme to provide support to small and marginal farmers as the farm sector has seen returns drop due to low food prices.

The scheme, called ‘Pradhan Mantri Kisan Samman Nidhi’, will:

  • Provide Rs 6,000 a year to farmers with landholding up to 2 hectares.
  • Transfer the money in three equal instalments of Rs 2,000 each.
  • Start retrospectively from December 2018.
  • Benefit 12 crore farmer families
  • Be fully funded by the government of India.
  • Cost the government Rs 75,000 crore in FY20.

It starts this year itself and the finance minister allocated Rs 20,000 for the rest of FY19. BloombergQuint spoke to leading agricultural experts on what they make of the scheme.

Define Who A Farmer Is

Abhijit Sen, Former Member, Planning Commission, Retired Professor, JNU

The idea of a direct income transfer to farmers has been adopted by Telangana, and more recently by Odisha. The budget proposal is an extension of this with some variations. In Telangana, farmers get Rs 4,000 per acre per season—that is Rs 8,000 per acre for two crops. The central proposal to pay every small and marginal farmer Rs 6,000 a year is considerably lower in scope.

The second difference is that the Telangana scheme was sold—how far it is functional is not known—as a means of financing capital. There was no way of determining whether it went to capital or to consumption. In the central proposal, no such distinction is being made. It is being seen simply as an income transfer—probably the more honest way of looking at it. That if you are a farmer who owns less than two hectares, then you get this amount. The landholding limit is not there in Telangana.

So, the central scheme is more focused on farmers with smaller landholdings. Therefore, it obviously costs the government much less. My take on the Telangana scheme and the central proposal relates to three separate issues.

Implementation

The first issue has to do with implementation.

Who is a farmer?

The way Telangana did it is by looking at land records, and anyone who had land was given an amount matching with that. If you could show that you are an owner of certain amount of land, you got a certain amount per unit of land. That meant tenant farmers and agricultural labourers—or the poorest farmers—didn’t get anything.

And then there were some people who had leased out their land or had cultivated it themselves while living in towns, but were still getting something.

There is a problem in trying to define farmers on the basis of land.

That’s because: a) there are people who are farmers who don’t have land; b) there are people who have land and are not farmers. That’s Telangana’s problem.

The Government of India’s problem is that they have not even defined a farmer. So it’s not very clear whom they are going to give it to. People are not walking around saying that we are a farmer.
Abhijit Sen, Former Member, Planning Commission, Retired Professor, JNU

This will have to be done at the level of villages and states will have to find their own way of defining a farmer. It’s something which can’t be done very quickly.

The problem with the central government’s implementation of the scheme is that they plan to make some payment by the end of this financial year—that is by the end of March. How they are going to select the farmers and do it, is not at all clear. It’s ill thought out in terms of how you will define the farmer.

Landless Farmers Will Be Left Out

An extension of this is that any definition of a farmer being difficult and likely to leave out the poorer guys who don’t own land, they might as well have gone to all rural households. What they have done is taken the number of operational holdings below 2 hectares, and that adds up to 12.5 crore farmer households.

If they had simply said that we will give it to all rural households other than those who have more than 2 hectares of land, they could have then looked at land records and weeded people out. This might have been a simpler way of doing it rather than saying that it’s only for farmers.

It would have the advantage that you don’t build in a disincentive against leaving farming, because now a lot of people will try to register themselves as farmers to get Rs 6,000. 

Of course, not everyone will do this, and Rs 6,000 is not that much of an amount anyways. But the point is that there are other ways around this.

Is This The Best Way Of Helping Agriculture?

One could argue that a universal benefits transfer should indeed be universal, and not necessarily to farmers. Farmers are also part of our universe.

Make the universal benefits transfer unconditional. Think of farm schemes as that help increase their incomes, rather than a handout.

Essentially, the central scheme is looking at farmers but ignoring how to make them more productive. There are a number of things that are very important to today’s farming. Our farms are too small and there is a reason to make them work together so they can benefit from economies of scale.

There would have been a much stronger case for an income transfer to farm groups. Then you help the groups rather than individual farmers or households. Benefits of that kind are better done through a universal transfer that doesn’t discriminate between what you are doing. It’s better to actually do it in a manner that helps the beneficiaries—in this case farmers—realise and overcome difficulties. In the Indian case, the main difficulty is the scale of farming.

Rs 6,000 Crore To Farmers A Drop In The Ocean

Ashok Gulati, Former Chairman, Commission For Agricultural Costs And Prices

The direction of moving towards direct income support is appreciated. But the amount is too little and too late.

This will not make any difference to distress of farmers. 

Rs 6,000 per annum is just a drop in the ocean. It does not make sense either politically or economically.

Budget Silent On Farm Reforms

Siraj Hussain, Former Agriculture Secretary, Visiting Senior Fellow, ICRIER

Farm scheme is a good beginning but Rs 6,000 is less than what people were expecting. In Telangana, they are giving much more.

This grant of Rs 500 a month will help the very poor among farmers. But for instance the farmers in Punjab, who earn much more than that, it may not be of any great significance.

Unfortunately, the budget was silent on any reforms in agriculture. Nothing has been said about why the Maharashtra government backed out of APMC reforms.

One Size Doesn’t Fit All

There’s no single solution for all farmers in India. There has to be a differentiated policy for each region, and one has to study the context of each state and each region.

For instance, farming is very different in Punjab and Bihar. For example, Bihar does not face any problem of water but Punjab is facing water scarcity. In Bihar, there are no mandis and infrastructure is poor.

There is a need for a different treatment for every state.

Also read: Budget 2019: Government Proposes Income Tax Breaks For The Middle Class Ahead Of Elections