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Mainstream, VOL LVII No 18 New Delhi April 20, 2019

Does Direct Income Support outweigh Agricultural Loan Waivers?

Tuesday 23 April 2019


by S.S. Sangwan

The genesis of increasing agitations by farmers across India is lower market prices of agricultural commodities especially pulse, oilseed and vegetables in recent years. Lower prices have pushed farmers to precarious situation. The most effected were the 86 per cent small and marginal ones with unviable average holding of 0.51 hectare as per the 2015-16 Agricultural Census. It united the farmers across India, resulting in political debacles and forcing the political parties to increase the minimum support prices, bonus and procurement and even conceding assistance in terms of Agricultural Loan Waiver (ALW) or direct income support (DIS) in the name of inputs, etc. The ALWs are happening since long with the first one in 1990 and the second in 2008 at the all India level and the third time ALWs have been given by 10 individual States since 2016. This demand is spreading to other States like a contagion. In the process, an alternative to the ALW, the DIS was introduced in 2018 by the Telangana State, popularly known as Raytu Bandhu input support scheme. In the last few months, Odisha, West Bengal, Jharkhand and AP have also announced Telangana-like DIS schemes. In the wake of the coming Lok Sabha election, the Central Government has also come out with a DIS scheme, known as PM-Kisan Samman Yojana in the Budget of 2019-20. Some features of these schemes are given in Table-1.

It is well known that ALWs have benefited the farmers who have overdues from banks only. Generally, the beneficiaries are farmers below five acres but in all India ALW of 2008, out of total eligible 3.69 crore beneficiaries, 18 per cent were above five acres too and the coverage was about 27 percents of total AHHS (CAG Report 2012). Farmers’ coverage may be less than 30 per cent in the recent State-wise ALWs too. But in cases of DIS, the AHHs covered are more, for example, 58 lakh in Telagana, 72 lakh in West Bengal, 65 lakh in AP and 12 crore (Small and marginal farmers as 86.4 per cent of total 14.6 crore) in India. Hence, the DIC scheme has much wider outreach than the ALWs.

Moreover, the DIS is easier to implement and transparent based upon well-authenticated revenue records. It is more equitable as it benefits even the smallest land owner upto 100th fraction of a hectare who may have never obtained bank loan to come under ALWs. The maximum beneficiaries of Central DIS may be farmers from UP, Bihar and West Bengal which have more share of small and marginal farmers. In ALW, the beneficiaries are mostly the defaulters even willful ones who further encourage default after availing ALW. The DIS will be independent of farmer’s bank loan which he has deal like others. Hence, the DIS will not spoil the credit discipline of the borrowing farmers. Among the DISs, the Telangna RBS is appreciated due to liberal annual payment of Rs 8000 per acre of cropped area, though, KALIA scheme of Odisha is more inclusive and egalitarian covering almost all rural households. Some persons doubt about the Telangana scheme’s continuation due to the political fallout of protest by the left out sections, in spite of better fiscal position of the State. The main criticism of Central DIS is the inadequate assistance of Rs 6000 per annum which further condensed to Rs 500 a month or Rs 17 a day. However, it has been revised upward by some states with their own contribution. To Illustrate, AP has contributed Rs 4000 from its own scheme and thus Rs 10,000 will be given per farmer. Depending upon fiscal situation and deteriorating size of holding over time, the amount has to be increased by Centre as well as states. The old age pension is an example which was started with just Rs 100 in Haryana by Devi Lal and now it is Rs 2000 per month after increase by every successive government, irrespective of party.

Therefore, just like old age pension, the farmers’ friendly option for Opposition parties is to promise increase in DIS as criticism on the basis of small amount may not be convincing. It is to be noted that farmers owning between 0.01 to 2.0 ha have average monthly Rs 3000 income from farming, hence Rs 500 is 17 per cent. However, the DIS shouldn’t be taken by the government as a substitute for ensuring MSP through procurement and other productivity enhancing measures.             

Dr S.S. Sangwan is a former Professor, SBI Chair at the CRRID, Chandigarh (upto June 2018) and the General Manager of NABARD, Rohtak.

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