Several economists are now advocating a similar Direct Income Support (DIS) scheme in India, like Telangana’s Rythu Bandhu model of upfront cash support of Rs 4,000 per acre (Rs 10000 per hectare) per season to every land-owning farmer at the time of sowing for purchase of inputs like seeds, fertilizers, pesticides, labour etc.
Farmers need loans for these and the scheme in which money is transferred directly to the bank accounts of the farmers ensures that they do not fall into the debt trap. Telangana has earmarked Rs12000 crore in its budget for the financial year 2018-19, which, ironically, was criticised by the Congress as “ointment for a patient who needs to undergo surgery”. Now Jharkhand has taken a cue from Telangana and announced a cash transfer of Rs 5000 per acre to 22.76 lakh farmers across the state, which will cost the state exchequer Rs 2250 crore a year.
However, in the absence of a ceiling on holding, Rythu Bandhu tends to be regressive, with only 9 per cent of the large landowners holding more than 5 acres each, likely to appropriate 34 per cent of the total payout. Earlier this year, Karnataka had announced a similar scheme, Raita Belaku, for providing Rs 5,000 per hectare to seven million dryland farmers, while limiting the assistance to Rs 10000 for each.
Investment is essential for increasing agricultural productivity and farmers’ income besides breaking the vicious cycle of their indebtedness. A survey by NABARD in August 2017 showed the highest incidence of indebtedness among agricultural households in Telangana (79 per cent), closely followed by Andhra Pradesh (77 per cent), Karnataka (74 per cent). Even states like Tamil Nadu (60 per cent), Kerala (56 per cent), and Odisha (54 per cent) have more than half the agricultural households in debt.
The same survey also pointed that the average outstanding debt is far higher for agricultural households than non-agricultural ones for every category of MPCE (Monthly Per capita Consumption Expenditure); it increases from 1.5 to 2.1 times from the lowest to the highest decile. In view of this, DIS schemes are far better than loan-waivers in addressing farmer indebtedness. However, they do precious little to address the regulatory and infrastructural deficiencies in agriculture.
In India, farmers’ distress has so far been sought to be addressed through price support mechanisms ~ by fixing a Minimum Support Price (MSP) above the cost of production. In the last budget, MSP was fixed at 1.5 times the cost, based on A2+FL (actual paid out cost-plus imputed value of family labour). But this mechanism distorts the system, is not crop-neutral and also inflationary. Besides, the Government does not procure all the produce of farmers forcing them to sell at the market at lower prices.
A variant of this mechanism ~ a price deficiency payment (PDP) scheme ~ was attempted in MP to compensate the price differential to the famers where the market price was less than the MSP through its Bhavantar Bhugtan Yojana (BBY) which was subsequently withdrawn because of poor implementation and its vulnerability to manipulation by traders.
In a joint paper, “Supporting Indian Farmers: Price Support or Direct Income/Investment Support?”, Ashok Gulati, Tirtha Chatterjee and Siraj Hussain have correctly argued that MSPs based on cost plus pricing completely ignored the demand side, thereby causing major distortions and inefficiency in the agri-marketing system. The consequent losses exceeded the support provided to farmers.
They argued that a DIS scheme like Rythu Bandhu is easier to implement, more transparent, more equitable, crop neutral, and less distortionary than the PDPs/BBY type schemes. They estimated the cost of such a scheme at Rs 1.97 lakh crore if launched nationally at Rs 10000 per farmer per hectare.
Even if this estimated cost goes up by a few thousand crore, it might still be less than the sum total of all loan waivers announced and likely to be announced by all states. The downside is that the tenant farmers stand to gain nothing from this scheme, and neither does it help the marginal farmers who own very little land.
But whether based on price support or income support, all such schemes are ultimately nothing but sops that do not provide a permanent solution to agricultural distress, which can only be ensured through heavy investments on cold storage, food processing and marketing infrastructure. There is another prerequisite, which is to consign our archaic APMC Act to the dustbin of history and allow direct buying from farmer producer organizations (FPOs), bypassing the mandi system.
In fact, the APMC system, which was introduced to protect farmers from the exploitation of intermediaries and traders and to ensure better prices and timely payment for their produce through auctions in the mandis, serves exactly the opposite purpose. It restricts the farmer from direct transactions with the processors, exporters or retail chain operators as all produce is required to be routed only through mandis, which over time have become extremely restrictive, extortionary and monopolistic markets, harming the farmers rather than helping them to realise remunerative prices.
The monopoly of Government regulated wholesale markets precludes competitive pricing, discourages private investment and is a major impediment to development of a common pan-Indian agricultural market; even within states, prices differ from district to district. The whole system is extremely opaque, and is plagued with multiple licences, myriad fees, taxes and levies and a range of agents who act as intermediaries between the farmers and buyers and collect commissions from both.
It is a Licence and Permit Raj where agents and intermediaries rule the roost, forming a cartel to exploit the farmers and establishing an unbreakable, intricate chain of multiple vested interests. The levies and commissions increase the farmers’ costs manifold while getting them poor prices and distort the markets with a cascading effect while erecting strong entry barriers.
They prevent seamless movement of produce across districts and states to fetch best prices to the farmers. But leaders from across the political spectrum who today are shedding copious crocodile tears for the farmers with an eye on the 2019 elections are averse to dismantle this last remaining bastion of the Licence-Permit Raj that gives the farmers a pittance for their products and drives them to debt and suicides, because the lobbies that regulate the markets are the same that also get them election funds and votes.
The Election Commission ought to take note when political parties promise doles and sops and freebies before every election, and its record has so far been dismal in this regard. In the case of S Subramaniam Balaji vs. Government of Tamil Nadu (2013), the Supreme Court, while observing that “distribution of freebies of any kind undoubtedly influences all people. It shakes the root of free and fair elections to a large degree”, directed the Election Commission to frame appropriate guidelines in this regard.
All political parties predictably reacted to this judgment, because it hurt their common interest by limiting their authority to dole out national resources for petty electoral gains. They argued that political parties, being committed to the Constitutional goal of a welfare state, were within their rights to frame their election manifestos highlighting the way they would serve the voters if voted to power, and hence the promises were neither meant to act as bribes nor to unduly influence the voters.
Since Article 324 of the Constitution gives the Election Commission unfettered powers to superintend, direct and control the election process which implies monitoring activities of political parties including promises made in their manifestos for conducting free and fair elections, it was the Election Commission that should have stopped such promises for electoral gains.
Instead, the Commission only legitimized the practice by stating in the guideline: “There can be no bar on the state adopting welfare measures. But, political parties must refrain from making promises that undermine the purity of the election process or aim to exert undue influence on the voters. There must be transparency with respect to the promises and how the parties aim to implement their promises. The promises must also be credible. Wherever freebies are offered, parties must broadly state how they plan to gather the funds and finances to fulfil such promises.”
The wording of the guidelines thus leaves the field wide open for political parties to make any promises including freebies to the voters which goes against the spirit of the Supreme Court ruling. Apparently, the Commission had succumbed to the pressure of the political parties, forgetting that in a mature democracy, a political party only owes good and corruption-free governance and nothing else to the electorate.
It also undermines the fact that the relief offered by freebies like loan-waivers or subsidized power is only temporary and ignores the solution to the larger problem of scarcity, input costs and capacity, which have to be addressed effectively, over a longer time-period, using the same national resources.
In the hands Yogi Adityanath or Rahul Gandhi and their ilk, to whom national resources are meant only to serve their political goals, sanity will be the casualty as they hanker for power at any cost. And so will be the hopes of farmers for a better life.
(Concluded)
The writer is a commentator. Opinions expressed are personal.