Will the 6,000 Farmer Payout Help?

(This editorial is based on the article “Will the ₹6,000 Farmer Payout Help?” which appeared in The Hindu for 8th February 2019. In this editorial, we’ll discuss the Pradhan Mantri Kisan Samman Nidhi i.e. PM-KISAN, scheme.)

With a view to augment the income of the Small and Marginal Farmers (SMFs), the government launched the new Central Sector Scheme, namely, “Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)” in the current financial year.

The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme, announced in the Interim Budget, is one of the biggest scheme launched by the Government of India till date for providing structured support to small and marginal farmers.

• Under the scheme, ₹6,000 per year will be provided to farmers holding cultivable land of up to two hectares.
• The scheme will be implemented with an estimated expenditure of ₹1 lakh crore till 2019-20, benefiting 12.50 crore small and marginal farmer families.

Objective

• The PM-KISAN scheme aims to supplement the financial needs of the SMFs in procuring various inputs to ensure proper crop health and appropriate yields, commensurate with the anticipated farm income at the end of each crop cycle.
• This would also protect them from falling in the clutches of moneylenders for meeting such expenses and ensure their continuance in the farming activities.

Benefits

• India’s current agrarian crisis has created a chance to use this innovative economic policy. This scheme is one of the solutions.
• Smaller the landholding, the greater the need for financial support. Most of the farmers in India have small holdings and this scheme is a small positive step in addressing their needs.
• This is a Central Sector Scheme and will be funded fully by the Government of India. The guidelines of the scheme have been already issued. It will not burden state governments.
• The government has developed a portal for managing the scheme (http://pmkisan.nic.in), which has gone live.
• The Ministry of Agriculture and Farmers’ Welfare will transfer the benefit directly into the accounts of the beneficiaries. The States have to upload the data of the beneficiaries on the portal which will minimize the leakages through corruption and interference of middlemen.
• It will help the farmers, who grow non-MSP commodities, and farmers affected by adverse terms of trade, including depressed international prices.
• Government is also trying to bring all farmers into the fold of institutional credit. The target is to bring more than six crore farmers into the Kisan Credit Card (KCC) regime. This will help farmers to get out of the vicious credit circle.
• An assured income can also encourage farmers to boost productivity and help them earn more. The cash received, if invested in agriculture for higher returns, will be a support to the credit and insurance systems and promote agricultural growth in the country.

Drawbacks

• The genesis of the current crisis lies in the faulty and ad hoc export-import policy, lack of infrastructure and cartelization and collusion in agricultural markets, which have prevented farmers from realizing the market prices for agricultural produce.
• Cash transfers do nothing to resolve any of these, nor are they any guarantee of protection against unforeseen events, whether natural or policy-induced.
• It is neither a substitute for the structural reforms needed in agriculture nor does it adequately compensate the farmer for the risks and uncertainty of crop cultivation.
• The current crisis may have worsened due to the sharp fall in agricultural crop prices, but is finally a result of multiple failures of policy. But it is also a crisis which is caused by the failure of the non-farm sector in creating enough jobs as is evident from the deceleration in real wages in rural areas.
• Lack of land records bank details and the absence of proper tenancy records will also benefit the absentee landlords.
• There are concerns at operational level land record reconciliation, digitization of land records, costs incurred in the consolidation of land records.
• The situation is slightly more complicated in the northeastern States, as land ownership rights in the region are community-based, making it difficult to identify beneficiaries.
• The mammoth drive of implementing PM-KISAN can increase opportunity costs of critical (human) resources, operational risks and, eventually, shoot up operating expenses and strain the fiscal health of concerned states.
• The farm crisis is real. Admittedly, it is not a recent phenomenon. Farmers with two hectares of land want not just ₹2,000 every four months, as the Pradhan Mantri Kisan Samman Nidhi promises. That is not even enough to fill diesel in their hired tractors.

Way Forward

• It is important to keep in mind that the average annual income of small and marginal farmers is well below the average income of all farmers. The benefit being given to small and marginal farmers through PM-KISAN will provide them assured supplemental income and also meet their emergent expenses, especially immediately after harvest.
• New India requires modern irrigation facilities. It needs seeds and scientific and modern technological knowledge that can help and guide in reducing costs. It needs a rapid transition to cost-effective organic farming. It needs timely delivery of inputs and transport systems to enable commercialization of agricultural products and activities. It does not need doles.
• The answer, of course, is to build rural infrastructure in markets and give tariff protection against subsidized imports. But urban interests become a constraint.
• The Interim Budget has rhetoric, but the NITI Aayog, which wrote this, does not have any fund allocation powers, unlike the reformed Chinese planning set-up where strategic plans are buttressed with funds.