Prioritise welfare of small, marginal farmers

A. Amarender Reddy

WITH the advent of JAM (Jan Dhan-Aadhaar-Mobile) trinity and the provision of linking bank accounts with phone numbers and Aadhaar, Direct Money Transfer (DMT) schemes are replacing in-kind subsidy schemes. Digitisation of land records further paved the way for DMT to farmers; it invariably increased targeting and efficiency and reduced leakage. The Central government is implementing PM-KISAN (Pradhan Mantri Kisan Samman Nidhi) since 2019, transferring Rs 6,000 per year per farm household in three equal instalments; it is exclusively for landowner-farmers. The intended purpose of this money transfer is to help farmers purchase farm inputs such as seeds, fertilisers and pesticides.

Direct Money Transfer

Some state governments also have DMT schemes for farmers. Telangana has its Rythu Bhandu scheme, under which Rs 10,000 per acre is transferred to landowning farmers. The Andhra Pradesh government is implementing Rythu Bharosa by transferring Rs 7,500 per farmer irrespective of the farm size; together with PM-KISAN; each farmer is getting Rs 13,500 per year in AP. In West Bengal, under Krishak Bandhu scheme, farmers with one acre or more of cultivable land are entitled to assistance of Rs 10,000 per annum; farmers with less than one acre are getting Rs 4,000. Thanks to state assistance and PM-KISAN, a marginal farmer with less than one acre is getting Rs 10,000, while a small farmer is getting Rs 16,000 in West Bengal.

Experience of the past few years shows that thanks to these schemes, farmers are able to cover a significant portion of cash expenses incurred by them and reduced dependence on high interest-bearing loans from moneylenders and input dealers for the purchase of seeds and fertilisers. As per the Commission for Costs and Prices (CACP), expenses on seeds, fertilisers and pesticides together were Rs 7,894 per acre for cotton, Rs 7,054 for maize, Rs 6,140 for paddy and Rs 2,970 for arhar in 2020-21. It indicates that DMT of Rs 6,000 under PM-KISAN is reasonably covering the cost of these inputs for a majority of the marginal farmers (who possess less than one acre) and partially covering expenses of small and medium farmers.

Another positive aspect of these direct money transfer schemes is easy implementation and no exclusion/inclusion errors; they are now reaching 100% of the targeted farmers; other schemes, such as procurement at the Minimum Support price (MSP), are covering less than 20% of the farmers, that too highly concentrated in developed states and for irrigated crops, with gross negligence of dryland growers of millets, pulses and oilseeds. Even fertiliser subsidies are also highly skewed, with more benefits reaching already rich farmers as they are able to use fertilisers in large quantities, with negligible benefits reaching farmers growing millets and pulses.

However, a negative aspect of the popularisation of DMT is that most of the other productivity-enhancing schemes are starved of funds. In a recent visit to agricultural offices in Telangana, I noticed that because of the diversion of a major share of the agricultural budget to Rythu Bandhu, schemes related to increasing technology adoption and productivity enhancement, such as the development of new high-yielding varieties, farm machinery like drip and sprinklers, land and water resource development activities like watershed development and agricultural extension activities were fund-starved and some schemes were just on paper, with no funds.

In recent years, public investment in agriculture is down to 2.7% of the agricultural GDP and private investment from the corporate sector in agriculture is low due to unstable policy conditions such as the imposition of stock limits and ad hoc export bans. So, whatever little private investment is coming, it is from the farmers in terms of minor activities such as land development, digging borewells etc, which is about 14.3% of the agricultural GDP. Overall investment in agriculture was below 16% of the agricultural GDP in 2019-20, which is not sufficient for doubling farmers’ income. To achieve 4% annual agricultural growth with the current Incremental Capital Output Ratio of 4.1%, investments should be increased to more than 16.4% of the agricultural GDP.

One way to enhance public investment and agricultural growth is to rationalise the burden of direct money transfer so that some money can be spent on investments. The money transfer should not be below Rs 10,000 even for a marginal farmer with less than one acre and should not be above Rs 30,000 each to make these schemes more egalitarian and progressive. The DMT schemes should be more focused on small and marginal farmers as large ones are able to get crop loans, more fertiliser subsidy and other assistance at subsidised rates and earn more income from MSP operations to reinvestment in agriculture.

In the long run, expenditure under all these schemes needs to be bundled as a package and given to farmers as DMT so that the amount transferred per acre or per farmer will be significantly increased and they adopt new technology and rationalise the use of agricultural inputs for maximum profitability with no harmful effect on market prices and environment. Thus, farmers will be able to use this money as per their choice to maximise their welfare.

The author is Principal Scientist (Agricultural Economics) ICAR-Central Research Institute for Dryland Agriculture, Hyderabad. Views are personal