Note4students
Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices
From the UPSC perspective, the following things are important:
Prelims level: Rythu Bandhu scheme
Mains level: Need of an income support policy for agriculture
Context
Farm loan waivers by state governments
- The talk of the season on the farm front seems to be loan waivers
- Farmer leaders are asking for it and those looking for power are ready to oblige
- Newly elected chief ministers of Madhya Pradesh, Chhattisgarh and Rajasthan have all announced loan waivers within their promised time of 10 days
- It may cost the state exchequers more than Rs 50,000 crore
- A pan-India loan waiver is likely to cost anywhere between Rs 4 and 5 lakh crore, including states that have waived farm loans since 2017
Atonement exercise
- It can be called as atonement for not reforming agriculture and following restrictive trade and marketing policies which, as per the OECD-ICRIER report, inflicted an implicit tax on farmers to the tune of 14 per cent of their gross farm receipts over a period of 2000-01 to 2016-17
- The loan waiver is only a temporary relief, that too tilted towards larger farmers
- It may be noted that institutional credit comprises about 64 per cent of total credit taken by all farmers, the remaining 36 per cent coming from non-institutional sources
- The marginal farmers with holdings of less than one hectare, who constitute 68.5 per cent of the peasantry, actually take more than half of their loans from non-institutional sources at interest rates that range from 24-36 per cent, and sometimes even higher
Income support is a better alternative
- The alternative is to think of a structured and stable income/investment support policy for farmers
- An improvised version of Telangana’s Rythu Bandhu scheme could serve as a starting point
- Under this scheme, the government can give Rs 10,000/ha as investment support to cultivators
- Payments under this scheme could be inversely related to the holding size, making it more pro-small holders
- Farms can be geo-tagged to ensure that only those farmers get benefits who are cultivating the land
- Land records will have to be upgraded to include tenants
- Government records still show only 10 per cent of tenancy in the country while ground realities are very different
- In any case, if this scheme is implemented in over 20 crore hectares of gross cropped area of the country, it will cost about Rs 2 lakh crore per annum, which could be equally distributed between the Centre and the states
- The Centre should also include fertiliser subsidy into this and encourage states to transfer their power subsidy through this platform based on per hectare basis
- Such a policy can reach the largest number of farmers, be more equitable, the least market distorting, and predictable
Way forward
- Striking the right balance between consumers and farmers is the need of the hour
- Loan waivers are poll bait. What is needed is a structured and stable income support policy
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