Agriculture

Will PM-Kisan Eventually Evolve and Replace Farm Subsidies During Modi 2.0? 

While the scheme has laid the foundation, its expansion will, like the GST, require a great deal of political consensus across states.

The Narendra Modi government’s interim budget, which was announced in February 2019, brought a bonanza for farmers. 

Piyush Goyal, who was the finance minister when Arun Jaitley was on medical leave, announced a new scheme called the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) under which Rs 6,000 per year was to be given to small and marginal farmers (SMF) owning up to two hectares of land. 

The scheme was effectively back-dated, that is from December 1, 2018, and an allocation of Rs 20,000 crore was provided in the revised estimate for 2018-19 itself. The scheme was to be entirely funded by the Central government and unlike most other schemes, the state did not have to make any financial contribution. 

Members of parliament, state legislatures, mayors, income tax payees and serving and retired officials of government (excluding grade IV employees) were excluded from the scheme.

Also read: Will the PM Kisan Scheme Impress India’s Farmers?

The accurate number of farmers in the country is not known. The agriculture census counts land which is wholly or partly used for agricultural production, without regard to title. So, the numbers given by the census as operational holdings may not accurately reflect the number of landholders as per revenue records. In common parlance, the number of operational holdings is considered to roughly represent the number of farmers.

The number of SMF as per the Agriculture Census of 2015-16 was 12.5 crore. 

Several states worked at great speed to identify the SMF beneficiaries under PM-Kisan. The scheme was formally launched by the prime minister at Gorakhpur on February 24, and the first instalment of Rs 2,000 was quickly paid into the bank account of SMFs. By March 2019, before the first vote in the general elections had been cast, about three crore farmers were paid Rs 6,000 crore. In Uttar Pradesh alone, about one crore SMFs had received money in their accounts.

In the first cabinet meeting of Modi 2.0 government, it was decided to extend the scope of the scheme from SMFs to those holding more than two hectares. The number of such farmers is about two crore. 

However, up to July 15, 2019, only 3.97 crore have received the first instalment. This is just about 32% of the total number of operational holdings of SMFs. Just about 3.15 crore farmers have received the second instalment.

We are in the sixth month of the scheme but states have provided data for only 4.95 crore farmers. Not a single farmer in Delhi and West Bengal has benefited as the states have not provided farmers data to the central portal set up for PM-Kisan. 

The breakup of payments made so far to SMFs and other farmers is not available but we can assume that all of the 3.97 beneficiaries who received the first instalment would be SMF as large farmers have been included only in the scheme after the formation of the Modi 2.0 government. 

There are large variations in the performance of states. In Bihar, only about 7.8% of farmers have been paid even the first instalment. In drought-stricken Maharashtra, only 34.5 lakh farmers have been paid the first instalment while the number of operational holdings is about 1.5 crore. This is just about 23% of farmers.

Also read: NDA 2.0’s Big Rural Challenge Will be Doubling Farmers’ Income by 2022

In Rajasthan, there are 76.5 lakh operational holdings but only about 25 lakh farmers have received the first instalment and only 14.40 lakh farmers have received the second instalment. Even in the best-performing state of UP, where there are 2.38 crore operational holdings, only 1.08 crore have received the second instalment.

In Punjab, the first instalment has been paid to 13 lakh farmers while the number of SMFs as per agriculture census was only 3.6 lakh. Due to the leasing out of land, the number of operational holdings in Punjab was much lower than the number of farmers having land in their names in land records. 

PM-Kisan has laid the foundation for direct transfer of subsidies which are presently routed through intermediaries. Fertiliser subsidy, for example, is paid by the government to fertiliser companies. The success of PM-Kisan can enable the government to reach the farmers directly. For example, if the government wants to promote diversification from the paddy-wheat cycle in over-exploited blocks in Punjab, Haryana and UP, the loss incurred by farmers due to growing crops other than paddy can be directly paid to them.

The direct transfer of subsidies in China is considered a success. According to an OECD report, the Central government provided direct payment of $2.4 billion per year between 2007-2014.

For using PM-Kisan for income support in lieu of subsidies, the government will be required to build a political consensus. For that, the opposition has to be given much more respect to bring them on board. In the Modi 1.0 government, such a consensus was achieved with opposition parties, though that may be due to Arun Jaitley’s amiable personality.

PM-Kisan has laid the foundation over which a strong structure can be built over the years but that can not be done by the Centre alone, even if it dominates the parliament.

Siraj Hussain is a former Union Agriculture Secretary. He is now with ICRIER as Visiting Senior Fellow.

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