With modifications, it could be the perfect farm solution
With the Centre scrambling to appease farmers with huge hikes in the minimum support price (MSP) and states rushing to write off their loans, India’s agri policy is a shambles. Price support schemes in both Madhya Pradesh and Haryana have failed to help; in MP, the system was gamed, forcing a hapless government to abort the Bhavantar Yojana, while in Haryana, tomato farmers watched helplessly as their selling prices collapsed even while those at the mandis shot through the roof. Meanwhile, more than half a dozen states have announced loan waivers for an aggregate amount that is nudging Rs 1.5 lakh crore. And subsidies for farm inputs such as power and fertiliser continue to strain the deficits. Had the Centre reformed local markets and allowed farmers to export freely, crop prices need not have been supported locally, as farmers would have got higher prices. But a closed export policy has asphyxiated farmers while the lack of market reforms has left them at the mercy of traders in the mandis.
In Telangana, though, the Rythu Bandhu scheme could help farmers cope with the distress. What the Telangana government has done is to give all farmers, who own land, a cash support of Rs 4,000 per acre per season for both the kharif and the rabi crops. Approximately, six million farmers are expected to benefit from the scheme; till June 14, Rs 5,000 crore had been transferred. To be sure the scheme comes with its own set of challenges; the land, for instance, needs to be titled and it could strain states’ finances since the money is being paid out in addition to the subsidies being provided.
Nonetheless, chief economic adviser Arvind Subramanian believes a modified version of the Rythu Bandhu policy could be the future of India’s agricultural policy and also the forerunner of a Universal Basic Income (UBI). What could help make the scheme less of a financial burden is to roll it out as a replacement for all the other benefits that farmers are given or at least some of them. This then would result in a big saving in costs—whether on the state machinery and manpower—reduce the leakage and corruption and inefficiencies. At another level it would lead to fewer distortions in the cropping pattern because farm incomes would be de-linked from production. If farmers aren’t eyeing the support prices, for instance, they might grow less of the water-guzzling sugarcane where support prices are very high or cereals which the government tends to procure more of. Subramanian points out the amounts transferred to farmers could be increased and will drive up farm incomes; the fertiliser and power costs in Punjab, he estimates, would free up an estimated `92,000 for every cultivator or `50,000 to every agricultural worker. With some tweaks therefore, Rythu Bandhu could be a good way to reform agriculture.