Income support: Panacea for farmers?

Income support: Panacea for farmers?

As the opposition Congress party took over the reign of governments in Rajasthan, Madhya Pradesh and Chhattisgarh, the first policy announcement was to waive farmers’ loans. In Rajasthan it will cost the exchequer Rs 18,000 crore; in MP, Rs 38,000 crore; and in Chhattisgarh, Rs 6,100 crore.

Other state governments, including those ruled by BJP, will feel compelled to follow suit and announce loan waivers in their states, too. Even before we understand the wider economic ramifications of these waivers on the farm sector, there is another major shift that is bound to be more populist and more attractive to political parties.

This is the income support scheme (ISS) for farmers, launched by Telangana Chief Minister K  Chandrashekhar Rao, called ‘Rythu Bandhu’, also wrongly called Farmers’ Investment Support Scheme. Under this scheme, every land owner gets Rs 4,000 per acre, irrespective of landholding or crops grown. Launched in February 2018, this has already helped Rao harvest rich dividends in the form of a landslide victory in the recent assembly polls.

Learning the lessons from Telangana, political parties have jumped onto the bandwagon of providing income support, with the sole aim of securing votes in the forthcoming national elections. Already states like Jharkhand and Odisha have announced similar schemes, of providing Rs 5,000 and Rs 10,000 per acre respectively.  In Tripura, the BJP government has announced Rs 1 lakh to those farmers who are willing to forego shifting cultivation!

Will this ISS address the crisis of Indian agriculture? Will it benefit the individual farmer, especially those with marginal and small holdings?

The ground truthing from Telangana is already indicating that the major share, almost 85% of this scheme, is cornered by only 15% of rich farmers. Those who are really cultivating the land as share-croppers, tenants or farm labour will be deprived of any benefit. In reality, the support is so miniscule that it hardly has any impact on the cultivation or in addressing the broader issues of the agriculture sector like marketing or credit.

Despite these shortcomings, there are clear indications that ISS will be the next big strategy for political parties this general election. Or even before the elections, the Modi government may announce this with some modifications.

Such a scheme at the national level will have to address 140 million hectares of cultivated land. With the aim of getting votes of small farmers, if the scheme is restricted to those owning two hectares or less, the cost will be Rs 1.49 lakh crore per year. The central government may pay 50% and pass on the burden and risk of the other 50% to state governments. Irrespective of party affiliations, the government will be forced to accept this offer or face the ire of the farming community.

Rising inequality

If this becomes reality, the states will have to drastically cut budgets for welfare schemes, with a dramatic negative impact on weaker sections of society, further deepening inequality.

Former member of the erstwhile Planning Commission Abhijit Sen says, “the state will get committed to certain expenditure, with its ability to meet other demands under huge fiscal pressure.” And he adds further that ”the state will have to collect more taxes or become insensitive towards other developmental functions”.

How will this scheme help ordinary farmers? Let us look at the case of Ira Naik, paddy cultivator in Navangeri village in the hill region of Western Ghats in Uttara Kannada, Karnataka.

After harvesting 20 quintals of paddy this season, he took it to the nearest Mandi in Banavasi, 15 km from his village. Paddy traders said there is no demand for it and he could not sell. Hoping to sell it in taluka headquarters, he took it to Sirsi at a distance of 25 km. Even there, he could not sell as there were no takers!  He was forced to bring it back to his farm, after having incurred a  loss of Rs 3,000 in transport costs, with unpaid labour costs adding to it.

How is the income support going to help farmers like Ira Naik?

Despite this reality check, political parties will resort to providing farmers with ISS as a panacea to address the crisis in the farm sector. Obviously, it is nothing but a gimmick, like farm loan waivers, that may help in meeting a small fraction of the costs, but without any substantial benefit. These populist schemes may win the elections for political parties, but they will not address the broader issue of the crisis in Indian agriculture.

The need of the hour is to rescue farmers with the right price for their costs of production, and to build the capital of soil and water to feed future generations.

The narrow mindset of our political parties is bound to accelerate the farm crisis leading to the destruction of self-esteem of farmers.

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