October 21, 2021

Lukmaan IAS

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Direct income support for farmers – Issues, challenges and lesson from states policies

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THE CONTEXT: The recent farmer agitation has brought the issue of farmer distress front and centre in the public consciousness. The time seems ripe to find new solutions to the structural challenges facing farmers. One of the solution is to support farmers by Direct Income Support (DIS) but in recent time several reports highlighted that such schemes are facing many challenges. In this article, we will discuss that what should be the way forward for the effective implementation of these scheme.

 

Income support scheme in India for farmers

 

  • In agriculture, there are two major types of government support measures. The first one is price support measure and the second is income support measures.
  • Price support means the government is procuring the agricultural produce from farmers at a remunerative price. India’s Minimum Support Price based procurement is a classic example of price support scheme.

 

Direct Income Support

 

  • The second type of support is DIRECT INCOME SUPPORT (DIS).In this scheme, government transfers direct payment to the poor farmers.
  • Under the WTO terminology, it is called Direct payments to farmers or Decoupled Income Support. Decoupled means such an income transfer to farmers will not influence (or minimum influence) production and price of the respective crops.

 

PM KISAN SAMMAN SAMMAN NIDHI

 

  • The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) is the first universal basic income-type of scheme targeted towards landed farmers.
  • It was introduced in December 2018 to manage agricultural stress.
  • Initially, the scheme was targeted at small and medium landed farmers, but with the declining growth in gross value added of the agricultural sector, it was extended to all farmers in May 2019.
  • This direct benefit transfer scheme was aimed at addressing the liquidity constraints of farmers in meeting their expenses for agricultural inputs and services.

Features of the scheme:

  • Income support: The primary feature of this Yojana is the minimum income support it provides to farmers. Each eligible farmer family is entitled to receive Rs.6000 per annum across India. However, the amount is not disbursed at once. It’s divided into three equal instalments and meted out four months apart.
  • Funding: PMKSNY is an Indian government-sponsored farmer support scheme. Therefore, the entirety of its funding comes from the Government of India.
  • Identification responsibility: While the responsibility of funding lies with GOI, the identification of beneficiaries is not under its purview. Instead, it’s the responsibility of State and Union Territory governments.

 

Benefits of Direct Income Support

 

Direct Income Supports’ ability to encourage farmers to raise production is less. At the same time, it has some positives:

  • There is no leakage – income is transferred through DBT.
  • There is protection for farmers against income loss and adverse terms of trade impact on agriculture.
  • It is less distortionary and is WTO combatable; there is less influence on production and price.
  • Farm income support is superior to price support as it is crop neutral. The farmer is getting reward for continuing with agriculture whatever may be the crop he is cultivating. On the other hand, India’s MSP historically, favored wheat and rice farmers as procurement was concentrated on these two crops.

 

PM KISAN after two years: A critical review

 

The PM KISAN scheme has completed two years (seven installments are released of the scheme) but facing several crises.  The scheme is a useful vehicle to provide support to farmers and it was included in the Pradhan Mantri Garib Kalyan Package during lockdown but, was this a useful way of relieving distress during the lockdown?  A survey by NCAER National Data Innovation Centre in June 2020 provides some useful insights in this regard:

Findings of the survey

  • Lower level of economic distress among farmers than among other groups.
  • While farmers faced some logistical challenges in transporting and selling their produce, 97 per cent of them continued to harvest Rabi crops and prepared for the Kharif season.
  • Nearly 75 per cent of the cultivators who usually hire labourers for agricultural activities continued to do so.
  • The farmers were relatively immune to the economic impact of the lockdown as nearly 32 per cent of them experienced a large income loss which is much lower compared to the proportion among casual wage workers and business households
  • The proportion of households that had to borrow to meet their day-to-day consumption needs during the lockdown was relatively low for the farmers.

Performance of PM-KISAN during the Pandemic

  • Only 21 per cent households received cash transfers through PM-KISAN.
  • Around two-thirds reported receiving Rs 2,000 and about a fourth received Rs 4,000, possibly because family members engaged in agricultural activities may be co-residing within a household.
  • About 35 per cent of rural PM-KISAN recipients suffered income losses to a large extentin comparison to more than half of the non-recipients.

Lack of Data Base

  • The scheme was hurriedly announced right ahead of the 2018 elections and then the government did not have proper database of farmers.
  • There are nearly 14.5 crore families in India but govt did not has proper database of these families. Many states like West Bengal, have delayed or did not submit the data related to farmers.

Difficulty in Identifying Beneficiary Farmers

  • According to agricultural census of 2015-16, number of landholdings in the country was projected at Rs 14.65 crore. But land holding do not determine the number of farmer families present in the country as there are multiple owners for a single land. In such scenario, all the farmer families which own the land are eligible for the scheme.
  • Number of landholdings in Punjab according to agricultural census were 10.39 lakh but number of beneficiaries’ farmers in PM-kisan data base list were 17.52 lakh till October 23, 2019.

Census Issue

  • Other problem includes the agricultural census that counts the number of operational landholdings. Which is the piece of land being used for cultivation without considering the title of land. Whereas PM-kisan scheme considers the farmer families recognised as land holders under the state or union territory.
  • Further, around 14.3 crore landless farmers (census 2011) will not be able to avail this scheme. Mainly due to the fact they are not the land holders and are contract farmers.

Others

Intended Farm Households are not covered: PM-KISAN is not reaching all farmer households as intended as most of the farmers in UP, Haryana and Rajasthan own land and should be receiving benefits but only 21 per cent of the cultivators interviewed reported receiving the benefit.

    1. Not a pro-poor scheme: it is not pro-poor since recipients of PM-KISAN seemed to be better off than the general rural population even before the lockdown.
    2. Lack of digitized land records: In many States, land records are not updated regularly and therefore, there could be instances where the cultivating farmers would have partitioned their holdings from other family members, but would not have the records-of-right to claim the benefit instantly.

 

What should be the Way Forward?

 

Proactive role of Banks

  • There are reports that after the loan waiver in Maharashtra or transfer of first instalment to the Bank accounts of farmers under KALIA scheme in Odisha, concerned bank branches adjusted the deposit money against past liabilities of few farmers.
  • This kind of scenarios may lead to subversion of the objectives of the income support scheme, which is clearly intended to assist the farmers with some disposable cash for purchase of inputs.

Strengthening IT backbone

  • Needless to say that States with robust computerized land records data base and a good IT infrastructure will be in a better position to implement PM-KISAN.
  • With ICT usage and direct transfer of money to farmers’ bank accounts, pilferage would also be less.
  • Farmers not having bank accounts should be encouraged to open ‘no-frills’ accounts under the Jan-Dhan Yojana. Linking Aadhaar data base will further strengthen the system and analytics later on from this big-data eco-system could assist decision making empirically.

Targeting benefits and updation of land records

  • In many States, land records are not updated regularly and therefore, there could be instances where the cultivating farmers would have partitioned their holdings from other family members, but would not have the records-of-right to claim the benefit instantly.
  • These kind of genuine cases need to be redressed by revenue authorities so that eligible cases are not deprived.

 

Lesson from states policies

 

  • Odisha’s KALIA scheme offers some important lessons for the effective implementation of the scheme.
  • Odisha used a three-step framework to identify beneficiaries. These are:
  • Unification:The first step involved unifying state databases with “green forms” which were essentially applications from farmers who wanted to opt in.
  • Verification:The second step involved verification of information through databases like the Socio-Economic Caste Census, National Food Security Act and other databases; de-duplication through Aadhaar; and bank account verification through bank databases.
  • Exclusion: The third step involved excluding ineligible applicants like government employees, tax payers, large farmers, and those that voluntarily opted out.
  • The use of technology and non-farm databases meant that KALIA could include sharecroppers, tenant and landless farmers as beneficiaries, which is a significant step towards inclusive agricultural policy-making.
  • KALIA has now laid the foundation for a state-wide farmer database with 100 per cent Aadhaar, mobile number and financial address seeding. This database can be leveraged for targeted scheme delivery beyond DIS, issuing customised agri-advisories and improving financial access.

 

CONCLUSION

 

PM- KISAN is India’s first direct support scheme, which should be surely successful. But for this, govt of India should learn some important lessons from other sources like the KALIA scheme and for that technology can play a vital role. The potential of technology to transform social welfare delivery is exciting. An approach that leverages data to maximize citizen benefits, while ensuring privacy, security and access, must be the way forward if we are to truly realize the power of digital to serve every Indian.

Just add to your knowledge

The MSP as a Price Support Measure

  • WTO calls these subsidies as amber box subsidies that distorts trade. Such subsidies should be reduced as they may make a high cost producer a big produce and the country may export its produce.
  • According to the WTO, a support (subsidy) by the government that influences production and price is trade distorting and it should be reduced.

PM-KISAN (Direct Income Support)

  • In this case; the government will be giving direct payment to the farmers for their low income from farming.
  • Under the WTO terminology, it is called Direct payments to farmers or Decoupled Income Support.
  • Decoupled means such an income transfer to farmers will not influence production and price of the respective croops.
  • Under Agreement on Agriculture (WTO), the direct payment to farmers comes under the Green Box.

Sources

https://indianexpress.com/article/opinion/columns/kalia-scheme-direct-income-support-odisha-welfare-7228320/

https://www.hindustantimes.com/india-news/5-top-performing-states-under-pm-kisan-scheme-101614160699833.html

https://indianexpress.com/article/opinion/columns/pm-kisan-farmer-scheme-lockdown-6536208/

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