Centre Considers Plan To Convert All Farmer Subsides Including Fertiliser Costs Into Direct Cash Transfer Scheme

The Union government is considering a plan to club all the farm inputs subsidies including the fertiliser costs and pay it as cash to the farmers, Bloomberg has reported.

Transitioning to a direct cash transfer regime in lieu of subsidies is estimated to incur an additional annual expenditure of Rs 70,000 crores. Finance Minister Arun Jaitley had budgeted Rs 70,100 crore for farm subsidies in the year ending 31 March 2018.

For years now, the government’s dominant policy instrument for supporting Indian farms has been subsidising key farm inputs (such as fertilisers, power for irrigation, canal waters, agri-credit and crop insurance) on one hand, and minimum support prices (MSP) for 23 major crops, on the other.

The rapidly rising input subsidies to agriculture has crowded out potential public investments in the sector. The public investments in agriculture as a percentage of agricultural gross domestic product (GDP) has declined from 3.9 per cent in 1980-81 to 2.2 per cent in 2014-15, while input subsidies as a percentage of agricultural GDP have increased from 2.8 per cent to around 8 per cent over the same period.

Experts have said that revival of Indian agriculture calls for prioritising investments, rationalising and converting subsidies into direct income transfers and invest in changing requirements of the modern agriculture, especially agri research and development.

A few of the state governments in India have already launched income support scheme for farmers, most notably the Telangana government through its Rythu Bandhu Scheme (RBS).

Under RBS, the Telangana government gives Rs 4,000 per acre to every farmer. This transfer is made twice a year, which coincides with the two cropping seasons to support the input purchases of farmers.

Though the scheme has its critics, it currently covers almost 93 per cent of landowners and yielded huge political dividends to the Telangana Rashtra Samithi. The party swept the recent Telangana Assembly elections.