Prime Minister Narendra Modi met finance minister Arun Jaitley, Bharatiya Janata Party (BJP) president Amit Shah and farm minister Radha Mohan Singh late on Wednesday night to discuss possible sops for farmers ahead of the 2019 general election -- a clear indication the National Democratic Alliance (NDA) government is well on course to responding to a politically challenging agrarian crisis in the country.
The two-hour-long discussions between the PM and his top ministerial colleagues, in presence of the BJP chief, set off, on Thursday, a series of inter-departmental meetings at the prime minister’s office, the finance ministry, the agriculture ministry and Niti Aayog, the government’s policy think-tank, a government official said, asking not to be identified.
The meeting between the prime minister and his colleagues was preceded by ministerial-level meetings on possible farm solutions over the past week.
A person familiar with the matter said that any solution will have to be “economically viable” and “politically appealing”, but refused to elaborate.
The agrarian crisis, primarily the result of a glut in farm production and a consequent decline in the prices of key commodities, is expected to figure prominently in the general election campaign next year. In the recent round of state assembly elections, the opposition Congress wrested back the key heartland states of Chhattisgarh, Madhya Pradesh and Rajasthan by promising farm loan waivers within 10 days of coming to power there.
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{{/usCountry}}The government has four broad proposals on the table, all of which will be evaluated in further follow-up meetings.
One, the government hasn’t completely ruled out a loan waiver, a second government official said on condition of anonymity, but it is generally “disinclined” to opt for a national farm loan write-off of the sort being demanded by Congress president Rahul Gandhi.
One reason is that many states have already announced multiple farm loan waivers. Secondly, the government’s fiscal space is anyway tight.
“In that case, the government will come up with a solution that is better and more attractive than a loan waiver,” this official added.
Two, the government is weighing its options for a national-level “direct income support” scheme for all land-owning farmers, similar to one that is already being implemented by Telangana. Jharkhand on December 21 also announced a similar scheme, the first BJP-ruled state to do so.
Quite simply, an income support scheme involves giving all farmers a free cash transfer ahead of the sowing season. The Telangana government offers every land-owning farmer ₹4,000 per acre, with total spending of ₹12,000 crore spread over the kharif and rabi seasons, the two sowing cycles common across India.
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Jharkhand announced ₹5,000 per acre for all farmers ahead of kharif sowing, which will cost the state ₹2,250 crore. On December 22, the Odisha government announced a ₹10,000 crore scheme for development of the farm sector.
The third proposal being considered is to offer crop insurance at a flat premium of ₹1, while the fourth is to offer ₹2,000 per acre to all farmers post-harvest to make up for losses incurred on account of crops selling below minimum support prices.
“We have about 140 million hectares of net sown area and about 195 million hectares of double-cropped area. For direct income support, assistance may have to be given considering double cropping on the entire land. Considering double cropping (rabi and kharif seasons), the total area comes to 280 million hectares. So, a direct income support, by this estimate, should cost the government at least ₹2.8 lakh crore,” said Siraj Hussain, former Union agriculture secretary and a fellow at the think tank ICRIER.
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Direct income or investment support on the lines of Telangana’s Rythu Bandhu scheme is certainly a better model than physical procurement of agricultural produce or price deficiency payment, Hussain added.
“However, the current Telengana model of direct investment support may not be a foolproof solution as it cannot fully compensate for price crash of the kind we have seen after demonetisation. Therefore, freeing up of agriculture markets and investment in food processing are also of primary importance,” he said.
A fall in oil prices has offered hope to the government in meeting its fiscal deficit commitments, a third government official said on condition of anonymity.
Moreover, the government is looking at an increase in its income (revenue receipts) from unutilised portion of the compensation cess that it must pay to states after the implementation of the Goods and Services Tax.
Finally, a committee led by former Reserve Bank of India governor Bimal Jalan is set to decide how much money the central bank needs to maintain as reserves, which means the rest can flow to the government, this person added.
Also read: After farm loan waivers, fund crunch for Rajasthan, Chhattisgarh, Madhya Pradesh