DBT, regular direct income, interest-free crop loan in relief package

With agrarian crisis gripping India, the Narendra Modi Government is considering direct benefit transfer (DBT) or transfer cash to farmers and other low income rural families to ease their financial burden, instead of offering subsidies. As per the plan, the Government may combine all farm subsidies, including fertiliser costs, in the DBT. The Government is also planning to tweak the guidelines of Prime Minister Fasal Bima Yojna to ensure minimum premium and maximum benefit to farmers.

The additional cost will be limited to Rs 70,000 crore ($9.8 billion) annually after a full rollout of the programme. Finance Minister Arun Jaitley had budgeted Rs 70,100 crore for farm subsidies in the year ending March 31, 2019.

Coming ahead of general elections next year, the proposal is expected to put more money into the hands of farmers, enabling more investments in the industry, and raising consumption to boost the overall economy, said officials privy to the plan. 

One proposal is to transfer Rs 4,000 per acre to farmers, including small or marginal farmers who are farm labourers. Under the direct income support scheme, farmers would be entitled to a periodic payment. The amount will be paid to them to carry out farming activities. An interest-free crop loan, from Rs 50,000 to Rs 1 lakh for every farmer, is also on the Government’s relief package menu. The cash transfer for irrigation and power cost for running tube can also be worked out.

Sources said that the Cabinet Secretary had held a several rounds of meeting with officials of Agriculture Ministry, Finance Ministry and NITI Aayog to decide package for farmers. “The cash transfer to farmers in a year by the Centre for land-owning farmers appears to be favourable. The scheme is expected to cost Rs 1.2- Rs 1.3 lakh crore,” sources said. “The fiscal burden will shift to the next fiscal year, giving room for the Centre to simultaneously rework some subsidies being given to farmers such as that on fertilisers and crop loans,” sources added.

Subsidies to the agriculture sector include power subsidy, fertiliser subsidy, agriculture loan at lower rate of interest, irrigation subsidy, and insurance cover for farmers at lower premium rates. The power subsidy alone stands at over Rs 90,000 crore followed by fertiliser subsidy at Rs 75,000 crore. The Government has already rolled out fertiliser subsidy to companies under DBT.

In order to keep the credit flow to the farm sector robust, the Centre is also planning to raise the Budget outlay for interest subvention for agriculture loans to Rs 23,000 crore in 2019-20, a huge jump from Rs 15,000 crore budgeted for the current fiscal. The other step being considered is doubling collateral-free loans under Kisan Credit Cards (KCCs) to Rs 2 lakh and changes in the PM crop insurance scheme to enhance coverage and ensure faster settlement of claims and schemes.

Besides, the Centre pays 2 per cent interest subvention against the base rate (9 per cent in case of PSBs) on all farm credit. An additional 3 per cent interest subsidy on crop loans of up to Rs 3 lakh is paid to farmers who repay loans in one year, reducing effective rate of interest in such cases to 4 per cent.

After electoral debacle in three major States — Chhattisgarh, Madhya Pradesh and Rajasthan — in the last year Assembly polls, the Narendra Modi Government has realised that its existing policies have failed to reach the farmers. The Modi Government, which is seeking a second term, has to win over discontented farmers before the election. They have been hit by falling crop prices and rising input costs, prompting thousands of them to protest in the street to seek debt waivers. At the same time, the Opposition Congress has mounted pressure on the Government to act after it waived farm loans following victories against the BJP in three States last month.