The government is currently developing a comprehensive plan to provide relief to the distressed agricultural sector, possibly including a limited direct benefit transfer (DBT) scheme. Modelled after Telangana’s flagship Rythu Bandhu system, this is expected to help marginal farmers meet their expenses of cultivation.

Other options include a direct payment of Rs 1,700-2,000 per acre to all landowning farmers, compensation for those who sold produce below government prices, and a loan waiver scheme. However, the DBT scheme could prove to be difficult to implement as it would require fetching all land records before the launch.

Why BJP is keen on DBT

After losing the assembly polls in three key states owing largely to BJP’s gross oversight of growing agrarian woes, Prime Minister Narendra Modi, Finance Minister Arun Jaitley and Agriculture Minister Radha Mohan Singh met last week to discuss the feasibility of a mega-plan to tackle the crisis, and reportedly decide the amount and time needed to roll it out.

The government may also buttress any package by revising the existing crop insurance policy to facilitate easier settlement of claims and also give greater non-collateralized credit assess to farmers, Singh is reported as having said.

The need for some sort of income support for farmers is being increasingly felt, in light of several failing schemes including farmers’ insurance, higher minimum support price (MSP), and irrigation schemes. The BJP has never been more desperate to reclaim rural votes of India’s 263 million farmers and their dependents, but in four years, all their agricultural schemes have lost credibility.

Congress, after winning in Chattisgarh and Rajasthan, has already declared complete or partial loan waivers for farmers riddled with crippling debt and bad yield. The nation has already seen three massive demonstrations by farmers this year itself, marching in the national and financial capitals to demand debt relief and subsidies among other things. The latest in Delhi drew solidarity from political parties, mainstream media, and activist groups, who collectively criticised the government for failing to adequately address the issue in the Parliamentary session.

Telangana’s DBT system, an alternative to farm loan waivers, has set aside Rs. 12,000 crore for the current fiscal year. Under Rythu Bandhu, the state gives every farmer Rs 4000 per acre of land each season, to purchase seeds, fertilisers, labour and the like. It had digitised land records before launching the project, to identify the beneficiaries of the scheme.

Details of the package: what we know so far

The opposition has already questioned how the centre intends to fund the scheme, which could cost about Rs. 1.25 lakh crore. According to unidentified sources cited by Times of India, the centre and states are expected to jointly bear the cost of this plan, some even suggesting a 70:30 cost-share. From an economic point of view, this stands to undermine the centre’s fiscal deficit target for FY18-19, and take a further toll on its already strained budget (due to low tax revenues).

It could work in states where the BJP is still in power, but the fast-shrinking window before the Lok Sabha polls could prove to be a challenge for roll-out, a senior official told the publication.

Alternative options to placate the nation’s agitating farmers include Niti Aayog’s proposed “price deficiency payment.” As part of this package, farmers will be entitled to a subsidy if the price of produce slips below the MSP threshold, up to a maximum of 10% of the support price. The difference received upon selling the produce in the market compared with the government price would then be transferred directly to an Aadhaar-linked bank account, for all farmers who are registered under the agriculture produce market committee. 

In order for the DBT scheme to succeed across the country, the government must first revamp the database of farmers and digitise their land records. It must also maintain transparency while regarding the ways in which it intends to fund the scheme.

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Prarthana Mitra is a staff writer at Qrius.

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