The issue of farmers’ distress has dominated the political discourse over the past few months. With the election season in full swing, all political parties are talking about farmers and promising sops, which may or may not reduce their distress or be financially sustainable in the long run. The promises made include minimum income guarantee for all farmers, debt waiver, remunerative prices for all farm products and income support for small and marginal farmers. The NDA government recently launched the PM Kisan Samman Nidhi Yojana, which is an income support scheme for small and marginal farmers. The question on everybody’s lips is whether the scheme can end or reduce farmers’ distress, and if not, what are the other policy options?

According to the Interim Budget 2019-20 and the guidelines that followed, the PM Kisan scheme is intended to provide direct income support of Rs 6,000 per year to about 120 million small and marginal farm households whose landholding is less than five acres. The Rs 6,000 per year per household will be paid in three equal instalments of Rs 2,000 each. However, any member of a beneficiary household must not be an income tax payer or a professional chartered accountant or a lawyer or a government employee or a pensioner having a monthly pension of Rs 10,000 or more. State governments have been asked to prepare and submit a list of all eligible farm households, duly verified by the local tehsildar, to the Union government. The amount will be directly transferred to the bank account of the farmer.

The Interim Budget made a provision of Rs 75,000 crore for 2019-20 and Rs 20,000 crore retrospectively for December 2018 to March 2019. The scheme was launched in February and the first instalment has been paid to all those farmers whose names were submitted by the state governments. Some states could not prepare and submit the list and therefore no farmers there received the first instalment.

The relative merits of PM Kisan

The PM Kisan scheme has been hailed as more inclusive than debt waiver, as it is meant for only small and marginal farmers who are in greater distress and excludes large farmers. Neither the Central government’s loan waiver scheme of 2009 nor those of various state governments recently have waived loans taken by farmers from private moneylenders, traders and other non-institutional sources. These schemes waived partially outstanding loans taken from banks and co-operatives only. As marginal and small farmers borrowed mainly from non-institutional sources at exorbitantly high rates of interest, they continued to be caught in a debt trap and distress. Hence, PM Kisan appears to be more beneficial than debt waiver to small and marginal farmers.

Similarly, unlike the Rythu Bandhu scheme in Telangana, which disproportionately benefits large farmers, as the unit of application is per acre of land and not per farm household, PM Kisan is more inclusive because only genuine small and marginal farmers are included. It may also be noted in this context that PM Kisan is an independent Central government scheme. As of now, a state government can additionally implement any debt waiver or cash subsidy scheme on its own, if it has the necessary resources to do so. Therefore, small and marginal farmers may benefit from both Central and state schemes. Further, PM Kisan is not in lieu of either fertiliser subsidy or food subsidy or MGNREGA as some economists wanted it to be. Therefore, small and marginal farmers have generally welcomed the scheme.

However, PM Kisan faces many implementation challenges. If debt waiver is criticised for not being inclusive, PM Kisan also excludes many small and marginal cultivators, especially informal tenants or sharecroppers who have no written lease agreement or record to prove that they are cultivators. Informal tenants constitute 20-30 per cent of total cultivators in many regions. Besides, the eligibility conditions are such that beneficiaries must have an Aadhaar-linked bank account and land record. As we know, a significant number of small and marginal land holders don’t have either updated land records or Aadhaar-linked bank accounts. Therefore, a large number of small and marginal farmers will fail to benefit, unless there is a special drive to update and digitise land records, legalise land-leasing and facilitate their access to Aadhaar-linked bank accounts.

If properly implemented, the PM Kisan scheme will certainly provide some relief to small and marginal farmers, even though the amount of income support per farm household looks small. But it cannot end farmers’ distress as the causes of distress are deep-rooted in the agrarian structure, climate change and market imperfections. Besides, any fixed income support scheme loses its real value in the face of rising input prices and unfavourable agricultural terms of trade.

Causes of farmers’ distress

The key causes of farmers’ distress are frequent crop loss due to natural calamities and market failure, resulting abruptly in low output prices, negative returns and rising debt burden. Small and marginal farmers, including informal tenants, are often unable to bear even minor shocks of climate change or drop in output prices. Besides, in low rainfall regions, even some large farmers are found to be in distress, as they borrow big sums for productive as well as unproductive purposes and fail to repay the loans. This happens as they borrow and invest heavily in borewells and other capital-intensive technologies that add to cost, but rarely to income rise, especially when output prices are low. Moreover, growers of perishable commodities such as potato, tomato and onion frequently face distressing situations due to seasonal glut and drop in prices, mainly in the absence of adequate post-harvest infrastructure such as cold storage, cool chain transportation, etc.

Informal tenants and other small farmers who borrow more from professional money lenders and traders at higher rates of interest remain more vulnerable. In 2015, about 76 per cent of the total number of suicides was by small and marginal farmers, including agricultural labourers and informal tenants. Furthermore, a close look at the farming of suicide-affected families in different states reveals that those who grow mostly a single crop and do not have allied activities such as poultry, goat or sheep rearing, dairy, bee keeping and non- farm incomes are more prone to it.

Conclusion and way forward

It becomes clear from the discussion that unless the government adopts crop, class and region-specific policies and strategies for solving farmers’ distress, any ad-hoc debt waiver or income support scheme will not be of much help. Recent initiatives by the Central government such as doubling farmers’ income by 2022, e-national market, soil health card, per drop more crop, etc. will be of greater significance. Besides, there will be a need for some transformative changes in the agricultural sector in general to ensure accelerated as well as inclusive growth and remove farmer distress.

The way forward would include…

1. Designing and implementing a comprehensive farm income insurance policy, covering both weather and price risks for all farm products

2. Comprehensive agricultural marketing reforms as proposed in the government’s Model APMC Act, 2017

3. Legalisation of agriculture land leasing as proposed in NITI Aayog’s Model Agricultural Land Leasing Act, 2016

4. Updation and digitisation of land records, followed by conclusive land titling

5. Eco-friendly and cost-effective technological innovations

6. Institutional innovations in the form of autonomous co-operatives and producers’ organisations

7. Adoption of integrated farming systems

8. Implementation of Forest Rights Act, 2006, for improving the livelihood and incomes of tribal farmers and other forest-dwellers

9. Provision of rural service centres in each cluster of villages, including quality schools, hospitals, banks, veterinary care facilities, etc. which will create additional employment, trigger rural growth and remove farmers’ distress.

To sum up, the PM Kisan scheme can at best provide some temporary relief to small and marginal farmers in distress. So will be the case with partial debt waivers. Even the idea of minimum income guarantee, which is vaguely propagated by some, may not be better than PM Kisan. Therefore, transformative changes, as spelt out above, would be critical for accelerated cum inclusive rural growth covering all regions and all sections of the farming population, which can help remove their distress on a sustained basis.

T. Haque is former chairman, Commission for Agricultural Costs and Prices, Government of India. The views expressed here are personal.