PM-Kisan Scheme: Future-oriented policy

Satish Kumar Sarma

(The writer is former Head of the Department of Economics,

Biswanath College)

In the last week of February 2019, over one crore small farmers were pleasantly surprised to receive Rs 2,000 in their bank accounts. This was the first of the three instalments under the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) scheme, which contains the seeds of many breakthrough reforms. If implemented diligently, these will change the face of Indian agriculture.

First job is the creation of accurate land records. Pity, 70 years after Independence progress in this area is patchy. Most states do not have a central database of land records. Farmers are dependent on the lowest rung of state bureaucracy for any changes in land records. PM-Kisan cannot succeed without accurate land records of farmers. Clear titles will make land pooling, sale and leasing easy.

Second job is using evidence-based policy making for Indian agriculture. PM-Kisan will function through an online portal (http://pmkisan.nic.in). State governments will load information about the eligible farmers on this. To get the benefit, 10 crore plus farmers will have to provide information like Aadhaar enrolment number, bank account and land details. This data will help in tweaking the existing subsidy schemes.

For example, the Shanta Kumar committee report says that Minimum Support Price (MSP) benefits only 6% of farmers. And just in wheat and paddy. With data support, the government may choose to restrict MSP procurement from marginal farmers and for wheat and paddy. Also, the database with Aadhaar and bank details will make benami transactions difficult. Today, buying rural land is one of the major ways to invest black money. Utmost care is needed to prevent leakage and misuse of this database.

The third job is possible integration of existing subsidy schemes. Removal of subsidy on power, fertilizer, etc will change a farmers’ decision-making process. Purchase of power at market rate will dissuade him from growing water-intensive crops like rice in the low water table states. And buying fertilizer at market rate will reduce its indiscriminate use that has made vast lands barren. Phasing out subsidies will thus improve farm health and ecology. Money saved from the removal of subsidies can be used for expanding annual payments to say Rs 25,000.

Any income transfer scheme like PM-Kisan will work the best if we understand its two critical limitations. One, it cannot ensure food security to the poor or prevent cheap imports. Consider a scenario after the withdrawal of MSP. In the absence of any assured price and buyback guarantee, farmers may choose not to grow crops like rice or wheat. We will then have to import food grains. MSP ensures a livelihood for farmers and food security for poor consumers. And keep the country self-reliant in food. But most countries have lost this policy space.

The number of countries dependent on the import of food grains is increasing. The UN Food and Agriculture Organization says most poor countries will be dependent on food imports from rich countries by 2030. Developed country farmers overproduce and export at a low price with help from enormous subsidies from their governments. Cheap imports depress local prices, make farming unviable, and make a country import dependent. Discontinuing MSP may have these perils.

PM-Kisan covers farmers with clear land titles. It does not cover sharecroppers who are more than 50% of the farmer population. It’s difficult to transfer money to them. They are the real farmers working as landless labourers.

Keeping the above limitations in mind, what could be the ideal package for Indian agriculture? An expanded PM-Kisan scheme which replaces all subsidies except MSP and a reduced size MSP scheme would work the best. This will keep us free from food grain imports, raise farmers’ income and significantly reduce pressure at WTO. But for exports, we need a different strategy.

We have many examples of successful practices - Dutch food and floriculture, French vineyards, Japanese intensive farming or Israeli water conservation technique. Let us see what made the Netherlands the world’s second-largest food exporter. It has many farming centres of excellence focused on exports. They use glass houses, produce pesticide-free fruit and vegetables. They use 90% less water, besides using drones to track crop growth.

Such practices need massive investments – in technology, farm-to-fork infrastructure, global certification of farms and produce. The government and most Indian farmers are not in a position to make such investments. We may invite private participation in less than 1% of arable land. Land can be taken on lease from farmers. No need to transfer land rights. This can be done by actively promoting contract farming ventures (CFVs) for large scale exports. They will be like SEZs for agriculture.

CFVs may invest in the best global practices. Soon, neighbouring farmers will begin to copy these. Many CFVs are already functioning in India. We need to remove policy glitches to ensure large-scale participation. An expanded PM-Kisan plus MSP plus CFVs will set Indian agriculture on a high growth path.