Telangana’s Rythu Bandhu Scheme: A ‘Quick-Fix’ Economic Model That Is Here To Stay

Indian states are hastily looking to adopt or adapt to Telangana’s Rythu Bandhu scheme. If politics is the deciding factor, we rest our case. But as far as a panacea to agrarian distress, an alternative to loan waivers and good economics goes, it may not serve any purpose, really.

Rythu Bandhu is statedly an “agriculture investment support scheme” that will relieve farmers from a debt burden.

Now consider this case from Telangana.

Nagendra Reddy (name changed) is a landowner with an 80-acre farm in Nalgonda, of which 25 acres is occupied by a sweet-lime plantation. The rest of the 55 acres is leased out to tenant farmers to grow paddy, after deciding the revenue-sharing arrangement, in lieu of rent. Reddy’s main occupation is his construction business in Hyderabad and other cities, which yields him a substantial income of several lakhs per month.

Unexpectedly, since the middle of 2018, Reddy’s Nalgonda’s farm began yielding him an additional Rs 6.4 lakh per annum, without him having to lift a finger. How? Courtesy, the famed Rythu Bandhu scheme of Chief Minister K Chandrashekar Rao – at the rate of Rs 8,000 per acre per year. This was directly transferred into Reddy’s bank account. For Reddy, it is practically ‘money for nothing’: something he gets simply by virtue of owning land – which is in fact, ancestral property. Though it is for “investment support”, the fact is that sweet-lime cultivation does not require investment support, because it does not need regular sowing seeds, ploughing, etc.

The rest of the land given on lease for paddy would require investment, but it is Mallesh’s (name changed), headache. Mallesh first pays Rs 5,000 per acre upfront as rent to Reddy, or later shares a percentage of revenue. Then, he shells out money from his pocket towards ploughing, seeds, fertilizers, pesticides, labour, etc. He, being a tenant farmer, is not eligible for the cash transfer as per the Rythu Bandhu scheme; nor is he eligible for the crop insurance cover from the Rythu Bandhu Bheema scheme - that would cover losses from droughts, foods and pest attacks, etc. Rare is the landowner farmer who would share any of these benefits with his lessees.

When asked why he is taking the money at all when he does not play any role in the farming, Reddy says, “he (KCR) is giving, so we’re taking!” Then adds, “what is wrong in this? No chief minister since Independence has done anything for the forward castes ever; it has only been for the poor, poor, poor! At least this CM is doing something for us.”

For KCR, it is another box ticked – among the several categories of people made happy through his giveaways.

For Mallesh, it is business as usual. He is what would qualify as a small/marginal farmer, with 1-2 acres of land of their own; the tenancy helps them to augment their income. In Telangana, the majority of farmers are small farmers, and for 1-2 acres, Rythu Bandhu would typically give them Rs 8,000-16,000 per year.

Even landowner Reddy concedes that this amount of Rs 8,000 per acre is grossly insufficient for farming inputs. Being hardly sufficient to cover any input-costs, this “investment support” amount is usually spent on buying provisions and groceries, we are told. Even there, this provides a very small respite at Rs 667-1,334 per month of additional income for daily expenses. “In all probability, the funds meant for inputs are going to be diverted to non-farm expenditure,” was always the prediction of an agriculture consultant working for the government.

There are two takeaways here: A) Since Rythu Bandhu money does not really act as investment support, it cannot really contribute to increased agricultural productivity;

And importantly, B) it does not stop him from taking loans, usually in lakhs of rupees.

According to the Telangana Social Development Report, most loans are taken to dig borewells, which again this amount is insufficient for. However, a study in 2017 commissioned by the Reserve Bank of India and published in Economic and Political Weekly (EPW) had found that loans and suicides were the result of rising input costs and aspirational consumption (spent on consumer durables and other luxury items), apart from faulty cropping patterns and the absence of non-farm sources of income.

Notably, the Telangana model takes care of none of these. No agriculture reforms undertaken on the ground by the Telangana Rashtra Samithi government related to marketing, E-nam, setting up of agri-industries, measures related to storage, transportation, role of middlemen, and even schemes like Mission Kakatiya for providing irrigation infrastructure that fell way behind target.

Life for tenant, small and marginal farmers is nearly as miserable as it used to be. As farmers, that is. Because they are also receivers-of-other-doles – Shaadi Mubarak/Kalyana Lakshmi, pension of Rs 1,000), 2BHK homes, and free rice – that they are only mildly complaining, being relatively better off than before.

Ironically, the effect of all these doles meant lower productivity for agriculture, as agricultural labour is now happy to work fewer days, just enough to meet the shortfall in their funds received from the doles. “There is no incentive to work to earn their living, and labourers have turned lazy and are often absent,” laments Reddy. Worse, lesser work and more free hours often mean more consumption of alcohol.

Would Such Direct Benefit Transfers Preclude Loans and Debt Culture?

Probably not, and this is because of the small amount of the cash benefit from Rythu Bandhu, whereas loans are taken in lakhs of rupees.

Of course, detailed studies will later reveal the exact effect of Rythu Bandhu on farmers’ income and wellbeing, etc. but common sense says that none of these conditions change with the Rythu Bandhu for the small and tenant farmer – the one prone to suicides and the face of “agrarian distress”. There is no change in the farming environment, ecosystem and circumstances that will make things any better in the short, medium or long term.

The Rythu Bandhu app does mention about “relieving farmers from debt burden and not allowing them to fall into the debt trap again… this scheme provides support for the farmer”. This notwithstanding, KCR’s recent election speeches again promised each farmer Rs 1 lakh loan waiver, amounting to a total of Rs 24,000 crore. In 2014, KCR had given a farm-loan waiver that amounted to Rs 17,000 crore, which means he also realises the inability of Rythu Bandhu to stem loans, debt traps and suicides.

Telangana’s `Model’ Land Records Updation Programme. Really?

Data is a huge issue in any scheme like this, and in the current flow of things, another complementary, Telangana programme is being seen as emulatable: the Land Records Updation Programme (LRUP).

LRUP was begun in 2017, with its sole purpose being to sort out land records for rolling out the Rythu Bandhu scheme. Thus, being merely a means to an end, the execution was hasty, even if intensive; the outcome was less-than-satisfactory, with several glaring omissions, and alleged irregularities and arbitrary updation. Many titles were not updated including those related to inherited land; many villagers were reportedly even unaware about the programme, since the community was not involved.

But more importantly, it was not a `cadastral survey’, which has repeatedly been emphasised as the required route for updating spatial land records. For land updation, various reforms have been suggested over decades, which this paper in the EPW, details. Yet, none of these were applied in the Telangana process. Textual records like the LRPU are known to be prone to errors.

Here, some other related serious issues with LRUP are pointed out: Reportedly, the Rythu Vari Bhu survey did not coordinate with a simultaneous survey by the agriculture department that had a database of farmers and crops across the state. Of course, the survey left out tenant farmers – and reportedly “expressly removed mortgages and tenants from the category of people that can apply for passbooks” from older acts related to land rights.

Post facto creation of records is another feature that is amenable to misuse and exploitation; it has been made possible by a 2016 initiative, Sada Bainama, that regularises unregistered sale of agricultural land.

How About As Universal Basic Income, Then?

Given these irregularities and inefficiencies, we may possibly concede that there is nothing path-breaking about Rythu Bandhu’s capabilities in addressing issues of loans, or improving productivity. So, as far as a reform and investment-support measure goes, Rythu Bandhu fails to cut any ice.

We have also seen that it does not sufficiently raise incomes of farmers, those who really need income support, so again its impact on agrarian distress – other things being equal – is questionable.

Viewed as a form of Universal Basic Income (UBI), it certainly has humanitarianism going for it. Yet, at the risk of being a killjoy, one must point out that the costs and benefits of UBI are still being debated across the world, as some countries experiment with it. Overall, when Organisation for Economic Co-operation and Development (OECD) analysed it as a policy option in 2017, it had concluded that even in advanced countries it would fail to reduce poverty.

Apart from OECD’s conclusion about UBI failing to reduce poverty, Telangana’s Rythu Bandhu, in fact, actually increases economic disparity (and resentment), with rich landowner farmers like Reddy getting huge amounts of money. It makes no sense, whichever way one looks at it.

OECD had also concluded that for UBIs to be effective, they would require much higher taxes to fund them.

That brings us to the funding part. If farm-loan waivers are expensive and therefore, fiscal disasters, is Rythu Bandhu any different? A one-time farm loan waiver of Rs 17,000 crore, versus a recurring annual expenditure of Rs 12,000 crore - how does it add up?

Plus, already Telangana is reaching a high-debt level, with the worrying part being that none of this debt is used for capital formation or industrialisation.

An Alcohol-Economy Model?

The only way the economics can work out is, perhaps, what Telangana has already figured: by the power of the alcohol economy. Rythu Bandhu, as we know, was financed mainly through excise collections from alcohol. Now, we see that the effect of Rythu Bandhu and other doles, pension and welfare measures is an increase in alcohol consumption by the farming community. This is what keeps money circulating!

And higher excise collections lead to higher state gross domestic product (SGDP). Is it any surprise then, that Telangana has been one of the fastest-growing states in the country? This growth rate brings applause to the state and its government. Such a win-win! Alcohol, apparently, can satisfy many goals, and has the ability to keep various people happy. Except for women in the state, who have been staging protests against the government’s idea of liquor trade as main income-generation source, because it is ruining their men and breaking up families.

Whereas the basic minimum requirements of every citizen must be met, certainly those capable of earning a living through their skills must do so. Would an economic model that is largely freebie-based, work out in the long run? With hard-work culture eroded, and the lure of alcohol at an all-time high, will productivity be enhanced?

By these schemes, and no avenues for employment or productivity enhancement through investments in the state, the TRS government is in fact, preventing people from earning their living respectably.

All indications are that schemes like Rythu Bandhu, contrary to popular understanding may, in fact, kill agriculture efficiency. Typical of KCR, it is a quick-fix measure, implemented in haste – and marketed well, both directly – and indirectly, through his paper Telangana Today, the hub of all T-government ‘achievements’.

For farmers to really live meaningfully, real measures need to be taken to augment their incomes, either through undertaking real reforms in agriculture, or through more non-farm avenues for employment.

Yet, after all is said here, governments are still unlikely to let go of the Rythu Bandhu scheme that has caught their fancy. Because nothing succeeds like easy money – especially when you are estimating and manipulating the power of a common man.