The Problem With Telangana’s Farmer Investment Support Scheme

The Telangana Rashtra Samithi (TRS) government in the state decided to deliver Rs 4,000 per acre twice a year from the state treasury to all the 72 lakh farmers in the state regardless of the size of their land holdings, purchase of inputs, price or quantity of crops sold or the crop grown and the nature of preparation required to grow it. This input support scheme, or “farmer investment support scheme” as the Telangana government calls it, to be launched in May is intended to cover the costs of inputs like fertilizers, seeds, pesticides etc. Though the objective behind the measure is a step in the right direction, the blueprint of the scheme is a potential breeding ground for rampant corruption and might just result in another abysmal failure providing no solution to the prevalent agrarian distress.

The scheme seems to give absolute cold shoulder to tenant cultivators who comprise close to 40 per cent of the farmer population in the state and are usually the ones who are trapped in the vicious cycle of debt. While official figures put the number at 25 per cent, the actual figure is likely to be close to 40 per cent since many tenants don’t go into formal agreements. A study conducted by the Rythu Swarajya Vedika found out that 70-75 per cent of the farmers who committed suicide were small and marginal farmers comprising landless agricultural labourers tenant farmers who take lands on oral lease to grow their crops on. In addition to facing crop losses, some farmers also have to bear the burden of land rental.

The scheme provides for identifying potential beneficiaries by distributing land ownership passbooks to all 72 lakh farmers, which will serve as proof of land ownership and only then will the farmer be eligible for this monetary input transfer scheme. The most disadvantaged class in the rural agriculture sector remains untouched by this scheme while absentee landlords who lease out their lands would be the ones benefiting out of this subsidy transfer. The archaic Andhra Pradesh (Telangana Area) Tenancy and Agricultural Lands Act, 1950 discourages landlords from renting out their land to tenant cultivators via a legal lease agreement. This complicates the process of providing for a system within the fabric of legal system of transferring the benefits of the subsidy from the landlord to the tenant farmer. In addition, with no cap on the size of the land holding, the scheme will greatly benefit the rich and established farmers.

A farmer owning 100 acres of land would be entitled to Rs 8 lakh per annum in subsidy via this scheme. 98 per cent of the farmers in the state own less than 10 acres of land with a majority holding less than 2 hectares which doesn’t even entitle to the minimum Rs 8,000 per acre every year. Lessons from the past prove that badly targeted subsidies end up benefiting the richest beneficiaries a lot more than the poorest beneficiaries.

The TRS government plans to hand out these subsidies in the form of cheques tainted in the TRS party’s official colour of pink instead of direct benefit transfer (DBT) to the bank accounts of farmers. This regressive decision of handing out cheques will incubate widespread corruption with no mechanism to plug leakages and lack of transparent system in place to monitor if the intended beneficiaries are receiving their subsidies. In the past, giving direct cash in lieu of subsidies has often resulted in inefficient delivery with beneficiaries reporting that they have not received the cash that they are entitled to which will further cost them more time and money as grievance redressal mechanisms are inadequate.

The success of DBT schemes in India is a stellar evidence of its effectiveness in hitting corruption at its roots and enhancing fiscal savings. By getting rid of intermediaries and middlemen, DBT has proven to curb the rampant system of illicit commission which is often sought by corrupt officials from beneficiaries since these officials are capable of holding their subsidies hostage. Executing this scheme via cheque transfers will revive the mammoth ecosystem of corruption prevalent in the Indian subsidy regime. Given how smoothly DBTs have been implemented by the central government across a plethora of Centrally Sponsored Schemes (CSS), the merger of DBT with the scheme would receive huge support from beneficiaries.

Projecting the total subsidy sum of Rs 8,000 per acre covering almost 72 lakh farmers in the state, the farmer investment support scheme is estimated to cost the state exchequer a whopping Rs 9,600 crore. In the past, the Telangana government has already been heavily chastised for its poor budget management by the Comptroller and Auditor General (CAG). CAG reports have time and again criticised the TRS government’s faulty and mindless planning with unrealistic budgetary allocations and frailty in monitoring expenditure and implementation. By not integrating this subsidy scheme with DBT, the Telangana government is narrowing down its chances of making fiscally safe (prudent) decisions. Amount saved by curbing leakages in the state via DBT can be diverted to other developmental projects.

Farmer suicides and hardship in the agriculture sector continue to haunt Telangana till today. According to National Crime Records Bureau, Telangana farmer suicides are second highest in the country after Maharashtra. The primary reasons for farmer suicides in the state can be attributed to crop failure and the burden of indebtedness. The state government failed to provide crop insurance commensurate to industry standards leaving already thin-skinned farmers even more susceptible to the caprices of nature. Crop failure further hinders the farmer’s ability to pay back loans and two successive crop failures lead to an inevitable debt trap. While the scheme brings relief to farmers by increasing subsidies and reducing cost of inputs thereby reducing cost of cultivation, it does not address the root cause of the crisis in the state, which is lack of institutional credit to farmers. Private moneylenders often charge humongous interest rates. Though some banks and financial institutions cover 30 per cent of the credit requirement, farmers are still forced to fetch the remaining 70 per cent of the credit requirement from private sources due to the absence of alternative institutional credit mechanisms.

The Mukhyamantri Bhavantar Bhugtan Yojana launched by Shivraj Singh Chauhan government in MP offers a feasible solution to providing relief to farmers in the state by paying them the difference between the official minnimum support price (MSP) and the price at which they sell their crops in the market. This difference is paid directly to the bank accounts through DBT. On registering, farmers are given a registration reference number which they need to use while producing mandi receipts and making a claim. Following this, they receive a claim reference number which they can use for tracking purposes. Farmers who expect their commodities to be selling for much lower than expected can also register themselves in advance regardless of whether they shall avail the benefits of the scheme after selling their produce.

The scheme is an outstanding remedial approach to solve the agrarian crisis which the TRS government can emulate in the state, thereby laying emphasis on the outcomes as well. The Bhavantar Bhugtan Yojana prevents an emergency financial crisis by providing a dashboard with information on the cash outflow against the quantum of claims. This scheme simultaneously addresses the concerns of leakages, poorly targeted beneficiaries and fiscal responsibility in the Telangana government’s input farm subsidy scheme.

The Pradhan Mantri Fasal Bima Yojana, a largely successful scheme implemented all across India, has failed to take off in the state with the state government not even doing the bare minimum of raising awareness about the scheme nor obliging to contributing its share required towards the implementation. In the course of the Telangana agitation, the TRS party had promised to eliminate the plight of farmers but under the current dispensation, KCR’s monocratic government remains apathetic to the appalling agrarian distress in the state. It is high time that the state government laid out a comprehensive strategy to revive our agriculture sector that includes not just monetary support but structural support via better market access, price protection, access to institutional credit etc. While this move to provide relief to the farmers on the input side, if implemented with due care will prove beneficial, the state government also needs to refocus their efforts towards strengthening the support system on the output end.