ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Price or Income Support to Farmers

Policy Options and Implications

The present study explores the scalability and feasibility of some of the major central government programmes, such as the Pradhan Mantri Annadata Aay SanraksHan Abhiyan, the Pradhan Mantri Kisan Samman Nidhi, and other possible methods of direct payments, by analysing their fiscal costs and physical storage requirements. Different models of price and income support have been discussed and a comparative picture has been drawn. The PM-AASHA and PM-KISAN are fiscally the most and the least expensive programmes. A judicious mix of policies is needed depending on the importance of the commodity in the public distribution system, adequacy of market demand, and whether the production is localised or limited.

This is a revised version of the Kunchala Rajaratnam Endowment Lecture delivered at the University of Madras on 6 March 2019. The author thanks the anonymous reviewer for their insightful comments that have helped in improving the paper a great deal. The author also thanks Yogesh Bhatt for his help in rechecking the computations. Usual disclaimers apply.

During the mid-1960s, self-sufficiency in food production was the overarching policy concern in Indian agriculture and was instrumental in promoting the green revolution. Thereafter, policy concerns have been changing every decade or so. The focus of the green revolution on well-endowed regions like Punjab, Haryana, and West Uttar Pradesh led to the rising interregional inequalities. By the 1980s, balanced agricultural growth became the focus of policy. However, the large quantum of input subsidies and output price support led to increasing resource degradation and deceleration in capital formation in agriculture. There was a severe stagnation in ­agricultural growth from 1995–96 to 2004–05, mainly as a result of the deceleration in public investment and capital formation that began in the early 1980s and continued into the mid-1990s. Some important initiatives were taken from the mid-2000s in order to address the growth stagnation. Focused initiatives such as the National Food Security Mission (NFSM) and National Food Security Act (NFSA) were also launched to increase food production and provide economic access to food, respectively, which helped in improving the growth scenario and increasing the food production. However, viability of farming continued to remain a major concern. The current policy priority is focused on ensuring a minimum level of ­incomes to farmers. The present government, while assuming office for the first time in 2014, had announced doubling farmers’ income as one of its major objectives.

There are several pathways to increase farmers’ income. Imp­ortant among these are increasing productivity, reducing cost of production, ensuring higher price, making direct income transfers, etc. These pathways are not mutually exclusive and can be used in conjunction with one another.  Many of the initiatives taken in the past belonged to the first two categories, that is, increasing the productivity and/or reducing the cost of production. Even some of the programmes since 2014 to increase irrigation, improve soil fertility, and reduce farmers’ risk—such as the Pradhan Mantri Krishi Sinchayee Yojana ­(PMKSY), soil health card scheme and the Pradhan Mantri Fasal Bima Yojana (PMFBY)—fall in this category. However, since 2018, the focus has shifted to the third and fourth components, that is, providing higher prices to farmers and direct income transfers. First, efforts were made in the direction of helping farmers achieve a better discovery of market prices through a network of agricultural markets (called Electronic National Agricultural Market or e-NAM). This was followed in Septe­mber 2018 with a more ambitious public price support ­programme called the Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA). In the 2019 Interim Budget of the union government, a direct income transfer programme, called the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) was announced. These last two initiatives, PM-AASHA and PM-KISAN, are major departures from the past in terms of scope and coverage. In this paper, we try to assess the feasibility of some of these policy initiatives, mainly focussing on the fiscal costs and other related issues. We analyse these programmes ­under the rubric of price support programmes and direct ­income support programmes.

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Updated On : 20th Mar, 2022
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