Farm ministry spends less in 2019-20 as PM-KISAN faces teething troubles

While the spending on the scheme hasn't been encouraging in its very first year, cutting down on allocations is premature and can't be justified

As the Narendra Modi government prepares to present its second Budget, most experts and observers have called for increased spending on the rural and agricultural sectors to boost consumption and kick-start the economy which has shown stagnating growth in the past few quarters.

But will the rural economy improve simply by allocating more money to it, or is there something else that needs to be done to give it a big push?

Also, of the various schemes and programmes of the Centre, which ones should be accorded greater priority in order to pump money into the hands of the rural population?

Data sourced from the Controller General of Accounts (CGA) shows that till November 2019, that is, in the first eight months of the 2019-20 financial year, agriculture and allied activities have spent just 49 per cent of the total Budget Estimate of Rs 1,38,564 crore for the year. In absolute terms, this comes to about Rs 68,000 crore.

In comparison, the estimated spending was proportionately much higher, at about 70 per cent, in the corresponding period in financial year 2018-19. In absolute terms, however, the spending in the current financial year surpassed that of the previous by as much as Rs 28,000 crore. The estimated spending till November 2018 was estimated Rs 40,320 crore.

"According to me, in the coming budget the expenditure on PM KISAN and MGNREGA would be same as this year despite the former's limited spending in first year, as there is very little the government can do to boost consumption in rural areas outside these. Unless, revenues rise significantly, this cut back on spending and limited ability to spend despite high allocations will continue, " Madan Sabnavis, Chief Economist CARE Ratings told Business Standard. 

PM-KISAN drags

A big chunk of the spending would be under the flagship PM-KISAN, for which Rs 75,000 crore was earmarked in Budget 2019-20. However, till the first week of January, just around Rs 50,000 crore was disbursed. If the pace of spending does not pick up within the next few weeks, about a third of of the allocation, or about Rs 25,000 crore, would be saved at the close of 2019-20.

In 2018-19, of the Rs 20,000 crore allocated for PM-KISAN, just around Rs 8,000 crore could be spent before the model code of conduct for the 2019 general elections kicked in.

The remaining Rs 12,000 crore is unused from last year. According to some estimates, a sum of about Rs 33,000 crore of the allocated Rs 95,000 crore (Rs 75,000 crore this financial year plus Rs 20,000 crore from 2018-19) could be saved from PM-KISAN.

The unspent fund also raises questions about the Centre’s overall assessment of the actual number of farmers with land who could be potential beneficiaries of the scheme.

The reluctance of some states such as West Bengal to implement the scheme is also one factor behind low enrollments.

According to some officials, West Bengal has some 7.5 million potential PM-KISAN beneficiaries, but in the absence of any proactive measures by the state government, these haven’t been included under the scheme so far.

That apart, some critics have questioned the scheme’s design as well, as it does not grant farmers their share of income support with retrospective effect. So, if a farmer joins the scheme after the first two installments have been paid, then he won’t get the arrears, and will only receive entitlements from the third installment onwards.

Also, as per the scheme’s guidelines, Aadhaar authentication was mandatory for the second and third installments, that is, for the period August to December. 

This immediately led to a fall in enrollment numbers. So, according to the latest data, of the 86.3 million farmers registered for PM-KISAN, about 94 per cent received the first installment of Rs 2,000, when Aadhaar linkage was not mandatory. That number fell to just 69 per cent when the third installment was doled out, as the authentication mechanism had been put in place. It is difficult to ascertain how many farmers have got all the three installments till now. 

The mismatch between Aadhaar details and bank accounts has been found to be a key reason for slower disbursal of the third and fourth installments under the scheme and also the ascertainment of the actual number of beneficiaries with land holding.

Officials said as against the 2015-16 census pegging the total number of farmers with land holdings at 145 million, the actual number on the ground wouldn't be more than 100 million. “This is mainly due to joint land holdings and improper records with the beneficiaries,” the official explained.

Rural development fares well

Spending of the rural development ministry as per the CGA numbers, however, doesn’t show any such slowdown, mainly because of good spending on rural roads, MGNREGA and rural housing.

The CGA numbers show that till November, of the BE of Rs 117,647 crore in 2019-20, around 70 per cent has been spent, which is just marginally lower than the spending done during the same period last year, at 74 per cent, and 72 per cent till November 2017.

MNREGA plus PM-KISAN the way forward

Between the two flagship schemes of agriculture and rural development ministry that can directly impact consumption growth in rural India, most experts believe that a combination of PM-KISAN and MGNREGA is the ideal way forward with more emphasis on the latter, as it is for the rural labourers who are generally at the bottom of the economic ladder.

Both PM-KISAN and MGNREGA serve a different purpose. MGNREGA is not a pension scheme, in fact its objective is to create durable assets. It is a sort of distress employment. When farm incomes rise, demand for MGNREGA automatically declines. In the past few months, the prices realised by farmers has improved slightly, which should naturally lead to drop in demand for MGNREGA work.

PM-KISAN, on the other hand, is a sort of income support for landed farmers. It is definitely better than loan waivers, but its true success can be gauged from only if it is dovetailed with the land records of farmers to transfer other forms of subsidy such as FASAL BIMA Yojana premium and fertiliser subsidy. In its refined form, PM-KISAN can obliterate the impact of low crop prices. Most importantly, PM-KISAN does not reach out to lease farmers and landless farm labourers, but MGNREGA is meant exactly for such a segment of the population.

"Therefore, the avenues of both PM-KISAN and MGNREGA both could play an important role in boosting rural income,” said Amarjeet Sinha, former secretary of Rural Development.

Mahendra Dev, Director of Indira Gandhi of Development Research (IGIDR), too believes both PM-KISAN and MGNREGA are needed to boost incomes in rural India on an immediate basis and both have a role to play. This is because PM-KISAN is more for landed farmers while MGNREGA impacts landless farmers and labourers. While some small and marginal cultivators also take on MGNREGA work in times of distress, the scheme largely caters to those who don’t own land.

“I feel within the constraints of government revenue, both need to focused to boost incomes in rural India. In the case of PM-KISAN, the income support is without any consideration, while in the case of MGNREGA, payment is made for the labour put in. Raising MGNREGA wages could be an option to boost incomes of a significant chunk of the rural population," Dev said.

But when it comes to spending, MGNREGA stands heads and shoulders above PM-KISAN. However, a counterpoint to this argument is that MGNREGA is a well-entrenched scheme, while PM-KISAN is still nascent and any move to n cut down on its allocation based on a year's performance is premature and cannot be justified.

Rural development fares better than farminng on expenditure during 2019-20
,	Expenditure on agriculture		Expenditure on rural development
Year*	Budget Estimates (Rs Cr)	Spending %age	Budget Estimates (Rs Cr)	Spending %age
2019-20

1,38,564  49% 1,17,647 70% 2018-19  57,600  70% 1,14,915 74% 2017-18  51,026  68% 1,07,759 72% * Till November each year; Source: Controller General of Accounts (CGA)