State-level cash support to farmers may cross Rs 30,000 crore a year

With Prime Minister Narendra Modi categorically discarding a nationwide farm debt waiver in an interview earlier this week, a direct cash support to farmers on the linesof 

Telangana’s Rythu Bandhu scheme is being looked at as a viable alternative by the Centre. 

Three states, Jharkhand, Odisha and West Bengal, have already announced their own version of a cash-support scheme for farmers. According to estimates, these states, and 

Telangana, will together spend Rs 31,000 crore on it per year. About 18 million farmer and labourer households would benefit. 

Coincidently, these are the states where the average size of land owned by farmers is the lowest. Against the national average of 2.5 acres, an average farmer in West Bengal owns 0.9 acres, while those in Odisha and Jharkhand own 1.3 and 1.7 acres, respectively, according to a survey by National Bank for Agriculture and Rural Development. Farmers in these states also earn lower than the national average. So, the smallest of farmers will benefit. The fiscal positions of the three states, however, present a mixed picture.

Odisha has promised to spend the most, at Rs 10,180 crore per year, under a scheme named Kalia, an acronym for Krushak (farmer) Assistance for Livelihood and Income Augmentation. Among the four states, this is the only scheme that promises Rs 10,000 per year to a million landless farm labourers and those who are not able to take up cultivation due to illness or disability, in addition to 3 million small and marginal farmers.  However, Odisha's fiscal deficit as a percentage of its gross state domestic product (GSDP) is already higher than 3 per cent mandated by the Fiscal Responsibility and Budget Management (FRBM) Act. It is slated to remain at 3.4 per cent in 2018-19, close to 3.5 per cent in 2017-18 (Revised Estimate).  With the addition of this scheme, the state's revenue expenditure will rise substantially, putting pressure on the fiscal balance. 

But on a positive note, Odisha's outstanding debt and interest payout towards historical debt are lowest among states. Its debt stands at 21.9 per cent of GSDP in 2018-19 (Budget Estimates or BE) while the ratio of interest payments to revenue receipts at 5.5 per cent. The FRBM Act mandates the two indicators to reduce to 20 per cent and 10 per cent respectively, till 2022-23. 

West Bengal, however, has not limited its scheme to small and marginal farmers, but will pay them in proportion of the size of the land held. It promises Rs 5,000 per acre (Rs 12,500 per hectare) annually to all farmers. Unlike Odisha, West Bengal will give the handout to every landholder, very similar to Telangana's Rythu Bandhu. This will cost the exchequer an estimated Rs 6,500 crore, according to rough estimates. 

The state has a good fiscal room, compared to the other three, with its fiscal deficit limited to 1.7 per cent of GSDP in 2018-19 . However, its own tax revenue stands at 3.3 per cent of GSDP, lowest among all Indian states. 

For Jharkhand, under the Mukhyamantri Krishi Aashirwad Yojana, the annual spending at Rs 2,250 crore is the lowest among the four states. The cash payout is also the lowest among them, and similar to West Bengal, at Rs 5000 per acre (Rs 12,500 per hectare). 

Only small and marginal farmers stand to benefit. 

The state's fiscal deficit at 2.5 per cent of GSDP is lower than all-states' average of 2.6 per cent in 2018-19 (BE). Its interest burden is also better than the all-states' average at 8.1 per cent of the revenue receipts, against 11.2 per cent.