Telangana solution: Paying cash to farm landowners is riddled with problems

Telangana’s path-breaking initiative to pay lump sum cash aid to farmers on the basis of their landholdings can prove useful if some of its glaring loopholes and flaws are suitably rectified. This programme, the first of its kind in the country, involves paying Rs 4,000 per acre (around Rs 10,000 a hectare) to every farmer twice a year (for the kharif and rabi seasons) to cover the cost of major farm inputs such as fertilisers, seeds and pesticides. With power being already supplied free of cost, these farmers need to bear only the labour expenses on their own. This plan can be viewed as another innovative way — in the genre of the price deficiency payment system of Madhya Pradesh and Haryana — being devised by states to ease farmers’ financial distress, though at the cost of straining the exchequer. The Telangana government is flaunting this in different ways — as input subsidy, as income support, as investment assistance, and even as an alternative to loan write-offs.

The idea of such upfront dole seems to have come from the European Union’s (EU) “single payment scheme” launched in 2003 to provide a direct subsidy to landowners under the EU’s Common Agricultural Policy. However, like the original prototype, the Telangana version, too, suffers from several shortcomings that can hamper the achievement of its intended objective. For one, being linked to land ownership, it automatically leaves out tenant cultivators who, in fact, are in greater need of such support. The state government’s plea that tenant farmers can deduct this amount from the rent payable to landlords is not convincing because it is most unlikely that landowners will allow it.

Besides, even if some landowners are agreeable, many tenants who pay full or part of the rent in kind will find it problematic to make such deductions. Moreover, since the payments are on a per-acre basis, a sizable share of the total payout will be cornered by undeserving large farmers and absentee landowners. The state government’s hope that rich farmers will voluntarily give up this subsidy is likely to be belied in most cases. Even in the case of LPG (cooking gas), hardly 5 per cent of rich consumers in Telangana are reckoned to have forgone the central subsidy which, in any case, amounts to a fraction of this sop.

The state’s move seems to be aimed primarily at cost reduction without covering the price risks of the kind which, at times, force cultivators not to harvest their produce or throw it away. Also, there is no provision in the scheme to ensure that the financial aid is actually utilised for purchasing farm inputs. There is every possibility of this money being used for consumption or other non-farm purposes. Even the EU experienced problems in the implementation of the single payments scheme. Some of the EU’s member countries, consequently, opted to modify this programme in 2013 into a more focused “basic payment scheme” to lend income support to those who are actually engaged in agricultural activities. Telangana, too, will do well to revisit and fine tune this well-intended move to make it truly useful for needy land-tillers.