Budget 2019: Government mulls Rs 12,000 annual cash transfer to 12 crore farmers

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The government’s agriculture credit target for 2018-19 was Rs 11 lakh crore, while actual disbursal may exceed this and reach Rs 13 lakh crore.
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By Prabhudatta Mishra

The much-awaited package for farmers to be unveiled in the interim Budget on Friday may involve transfer of Rs 12,000/year (Rs 6,000 each for the winter and summer crops) to all ‘small and marginal farmer households,’ an official source told FE. The transfer won’t be on a per-acre basis as under Telangana’s Rythu Bandhu scheme, but a flat amount would be given to all the identified beneficiaries as under Odisha’s recently launched Kalia scheme, the source said, without elaborating on the selection criteria and process.

Given that there are 12 crore small and marginal farmer households in the country, the cost of the scheme could be as high as Rs 1.44 lakh crore, or 0.76% of the projected FY19 nominal GDP.
Additionally, the source said, the the crop insurance scheme Pradhan Mantri Fasal Bima Yojana (PMFBY) would be given a leg-up by completely doing away with the requirement of farmers to share the premium amount.

Also, the interest subvention for agricultural credit will be enhanced by 1-2 percentage points from the current 3% for those who repay the loans in time. While the waiver of PMFBT premium for farmers could cost Rs5,000-Rs6,000 crore (the premium paid by farmers in FY18 was Rs4,500 crore), the additional interest subsidy on farm loans could entail government spending to the tune of Rs6,000-Rs12,000 crore.

So the total cost of the farm package is seen at around Rs1.62 lakh crore or thereabouts. It is not clear whether the Centre alone will foot the Bill or it expects the states to share the burden.

Of the 12% (of sum insured) premium paid under PMFBY, farmers’ share is 2 pps, while the remainder is split equally between the Centre and states. the gross premium paid of Rs25,631 crore for FY18, the claims settled were Rs16,712 crore.

The government’s agriculture credit target for 2018-19 was Rs 11 lakh crore, while actual disbursal may exceed this and reach Rs 13 lakh crore.

For the same level of support to farmers (Rs 8,000 an acre a year) as under Telangana’s scheme, the pan-India cost, given the net sowing area of 140 million hectares, could be over Rs 2.75 lakh crore a year.

Odisha’s Kalia scheme involves a succour of Rs 10,000/year for its farmers for three years (2019-2021). The scheme’s cost is estimated at Rs 10,000 crore over three years. Under its Mukhya Mantri Krishi Yojana, the Jharkhand government will pay Rs 5,000/acre every year to the state’s 22.76 lakh small and marginal farmers, at an estimated annual cost of Rs 2,250-crore, starting April 2019. West Bengal too has a cash transfer scheme for farmers.

HSBC Global Research said in a report: ” .. We think it is likely the central government will announce some version of direct cash support for rural India. Estimates suggest that if the government were to enact a similar direct cash transfer schene nationwide (as the schemes of the four states), it could cost around (Rs 2 lakh crore, 1% of the GDP in FY20). However, if it were to subsume some pre-existing schemes, and is a shared budren with India’s states, the additional budren would be lower.”

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