To address the plight of tens of millions workers in the ‘informal’ sector viz. street vendors, craftsmen, construction workers, domestic help, agricultural laborers, self-employed etc affected by Covid – 19, on March 26, 2020, the finance minister, Nirmala Sitharaman announced a Rs 170,000 crore package under PM Gareeb Kalyan Scheme [PMGKS]. The most crucial component of this package is giving 5 kg of rice or wheat per person per month for ‘free’ to around 80 crore people through the public distribution system [PDS] plus one kg of preferred and region specific choice of pulse per household for 3 months. To understand the full implications of the relief which is estimated to cost the exchequer about Rs 50,000 crore, let us...
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Category: Targeting subsidies
Loot in farmers’ name continues unabated
A high level committee on ‘road-map for agriculture and rural sector in the next five years’ has recommended corrective steps to reduce agricultural subsidies and use the money thus saved [it has estimated the savings to be Rs 10,000 – 15,000 crore annually] for investment in rural areas for creating livelihood opportunities by empowering Farmers- Producer Organizations [FPOs], Joint Liability Groups [JLGs] and making small and marginal farmers diversified producers. It has also suggested providing FPOs and other forms of collectives a proper eco-system to grow and diversify operations. The government spends close Rs 450,000 crore on agricultural and food subsidy every year. This includes food: Rs 175,000 crore; fertilizers: Rs 100,000 crore; PM-KISAN: Rs 90,000 crore; power [centre plus...
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Want UBI, shun subsidies
Reportedly, the union government is contemplating to give universal basic income [UBI] of Rs 4000 per acre to each land owning farmer to soothe the nerves of farming community who gave a befitting blow to the Modi – dispensation in assembly elections held in three Hindi heartland states for ignoring their interest. Whether, this will help BJP [the party that Modi leads] during the upcoming general elections remains to be seen. Meanwhile, it is important to understand its full ramifications, in particular, how it stacks up vis-à-vis existing support mechanisms for the farmers. With a view to make fertilizers, irrigation, power, credit etc affordable to farmers, the government gives subsidy on these inputs and is routed through their manufacturers/suppliers. The...
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Farm loan waivers – the road to disaster
The waiver of farm loans worth Rs 70,000 crore about a decade back by the then UPA – dispensation with an eye on the impending general elections in 2009, had a debilitating effect on the finances of the union government [the fiscal deficit during 2008-09 was in excess of 6%] While, this should have raised an alarm bell but, political parties of all hues do not seem to have learnt any lesson. Early last year, the BJP ruled government in Uttar Pradesh [UP] granted a mammoth loan waiver for small and marginal farmers costing the exchequer Rs 36,000 crores. This was followed by the by JD [Secular] led coalition in Karnataka granting an equally massive about Rs 40,000 crore waiver...
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Unshackle farmers from subsidy and control raj
Dr Ramesh Chand, Member [Agriculture], NITI [National Institute for Transforming India] Aayog – the new incarnation of erstwhile Planning Commission – has reiterated that prime minister’s commitment to double farmers’ income by 2022 is doable. The average income of a farmers’ family in India is about Rs 6400 per month, but the variations across states are huge. For instance, in Punjab the average income is a high of Rs 18,000 per month, in Bihar, Odisha and Jharkhand, it is less than Rs 5000 per month. This may point towards the possibility of increasing farmers’ income manifold [even more than 100%]. If, farmers of Punjab can do it, there is no reason why those in other states cannot come up. But,...
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Yogi – Modi onslaught on poverty
The just concluded assembly elections in Uttar Pradesh [UP] were fought in the backdrop of deteriorating law and order situation, hostile environment for investment, crumbling infrastructure [sans a few pockets in urban areas], widespread farmers distress, their high level of indebtedness and acute shortage of bare necessities viz. home, food, education, health, water and electricity. The poor investment climate and pathetic law and order discouraged industrialists and businessmen from setting up factories/shops even as existing establishments were facing closure. Together with farming being un-remunerative/losing proposition, this made a deadly cocktail leading to large-scale loss of jobs and in turn, migration of youth en mass to other states such as Maharashtra and Gujarat. Promises galore BJP led by Modi promised liberation...
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PM agri–insurance scheme – challenges ahead
Farmers in India are constantly under the threat of drought and other natural calamities such as floods, hailstorms, pest attacks etc leading to unprecedented loss of crop output. Unable to pay back loans [taken for growing crop], tens of thousands of them commit suicide every year. It is a national curse. The issue has been debated several times in the parliament wherein parliamentarians across the political spectrum pledge to put an end to it but things have so far remained at a standstill. The Pradhan Mantri Phasal Bima Yojna [PMPBY] launched by Modi – government early this year has come as a beacon of hope. Under PMPBY, a farmer will be compensated for the crop loss by paying small premium...
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Exclude the better-off
FOOD SUBSIDY The National Food Security Act (NFSA) enacted by the then UPA – government in 2013 guarantees availability of 5 kg of cereals per person per month at Rs 3 per kg rice, Rs 2 per kg wheat and Rs 1 per kg coarse cereals to 67% of India’s population (75% rural & 50% urban). The cost of making food available being substantially higher, this entails massive subsidy payment. Subsidy is financial supports given by government to enable a person buy a commodity which he cannot afford with his limited income. Prudence demands that this should be given for a temporary period to avoid perennial burden on the exchequer. This period should be used to enable him earn more...
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Food subsidy reform – unlikely in Modi’s term
The National Food Security Act (NFSA) enacted by the then UPA – government in 2013 guarantees availability of 5 kg of cereals per person per month at Rs 3 per kg rice, Rs 2 per kg wheat & Rs 1 per kg coarse cereals to 67% of India’s population (75% rural & 50% urban). This is an astounding admission that six-and-a-half decade after independence, nearly 800 million of country’s population are so poor that food has to be supplied at close to ‘zero’ price. Subsidy is financial supports given by government to enable a person buy a commodity or service which he cannot afford with his limited income. As a matter of prudent policy, this should be given for a...
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Vanishing food stocks and bleeding banks
For the first time ever in the history of food procurement, storage, movement and distribution by state agencies, India has faced an unprecedented situation of hibernating food stocks worth Rs 20,000 crores in Punjab. The stocks were mostly funded using cash credit taken from a consortium of public sector banks [PSBs]. In an equally unprecedented move, the Reserve Bank of India [RBI] – the regulator of banks – has directed concerned PSBs to declare the mentioned loan as non-performing assets [NPAs] and accordingly make a provision of 7.5% during the quarter ending March 31, 2016 and another 7.5% during Qr ending June 30, 2016 for now. That adds to Rs 3000 crores [15% of Rs 20,000 crores] and will correspondingly...
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