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Tuesday, October 26, 2021

Karnataka’s way

Implementation of loan waiver in state points to possibility and promise of direct benefit transfer in helping farmers

By: Editorial |
Updated: July 2, 2019 2:00:54 am
Maratha quota, bombay high court, maharashtra news, reservation, maratha reservation, indian express The Karnataka government expects to complete this scheme, covering some 41 lakh farmers, by the end of this fiscal.

The Karnataka government has released nearly Rs 8,357 crore as waiver amount to 20.40 lakh farmers against overdue crop loans of up to Rs 2 lakh till December 31, 2017. It expects to complete this scheme, covering some 41 lakh farmers, by the end of this fiscal. The remarkable thing isn’t the scheme itself, but how it has been implemented. Karnataka is one of the few states with fully digitised records of land ownership, rights, tenancy and crop information. Most states undertaking loan waivers have done so based on the lists given by banks. In many cases, the same farmer would have taken loans from multiple banks, thereby benefitting from waivers against all these accounts, even if the outstanding dues added up to beyond the announced limit. In Karnataka, however, the state government could match the data from banks with the land survey, Aadhaar and ration card numbers. It led to savings in double payments to around 5 lakh farmers and the waiver was limited to Rs 2 lakh per family against all their crop loan accounts.

The Karnataka scheme reveals the promise held out by direct benefit transfers (DBT) — how they can be made in a practically foolproof manner to every farmer based on their Aadhaar-seeded bank accounts as well as digitised land ownership details. The next logical step should be to eliminate all farm subsidies and convert these into targeted DBTs or income support programmes. Ramesh Chand, Member of the NITI Aayog, has favoured such a transition that is justifiable from both an efficiency and equity standpoint. The Centre could take the lead here. Currently, its annual subsidy on food, fertiliser, crop loans and insurance premium, without accounting for rollovers and late payments, is over Rs 2,91,000 crore. In addition, state governments dole out subsidies through free/cheap farm power and water that would total another Rs 1,50,000 crore or so. Why should fertilisers or electricity be given to farmers at rates that incentivise their inefficient consumption with attendant environmental costs? Why should the Food Corporation of India physically procure, store and distribute paddy or wheat way beyond the requirements of the PDS?

The Union Budget can make a beginning by announcing a three-year phase-out plan for all fertiliser subsidies and capping yearly foodgrain procurement for the PDS to 50 million tonnes. The savings can be used to provide a flat Rs 5,000 per hectare to all farmers. A single DBT scheme, with income support under PM-Kisan, will serve India’s farmers better than iniquitous and market-distorting subsidies.

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