The Uttar Pradesh government plans to transfer subsidy on seeds directly into the bank accounts of about 10 lakh farmers in the ongoing rabi crop season. This is a creditable achievement for a programme for the online registration of farmers for the direct benefit transfer (DBT) system, which was launched only last September. The fact that the registrations — capturing details from the names, villages and land particulars of individual farmers to their bank account and mobile numbers — have already crossed 36 lakh, and payments were made to around 1.5 lakh beneficiaries even in the 2015 kharif season, makes it all the more remarkable. Add to that the Rs 2,127 crore transferred as relief to the state’s distressed cane growers — again into their accounts and amounting to Rs 28.60 of the Rs 280 per quintal price payable for supplying to mills in the last sugar year — and it is clear that UP has emerged as a model of sorts in the implementation of DBTs to farmers.
This is welcome, more so when it concerns a state that is India’s most populous and ranked next only to Bihar in overall backwardness. Akhilesh Yadav’s government in UP has shown it is possible to deliver subsidy in a manner that is both efficient and equitable. DBTs are efficient because they are independent of market transactions. In this case, farmers are paying the market price for seeds, which minimises the possibility of the subsidised material being diverted. Since the subsidy is being credited separately into the bank accounts of farmers, who are clearly identifiable under the online registration system, there is no leakage of transfers either. The fact that the subsidy is reaching the intended beneficiaries, and is also capped to meet the seed requirement of five acres, also makes it equitable. And if this system can work in UP — farmers haven’t complained of not getting either the seed subsidy or the cane-relief payment — it should effectively silence armchair critics of the DBT system.
There are takeaways for other states and the Centre, too, from UP’s experience. If money can be credited directly to individual farmer accounts, it makes little sense for government agencies to undertake physical procurement and stocking of grain beyond that necessary to run a targeted public distribution system or undertake effective market intervention. Rather than incur the huge carrying costs of inventories, farmers could simply be paid on a per-hectare basis after factoring in crop yields and indicative market prices for different regions. A payment of Rs 5,000 per hectare, even on the country’s 200 million hectare gross cropped area, will cost half the Rs 2,00,000 crore the Centre
expends on food and fertiliser subsidy alone. That is better than the current inefficient and iniquitous system of subsidies.