Three Point Formula to End Farmer Woes Ahead of 2019

The Government is in view of three options - writing off farm loans, introducing a price differential plan and Direct Transfer of Cash to the farmers. Currently, Modi Government is trying their best to introduce a relief package for farmers before general elections in 2019. Congress party’s quick loan waivers in 3 states - Rajasthan, Madhya Pradesh and Chhattisgarh have also alarmed the ruling party. 

The bailout process may cost as much as Rs 3 lakh crore, added government sources. Options include direct credit payment to farmers who own land, compensation to those who sold crops below minimum support price (MSP) at market rate and a loan waiver program. 

After a high-level meeting between Prime Minister Narendra Modi and top ministers including Union Agriculture Minister Radha Mohan Singh, Government has shortlisted three options to offer a relief package to farmers. 

Considering budgetary concerns pertaining to awarding loan waivers, the government is looking at a plan which can help maintain financial balance. Any overwhelming relief package could lead to widening fiscal deficit next year, added sources. 

One of the moves expected as part of the mega package includes dealing with the MSP issue. With healthy crop production over the past few years and lower exports, farmers are unable to reap the benefits of their produce. 

The quickest way to deal with farmer woes in the country is to directly pay farmers who own land to the tune of Rs 1,700-2,000 per acre. The Finance Ministry has estimated this scheme to cost the Government up to Rs 1 lakh crore. 

The second option involves compensating farmers for selling their products at a lower price than MSP in the markets, said one finance ministry official. This option is a little cheaper and would cost about Rs 500 billion. 

However, the option may have some major drawbacks as government support schemes do not cover all categories of farm produce. Most of the times, middlemen take advantage of farmers and claiming such benefits become difficult. 

Another option the Government has but is unlikely to use involves writing off farm loans to the tunes of Rs 1, 00,000/farmer. However, experts have clearly warned against the use of loan waivers.