Hike farmers’ cash transfer: Ashok Gulati | Mint

Hike farmers’ cash transfer: Ashok Gulati

Dr Ashok Gulati, noted agricultural economist. (HT)
Dr Ashok Gulati, noted agricultural economist. (HT)

Summary

Indexing to inflation takes the annual transfer amount to 8,000, Dr Gulati told Mint. That apart, there was also a need to compensate for earnings that farmers lost after the government imposed export controls.

NEW DELHI : Cash transfers to landholding farming families under the PM Kisan scheme should be raised from 6,000 per year at present to 10,000, noted agricultural economist Dr Ashok Gulati has recommended in ongoing deliberations with the government, saying measures to check food inflation have come at the cost of farmers’ earnings.

The economist’s inputs were earlier taken by Prime Minister Narendra Modi’s office ahead of the farmer income support scheme’s roll-out in the run up to the 2019 Lok Sabha elections.

Indexing to inflation takes the annual transfer amount to 8,000, Dr Gulati told Mint. That apart, there was also a need to compensate for earnings that farmers lost after the government imposed export controls.

While the export controls have helped check foodgrain prices slightly, this has in effect been achieved by transferring resources from farmers to consumers, said Gulati, distinguished professor at the Indian Council for Research on International Economic Relations (Icrier).

“As per our estimate, the export controls placed on just one item, wheat, and the offloading of stocks below economic prices, which suppressed market prices, reduced farmers’ earnings by 39,000 crore, while consumers benefited by as much," he said.

The PM Kisan scheme is fully funded by the union budget. It was announced in the 2019 interim budget by then finance minister Piyush Goyal after two state governments—Telangana, followed by Odisha—announced schemes for income transfers to farmers, taking on board advice from Gulati, who was at that time advocating income support for farmers in his writings.

The first of the PM Kisan’s three annual instalments of 2,000 was transferred to farmers before the start of polls in April 2019.

In a departure from Gulati’s recommendations, the cash transfers are given without dismantling distortionary input subsidies, such as those for power by state governments and fertilizers by the Centre.

The budget presented in February 2023 by finance minister Nirmala Sitharaman earmarked 60,000 crore for PM Kisan disbursements during FY24, equivalent to the outgo, as per the revised estimates for FY23.

Calling for more pro-farmer trade policies, Gulati said that the government ought to discriminate on the basis of consumers’ ability to pay when opting for export curbs as a price control measure.

“If you were suppressing prices for very vulnerable people to cushion them against inflation, I would have no problem." But to them, the government is giving free food, he said, referring to the centre’s free food grain transfers programme covering 810 million Indians. This means the government is suppressing farmers’ earnings to cushion consumers that can well afford to pay higher market prices, Gulati said.

Icrier will publish a policy brief soon outlining these recommendations.

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