Does Maharashtra have the fiscal wiggle room to meet protesting farmers’ demands?

Maharashtra Deputy CM Fadnavis present's first Eknath Shinde-govt state Budget for 2023-24

Protesting farmers, who were walking from Maharashtra’s Nashik to Mumbai last week, called off their long march on Saturday, March 18, after the government promised to fulfil most of their demands.

What will be the fiscal burden of fulfilling these promises?

The march had started from Dindori town, located around 195 km away from Mumbai, on March 12, with the main demand of farmers being a subsidy of Rs 600 per quintal to onion growers hit by a price crash, 12-hour uninterrupted power supply to farmers and a waiver of farm loans.

“They considered all of the points we had raised during our discussions and even relayed orders to district collectors for their implementation. So we compromised a little as well, and called off the march at the subsidy of Rs 350 per quintal for onion. We at least got something,” Ajit Nawale, general secretary of the All India Kisan Sabha, said.

“Moreover, they agreed to waive loans of about 88,000 farmers who were left out in the June 2017- December 2019 cycle. They also agreed to provide farmers with 12-hour uninterrupted supply of electricity. A committee with two of our members has been made to look into forest rights of farmers cultivating forest land. This is nonetheless a win for us. Our struggle will go on to make sure all our demands are met,” he added.

A committee comprising cabinet ministers, government officials and former Communist Party of India (Marxist) legislator JP Gavit and MLA Vinod Nikole would be formed to look into the problems related to the implementation of the Forest Rights Act in the state. The committee will submit its report within one month.

The Maharashtra government arranged special trains and gave other trains additional halts at Vasind, where the farmers had stopped on their way to Mumbai as the negotiations commenced.

The march reached Vasind, in Thane district, around 80 km away from Mumbai, on March 17 when Chief Minister Eknath Shinde held discussions with a delegation of farmers.

On March 18, as farmers camped at Vasind, Shinde told the state assembly that onion cultivators will be given financial relief of Rs 350 per quintal of onion and appealed to them to call off their protest. The subsidy will be provided for onions sold between February 1 and March 31 this year.

What will this mean for the state budget? 

While there is no way to assess the exact amount that giving in to farmers’ demands will cost the state, with no announcements from the government and no clarity on the quantity of onion that will receive the subsidy, experts believe the exchequer will be able to bear the cost.

“Looking at state’s latest budget numbers, the fiscal position of the state seems good. The fiscal deficit has stayed at less than 3 percent, even at peak of the COVID pandemic. Outstanding liabilities of state are low and there is a lot of fiscal leg room the government can use,” Manish Gupta, Associate Professor at the National Institute of Public Finance and Policy, said.

“Even though the revenue deficit is about 0.5 percent of the Gross State Domestic Product, it seems manageable. The state has not made any tall claims on the revenue front, with numbers seemingly achievable. The state budget can very much accommodate the promises it has made to the farmers,” he added.

Commenting on Maharashtra’s mounting debt burden of Rs 7.07 lakh crore, one of the highest for any state in the country, Gupta said: “The debt burden cannot be looked at in terms of absolute numbers. It has to be looked at in comparison to the size of the state, its infrastructure. With the fiscal deficit much below the 3 percent limit, the state seems well positioned to provide for the promises made.”

Agri focus in state budget 

The state budget announced on March 9 by focused on the welfare of farmers and development of agriculture.

The state proposed to provide an additional Rs 6,000 per year to farmers as farm income support, on top of the Rs 6,000 provided under a central scheme.

An agriculture-focused scheme was also announced under which all aspects of farming -- from production to value addition -- will be financed by preparing an integrated crop-based plan for taluka and district-wise groups of farmers.

The scheme aims to increase the income of farmers, and a provision of Rs 3,000 crore has been made for the next 5 years.

In addition, the crop insurance premium will be paid by the government with an annual outlay of Rs 3,312 crore proposed in the budget.