PM Modi mulls cash handout to farmers ahead of Lok Sabha polls: Report

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Prime Minister Narendra Modi is said to be considering three options, including a cash handout to farmers, to ease the agrarian distress ahead of the Lok Sabha elections, Bloomberg has reported.

The government is studying three options — a monthly income support programme for farmers; a cash handout plan for the difference incurred between the actual sale price and the procurement rate set by the state government and revamping the existing crop insurance scheme. The final programme, the report has pointed out, could be a combination of all three.

The report comes in the wake of the Bharatiya Janata Party (BJP) losing three states — Chhattisgarh, Rajasthan and Madhya Pradesh — in the recently-concluded state assembly elections. The Congress, which wrested the Hindi heartlands from the saffron party, had promised farm loan waiver during their campaign and lived up to it after forming the government in these states.

The additional spending could hurt the national coffers as the government has already breached the fiscal deficit target.

Read More | Waiver conundrum: Congress, BJP in race to write off loans, but experts advise against it

If the plan is eventually rolled out, the income support programme, which involves a monthly payout to farmers, is expected to benefit as many as 150 million farm households, the report mentioned. This could have significant repercussions in the outcome of the general elections.

In July 2018, the government had increased the minimum support price of crops such as cotton, soybeans and rice to ensure that the farmers get at least 50 percent more than the estimated cost of production. However, that has not been able to alleviate farm distress, particularly because of the lack of state procurement. Hence, the government is mulling over paying the farmer in cash in the case that they are not able to sell their produce at the procurement rate decided by the state government.

The third alternative being considered by the Modi government is revamping the existing crop insurance scheme. According to the report, the amendments could include a reduction in the premium paid by farmers, inclusion of more crops to avail state incentives and bringing tenant farmers under the cover.

It is crucial for the Narendra Modi-led BJP government to pacify farmers who have been holding protests in the national capital demanding an increase in MSP. After having suffered electoral losses in the state elections, the BJP seems to walk the tightrope, trying to woo farmers on one side and achieving the fiscal gap target of 3.3 percent of GDP on the other.