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LATEST NEWS UPDATES | Is farmer income support a sustainable solution? -Sanjiv Phansalkar

Is farmer income support a sustainable solution? -Sanjiv Phansalkar

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published Published on Mar 28, 2019   modified Modified on Mar 28, 2019
-VillageSquare.in

Income support to smallholder farmers is similar to palliative measures like minimum support prices or loan waivers that do not address the problem of an unsustainable population living on a fixed resource base

The government in the budget for this year has announced an allocation of Rs 75,000 crore for direct income transfer of Rs 6,000 annually for every farmer who owns less than 2 hectares of land. This amount is to be given in three installments to over 12 crore farmer households. Diverse opinions have been expressed about this bold decision. We attempt to look at the issues and arguments in their long-term context.

As noted by us earlier, direct income transfer of this kind is among three options for reducing the distress of farm households. Declaration of minimum support price (MSP) and periodic debt waivers are the other two methods that have been in vogue for decades now. The arguments supporting direct income transfer rather than the other two run as follows.

MSP needs to be backed by a credible public procurement and storage network. This can realistically be created only for a subset of all possible crop choices that farmers have. Declaration of MSP backed by procurement structures eliminates market risks and thus make the supported crops more attractive. This tends to make farmers prefer them.

Such a policy was useful when India was deficit in cereals and oilseeds, but now the economy is headed for a surplus situation, at least medium term. Therefore, this policy creates problems of huge surplus stocks. There are the associated costs of waste, inefficiency and corruption in maintenance of the support structure.

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VillageSquare.in, 27 March, 2019, https://www.villagesquare.in/2019/03/27/is-farmer-income-support-a-sustainable-solution/


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