On January 25, Mohan Darwa, 30, a resident of Jharjhari, a village in Sambalpur in Odisha, received a message on his mobile phone congratulating him for having received money from the state’s farm income transfer scheme, Krushak Assistance for Livelihood and Income Augmentation, or Kalia, in his bank account. But when he checked, there was no money there.

“Even today, I still have not received the money,” said Darwa, on March 3. He owns three acres of land and is eligible for benefits under the Kalia scheme. “Only around 10 people in our village have got the money though many of us got the message.”

Across the border in Telangana, there are similar complaints that the second round of payments for the Rythu Bandhu scheme was delayed, with money for around five lakh farmers arriving in January instead of October. While the Assembly elections in December interrupted payments, Telangana reportedly did not have the money to pay farmers that month.

It is not just farm investment.

Congress president Rahul Gandhi on Monday announced that if elected to power in the upcoming Lok Sabha elections, his party would launch a scheme called the Nyuntam Aay Yojana, or NYAY, through which poor households will get up to Rs 72,000 per year.

As states across India, and even the Union government, roll out income transfer schemes, a looming question is how they will manage this financially.

Both Telangana and Odisha have somewhat high levels of debt. Telangana has a debt burden that forms 22.2% of its gross state domestic product, according to the Reserve Bank of India, while Odisha’s debt is at 18%. Yet the budget outlays for Telangana and Odisha at Rs 12,000 crore and Rs 3,393 crore per year respectively, form a significant percentage of their expenditures.

“This is a huge amount of expenditure for a state,” said Himanshu, associate professor at the Centre for Economic Studies and Planning at the Jawaharlal Nehru University. “This is not a small amount of money. It is going to everybody whether they are cultivating land or not. I really do not understand how it will help to improve agricultural productivity, investment or prices.”

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Delays in Telangana

Telangana launched Rythu Bandhu in April 2018, soon after it updated its land records. It allocated Rs 11,925 crore to the scheme in 2018-’19, with the first payments rolling out from May. At that time, it paid Rs 4,000 per acre to 42 lakh beneficiaries.

The payments were made by cheque to ensure that banks did not debit the amount to pay off outstanding loans, the state said in a detailed note describing the scheme. This is a common problem with the Centre’s crop insurance scheme, the Pradhan Mantri Fasal Bima Yojana. Farmers could present the cheque at any branch of the bank it was issued from to withdraw the money.

The second round of payments were for the rabi season, which starts in October. With state elections due two months later, the Election Commission directed Telangana to send beneficiaries the money by bank transfer to avoid a public display of the scheme. It also barred the state government from publicising the scheme. No new beneficiaries were added either. The state allowed farmers to choose to have the money credited to non-loan accounts.

Before the elections in December, the state paid Rs 4,000 per acre to 42 lakh beneficiaries, but had to delay payments to another 5 lakh beneficiaries until January. As recently as the end of February, officials in Adilabad district were still updating bank account details for the bank transfers for the scheme, farmers said.

For 2019-’20, Telangana increased the outlay for Rythu Bandhu to Rs 12,000 crore, increasing the payout to farmers by 25%, to Rs 5,000 per acre per season. This outlay is just Rs 220 crore less than the state’s entire allocation for education in 2019-’20. Rythu Bandhu forms the largest overhead under its total Rs 20,106 crore allocation for agriculture and around 9% of the state’s estimated revenue expenditure. The other major overheads in the budget are for irrigation and welfare schemes.

“The full amount will be given as per our latest database, regardless of whether the budgetary provision is there,” said C Partha Sarathi, Agriculture Production Commissioner of Telangana. “The budget presented in the Assembly is only provisional. It does not mean that the entire amount will be spent or that if it falls short, no provision can be made.”

To pay for the scheme, the Finance Department began to release money for it a few months in advance to ensure that payments would not be staggered once they began, Partha Sarathi said. The bulk of the expenditure for Rythu Bandhu is concentrated over two months each season, averaging around Rs 3,000 crore per month, according to a report in the New Indian Express. State revenues are around Rs 10,000 crore per month and around 80% of it goes to paying government salaries, the report said.

Spread thin in Odisha

Advertisements of the Bharatiya Janata Party (left) and Biju Janata Dal (right) jostle for space with each other across Bhubaneswar. (Photo credit: Mridula Chari).

With an outlay of Rs 10,180 crore spread across three years, or Rs 3,393 crore a year, Odisha’s Kalia is a cheaper scheme than Rythu Bandhu as it limits the amount given to each beneficiary.

The scheme has four components: a cash transfer of Rs 10,000 per year to households who own less than five acres of farmland, a livelihood trainings component that entails the transfer of Rs 12,500 to landless agricultural households, a one-time cash transfer of Rs 10,000 to vulnerable agricultural households, and a subsidy on life insurance for cultivators and landless agricultural labourers.

Odisha began to implement the first two of its four components – the two cash transfer parts that will reach the largest number of households – almost immediately after it notified the scheme at the end of December. The outlay for implementing just these two components will be Rs 8,790 crore over three years or Rs 2,590 crore per year.

For the 2018-’19 financial year, the state needed only Rs 1,600 crore, Garg said. The remaining Rs 8,500 crore is budgeted to be spent in the coming years.

On January 15, Odisha’s Finance Department sanctioned the borrowing of Rs 734.7 crore from its contingency fund, meant to be used in emergencies. Right to Information activist Subhash Mohapatra challenged this with a Public Interest Litigation appeal in the Odisha High Court that month itself. Though such a borrowing is unusual, it is not unprecedented. In May, for instance, Maharashtra borrowed Rs 1,565 crore from its contingency fund to repay a loan it had taken to procure tur dal when its price had dropped.

Despite borrowing from the contingency fund and the state’s own reporting of payouts having reached 31 lakh small and marginal farmers and 5.5 lakh landless workers, on the ground, Mohan Darwa’s experience seems common.

“We have paid those who we are sure have to be included,” Garg said, adding that the payments were an ongoing process.

Mohan Darwa, a resident of Jharjhari village in Odisha's Sambalpur, shows a message he received from the government saying that he would receive a payment from the Kalia scheme. (Photo credit: Mridula Chari).

Scaling up

How much would schemes like this cost to implement across the country?

An analysis by the Indian Council for Research on International Economic Relations in April calculated that it would cost the Union government Rs 1 lakh crore to roll out a scheme at the rate of Rs 5,000 per hectare per annum, based on the total cropped area. One hectare is around 2.5 acres.

“The easiest and most direct and fastest way to reach the farmer is through Direct Benefit Transfer related schemes,” said the report, which is authored by Ashok Gulati, Tirtha Chatterjee and Siraj Hussain. “This will work irrespective of the shocks that the farmer receives, be it supply or price.” The report goes on to recommend that if such a scheme is implemented, the number of crops for which a minimum support price is announced should be reduced to those for which procurement is “robust and efficient”.

Another analysis by the State Bank of India’s Research Desk in July had a slightly different calculation, estimating that a similar scheme at the rate of Rs 4,000 per acre twice a year, which covers all the sown area across India, will cost Rs 2.7 lakh crore. The report said that this “will be a costly affair” and recommended against implementing it.

In the event, the Centre ended up launching PM-Kisan in its interim budget on February 1. This scheme will give small and marginal landholders Rs 6,000 per year. The Centre has budgeted Rs 20,000 crore for the scheme. So far, around 2.79 crore farmers of an estimated 12 crore small and marginal farmers have received the first instalment of Rs 2,000. A third of all beneficiaries are in Uttar Pradesh. Congress-ruled states such as Madhya Pradesh and Rajasthan have not rolled out the scheme. Should all states implement the scheme and identify beneficiaries, the outlay of Rs 20,000 crore will almost certainly fall short.

In comparison, the Economic Survey of India of 2016-’17 calculated that implementing a Universal Basic Income, a poverty-reduction scheme that envisions giving every individual a fixed amount of money periodically without conditions, would cost 4.9% of India’s Gross Domestic Product.

While several states and the Centre have begun to show interest in cash transfer schemes, economists say that this should not come at the cost of long-term inputs to improve agricultural productivity.

“The problem of farm incomes has come for certain reasons,” Himanshu said. “Those reasons are not being addressed [by schemes like this]. The government should be looking at the long term. This cannot be the solution to the crisis in agriculture.”

He noted that schemes such as PM-Kisan come even as central expenditure on agricultural investments had declined, particularly in the Modi years. As for loan waivers at the state level, many of these came at the cost of investment in agriculture.

“We are still dealing with a very old framework in our strategy for agriculture,” he added. “There is no investment on increasing logistics such as cold storages or markets, or in agricultural research, extension or irrigation.”

Limited monitoring

For now, neither state is monitoring how the funds are used in agriculture as these are meant to be unconditional cash transfers. Odisha will evaluate the scheme at the end of five agricultural seasons, while Telangana is conducting internal assessments on how the scheme is being implemented.

Farmers in both states strongly expressed that the best way to ensure the money is not diverted to other purposes is for the government to release the payments just before an agricultural season – when they buy inputs such as fertilisers and seeds on credit from agricultural dealers or take loans from commission agents.

“We start sowing in June so the first instalment should come in May or people will spend it elsewhere,” said Chinthanna Linganna, a resident of Umri village in Telangana’s Adilabad district. “This is why, if the PM-Kisan money comes in February or March, it will go to waste.”

While Telangana has so far timed its payments to agricultural seasons, it has not, as state officials have said they would, restricted payment only to those who will cultivate land in a given season. This means that, like in Odisha, even farmers who sow only one crop will receive two rounds of payment.

Curiously, despite Odisha having reportedly decided at a Cabinet meeting to roll out seasonal payments to farmers when agricultural operations begin for each season – around early April and September – the state began to release payments for Kalia at the end of January itself. Payments continued until March 10, when the election code of conduct came into play. Assembly elections in Odisha coincide with the Lok Sabha elections, which will be held over April and May.

Meanwhile in Jharjhari village, doubts still abound about Kalia.

Sartakar Thela, 50, has half an acre of land and is one of the few people in his village to have received the money. Thela laughed when asked what he would do with it.

“I am keeping it in my house for the next season – or in case the government suddenly says that it wants to take the money back,” he said.

This is the concluding part of a three-part series.

Part I: Income transfers are hottest trend in agricultural policy. But how do states identify beneficiaries?

Part II: Most vulnerable farmers are left out as states across India start money transfers to farmland owners