Intro : Prime Minister Narendra Modi announced in Punjab recently that the government is working on a scheme to provide a pension of up to Rs 5,000 per month to farmers under a Public-Private Partnership (PPP) model.
The Modi government is working on a scheme to provide pension up to Rs 5,000 per month to farmers of 60 years and above under a Public-Private Partnership (PPP) model. The PPP model may be like the National Pension Scheme (NPS), in which participation is compulsory for government servants. They contribute 10 per cent of their salaries to the NPS and the government contributes an equal amount. The NPS is open for private individuals as well, but with a critical difference-The matching government contribution is not available to private participants. They will get pension only from the income earned from the money contributed by them.
It is similar to saying that a person may deposit money in a Time Deposit in a bank and get interest on the deposit after he has attained 60 years age; or he may deposit with the NPS and get the same pension. The NPS works merely as a money manager for the private subscribers. Infact, the Private Partnership in “PPP” is restricted to the government money managers getting an additional opportunity to play with the participant’s money.
“At the age of 60, the capability of people—particularly of farmers—to do hard work reduces. Therefore, the government has decided to provide them a pension,” Union Minister for Home Affairs Rajnath Singh said in a rally in Patna adding that some positive measures for farmers were likely to be taken.
The then UPA Government had during their rule initiated a Swavalamban scheme. As a part of the scheme, a person would make a commitment to pay a premium of Rs 1,000 to Rs 12,000 per year for a minimum 20 years. The government would make a contribution of Rs 1,000 for the first three years in his account. A person contributing Rs 1,000 per month would contribute Rs 20,000 over the 20 years and get a government subsidy of Rs 3,000. Because people did not find it attractive to place their hard earned Rs 20,000 in hands of bureaucrats to secure a subsidy of Rs 3,000! As a result, the scheme was a failure.
What the Modi government has done is it has made some changes in the Swavalamban scheme. It has renamed it as Atal Pension Yojana, and has removed the requirement of minimum contribution of Rs 1,000 per year but has retained the minimum period of 20 years. The government contribution now would be 50 per cent of the participant’s contribution subject to maximum Rs 1,000 per year that will now be made for five years. So a person contributing, say, Rs 500 per month for 20 years or total of Rs 10,000 will get a subsidy of Rs 250 per year for five years or Rs 1,250. Better, but not enough. The government contribution is still paltry though.
Moreover, the loss of income in running after banks and insurance agents and bribes to be paid to get the pension cheques would still be prohibitive. It is like a benefactor meeting a traveler wanting to go to Mumbai at the Delhi Railway Station. The Benefactor gives him bus fare from his home to the Railway Station and tells him to buy the ticket to Mumbai himself! The Benefactor would take the credit for sending him to Mumbai while the poor fellow would bear most of the expenditures! The need to draw this analogy is in a way a caution for the Modi government to weigh all the possible pros and cons, and execute the improvised scheme in a way that it does not meet the same fate as the UPA’s Swavalamban scheme. The total agricultural production in the country was Rs 907 thousand crores in 2013-14. A small one percent increase in the price of agricultural produce would beget the farmer an additional income of Rs 9,070 crores. In contrast, the UPA government had made a budget allocation of mere Rs 100 crores for Swavalamban. The NDA Government may increase this to, say, Rs 200 crores to benefit the farmers.
It is necessary to keep in mind that the problem of the farmer is not pension. He has plenty to eat. His problem is that his crops do not fetch him a good price. He loses if the production is more because the prices collapse—a situation faced by the potato farmers these days. The homemaker pays Rs 10 per kilo to purchase potatoes; but the farmer hardly gets Rs 3 per kilo after deducting the cost of transport, spoilage, storage and shopkeeper’s commissions. The farmer again loses if the production is less. In this case he has only straw to sell. As a consequence, the farmer is unable to save money for his old age.
Walking towards solution the government is to provide a “Soil Health Card” to all farmers. The card will indicate the deficiencies in the soil and help the farmer determine which fertilisers to use in what quantity. So what? The price in the market will still collapse and the farmer will still lose. The government’s second strategy is to establish modern mandis. Good. But how will that lead to better prices? The homemaker will still pay Rs 10 for a kilo of potato and the farmer may get Rs 4 instead of Rs 3. That will not solve his problem. The government’s third effort is that the farmer must use drip and sprinkler irrigation to save water. But who will pay for these systems? And, once again, if the crops are good, who will ensure that the prices do not collapse? The government is heading in the right direction but it must take these three steps to help the farmer. One, it should push for a change in the World Trade Organization on the question of agricultural subsidies. The developed countries had promised to work towards elimination of agricultural subsidies at the time of signing the WTO treaty. This has not happened. As a result the developed countries are subsidising exports of agricultural goods, the prices in the global and Indian markets are low, and the Indian farmer is suffering. The government must insist that the developed countries remove all agricultural subsidies and should impose a hefty import duty on agricultural goods until this is done.
Two, the government must establish a “High Value Added Agricultural Export Corporation.” This company must help farmers produce and export customised fruits, vegetables and flowers. That will provide a new avenue for increased incomes to our farmers. Three, The government must start imports of straw and cow dung instead of potash and phosphate fertilisers. These chemical fertilisers are spoiling the health of the soil of the country. Availability of cheap straw and cow dung will help reduce the cost of production of the farmer.
In long run if these steps are followed, the government may help Indian farmers get their fair share.
Dr Bharat Jhunjhunwala (The writer is former Professor of Economics at IIM Bengaluru)