That reform measure — to ensure that the benefit of minimum support price (MSP)-based procurement of paddy and wheat goes only to farmers — is now being extended to food subsidy. (Representational Image)
FIRST IT was fertilisers, where the NDA government made disbursal of subsidy conditional upon actual sales to farmers getting registered on PoS (Point of Sale) machines in retail outlets. That reform measure — to ensure that the benefit of minimum support price (MSP)-based procurement of paddy and wheat goes only to farmers — is now being extended to food subsidy.
In Odisha, procurement of paddy during the ongoing 2019-20 Kharif Marketing Season (KMS) is, for the first time, being done from registered farmers only after Aadhaar-based biometric authentication.
More significant, however, is the move underway in Punjab, where government agencies have traditionally undertaken procurement through arhatiyas (commission agents) in mandis. From this KMS, Punjab has made a beginning in getting arhatiyas to provide bank account numbers of farmers. These are to be linked to the Centre’s Public Financial Management System (PFMS) network, enabling transfer of MSP money directly into farmers’ accounts. Haryana is set to follow.
Rationalising, brick by brick
The NDA government has successfully eliminated or capped subsidies on fuel. But food and fertiliser subsidies, totalling over Rs 260,000 crore annually, are politically trickier. Hence, brick-by-brick rationalisation — of first stopping leakages to non-farmers and eventually targeted direct benefit transfers to smallholders — is the preferred approach.
Explaining the Odisha model, a senior official of the Union Ministry of Consumer Affairs, Food and Public Distribution told The Indian Express: “The state has an existing web-based Paddy Procurement Automation System, wherein online registration of farmers is done before the season and they are intimated by SMS about the date for bringing their crop to purchase centres or mandis a week in advance. But from 2019-20, Aadhaar has been made mandatory even for registration, and the purchase officer will authenticate the identity of the farmer at the time of procurement. The payment of MSP is also done online through direct transfer into Aadhaar-authenticated bank accounts of farmers within 48 hours of purchase.”
In Punjab, there are about 48,000 licensed arhatiyas, of whom around 28,000 are active. They provide platforms outside their shops where the produce of farmers is unloaded, cleaned, auctioned, weighed and bagged, before being loaded and moved from the mandi premises. For these services, they are given a 2.5 per cent commission over and above the MSP. MSP payments, too, are made into the accounts of these market intermediaries, who pay farmers in cash or cheque.
“We have been nudging Punjab and Haryana to do away with the system of routing MSP payments through intermediaries, with the Minister (Ram Vilas Paswan) himself writing letters to the Chief Ministers. Punjab agreed to implement it from this KMS by issuing directions to all arhatiyas, who deal with anywhere from 20 to 200 farmers each,” said the senior official.
The effort did not make much headway, though, till a meeting that took place on November 21 in New Delhi between officials of the Union Ministry and Punjab government.
“They (state officials) were told that we will not release the 2.5 per cent commission payments to arhatiyas till the names of farmers with their bank accounts are uploaded on the PFMS portal. That’s when things started to move,” said the official.
For the 2019-20 KMS, paddy procurement from Punjab, which is already completed, stood at 162.28 lakh tonnes (lt). The MSP value, at Rs 1,835 per quintal, would be nearly Rs 29,780 crore, with payments to arhatiyas another Rs 745 crore. Data sourced by The Indian Express shows that only 3,921 arhatiyas provided the relevant details of 4,123 farmers, who received Rs 86.74 crore of e-payments for their paddy sold at the MSP this season.
“We expect the numbers to improve in the upcoming 2020-21 Rabi Marketing Season (RMS: April-June), when the new wheat crop gets procured. In the past two weeks alone, over 9,000 arhatiyas have come on board and the rest of the total active 28,000 will also sign up. Moreover, almost six lakh farmers (out of the state’s estimated 18.5 lakh) were eligible under our debt waiver scheme and we will upload their details as well on the PFMS portal,” said Anindita Mitra, who is the director of Punjab’s food, civil supplies and consumer affairs department.
Efforts are on to force Haryana to implement direct MSP payments from the 2020-21 RMS. “The state government has an “e-Kharid” portal for foodgrain procurement, on which they have already registered about 7.8 lakh out of their total 14-15 lakh farmers. They have committed to link the details of all these farmers to the PFMS before the coming RMS,” said the Ministry official.
Paddy procurement from Haryana in the 2019-20 KMS, at 64.23 lt, was worth Rs 11,786 crore at the MSP value. During the last 2019-20 RMS, 129.12 lt of wheat from Punjab and 93.20 lt from Haryana also got procured, with their respective MSP values at Rs 23,758 crore and Rs 17,149 crore. The total annual MSP value of foodgrain procurement from the two states alone would be roughly Rs 85,000 crore.
The central government’s calculation is that once a system to ensure MSP payments go only to genuine farmers is in place, it will bring in greater transparency and lead to subsidy savings. In fertilisers, subsidy disbursal to companies only after Aadhaar authentication and actual sales at retail point getting captured in POS machines is seen to have substantially curbed diversion of material to non-farmers.
Further, the fertiliser department’s new “e-Urvarak” direct benefit transfer platform has generated a database that allows for restricting the subsidy to small and marginal farmers or capping the number of subsidised bags sold per holding.
A similar possibility for using PFMS data to limit the MSP entitlement in future to genuine and deserving beneficiaries also exists vis-à-vis the food subsidy, whose budgeted bill for 2019-20, at Rs 184,220 crore, exceeded the Rs 79,996 crore of fertiliser.
The NDA government has also barred states such as Chhattisgarh and Madhya Pradesh, currently Congress-ruled, from announcing bonuses on paddy and wheat in addition to the Centre’s MSPs.
But these “brick-by-brick” rationalisation moves have faced resistance. The Punjab Arhatiya Association has filed a High Court petition against PFMS. “Farmers take money as cash advance from us, which they repay after sale of crop. If MSP payments are deposited directly into their accounts, how will we ensure repayment of the same loans? Secondly, many farmers cultivate land taken on lease. Whose bank account do we, then, upload — the owner’s or the lessee cultivator’s?” said Ravinder Singh Cheema, who heads the association.