The budget made a small but brave attempt to streamline subsidies. It tried to convert part of the kerosene and fertiliser subsidies into cash. Though there were welter of discussion on the budget, this issue of cash subsidies hasn't been discussed threadbare. CNBC-TV18's Latha Venkatesh is taking a 360 degree look at this much-lauded, much-awaited concept of cash subsidies in lieu of actual goods.
Venkatesh caught up with the authority on farm subsidies, Yogendra Alagh, former member of Planning Commission and former vice chancellor of Jawaharlal Nehru University (JNU) along with a younger Professor from JNU, Professor Himanshu to discuss the issue.�
Below is a verbatim transcript of their interview on CNBC-TV18. Also, watch the accompanying videos.
Venkatesh: Do you think it is advisable at all to get into cash subsidies on fertilizers. Do you think any identification of the target group is possible in this realm?
Alagh: In fertiliser as you could in those districts where the cooperative fertilizer factories have good footprint like Indian Farmers Fertiliser Cooperative Limited (IFFCO) and Krishak Bharati Cooperative Limited (KRIBHCO) and others, you probably could start in about five-seven districts because there are farmer associations to back then up. They would be able to deliver the cash subsidy, at least on an experimental basis they had agreed to that in a committee on fertiliser pricing that had chaired.
So the best thing is you should start with that and then see if you can expand it because the problem is that you are not able to, on a general basis, if the land records are not there and around 40% of Indian farmers do not have recorded rights, then it becomes very difficult to give them a cash subsidy. But if there is a farmers organisation, which knows who are there, then you can do something. The best thing is to start experimentally and then expand.
Venkatesh:� It depends on whether village cooperatives or village Panchayats can be roped in into identification of target groups. But you have studied article on this issue. What is your sense? Is there not a lot of illegal tenancy and reverse tenancy? Would it be possible at all to get, even if it succeeds in a pilot group, to be able to expand this to anything larger?
Himanshu: In fact, targeting the identification of the beneficiaries is the core for all of these cash transfers whether it is fertiliser, whether it is food or kerosene or any other targeted programme, which is trying to deliver benefits to the people. In fact, we had had an experiment on this for the last 15 years. We had four rounds of BPL targeting that we had gone through and with no success. In all the targeting effort that we had since 1992 onwards we have failed to identify the poor and here we are getting into a completely new territory on trying to identifying tenants, trying to identify farmers without land records, without recorded tenancy rights.
I think we are simply trying to divert attention from the real issues and those real issues are how to identify the poor and how to make sure that benefits have reach the intended beneficiaries. Whether its in the form of product-linked subsidies or in the cash that is a secondary issue. We are unnecessarily spending more time on the secondary issue without even acknowledging the problem in the primary issue.
Venkatesh: Since you have been involved with these farmer cooperatives, do you realistically think that it can be expanded or do you think that we are perhaps barking up the wrong tree?
Alagh: As far as food is concerned, I think Himanshu is absolutely right. The paper by Himanshu and Abhijit Sen is an advance forward, just as the Supreme Courts judgment is an advance forward. I have said in sort of tongue-in-cheek that if you give cash subsidies, it doesnt matter, because the poor dont get the subsidies in any case and the real issue as he says is targeting and their paper what it says is that you have a universal scheme but for the really hungry you give them food almost free.
They are saying you charge a nominal price and for some remaining group, which is what I have called the malnourished, you give them subsidised food and for the balance they are recommending somewhat close to market prices the minimum support price (MSP) with little bit of tweaking around that and I think that a very sensible strategy for food.
Fertilisers, I was only saying, that there are companies which know who is using fertilizer if they have contacts, you can start with that and then see if there are possibilities. I said five districts but the FM then five years ago said 25 districts and now they are saying they are going to come in the whole country. I agree with Himanshu even in fertilizer thats not possible.
Venkatesh: On fertiliser, would you say therefore that by the end of this year we are simply not going to be able to cut any ground at all in terms of cash transfers and if we do it will be a colossal denial of fertiliser benefits to perhaps large number of actual tillers?
Alagh: Yes, because when you work through the market even if you dont have tenancy right, you buy fertiliser at a cheaper price. You might be only farming 30% of the land but as you said through reverse tenancy or actually concealed tenancy you are talking about two-third of the farmers. How are you going to identify the guy who is using fertiliser? You can only identify the person who is tilling the land. If an IFFCO cooperative is there, they know to whom they have delivered the fertiliser. But generally you cannot do it and so you begin with something, which is viable, then see you know if you can go further with that.
Venkatesh: But the point is then is that if you actually attempted what the budget is trying to say in terms of cash subsidies for fertilisers and if, as Professor Alagh points out, two-third of farmers get excluded you will actually harm agricultural output itself. Wont you?
Himanshu: Let me also clarify on this whole fertiliser thing. Unfortunately, we havent got any details on how is it going to be basically pan out. The problem is not just land records. The problem is also on who is growing what whether land is fallow, whether land quality is that of the dry land areas. Its a black soil or what kind of soil because fertiliser requirement basically varies from land to land. So we just dont need the land ownership records. We also need the quality of information; the land quality, on the kind of crops and various other things.
We are nowhere close to having that data and the other problem that he has already talked about, this whole question of tenancy, absentee landlords but the problem really is that the moment you introduce cash subsidy it basically is an invitation for corruption in the system. Right now only the farmer who is interested in farming will go and basically queue up in the line and get his subsidized fertilizer but the moment it is cash then everybody who has no interest in agriculture will also try and game the system and that is an open invitation for everybody to come and join the system and make it corrupt. I think thats something which we are not filtering in as of now.
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