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Haryana’s deficit payment scheme still a work in progress, I learnt in my mandi visits

Farmers, farm leaders, economists and policy makers would do well to study this scheme carefully as it shows a possible path to the future.

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A new model? Or another fiasco in the making? I kept asking my colleagues and myself as we travelled across the semi-arid bajra growing belt of south Haryana. We stopped at a few mandis — Rewari, Kanina, Ateli, Narnaul, Dadari and Bhiwani — and spoke to farmers, adhatiyas as well as mandi officials to get a sense of how Haryana government’s new scheme of deficit payment to ensure Minimum Support Price (MSP) to the farmers has fared on the ground. I came back conflicted.

Something big is at stake here, far beyond bajra or Haryana.

This experiment impinges upon the larger issue of how to ensure that the farmers get at least a minimum assured return on their hard work, investment and risk. The government routinely announces MSP for 23 crops. This remains a mirage for farmers because the official “minimum” remains a dream in all except the few crops like wheat and paddy, and that too in a few states, where the government does large-scale procurement. How do we ensure MSP to the vast majority of farmers? The government cannot possibly purchase the entire produce of all these 23 crops. Such an exercise would mean virtual take-over of the entire agricultural marketing by the government, involving massive bureaucracy, impossible web of red-tape and, of course, corruption that would leave the government over-stretched and farmers unhappy. The anti-farmer lobby has used this argument, laced with fanciful data, to show why the demand for legal entitlement to MSP is “impractical”.

Also read: Has crop insurance helped Indian farmers? Many don’t get payments on time

The deficit payment experiment

Farmer representatives and economists have argued that there are multiple ways of ensuring MSP other than state procurement. One of the alternatives used all over the world is deficit payment. The idea is simple: instead of purchasing, the government makes up for the gap between the desirable and the actual market price. Farmers sell their produce in the market as they always did, but if the price they get is lower than the MSP, then the government compensates them for the difference. Good idea. The devil, however, lies in the design. In the absence of an intelligent and workable mechanism for determination and delivery of deficit payment, the scheme can be a disaster. That is what happened when the Madhya Pradesh government unrolled its Bhavantar Bhugtan Yojana (BBY) in 2017. Poorly designed and shoddily executed, the scheme brought bad name to the idea of deficit payment.

This is why the latest Haryana scheme is worthy of wider attention.

Over the last four years, following continuous agitation by Jai Kisan Andolan, the Haryana government had begun procuring bajra at MSP. The success of procurement last year — augmented by arrival of bajra from Rajasthan and Gujarat where there was no procurement — created a real difficulty for the government. Besides storage issues, the state had to pay mandi charges and adhatiya commission. Ration shops showed little appetite for bajra, which is far more nutritious than wheat. So the government had to sell much of the bajra back to the market for a loss. This year, the government decided to shift to deficit payment through the Bhavantar Bharpayi Yojna.

The design of the Haryana scheme is simpler and more intelligent than its disastrous counterpart in Madhya Pradesh. Deficit was seen, as it should be, as the difference between the market price and the MSP. Instead of asking each farmer to produce a receipt of sale and calculating a separate deficit for each of them as in Madhya Pradesh — thus inviting possible collusion involving traders — the scheme fixed a flat rate of deficit compensation per quintal for the entire state. Again, instead of asking each farmer to state and prove their yield — another occasion for corruption — the scheme assigned average yield of the bloc to every farmer. A little unfair to the farmers who work harder, but the advantages of simplicity outweigh such fine considerations. So, every farmer who had produced bajra and registered on the government portal was verified and money sent to his or her bank account at the rate of Rs 600 per quintal of yield expected in that bloc. No hassles of government procurement, storage and reselling. No payments to middlemen. No risk of smuggling from nearby states. There is a lot to be said for this simple and smart design that could become a template for deficit payment schemes elsewhere.

The problem, as I discovered in my tour, lies in the implementation of this design.

Also read: Not just farmer suicides, let’s talk about rural debt due to government policies

Why farmers feel cheated in Haryana

First, the decision to fix Rs 600 as the amount of ‘deficit’ proved unfair.

The government assumed – based on some market intelligence and a dose of hope – that the modal (average) market rate of bajra was going to be Rs 1,650 per quintal. That worked out to be Rs 600 below the MSP of Rs 2,250. But in reality the market rates were lower. In the first half of October, small or needy farmers sold their crop for around Rs 1,200 per quintal. The rate improved a bit towards the end of October and was around 1,400 per quintal for average quality bajra, slightly affected by unseasonal rains this year, when we visited the mandis. So, the deficit turned out to be Rs 850, if not more. By paying the farmers only Rs 600 the government has effectively brought down the official MSP to Rs 2,000. This loss of Rs 250 per quintal for the farmer amounts to a cumulative loss of up to Rs 300 crore for the farmers of Haryana. So, unless the government releases a second top-up installment of at least Rs 250 per quintal, the farmers of Haryana have reasons to feel cheated by the new scheme.

The second and the bigger problem is the identification of beneficiaries.

The farmers were required to register themselves on the government portal. This leaves out about a quarter of them, mostly the poorest and from disadvantaged regions, who could not register due to lack of awareness or net access. This also leaves out tenant farmers who actually cultivate and sell the crop, as also farmers who cultivate panchayat land etc. These problems always plague any registration system. What made it worse this time was the stringent and multiple source-based verification mechanism. The farmers’ claim was cross checked with the help of girdawari (a register of crop cultivated for each parcel of land for each season) records, department of agriculture report and satellite/drone image data. Looks fine on paper, but the results have been bizarre on a scale that is unacceptable. We met scores of farmers who cultivated and registered their bajra crop but the official records showed that their land was uncultivated or assigned a different crop than bajra. I met a farmer whose bajra crop was selected for “crop cutting experiment” by an insurance company but the government insisted that he had cultivated cotton and not bajra! For all such cases, the appeal rests with the District Magistrate who is impossible to access for an ordinary farmer. The government must find a way past this operational difficulty if this scheme has to retain farmer’s confidence.

Farmers, farm leaders, economists and policy makers would do well to study this scheme carefully as it shows a possible path to the future and its pitfalls.

Yogendra Yadav is among the founder of Jai Kisan Andolan and  Swaraj India. Views are personal.

(Edited by Anurag Chaubey)

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