Calcutta Notebook


Modi Government has implemented a scheme of providing increased subsidy to the farmer to help him pay premium of crop insurance. Farmers have taken huge loans. They are unable to pay these in the event of the crops getting damaged due to a drought or hailstorm. Then they commit suicides. Crop insurance will protect them from such an eventuality. The insurance company will pay compensation for the loss of crop and the farmer would be able to repay the loan.

About two-thirds of farmers of the country own less than a hectare of land. About 50 quintals of wheat valued at about Rs 75,000 would be produced in a good year. The crop insurance premium at the rate of two percent would be about Rs 1,500. The Union Government previously had a scheme to provide 10 percent subsidy on the premium to the small farmers. Modi Government has increased this to 40 to 75 percent depending upon the level of premium. Subsidy is 40 percent higher if the crop is less risky and premium paid is between 2 to 5 percent of the sum insured. Subsidy is 75 percent if the crop is more risky and the premium is more than 15 percent of the sum insured. Let us say a farmer insures his less risky crop for Rs 75,000 at 2 percent premium. The farmer would then get a relief of Rs 600 in a crop. In truth this will still not attract the farmer because premium constitutes only a small fraction of the cost of insurance. Much bigger expense is incurred in navigating through the insurance bureaucracy.

Burden of the proposed scheme will ultimately be borne by the urban taxpayer. Increased tax will be collected from him and used for paying subsidy on the premium. Why not, then, pay the money to the farmers directly? Say, the Government pays Rs 5,000 crore as subsidy on the premium. Why not pay Rs 250 in cash to each of the 20 crore farmer households instead? At least the farmer will be saved from spending his time and money making rounds of the insurance company. Even better, why not increase the price of wheat by 10 paise and transfer this amount directly from the taxpayer to the farmer?

The "Government" is run to serve the interests of the Government Servants. Bureaucrats are mighty interested in obtaining cheap food grains. They make policies such that price of the agricultural produce is kept low so that the urban middle class is happy. Recently, for example, the bureaucrats decided to import Urad Dal so that domestic prices did not shoot up. Pray! Why? The farmer bears the brunt when the prices are low. Why not allow him to make profits when the prices are high?

The alleged purpose of the proposed insurance scheme is to provide protection to the farmer from the debt collector. But the Government itself has mired the farmer into this debt. The agricultural production made by the sample farmers increased by 13 percent during 2003-13 according to National Sample Survey. The debt, however, increased by 24 percent during this same time. This means that farmers have taken loans but used it for other purposes such as for the daughter's marriage. The loan has not led to an increase in production. In this regard an evaluation of an NGO in Rajasthan is self revealing. The NGO said they had made a Self Help Group, linked it with the bank, arranged loan from the bank, farmers bought buffaloes from the loan and were now more prosperous. But what was the number of buffaloes in the village five years ago and at present? People said the numbers remained the same! This meant that the loan had not been used for buying the buffaloes as alleged. Actually loan had been taken on the buffaloes already owned by the farmers. Previously the farmer was earning Rs 10,000 and keeping all of it for his use. Now the farmer was earning the same Rs 10,000 but paying Rs 1,000 interest and was left with only Rs 9,000. He had actually become poorer, courtesy loans. The situation would be different if the loan had been used for some productive purpose such as setting up a flour mill. But there are precious few such opportunities in the village.

Agriculture has become a loss proposition today because the price of agricultural produce is deliberately being kept low. The farmer's situation is like that of a loss-making company that takes loans, is unable to repay them and ultimately goes bankrupt. This has been part of a well planned strategy of the Vajpayee and Manmohan PMOs to keep the farmer impoverished so that the bureaucracy is happy. Modi wants to tie up the farmer in yet stronger chains. His bureaucrats want to additionally ensnarl the farmer in the web of insurance bureaucracy so that the farmer remains poor and the bureaucracy gets one more opportunity to make commission in disbursing insurance claims.

Vol. 48, No. 20, Nov 22 - 28, 2015