“Rythu Bandhu, a beacon of hope and agriculture policy template”

“Rythu Bandhu, a beacon of hope 

and agriculture policy template”

Rythu Bandhu scheme attracted nation-wide attention with several other state governments showing interest in its implementation. The investment support scheme has also received strong support from eminent economists in the country.

Three brilliant articles on the Rythu Bandhu Scheme which is being successfully implemented in Telangana described it as future of agricultural policy and as a beacon of hope in the area of farming. One article is by Arvind Subramanian appeared in Financial Express, the other by the Economist in the Asia Edition and the third one by Neelkanth Mishra in the Business Standard.

The Telangana Government introduced the Rythu Bandhu scheme to provide the much-needed investment support for agriculture to farmers with each landholding farmer receiving Rs 4000 per acre per crop for two seasons for agriculture inputs. For the first year of its implementation the government allocated Rs 12000 crores for this scheme.

Arvind Subramanian in his article “Rythu Bandhu can be the social and agriculture policy template” mentioned that, Telangana’s Rythu Bandhu policy is an embryonic UBI (Universal Basic Income) or rather an embryonic QUBI (a quasi-universal basic income, pronounced) and it could potentially also be the future of agricultural policy in India.

Elaborating his concept Arvind Subramanian wrote:

“India will never provide basic income that is literally universal. Our politics will never countenance government cheques being sent to the rich. But, government transfers to everyone except those at the top are a serious policy contender. And, such a scheme would be a QUBI. More generally, QUBIs are schemes in which transfers are given to everyone who meets an easily identifiable criterion. That is, they are universal within a clearly identifiable category. In the Rythu Bandhu scheme, that category is all farmers who own land. This criterion can be applied because Telangana has titled nearly all land holdings and has done so in an impressive fashion, without serious controversy or contestation, and within a short space of time”.

“Rythu Bandhu is mainly intended as an agricultural rather than a social policy. In fact, viewed from this perspective, it could be the future of agricultural policy. Rythu Bandhu has three critical advantages. First, the surfeit of state capacity/administrative apparatus as well as financial resources – and all the patronage and corruption and inefficiency – devoted to administering the plethora of schemes for good, bad, and all states-of-the-world could be economised on. Second, farm income could be decoupled from production, avoiding the serious distortions that have been created, especially from over-production of cereals (rice stocks are becoming pest–infested mountains) and the over-use of water and fertilisers. Third, the magnitudes that can be transferred can be increased so that farm incomes can be augmented substantially and quickly”.

“It will take some time and effort before schemes like Rythu Bandhu can be adopted in other states. First, they will have to introduce comprehensive land titling. Second, a decision will need to be made on whether the scheme should be more social policy or agricultural policy. As agricultural policy, the per-acre payment has a rationale. Third, it will be important to bring cultivators into the fold, as not all those who derive their income from agriculture are land owners. Under Rythu Bandhu, the hope is that market forces will lead to land owners sharing some of its benefits with agricultural labour. But, that might not be effective. Fourth, the usual pressures to cater to various groups – such as providing differing amounts of assistance to different types of agriculture, irrigated versus rain fed – will lead to demands for finer targeting”.

“The final challenge – or rather an opportunity – is this: schemes like Rythu Bandhu must be done within a cooperative federalism framework, not least because of a fundamental complementarity: states control the implementation apparatus (namely, the land titling) while the Centre can provide resources. A kind of ‘Grand Bargain’ is thus possible between the Centre and the states. For example, the Centre could offer to finance part of the scheme, finding the funds by reducing the fertiliser subsidy. Alternatively, the Centre could convert some of its tied transfers into untied ones, giving states the freedom to use them for schemes of their choice, including QUBI to farmers. A QUBI like Telangana’s Rythu Bandhu scheme – with some modification, preparation, and cooperation – affords a similar opportunity: it could augment farmers’ incomes and reduce agrarian distress in a way that is good social, and even better, agricultural policy”.

The Economist singled out Telangana’s Rythu Bandhu as a beacon of hope and described it as “a project that could lead to the phasing out of less efficient subsidies.” The Economist also took note of the land record purification exercise taken up by the Telangana Government calling it a “feat that remains a far-off prospect in much of India”.

Neelkanth Mishra in the Business Standard in his article titled “A bold experiment for a tough problem” said that there is much in favour of Telangana’s Rythu Bandhu Scheme.

Elaborating his idea in the article he said that, “In the last four years, the Telangana state government followed the set template of loan waivers and subsidies, in addition to large irrigation projects and quintupling warehousing capacity. With a year to go for the next elections, it has now embarked on two interesting schemes”.

“The more ambitious scheme is the Rythu Bandhu (RB) scheme or the Agricultural Investment Support Scheme. In mid-May this year, a month before sowing started for the Kharif season, the state government distributed cheques to nearly 6 million farmers at the rate of Rs. 4,000 per acre of land owned. This transfer is to be repeated for the Rabi season later this year. The total planned expenditure of Rs. 120 billion is 1.5 percent of the state’s annual output, 7 percent of the government expenditure and does not come with any cuts in other subsidies or transfers”.

“This is not really Universal Basic Income, but there are no conditions other than land ownership. The farmland owner gets the benefit irrespective of whether the land parcel is fallow or crop-worthy, whether the farmer intends to plant a crop or not, and whether this money is used for agricultural investment or just for consumption. According to the government, the absence of conditions is to obviate discretion at the lower levels of administration, to avoid leakage: a pragmatic assumption”.

“As the condition for the Rythu Bandhu is evidence of land ownership, the state revenue department undertook a 100-day ‘mission’ to prepare a clean database of computerised land records. Multiple levels of checks were made, including public hearings in every village. As per the Chief Commissioner for Land Administration, more than 90 percent of the land titles were undisputed and the transfers are being made against them. Each has been Aadhaar-linked”.

“The RB scheme is so large, and so radical, that it is hard to envisage implications in advance. Academic studies have been commissioned to study the impact of this scheme, but it will be a while before even preliminary results are available. The amount of Rs. 4,000 an acre covers about 18 to 34 percent of the cash costs of kharif crops and is expected to replace borrowing from the money-lender. Will other states also adopt this scheme? If the Telangana government is voted back to power next year, one can imagine the temptation for others to follow suit”.

(Source and Courtesy)

Financial Express (11-07-2018)

Economist (12-07-2018)

Business Standard, (04-07-2018)