While Reserve Bank of India has advocated direct cash transfer to farmers instead of giving them subsidies, Punjab Government has expressed reservations on cash transfer schemes.
In a draft sent to Union Ministry of Agriculture and Farmer Welfare, Punjab Government has said that the cash transfer may not achieve the desired objective. The draft says that the cash transfer may not lead to purchase of desired quantity of fertilizers or piece of machinery as the poor financial condition of beneficiaries may necessitate the use of cash to meet other immediate needs.
A committee of RBI had recently reframed the fertiliser subsidy. RBI had suggested the same mode of benefit transfer for irrigation and electricity subsidies too.
In the report, RBI had said that subsidies in fertilizer, irrigation, power and credit suffer vast leakages and the burden of subsidy in fertilizers only, Rs 73,000 crore approx. will not be sustainable for the country in the long run.
Not only cash transfer schemes but state also has recommended a review in the format of central schemes on agriculture. Objecting strongly to the cut in subsidies that was earlier being provided under RKVY (Rashtriya Krishi Vikas Yojana), the State Government has said that the change in the format of subsidy under RKVY will certainly affect the public investment in agriculture and more so in creation of infrastructure.
RKVY was started to motivate states to increase public investment in agriculture and allied sectors. The 100 percent funds were to be made available by the Centre to the states and states were provided flexibility and autonomy to plan and execute new schemes for boosting up agriculture and allied sectors. But the 14th Finance Commission recommended devolution of 50 percent share of financial burden of schemes under RKVY on states.
A senior official of Punjab Government requesting anonymity said that the impact of subsidy cut would be seen in the months to come.
He said that a number of schemes had suffered due to crunch of funds with the states. Though Punjab will somehow survive as the state gets around Rs 50 thousand crore for purchase of paddy and wheat for the Central pool that provides a healthy fillip to the state economy but the slow down in the creation of infrastructure may result in further slump in the agrarian economy.
Objecting to nutrient based subsidy (NBS), the state has said that the NBS has led to decline in the use of phosphorus in farming and in the state, it has gone down by 15% as compared to 2009 and the use of urea is increasing.
The draft further says that the impact of low use of Phosphorus would be visible after some time. And the impact will not be healthy for agricultural growth. Thus, the Centre should also review the amount of subsidy for various nutrients.