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DBT route likely for agriculture power subsidy, farmers to pay by meter

   November 2, 2018        489        Madhvi Sally&Yogima Seth Sharma

The government is considering paying a part of the agriculture power subsidy directly to farmers, instead of free or cheap electricity, as part of a move to rationalise farm sector subsidies.

Coming ahead of general elections next year, the proposal, if it goes through, is expected to put more money into the hands of farmers, enabling more investments in the industry and higher consumption to boost the overall economy, officials familiar with the development said.

A high-level committee, chaired by NITI Aayog member Ramesh Chand, has recommended that more than half-a-dozen subsidies to agriculture, amounting to over Rs 2.2 lakh crore, or Rs 11,340 crore per hectare, should be reconsidered to ensure that there is no over utilisation or wastage of subsidised power and urea, they said.

“One of the key recommendations of the committee is to let farmers pay for the power used as per metre and this subsidy will be reimbursed under direct benefit transfer (DBT),” one of the officials told ET on condition of anonymity.

The committee’s recommendations are being considered by NITI Aayog’s top brass, following which the report will be submitted to the Prime Minister’s Office and the agriculture ministry, the sources said.

Subsidies to the agriculture sector include power subsidy, fertiliser subsidy, agriculture loan at lower rate of interest, irrigation subsidy, and insurance cover for farmers at lower premium rates.

Of these, the power subsidy alone stands at over Rs 90,000 crore followed by fertiliser subsidy at Rs 75,000 crore. The government has already rolled out fertiliser subsidy to companies under DBT.
DBT route likely for agriculture power subsidy, farmers to pay by meter
According to the panel’s report, with resources like power not being charged to the farmer, there has been over-exploitation of water resources, leading to a drop in water table and creation of scarcity situation for water and power.

Ditto for fertiliser subsidy. Since the essential input like urea is inappropriately priced, farmers are not making rational use of them. “With urea price heavily subsidised, farmers use it more than required compared to other essential micronutrients, which leads to imbalance,” said one of the persons cited earlier. “Hence, the need for rationalisation of all subsidies to the sector.”

Another official familiar with the development said the government is looking into alternative and efficient ways of using resources spent on agriculture subsidy.

Currently, the total subsidy to the sector is equally shared between Centre and the states. “Going forward, the plan is to collaborate with states and pool all resources available for the sector under different heads and pass them on to farmers under DBT to have a bigger impact,” the person said.

ET Bureau

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