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The possibilities are a direct payment to all landowning
farmers, compensation for those who sold produce below
government prices, and a loan forgiveness program.
Modi is desperate to claw back support among India's 263 million
farmers and their many millions of dependents after his Hindu
nationalist Bharatiya Janata Party (BJP) lost power earlier this
month to the opposition Congress in three big heartland states.
A general election has to be held by May.
The government is keen to find a way to get money to farmers as
quickly and simply as possible so that they can feel the
benefits before the election. That could come at a major cost to
its budget, which is already strained because of
lower-than-expected tax revenues, and is likely to undermine its
fiscal deficit target for the year ending in March.
The BJP won much of the rural vote at the last election in 2014
but there has been increasing anger with the government in the
countryside because Modi has tried to get the market to play a
bigger role in setting prices and sought to reduce government
intervention. Healthy crop production in the past two years and
lower than expected exports have combined to drive prices down
at a time when some farm costs have been surging.
The quickest option, and currently the most favored inside the
government, is to directly pay landowning farmers 1,700-2,000
rupees per acre, said two of the sources, including one at the
farm ministry. They spoke on condition they not be identified.
The finance ministry estimates such a scheme, which means
farmers would get the money before next sowing season, could
cost up to 1 trillion rupees.
The second option would be to compensate farmers for the
difference they received by selling their produce in the market
compared with the government price that is set for grains and
some other products, one of the finance ministry officials said.
That would be cheaper, costing about 500 billion rupees, the
official added.
That option has some major drawbacks, though, as government
support schemes have lost credibility because they don't cover
all farm produce and claiming from the government has often
proven difficult. Middlemen have also taken advantage of such
schemes by persuading the farmer to give them part of any
subsidy or compensation.
The most expensive option - at a cost of as much as 3 trillion
rupees - and the least favored inside the government, would
involve writing off farm loans by up to 100,000 rupees per
person. That is a policy that is being pushed hard by the
opposition Congress party.
MODI IN SERIES OF DISCUSSIONS
"Broadly speaking, the government is considering three options –
writing off some farm loans, introducing a price differential
plan and direct transfer of cash to farmers," said a source at
the farm ministry.
All three sources, said that the government has not yet
discussed the ways in which it plans to fund any of the schemes.
In the last week Modi had a series of meetings with Finance
Minister Arun Jaitley, Agriculture Ministry Radha Mohan Singh
and officials from its top think tank Niti Aayog to weigh its
options for a farm relief program.
BJP President Amit Shah also met Agriculture Minister Singh last
night to discuss the proposals, according to a senior cabinet
minister, who did not want to be named.
The government is also planning to buttress any package by
revising the existing crop insurance policy to facilitate easier
settlement of claims and also give greater non-collateralized
credit assess to farmers, the minister said.
($1 = 70.06 Indian rupees)
(Reporting by Aftab Ahmed; additional reporting by Nigam Prusty;
Editing by Martin Howell)
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