PM-KISAN scheme funding: Does govt plan to rely too much on GST revenues to finance mega farmers’ project?

There was just one major point in Finance Minister Piyush Goyal’s more than 100-minute Budget speech. It was the launch of a scheme named Pradhan Mantri Kisan Samman Nidhi (PM-KISAN). PM-KISAN is an income support scheme for farmers. Farming households owning up to 2 hectares (around 4.94 acres) of cultivable land will get an income support of Rs 6,000 per year, from the Central government. This payment will be made in three equal instalments of Rs 2,000 each. The scheme will start retrospectively from 1 December, 2018. Given this, the first instalment of Rs 2,000 will be paid by 31 March, 2019, before the Lok Sabha elections. [caption id=“attachment_5579321” align=“alignleft” width=“380”] Representational image. Reuters[/caption] Of course, genuine doubts have been raised about how such an ambitious scheme, the biggest income support scheme in the world, will be launched in less than two months. Also, it remains to be seen how will the government identify those who qualify for the scheme, given the bad state of land records across large parts of the country. Before launching such a scheme, a well-laid out plan for digitising land records across the country was necessary. Let’s now look at where the money for this scheme is to come from. The government has allocated Rs 20,000 crore towards this scheme in the current financial year. That amount should not be difficult to finance. For 2019-2020, the government has allocated Rs 75,000 crore towards this. This calculation is based on the assumption that there are 12 crore farming households owning land of up to 2 hectares and being paid Rs 6,000 each. The actual number is actually 12.56 crore. And this number is for 2015-2016. The number would have grown by 2019-2020. Hence, Rs 75,000 crore is not going to be enough, if the idea is to reach everyone. Also, there will be administrative expenses involved in running the scheme. What about that? Hence, the allocation for the scheme clearly has to be more than Rs 75,000 crore, unless the idea is to implement the scheme in stages. Clearly, the government hasn’t bothered about these things, given that this allocation is in the next Budget and will have to be vetted by the next government and the new Lok Sabha, when the actual Budget for 2019-2020 is presented. Also, where will this money come from? If one looks at the revenue side of the Budget, the Central Goods and Services Tax (GST) collections in 2019-2020, are expected to grow by 21 percent to Rs 6.10 lakh crore. This is a huge assumption to make especially given that in 2018-2019, the actual collections are expected to be Rs 5.03 lakh crore or Rs 1 lakh crore lower than the Rs 6.03 lakh crore originally forecast.

This has happened primarily because many people, who the government think should be paying the GST, aren’t. In November 2018, 28.8 percent of taxpayers did not file their GST returns, up from 15.4 percent in April 2018. When it comes to composition taxpayers, more than one-fourth did not file their GST returns between July and September 2018, up from 19.3 percent during April and June 2018.

A simple explanation for this lies in the fact that people aren’t filing returns because they aren’t paying the GST, which is reflected in lower than expected collections as well. As of now, nothing really suggests that this trend is going to change any time soon. Hence, the assumption of a 21 percent growth in GST just doesn’t make sense. Also, even the revised target of Rs 5.03 lakh crore is a bit of a stretch, looking at the GST collections between April to January 2019. If the GST collections do fall short, as they are likely to, how will PM-KISAN with its Rs 75,000 crore Budget, get financed? Of course, there are other taxes. But if PM-KISAN has to be financed properly, some other expenses will have to be cut. What does all this tell us? It basically tells us that the government hasn’t really thought through this. And their basic aim seems to launch the scheme, distribute as much money as possible to the farmers over the next two months, before the elections, and then figure out everything after the elections, if they get re-elected. Else, it will be someone else’s problem. (The writer is a an economist and author of the Easy Money trilogy)