NEW DELHI: India’s Prime Minister Narendra Modi is considering three options for a relief package to help farmers suffering because of low crop prices at a cost of as much as 3 trillion rupees ($42.82 billion), according to three government sources.
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.
Modi considers three options to aid Indian farmers hit by low crop prices
Modi considers three options to aid Indian farmers hit by low crop prices
- 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
Global brands shut Middle East stores as conflict causes chaos
- Luxury brands and retailers close stores in Middle East
- Conflict threatens the region that has been luxury’s fastest growing
- Mass-market retailers monitor situation, adjust operations in region
PARIS: In Dubai and other major Middle Eastern shopping hubs, many stores are closed or operating with a skeleton staff as the escalating conflict in the region causes chaos for businesses and travel.
The US-Israeli air war against Iran expanded on Monday with no end in sight, with Tehran firing missiles and drones at Gulf states as it retaliates for a weekend of bombing that killed Iran’s supreme leader and reportedly killed scores of Iranian civilians, including a strike on a girls’ primary school.
Chalhoub Group, which runs 900 stores for brands from Versace and Jimmy Choo to Sephora across the region, said its stores in Bahrain were closed, while other markets, including the UAE, Saudi Arabia, and Jordan remained open though staff attendance was “voluntary.”
“We operate with a lean team formed of members who volunteered and feel comfortable to come to the store,” Chalhoub’s Vice President of Communications Lynn al Khatib told Reuters, adding that the company’s leadership team personally visited Dubai Mall and Mall of the Emirates on Monday morning to check in with workers.
E-commerce giant Amazon closed its fulfillment center operations in Abu Dhabi, suspended deliveries across the region and instructed its employees in Saudi Arabia and Jordan to remain indoors, Business Insider reported on Monday, citing an internal memo.
Gucci-owner Kering said its stores were temporarily closed in the UAE, Kuwait, Bahrain and Qatar and it has suspended travel to the Middle East.
Luxury growth engine under threat
Shares in luxury groups LVMH, Hermes, and Cartier-owner Richemont were down 4 percent to 5.7 percent on Monday afternoon as investors digested the knock-on impacts of the conflict.
The Middle East still accounts for a small share of global spending on luxury — between 5 percent and 10 percent, according to RBC analyst Piral Dadhania. But the region was “luxury’s brightest performer” last year, according to consultancy Bain, while sales of expensive handbags have stalled in the rest of the world.
Now, shuttered airports have put an abrupt stop to tourism flows into the region and missile strikes — including one that damaged Dubai’s five-star Fairmont Palm hotel — are likely to dissuade travelers, particularly if the conflict drags on.
“If you assume that it’s a $5 billion to $6 billion (travel retail) market and let’s say it’s going to be shut down for a month, we are talking about hundreds of millions of dollars that are definitely at risk,” said Victor Dijon, senior partner at consultancy Kearney.
If Middle Eastern shoppers cannot travel to Paris or Milan, that could also hurt luxury sales in Europe, he added.
Luxury brands have been investing in lavish new stores and exclusive events across the region. Cartier unveiled a “high-jewelry” exhibition in Dubai’s Keturah Park just days before the conflict started.
Cartier and Richemont did not reply to requests for comment.
Luxury conglomerate LVMH has also bet big on the region. Last month, its flagship brand Louis Vuitton staged an exhibition at the Jumeirah Marsa Al Arab hotel, and beauty retailer Sephora launched its first Saudi beauty brand.
LVMH does not report specific figures for the region, but in January Chief Financial Officer Cecile Cabanis said the Middle East has been “displaying significant growth.” LVMH did not reply to a request for comment on how its business may be impacted by the conflict.
The Middle East has also attracted new investment from mass-market players. Budget fashion retailer Primark said in January that it plans to open three stores in Dubai in March, April and May, followed by stores in Bahrain and Qatar by the end of the year.
“Primark is set to open its first store in Dubai at the end of March but clearly this is a fast-moving situation which we are monitoring closely,” a spokesperson for Primark-owner Associated British Foods said.
Apple stores in Dubai will remain closed until Thursday morning, the company’s website showed, while Swedish fast-fashion retailer H&M said its stores in Bahrain and Israel are closed.
Consumer goods group Reckitt has told all employees in the Middle East to work from home, temporarily closed its Bahrain manufacturing site and suspended all business travel to the region until further notice.
