Budget gives ₹1.34 lakh crore boost to agriculture

Early in her speech, finance minister Nirmala Sitharaman said that the Union Budget for FY21 was woven around three prominent themes: ‘aspirational India’ in which all sections of society seek better standards of living; ‘economic development’ for all that would ensure higher productivity and greater efficiency; and that India shall be a ‘caring society’ that is both humane and compassionate.

Under aspirational India, Sitharaman touched upon agriculture along with irrigation, rural development, wellness, water, and sanitation apart from education and skills. And, for the sector comprising agriculture and allied activities, irrigation and rural development, an allocation of about ₹2.83 lakh crore has been made in the Budget for FY21.

Sitharaman spelt out that the amount is divided into two tranches: ₹1.60 lakh crore for agriculture, irrigation, and allied activities; and ₹1.23 lakh crore for rural development and Panchayati Raj. The fine print of the Budget documents reveals that the ministry of agriculture and farmers’ welfare has got a proposed allocation of over ₹1.34 lakh crore—31.9% higher than the Revised Budget Estimates of ₹1.02 lakh crore in FY20. However, in comparison to the Budget estimates for FY20—of over ₹1.30 lakh crore—the annual increase stands at just 3%.

“Our government is committed to the goal of doubling farmers’ incomes by 2022,” Sitharaman said in her speech. She highlighted that the government provided energy sovereignty through PM-KUSUM (Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan) and input sovereignty through Paramparagat Krishi Vikas Yojana. “We have provided resilience for 6.11 crore farmers insured under Pradhan Mantri Fasal Bima Yojana,” FM added.

Sitharaman also highlighted that focus on cultivation of pulses, expansion of micro-irrigation through Krishi Sinchai Yojana, have raised the self-reliance of the country. Further, provision of any annual supplement of the income to the farmer, directly is done through PM-KISAN (Pradhan Mantri Kisan Samman Nidhi). And, connectivity through PMGSY (Pradhan Mantri Gram Sadak Yojana), financial inclusion has helped raise farm incomes.

Sitharaman also mentioned that prosperity to farmers can be ensured by making farming competitive. “For this, farm markets need to be liberalised.” The FM also pointed that distortions in farm and livestock markets need to be removed. According to FM, purchase of farm produce, logistics and agri-services need copious investments, and substantial support and hand-holding of farm-based activities such as livestock, apiary, and fisheries need to be provided for.

While spelling out that farmers desire integrated solutions covering storage, financing, processing and marketing, Sitharaman pointed that adopting sustainable cropping patterns and bringing in more technology are integral to our plan. “All this and more can be achieved through working with and in cooperation with the states,” Sitharaman said.

In order to reiterate her government’s focus, Sitharaman laid out 16 action points in her speech. She proposed to encourage those state governments who undertake implementation of three model laws already issued by the central government; Model Agricultural Land Leasing Act, 2016; Model Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017; and Model Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation) Act, 2018.

“Water stress-related issues are now a serious concern across the country,” Sitharaman said. “Our government is proposing comprehensive measures for one hundred water stressed districts,” she added. Sitharaman touched upon her previous speech of July 2019, where she had stated that “annadata” can be “urjadata”, too. She said that the PM-KUSUM scheme removed farmers’ dependence on diesel and kerosene and linked pump sets to solar energy. “Now, I propose to expand the scheme to provide 20 lakh farmers for setting up stand-alone solar pumps; further we shall also help another 15 lakh farmers solarise their grid-connected pump sets,” Sitharaman said. “In addition, a scheme to enable farmers to set up solar power generation capacity on their fallow/barren lands and to sell it to the grid would be operationalised.”

Sitharaman also highlighted that the government shall encourage balanced use of all kinds of fertilisers including the traditional organic and other innovative fertilisers. “This is a necessary step to change the prevailing incentive regime, which encourages excessive use of chemical fertilisers,” she said.

Highlighting that India has an estimated capacity of 162 million metric tonnes of agri-warehousing, cold storage, reefer van facilities, Sitharaman said that the National Bank for Agricultural and Rural Development (NABARD) will undertake an exercise to map and geo-tag them. Additionally, the minister proposed creating warehousing, in line with Warehouse Development and Regulatory Authority (WDRA) norms. “Our government will provide Viability Gap Funding for setting up such efficient warehouses at the block/taluk level,” she said, adding that this can be achieved, where states can facilitate with land and are on a public private partnership (PPP) mode. “Food Corporation of India (FCI) and Central Warehousing Corporation (CWC) shall undertake such warehouse building on their land too,” she said.

The Budget also proposed that as a backward linkage, a village storage scheme is proposed to be run by the self-help groups (SHGs), which will provide farmers a good holding capacity and reduce their logistics cost. “Women, SHGs shall regain their position as ‘Dhaanya Lakshmi’,” Sitharaman said.

Further, to build a seamless national cold supply chain for perishables, inclusive of milk, meat and fish, Sitharaman said that the Indian Railways will set up a ‘Kisan Rail’—through PPP arrangements. “There shall be refrigerated coaches in express and freight trains as well,” she said. And, on similar lines ‘Krishi Udaan’ will be launched by the Ministry of Civil Aviation on international and national routes. “This will immensely help improve value realisation especially in North-East and tribal districts,” Sitharaman read out.

Sitharaman also talked of the horticulture sector which with its current produce of 311 million metric tonnes exceeds production of food grains. “For better marketing and export, we propose supporting states which, adopting a cluster basis, will focus on ‘one product one district’,” she said. She also said that integrated farming systems in rain-fed areas shall be expanded. Multi-tier cropping, bee-keeping, solar pumps, solar energy production in non-cropping season will be added, where zero-budget natural farming (mentioned in July 2019 Budget) shall also be included.

According to Thomas John Muthoot, chairman and managing director of Muthoot Pappachan Group, the agricultural sector contributes to over 16% of the GDP and more importantly employs 50% of the workforce in India. “An allocation of ₹2.83 lakh crore for the agriculture and allied sector is large and marks a major jump over last year,” says Muthoot. “Along with a very sharp and long 16-point list of specific measures, like on cold-chain, warehousing and so on, this is a critical allocation,” he adds.

Among market observers, Dharmesh Kant, head, retail research at IndiaNivesh, is negative on agri-chemical manufacturers and fertiliser manufacturers after the finance minister announced that balanced use of fertiliser will bring about change in the prevailing regime of providing incentive for use of chemical fertiliser. “While the government targets to double farm income by 2022, how this will be achieved is yet to be seen,” Kant questioned on the government’s wishful intent.