AGRICULTURE SECTOR

The budget presented on 1st February 2021 was an important one for Indian agriculture. It was the 1st budget in the COVID era thus it had the ownership to bring back growth in a sector that employs 60% of India’s population. Also, in 2015, the government made a promise to double farmers’ income by 2022, thus it had the onus of one final push to fulfill this promise. In addition to that, this budget has been presented in the background of the ongoing Farm Law protests and could have been used to mollify the situation by increasing budgeted allocation for the agriculture sector.

This year, the government allocated Rs.1,23,018 crore to the Dept. of Agriculture, Cooperation and Farmers’ Welfare (DACFW) which is 8% less compared to Budgeted Expenditure (BE) in FY21. This department is responsible for the implementation of schemes such as Pradhan Mantri Fasal Bima Yojana, which provides interest subsidy for short-term credit to farmers and promotes up-gradation of skills to enhance the adoption of technology in this sector. Due to this decline in budget allocation towards DACFW, the PM- Kisan Scheme, which provided direct cash support to farmers of Rs. 6000, has seen a decline of Rs. 10,000 crores to Rs. 65,000 crores in FY22. This is a surprising move considering the current political and economic situation of the country as it was expected that agriculture and allied sectors will not see a decrease in budgetary allocation. Although, due to COVID-19, the government had introduced a revised budget in 2020, thus the current allocation is 5% more than the revised estimates of FY21.

In this budget, the government has ensured its commitment to the APMC system, a point of contention in the recent farm protests. Now, APMC’s will become eligible to utilize Rs. 1 lakh crore financing under the Agriculture Infrastructure Fund (AIF) which will lead to enhancement of infrastructures of the mandis. In addition to this, 1,000 APMCs will be connected to the e-National Agriculture Market (e-NAM). An additional source of funding for the agriculture sector has been made through the introduction of an Agriculture Infrastructure and Development Cess (AIDC). Through this cess, the government hopes to raise Rs. 30,000 crores to build infrastructure facilities for post-harvest produce in the mandis. According to a study conducted by NABARD, there have been infrastructural gaps ranging from 10% in case of cold storage (bulk & hub) to 99.6% in the case of packhouses. In India, food worth Rs. 92,651 crores are lost in post-harvest processes. [1]Insufficient private investment in such infrastructure and logistics is one of the principal reasons for such gaps. [2]Thus, creating a cess fund for this purpose is a move in the correct direction.

In addition to the existing 6,000 Farmer Producer Organisations (FPOs), the government has budgeted Rs. 700 crores to the development of 10,000 new FPOs. Almost 86% of Indian farmers have small and marginal land holding sizes i.e. 0.58 hectares of land only. These small land sizes make it impossible for them to achieve economies of scale which come from increasing production thus leading to low costs. However, when farmers join FPOs, they get shared access to markets, schemes, and credit. For example, Maharashtra based Rushiwat Farmer Producer Company Ltd. (RFPCL) with 1270 farmer shareholders, now owns a seed and turmeric processing plant and a warehouse where the product is sorted and graded. In 2019-20, the FPCL made Rs. 1.32 crore and received a premium for the turmeric they grew. [3]

Although the FY22 budget does not make provisions for any immediate relief to the agriculture community, it has made necessary allocations that will make this highly inefficient sector self-reliant and resourceful.

Author: Ambika Shevade
Editor, TJEF

[1] https://medium.com/@IamDineshN/post-harvest-losses-in-india-fa7e3e8981fe

[2] https://pib.gov.in/newsite/PrintRelease.aspx?relid=199102

[3] https://www.livemint.com/news/india/how-farmer-led-firms-are-hedging-inflation-11600094280389.html

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