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

Budget Series 2018-19 : #5 Impact on Telecom Sector

By TJEF Editor Junitha Johnson

The Telecom Sector is deeply disappointed that Budget 2018 has not addressed any of the key issues of the financially stressed telecom industry that is already plagued by brutal price wars and high debt, upwards of Rs 7 lakh-crore. Quoting Rajan Matthews, director general of Cellular Operators Association of India (COAI) –

 

“The telecom industry is disappointed that none of its key asks have found mention in finance minister Arun Jaitley’s budget. We had sought a reduction in the high levies and taxes, and an urgent intervention for resuscitating the sector, which is currently experiencing its worst financial health and hyper competition,” 

In the past few years, the Telecom Sector has seen considerable reduction in the profitability primarily due to reduced tariffs, increased competition and increase in costs due to spectrum purchases. Further, unprecedented increase in adoption of digital services such as payments, e-governance and entertainment has made further investments in the telecom infrastructure sector a necessity.

In the above backdrop, this sector has been pushed into a wave of consolidation as also increased investments in networks, to keep pace with changes. This has increased the pressure on the already debt laden companies in the sector.

The Telecom Industry’s expectation from the Budget 2018 were high, following are the certain expectations –

  • Clarity on tax treatment of spectrum payment
  • Characterization of telecom services as royalty
  • Amendment to the definition of ‘industrial undertaking’ to include telecom infrastructure service providers
  • Benefit of Investment Allowance should be provided to telecom infrastructure service providers

The salient points of the Budget 2018 with regards to the Telecom industry are as follows: –

  • Custom duty on mobile phones up from 15% to 20%
  • Corporate tax rate cut to 25% for companies with up to Rs 250 crore turnover
  • 1 lakh Gram Panchayats are connected to optic fibre; 5 lakh Wi-Fi spots to be created in rural areas
  • Rs 10,000 crore announced for creation and augmentation of telecom infrastructure
  • Broadband access to over 20 crore rural Indians in 2.5 lakh villages

In our opinion the Budget has not been in line with expectations of the industry. The Government, as per Mathews said the finance minister “had completely ignored” the sector’s four key demands, including the immediate reduction of high and unsustainable levies & taxes, cut in basic customs duty on 4G network gear, clarity on right of way (RoW) related taxation at the state level and the industry’s call for a lower tax rate to 1% on discounts extended to small dealers.

 

Budget Series 2018-19 : #4 Impact on Healthcare Sector

By TJEF Editor Gandhali Inamdar

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The Union Budget 2018-19 has provided a big opportunity to the entire Healthcare industry and allied services to address the healthcare needs of a large population of the country. As envisioned under the National Health Policy 2017, the Union Budget 2018–19 has taken a long stride towards Universal Health Coverage, with focus on increasing the health coverage for the underprivileged and the bottom-of-pyramid section of the society. This budget is in line with industry expectations of an increase in insurance coverage, especially for those below the poverty line.

Under the cover of ‘Ayushmaan Bharat’, the government has announced measures to holistically cover primary, secondary and tertiary care services. The National Health Protection Scheme is at the forefront of this programme. This scheme will cover 10 crore families with an annual coverage of 5 lakh per family. This is a significant increase from the coverage under the ‘Rashtriya Swastha Bima Yojana’, which benefits 45-50 crore families by providing access to secondary and tertiary care services. The proposal of setting up 1.5 lakh health and wellness centres will bring primary health care to every household by providing essential drugs and diagnostics free of cost. By increasing government support and coverage, this will boost demand for medical services in the country, giving an opportunity to healthcare providers and insurance companies to partner with the government. It will also reduce the financial and mental burden of healthcare costs on the less privileged. Reduction in household Out-of-Pocket (OOP) expenditure on healthcare will lead to increased disposable income which with time will give an impetus to the economy. Support for Tuberculosis (TB) patients during the period of treatment will further lead to increase in demand for nutritional supplements and is a welcome step to ensure a TB-free India.

The budget also proposes steps to address the shortage of qualified medical personnel. It propagates setting up of at least one medical college for three parliamentary constituencies and one Government college per state. Further, 24 new government medical colleges and hospitals will be established by upgrading existing district hospitals. This will further enhance quality and accessibility of medical education and healthcare. Amidst all the initiatives, more clarity is required regarding the breakdown of allocated Budget and a roadmap to implement these plans. Convergence with existing government schemes needs to be considered to reduce hurdles during implementation. Barring the announced efforts to increase medical colleges, more efforts are required to reduce the existing manpower and skill gap. There was also no mention of measures to support investment and collaboration with technology to upgrade the quality of care. The government needs to incentivise healthcare providers to imbibe technology and digitise the healthcare sector.

India has been long lagging in its expenditure on health at a global level, the Union Budget 2018 does help in increasing it from 1.5% to 2.5% of GDP, the first positive step on a long path for healthy India. Implementing these measures on the envisioned scale will require close coordination of the centre, state, and districts with healthcare and insurance providers. Even with good intentions, there is need to ensure adequate quality measures are adopted and adhered to.

Budget Series 2018-19 : #3 Impact on Education Sector

By TJEF Editor Laxmi Mishra

Challenges faced by the Industry

  • Gross enrolment pattern: At present, in India, there are about 1.86 crore students enrolled in various streams of higher education including Business Management. The ratio is just 16%. The government needs to focus on strategies to increase this ratio.
  • Infrastructure facilities: There is an imperative need to ensure quality physical infrastructure by managing apolitical private sector participation in the establishment of colleges.
  • Student-teacher ratio: India has Student-teacher ratio is 22:1 while the average for developed countries is as low as 11:1. It brings the necessity to hire quality teachers and strengthen the backbone of Indian education sector.

Expectations from Budget

  • The Government’s budgetary expenditure on health, education, and social protection was INR 8.18 lakh crore in 2017-18. It is expected to increase by 3-5%.
  • The National Testing Agency (NTA) which was proposed by Mr. Arun Jaitley is expected to be the main focus of this year’s budget.
  • Students are expecting some relation on education loans considering the ever-increasing cost of higher education.
  • Expenditure towards recruitment of teachers is expected to be high.
  • Initiation of more programmes to increase the gender parity in educational institutions.

Budget Announcements

  • The Government has allocated INR 8.5 lakh crore this year, an increase of approx. 4% over last year.
  • Also announced Rs. 1, 00, 000 Crore initiative to drive research and infrastructure over the next four years.
  • The government proposes to move to “Digital Board” over the next few years to mark the involvement of technology in Indian education system.
  • “Revitalising Infrastructure and Systems in Education (RISE)”, a major initiative dedicated towards revamping the education infrastructure, will be launched.
  • An integrated B.Ed. programme for teachers will be initiated to ease the training of teachers during service.
  • Launch of ‘‘Prime Minister’s Research Fellows (PMRF)’’ Scheme to encourage students to undertake Ph.D. in IITs and IISc with an attractive fellowship.
  • To ensure quality education for tribal children an “Ekalavya Model Residential School” will be setup in every block with more than 50% ST population and at least 20,000 tribal persons.
  • A specialized Railways University at Vadodara also to be setup under the scheme of setting up Institutes of Eminence.
  • 18 new Schools of Planning & Architecture (SPAs) will also be established in IITs and NITs as autonomous schools.

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