Budget 2020 -Agriculture related information.

Budget 2020: FM Sitharaman announces 16-point action plan for agriculture

Agriculture in India constitutes 14% percent of GDP, 44 percent of employment and is the backbone of the rural economy but contributes only 16% of Gross Value Added (GVA)1. 

The lot of the farmer has improved little, with various states having cumulatively written off a whopping Rs 4.7 lakh crore of farm loans in the past one decade, which is 82 per cent of the industry-level bad loans.

The government is committed to doubling farmers' income by 2022 and the budget aims to boost the income of people and enhance their purchasing power Union Finance Minister Nirmala Sitharaman in her budget speech said.

Announcing 16 action points plan for farmers, towards the goal of doubling farmers income she said that these measures are underlined by the FM for the agriculture sector.

Farm markets need to be liberalized, farming need to be made more competitive, handholding of farm-based activities need to be provided, sustainable cropping patterns and more technology needed, she said.

The government allocated 2.83 lakh crore rupees for agriculture and allied activities, irrigation and rural development in 2020-21 budget.

“We will encourage state governments who implement following model laws- Model Agricultural Land Leasing Act of 2016, Model Agricultural Produce and livestock and Marketing Act of 2017 and Model Agricultural Produce and Livestock contract farming and services promotion and facilitation Act of 2018,”she said.

Further, she proposed comprehensive measures for 100 water-stressed districts in the country. She added that agricultural credit target has been set up at 15 lakh crore.

Pradhan Mantri Kisan Urja Suraksha evem Utthan Mahabhiyan (PM KUSUM) to be expanded to provide 20 lakh farmers in setting up standalone solar pumps.

Farmers who have fallow or barren land will be helped to set up solar power generation units and also sell surplus power to the solar grid and also make living out of even barren land,” she said in the Budget .

Announcing 16 action points plan for farmers, towards the goal of doubling farmers income she said that these measures are underlined by the FM for the agriculture sector.

Farm markets need to be liberalized, farming need to be made more competitive, handholding of farm-based activities need to be provided, sustainable cropping patterns and more technology needed, she said.

The government allocated 2.83 lakh crore rupees for agriculture and allied activities, irrigation and rural development in 2020-21 budget.

“We will encourage state governments who implement following model laws- Model Agricultural Land Leasing Act of 2016, Model Agricultural Produce and livestock and Marketing Act of 2017 and Model Agricultural Produce and Livestock contract farming and services promotion and facilitation Act of 2018,”she said.

Further, she proposed comprehensive measures for 100 water-stressed districts in the country. She added that agricultural credit target has been set up at 15 lakh crore.

“Pradhan Mantri Kisan Urja Suraksha evem Utthan Mahabhiyan (PM KUSUM) to be expanded to provide 20 lakh farmers in setting up standalone solar pumps.

Farmers who have fallow or barren land will be helped to set up solar power generation units and also sell surplus power to the solar grid and also make living out of even barren land,” she said in the Budget speech.

We will encourage balanced use of all fertilizers, a necessary step to change the incentive regime which encourages excessive use of chemical fertilizers, the minister said.

Warehouses will be set up, viability gap funding to be provided to set up warehouses, she added.

The sixth action point will be village storage scheme run by SHGs, which will provide holding capacity for farmers, women in villages can regain their status as Dhaanya Lakshmi, said the minister.

“Indian railways will set up Kisan rail through PPP arrangement, for transportation of perishable goods,” she said.

Further, Krishi UDAN will be launched by Ministry of Civil Aviation on international and national routes, improving value realization in North East and tribal districts, she said.

For better marketing and export, supporting states will focus on one product for one district, so that high focus is given at district level for horticulture to gain momentum.

“Financing on Negotiable Warehousing Receipts to be integrated with e- National Agricultural Market,” the minister said in the budget speech.

NABARD Refinancing Scheme to be further expanded, agri credit target for the year 2020-21 has been set at 15 lakh crore rupees, she added.

The minister said that Milk processing capacity to be doubled from 53.5 million tonne to 108 million tonne by 2025.

Framework for development, management and conservation of marine fishery resources to be put in place , she said. The fish production to be raised to 200 lakh tonnes by 2022.

Agriculture in India constitutes 14% percent of GDP, 44 percent of employment and is the backbone of the rural economy but contributes only 16% of Gross Value Added (GVA)1. Hence, government intervention and assistance is highly essential to facilitate implementation of both policy and structural reforms to address some of the key challenges in agriculture. Rising incomes and changing consumption patterns are expected to continue the increased demand in horticulture and proteins which is likely to have a cascading impact on inflation which is a key focus area for the government. Hence, increasing storage capacities, improving availability of pulses, reduction in import dependence in areas like oilseeds and enhancing farmer livelihoods will be some of the key areas that the budget could target.

In the forthcoming budget it is expected that the government would look at Direct Benefit Transfer (DBT) for agri input subsidy using Aadhaar linkages so as to eliminate leakages. This would also help in putting money directly in the hands of the right beneficiary. The DBT of input subsidy would also encourage farmers to follow the proper package of practices with respect to input usage and not go only by subsidy considerations thereby leading to higher productivity.

The government may consider favorably tweaking the quantum and coverage of the Pradhan Mantri Kisan Samman Nidhi (PMKISAN) scheme which provides a guaranteed income to small and marginal farmers. At the same time, the government may consider providing incentives and increased budgetary provisions for agri extension services and programs, preferably in PPP mode, which are essential if the aim of “doubling farmers’ income" is to be achieved. The government can facilitate spurring of capital formation by incentivizing agri term-loans via interest subvention or credit guarantee fund covering a wider range of crops and agri industries. Extending the ambit of such schemes has the potential to lead to greater gross capital formation in agriculture across the spectrum and not be limited to only the major crops.

Agricultural productivity has a positive correlation with level of farm mechanization. With the steep rise in labor cost, the inflection point where mechanized farming is cost-effective is imminent in next 8-10 years. Farm mechanization constitutes a key area wherein policy reforms in the form of incentives and interest subvention schemes are expected in the upcoming budget. The government may also increase the ambit of the Rashtriya Krishi Vikas Yojana (RKVY) to support rural storage infrastructure which will enable small producers to hold the produce till market prices are remunerative enough to sell. This will help achieve the 2 prong benefits of augmenting farmer income as well as minimizing post-harvest losses and preventing distress sale. An important aspect of the rural supply chain is storage infrastructure especially cold storages. Policy measures that can be expected to accelerate growth in the cold chain sector are innovative rural financing models to provide capital and viability gap funding as well as use of alternate fuels that are locally available to reduce cost.

Apart from this, extending such policy reforms towards efforts in increasing infrastructural support in agriculture is another focus area. Infrastructural gaps like lack of scientific storage solutions, last mile connectivity and lack of market access plague Indian agriculture. This issue may be addressed in the budget by increased allocation to creating agri-infrastructure as well as promoting incentives schemes and tax holidays for PPP in infrastructure projects catering specifically to agriculture. Also, including credit for agri-infrastructure projects under the direct lending of Priority Sector Lending Norms would provide an attractive option for private players’ entry.

A similar approach could also be applied to the food processing sector wherein the mega food park scheme, which currently covers Greenfield projects, could be extended to bring the existing food processing units under its ambit. This measure could assist in rapid growth of the sector through the extension of this successful scheme. At the same time, such schemes and measures need to be supplemented with budgetary provisions for setting up of new and upscaling existing R&D facilities and skill development centers so as to implement the best practices & produce trained manpower.

With the finance Minister emphasizing on “Gaon-Garib-Kisan" (Village-Poor-Farmer) as the cornerstone of policymaking, the upcoming budget may see increased attention on the agriculture sector with a two pronged approached to policy reforms and technical intervention. The former could concentrate on farmer welfare, structural reforms and doubling farmer income whereas the latter could see more focus on increasing productivity, efficiency and output across the agriculture business value chain.

Budget play  importent role in development of country.

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