In the forthcoming Budget, government intervention through policy and structural reforms is expected to provide the necessary fillip to the agriculture sector which has been facing headwinds for quite some time.
The government could look at Direct Benefit Transfer (DBT) for agri input subsidy using Aadhar linkages so as to eliminate leakages. 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. At the same time, the government may provide incentives for agri extension services and programs which are essential if the aim of “doubling farmers’ income” is to be achieved. Another step would be to consider broadening the purview of PM Fasal Bima Yojana. The PMFBY could bring more crops under its portfolio which would widen the farmer base with access to this scheme. Currently, it covers three major types of crops, food, oilseeds and horticulture crops, which constitute only 30 percent of the total crop loans given by banks.
The government may look at tweaking the provisions under the Pradhan Mantri Kisan Samman Nidhi (PMKISAN) scheme which provides a guaranteed income to small and marginal farmers. Apart from this, the time tested measures of incentivising agri term-loans via interest subvention or credit guarantee fund covering a wider range of crops and agri industries may also be considered. Extending the ambit of such schemes would lead to greater gross capital formation in agriculture across a wider basket of crops.
Water being a key focus area for the government, it could initiate measures to audit irrigation and groundwater management, implementing standard operating processes to rationalise water usage. This would not only lead to efficient water usage for crops but would also ensure wider access to irrigation facilities for the whole farmer community.
Farm mechanisation 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 ensure the two-prong benefit of augmenting farmer income as well as minimizing post-harvest losses and prevent distress sale. An important aspect of the rural supply chain is storage infrastructure, especially cold storage. 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 the use of alternative 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 incentive 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.
Rising incomes and changing consumption patterns will continue to lead to increased demand in horticulture and proteins which will 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 should target.
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 would ensure the 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 an increased focus on addressing the systemic challenges in the agriculture sector, the upcoming Budget may see greater attention on the agriculture sector covering policy reforms and technical intervention. This would achieve the dual aim of farmer welfare, structural reforms and doubling farmer income with more focus on increasing productivity, efficiency and output across the agriculture business value chain.
(Ramanathan is Partner, Deloitte India; Ghosh, Director, Deloitte Touche Tohmatsu India)
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