Sugar industry has never found a favourable space in Budgets

Written by Rajshree Pathy | Updated: Mar 1 2011, 06:44am hrs
It was evident that the most threatening issue for the government is food inflation and the FMs Budget presentation made a determined effort at bringing in a new dynamism in the rural economy. The inclusion of warehouses and cold storage chains as part of the infrastructure sector is most welcome, as this will make it eligible for inclusion in the viability gap funding scheme and facilitate soft credit terms from banks. Excise duty on air-conditioning for cold storage is completely exempted; however, the major issue faced by promoters of these chains is the non-availability of quality power and the high costs of captive power generation. Some support for this would have boosted public-private partnerships in this sector.

The sugar industry has never found a favourable space in any FMs Budget, even though it is the only industry that supports the farmer in the most organised manner, supplying seeds, lending for irrigation, arranging for harvest and transport of sugarcane, and storage of processed sugar throughout the year. The industry has been bearing the 10% subsidy of sugar procured by the government for PDS and yet no mention of it in the Budget! The pre-Budget memorandum submitted to the FM from the sugar industry asks for inclusion of sugar warehousing under Section 35 AD of the IT Act introduced in the previous Budget. This has been ignored. Despite many demands for support for farm mechanisation, no real measures have been announced, except for import duty reduction from 5% to 2.5% for agricultural machinery and components.

With the migration of rural labour to urban industrial hubs, and with agricultural operations not being included under the NREGS, there exists a serious dearth of farm labour. This makes the need for mechanisation across the country a necessity. Unless the government includes farm mechanisation under a technology upgradation or similar scheme, the capital expenditure will be prohibitive and a disincentive for the farmer to continue operations.

The direct transfer of cash subsidy for kerosene, LPG and fertilizer is welcome, but I wait to see how Mr Nilekani will manage the procedural nightmare of the logistics! I am happy that the overall allocation for credit to the agri sector has been considerably increased, by R 1,00,000 crore, with crop loans having an effective lending rate of 4%, including the increase of the 1% interest subvention.

However, the past practice of the government largesse in waiving farmersloans has not promoted fiscal discipline in farmers to repay their loans. The extra budgetary allocation for the RKV yojana will support the state governments to initiate broad programmes to improve crop productivity, micro-irrigation etc., if used intelligently!

The FM mentioned that the Food Security Bill will be introduced this year in the Parliament, with its promises of assured food security for every citizen. Without addressing the inadequacy and non-accountability of the current delivery system, I have grave doubts if these noble inclusive development initiatives will translate into sustainable programs or, will just be another futile annual exercise