Budget 2020: Five things govt can do to boost farm income, agri productivity

Updated: Feb 01, 2020 5:55 PM

Budget 2020-21: Some important ones include doubling of farmers income by 2022-23, improving the terms of trade for farmers by focusing on target based exports.

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By Aloke Agarwal

Union Budget 2020 India: Agriculture and allied sector is one of the significant contributors to India’s economy with a share of 14.9% 1 in the total Gross Value Added (GVA) in 2017-18 at constant prices. It also employs 43.9% 2 of the country’s total workforce. Given the importance of this sector to both the economy and the country’s rural population, the Central Government has identified various priorities for the development of this sector. Some important ones include doubling of farmers income by 2022-23, improving the terms of trade for farmers by focusing on target based exports, promoting precision agriculture through use of innovative technologies, increasing water-use efficiency and renewing focus on animal husbandry, dairy and fisheries thereby shifting cultivators from farm to non-farm activities.

To achieve these objectives various initiatives and schemes have been undertaken by the Government. For increasing the farmer’s income, the government raised the MSP for select crops; it is also providing Rs 6,000 annually to farmers under the Pradhan Mantri Kisan Samman Nidhi (PMKSN); for linking the farmers directly to the market the government is working on the National Agricultural Market (e-NAM), a single national market allowing interstate trading of agricultural produce.

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For improving the on-farm water use efficiency, the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) has been launched. For ensuring continuous supply and mitigating price volatility in Tomato, Onion and Potato the government is implementing the Tomato, Onion and Potato (TOP) scheme under Operation Greens aimed at promoting market linkages, farm gate agri infrastructure, agri-logistics, processing facilities etc. To boost exports, financial assistance and subsidies to exporters is being provided through the Agricultural and Processed Food Products Export Development Authority (APEDA).

Last year a separate Department of Animal Husbandry, Dairy and Fisheries was formed to give special impetus for harnessing the immense potential of this agri-allied sector. Other initiatives like the Fasal Bima Yojna, Agri Marketing infrastructure scheme, Model Agri Produce Marketing Act etc. are also being undertaken for the overall development of this sector.

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Last year the government significantly increased the budget outlay of the Agri and Allied sector by about 78% to Rs 1.30 lakh crore. To supplement these initiatives and to take forward the agri sector development agenda, some additional measures that the government can consider are as follows.

* For providing farmers adequate access to finance, innovative lending schemes linking loan repayment to the crop harvest period rather than a fixed term may be introduced. Further delineating formal guidelines to permit restructuring of farmer loans with lenders based on the crop harvested, market prices and compulsory farm insurance may also be considered.

* Last year’s budget announced forming another 10,000 Farmer Producer Organizations (FPOs) in the next 5 years. To make these FPOs sustainable it is suggested that innovative financing schemes with flexible collateral assessment requirement may be considered for FPOs. Further to promote use of innovative technologies in agri production, incentives may be provided to FPOs for adopting smart technologies like smart water sprinklers, sensors based pest control, humidity & soil nutrient sensors etc. This will help individual farmer members to access latest technologies at relatively lower cost.

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* To promote organic farming and to reduce the cost of production for increasing farmer’s income, the government introduced incentives for Zero based Natural farming last year. Increasing the incentives on alternative farming practices like use of Hydroponics or Aquaponics may also be considered. These are soil less technologies using substantially less water, chemicals and having much higher yield. . It is important to note that Maharashtra government?is providing 50% 4 subsidy? on hydroponics?for growing animal fodder. Also the eligibility criteria under National Horticulture Board is quite stringent for small farmers to undertake hydroponics and may be relooked into.

* Given the potential of the animal husbandry and dairy sector, additional allocation to the schemes related to this sector may be considered. In 2016-17 this sector contributed about 27% 5 of the Agri sector Gross Value Added (GVA) and was about 11% 6 of total agri-related exports. Currently the allocation to the animal husbandry and dairy sector schemes is only 2.1% 7 of the total agri sector budget.

* Though schemes like Rashtriya Krishi Vikas Yojana (RKVY) have shown good results in some states as it provides them with sufficient inbuilt flexibility, some other centrally sponsored schemes have however given mixed outcomes. This is due to a strict requirement of a proportionate contribution by the State government to these schemes. The Government may consider moving some of these important schemes to the Central Sector Schemes which are 100% funded by the central government, so that the entire allocation by the central government is utilized and the state government may top up additional funds, if required, based on their priorities.

Aloke Agarwal is Partner, Deloitte India. Views are the author’s own

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