The farm sector has in recent years been a bright spot in the economic landscape, even amid controversies surrounding reforms in the sector and slower-than-projected growth in the income of farmers. Finance minister Nirmala Sitharaman’s Budget speech on February 1 will likely include a set of measures to boost investments in agriculture infrastructure, including those aimed at encouraging private investments.
Food and fertiliser subsidies, which have relevance for the sector, is set to cross Rs 5 trillion in FY23 due to the volatility in international prices of hydrocarbons and other fertiliser inputs and the free food grains supply scheme. The total expenditure on these subsidies is expected to moderate in FY24 to less than Rs 4 trillion, which is still an elevated level.
Official sources indicate that the coming Budget may also meaningfully increase the outlay for agricultural research and development (R&D), and unveil steps to promote usage of nano fertilisers to reduce import dependence.
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The share of gross value added (GVA) in agriculture and allied sectors rose to 20.2% and 18.8%, respectively, in FY21 and FY22 from the trend level of around 18%, partly because other sectors of the economy suffered more during the pandemic.
Adequate monsoon rains in the last four years also have positively impacted the sector as food grains production rose by more than 10% since 2018-19 to a record 315.72 million tonne (MT) in 2021-22 crop year (July-June).
Since the launch of Rs 1 trillion Agri Infrastructure Fund a year back, projects worth Rs 13,680 crore have been sanctioned so far. Experts say that the focus of the Budget would be to give a boost to the livestock sector which grew at a compound annual growth rate (CAGR) of a robust 8.15% over the five years ending 2019-20. In contrast, the production of rice, wheat and coarse cereals expanded at CAGRs of 2.7%, 2.9% and 4.8%, respectively, between 2015-16 and 2020-21.
“Stimulating investment in the animal husbandry sector should be given high priority in the coming budget,” Pratap Birthal, director, National Institute of Agricultural Economics and Policy Research (NCAP), said.
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In the last four years, annual allocations to the department of agriculture and farmer welfare have been in the range of Rs 1-1.24 trillion, of which a major chunk went towards the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) scheme. In the current fiscal, Rs 68,000 crore or 55% of the allocation to the agriculture ministry was for the income support scheme for farmers — PM-Kisan — launched in 2019. Currently, Rs 6000 is annually transferred to around 100 million farmers bank accounts in three equal installments.
“We envisage a similar outlay of PM-Kisan in FY24,” an agriculture ministry official said. The government is likely to release the 13th instalments of PM-Kisan to farmers this month. The budgetary allocation for R&D in the agricultural sector for development of new crop varieties and technologies, which had been stagnated in the range of Rs 7,000-8,000 crore annually in the last five years, is likely to get a boost given the urgent needs for developing climate resilient crop varieties.
“Financial allocation for research and development and micro irrigation should get a substantial boost so that productivity of crops could be enhanced substantially and make Indian agriculture globally competitive,” Ashok Gulati, agricultural economist and Infosys Chair Professor for Agriculture. Indian Council for Research on International Economic Relations (ICRIER), said. He added that the Budget should chart out steps for rationalisation of fertiliser and food subsidies.
The farmers’ income on an average may increase by around 70% nationally in seven years through June 2023, falling short of the target of doubling their income during the period, even though some states, including Andhra Pradesh and Madhya Pradesh, may achieve the goal fully. At the national level, one of the reasons for not achieving the target will be the non-implementation of farm reforms such as model Agriculture Produce Marketing (Regulation) Act, Livestock Marketing Act and Land Leasing Act.
The Budget is expected to announce revamp of flagship Pradhan Mantri Fasal Bima Yojana (PMFBY) through measures, including the usage of AI-based technologies, so that more states come on board after dropping out because of fiscal constraints, for implementation of the scheme where subsidies on premium is shared between centre and states.
Currently, 19 states and union territories are implementing the crop insurance scheme. Punjab, which has not adopted the scheme launched in 2016, is in discussion with the agriculture ministry to launch the scheme from kharif 2023 in the state. Telangana, Bihar, Jharkhand and Gujarat, which had dropped out of the crop insurance scheme citing the high cost of premium, have initiated discussion with the Centre to roll out PMFBY by next year.
To reduce rising fertiliser subsidy which is expected to reach a record Rs 2.5 trillion in FY23, the Budget is expected to provide a road map for reducing import dependence on soil nutrients through boosting production of nano-urea (launched last year) and introduction of nano-DAP in coming kharif season.
Fertiliser secretary Arun Singhal recently said that out of 35 MT of annual urea demand, potentially 20 MT can be replaced by nano urea. “Even if that does happen to the fullest extent in the next couple of years, the urea imports will be ruled out by 2025,” he said.
For promotion usage of drones in agriculture for crop assessment, digitisation of land records, spraying of insecticides, and nutrients as announced in the previous year budget, the agriculture ministry, under the sub-mission on agricultural mechanisation, provides subsidies in the range of 40-100% for the cost of drones.
Sources said the Budget is expected to announce sops under the proposed digital agriculture mission for usage of advanced technologies in crop forecasting, application of inputs and weather forecast. In her FY23 Budget speech, Sitharaman had announced promotion of ‘chemical-free natural farming’ with a focus on farmers’ lands in 5-km wide corridors along river Ganga. This year’s budget announcement could include financial allocation for promotion of natural farming.
Sources said there will be a sizable increase in financial allocation provided under the Bhartiya Prakritik Krishi Padhati (BPKP), a sub-scheme under the Paramparagat Krishi Vikas Yojana being implemented by the agriculture ministry.
After the discontinuation of Pradhan Mantri Garib Kalyan Anna Yojana or free ration scheme from December 31, 2022, the government envisages a food subsidy of around Rs 2 trillion in FY24 from an estimated Rs 2.73 trillion in FY 23. The government last month had announced providing food grain to states under the National Food Security Act free from January 1, 2023 for one year.
The MSP of paddy and wheat has been consistently rising at slightly higher than earlier in recent years thanks to the policy of cost-plus-50% returns ensured since the 2019-20 marketing year. Also, with the exception of the current rabi marketing year (April-June) when wheat procurement dropped sharply, MSP purchases from the farmers have been around 60 MT annually. Currently, the government fixes MSP for 23 crops grown in both kharif and rabi seasons.
