Agriculture in Budget 2010-11

Surinder Sud**

Describing the agriculture sector as the centre-stage in the Government’s resolve to promote inclusive growth, enhance rural incomes and sustain food security, the Finance Minister, Shri Pranab Mukherjee, proposed nearly 21.6 per cent increase in the Central Plan outlay for this sector in the 2010-11 Union Budget. This is the biggest step up in the plan allocation for this sector in several years.

The Budget envisages a four-pronged strategy to spur agricultural growth and tackle supply side constraints that have set the food prices soaring in recent months. Under this, the sway of the green revolution is proposed to be widened, besides consolidating the gains already made under it. Many fiscal incentives have been proposed in the Budget to lend sustainability to agriculture and introduce reforms in the marketing of the food products to reduce the wide gap in the prices received by the farmers and those paid by consumers. Stress has been laid on further infusion of technology in this sector to augment agricultural production.

The Budget has set apart Rs 12,308 crores as the Central Plan outlay for agriculture and allied sectors for 2010-11. This is Rs 2,185 crores, or 21.58 per cent, higher than the 2009-10 Revised Estimates (RE) of Rs 10,123 crores. The major part of the additional allocation has gone to the Department of Agriculture and Cooperation. The rest has been shared by the Department of Agricultural Research and Education (DARE) and the Department of Animal Husbandry, Dairying and Fisheries.

The outlay for the Department of Agriculture and Cooperation has been raised from Rs 7,018 crores in 2009-10 (RE) to Rs 8,280 crores for 2010-11. This marks an increase of Rs 1,262 crores. Similarly, the Department of Agricultural Research and Education has been allocated Rs 2,300 crores for 2010-11, against Rs 1,760 crores for 2009-10 (RE), a hike of Rs 540 crores, and the Department of Animal Husbandry, Dairying and Fisheries Rs 1,300 crores for 2010-11, against Rs 930 crores in the 2009-10 (RE), marking a hike of Rs 370 crores.

The four elements of strategy outlined in the budget to spur farm production are: Increase in agricultural production; Reduction in wastage of farm produce; Credit support to farmers and Thrust to food processing sector.

Under the first element, farm production is proposed to be increased by extending the green revolution to the eastern region of the country which had not benefitted from the green revolution as much as the North-Western and some Southern States had. The States identified for this purpose include Bihar, Chhattisgarh, Jharkhand, Eastern Uttar Pradesh, West Bengal and Orissa. The Gram Sabhas and the farming families are proposed to be involved in the endeavour to achieve this objective. A sum of Rs 400 crores has been earmarked for this purpose.

Going a step further, the Budget envisages celebrating the 60th year of the Indian Republic by organising 60,000 “pulses and oilseed villages” in predominantly rainfed areas for concentrated interventions for boosting the output of pulses and oilseeds to augment their domestic supplies. Programmes related to rain water harvesting, watershed management and soil health improvement are planned to be taken up under the pulses and oilseeds villages initiative as part of the Rashtriya Krishi Vikas Yojana. An outlay of Rs 300 crores has been fixed for 2010-11 for this scheme.

To sustain the gains already made in the green revolution areas, the budget proposes to promote conservation farming, which involves concurrent attention to soil health, water conservation and preservation of biodiversity. A sum of Rs 200 crores has been allocated for launching this climate resilient agriculture initiative.

As part of the second element of the four-pronged strategy, the Budget proposes reduction in wastages in storage as well as in operations of the existing food supply chains. Quoting the Prime Minister, Dr Manmohan Singh, who had said, “We need greater competition and therefore need to take a firm view on opening up of the retail trade”, the Finance Minister said that this would help bring down considerable difference between the farm gate prices, wholesale prices and retail prices.

The Finance Minister also referred to the wastage of grains procured for the buffer stocks and the public distribution system due to acute shortage of warehousing capacity of the Food Corporation of India (FCI). “This deficit in the storage capacity is met through an ongoing scheme for private sector participation where the FCI has been hiring godowns from private parties for a guaranteed period of 5 years. This period is now being extended to 7 years”, he said.

The 3rd element of the strategy involves greater flow of institutional credit to Agriculture. For this, the Budget raises the target for total credit flow in 2010-11 to Rs 3,75,000 crores from Rs 3,25,000 crores in 2009-10. The Regional Rural Banks (RRBs), which play a significant role in meeting the credit needs of rural people, have been provided higher capital support to enable them perform their job more effectively. These banks were last capitalised in 2006-07.

To provide relief to the farmers who have taken loans and are finding it difficult to repay in time because of the recent drought, the repayment period for farm loans has been extended by six months, from December 31, 2009 to June 30, 2010. Besides, the subvention for timely repayment of crop loans has been increased from 1 per cent to 2 per cent for 2010-11. Thus, the effective rate of interest for the farmers repaying their loans on time will work out to 5 per cent per annum, instead of the usual 7 per cent.

The promotion of Food Processing has been included in the agricultural growth strategy as its fourth element. The Budget has proposed setting up of five more mega food parks, in addition to the 10 such parks already being put up, to facilitate availability of state-of-the-art infrastructure for Food Processing sector.

The budget identifies three key areas for focused attention. These are: (i) A strong supply chain for perishable farm produce to reach consumption and processing centres promptly; (ii) Infrastructure and technology to convert such produce into value-added products; and (iii) Infusion of technology to augment agricultural production.

For these areas, the budget has proposed granting ‘project import status’ with a concessional import duty of 5 per cent for setting up mechanised handling systems and pallet racking systems in mandis or warehouses for foodgrains and sugar as well as full exemption from service tax for the installation and commissioning of such equipment. Similar concessions have been offered for setting up cold storages, cold rooms and pre-coolers for preservation or storage of the produce of agriculture and related fields.

The Budget proposes several other duty concessions as well. The concessional import duty on specified machinery for use in the plantation sector, introduced in 2003 to last till July 2010, has been extended till March 2011. This is expected to provide sufficient time for this sector to achieve the desired objective of mechanisation of key operations. The Budget has also mooted concessional customs duty of 5 per cent on specified agricultural machinery which is at present not manufactured in the country. Full exemption from excise duty has been granted to trailers and semi-trailers used in agriculture. In the field of service tax, full exemption has been granted to testing and certification of crop seeds as well as to transportation of cereals and pulses by road. The transportation of these items by rail is already exempted from service tax.

Regarding the nutrient based subsidy policy for fertilisers, which is scheduled to come into force from April 1, 2010, the Finance Minister said that this would promote balanced fertilisation through new fortified products and focus on extension services by the Fertiliser Industry. This will, in turn, enhance agricultural productivity and ensure better returns to the farmers. “Over time, the policy is expected to reduce volatility in the demand for fertiliser subsidy in addition to containing the subsidy bill”, the Finance Minister said. “The new system will move towards direct transfer of subsidy to the farmers”, he added.

The Finance Minister assured that the Government would see to it that the retail prices of the fertilisers remained near the present level in the transition year, that is 2010-11, for the subsidy system to move from product-based to nutrient-based.

In a first such move aimed at empowerment of the women farmers whose number is steadily growing, the Budget moots launching of a “Mahila Kisan Sashaktikaran Pariyojana”. An outlay of Rs 100 crores has been set apart for this initiative as a sub-component of the National Rural Livelihood Mission.

**Senior Journalist

Disclaimer : The views expressed by the author in this feature are entirely his own and do not necessarily reflect the views of  INVC.