Budget 2020 to make agri-economy more competitive

Modi government continues with infrastructure push. Budget to trigger broad spectrum changes in the agri-economy, generate rural employment and pave way for second-generation reforms in port, electricity distribution sectors

New Delhi: Union Budget 2020, made it amply clear that the Narendra Modi government is looking at logistics and infrastructure to boost long term growth and employment, particularly in the rural economy.

Having come to power in 2014, the government literally brought infrastructure sector out of the sick bed and pushed it to a level that was unprecedented.

Leaving aside big bang announcements like Bharatmala or Sagarmala; much of work in transport logistics sector was done silently. This was most evident in the case of railways, that deviated from the usual path of announcing passenger trains and focused on improving the efficiency of cargo movement by debottlenecking chocked tracks, electrification etc.

Barring AC-III passenger movement is not profitable for railways, moreover it occupies the track capacity at the cost of cargo which is already paying too high a tariff. Railways is trying to change this design by private operations of passenger trains (150), dedicated freight corridor, high speed rail etc.

Over and above taking these activities forward, the Logistics Policy - as promised by the finance minister – might henceforth pave way for entry of private sector in an area that is suffering from serious distress.

The Budget has left some clue in this direction by promising “Kishan Rail”, KrishiUDAN (air cargo services for agriculture), granular storage to be run by village societies, geo-tagging land available for private sector investment in storage facilities etc.

The whole plan will be clear in the days to come as we read the fine prints of Budget and follow the policy implementations. But, agri-logistics, that was always held responsible for low returns to farmers, are expected to get a serious leg up.

Building efficient logistics is no easy task, so benefits of this policy focus will take time to be visible enough. But, if implemented it will trigger a paradigm shift in agri-economy.

With market linkage available, farmers will be more prone to change farm and crop patterns depending on potential returns. The results will be felt in rural employment generation.

With a national gas grid finally under construction, downstream industrial opportunities should rise in the hinterlands of the country in the foreseeable future.

Improving efficiency of government-run major ports (12) in the country has been an old agenda. Poor operational efficiency and high cost of Kolkata port, has been a drag force on Eastern India and neighbouring economies of Nepal and Bhutan.

This Budget finally dared to address this crucial area by promising corporatizing atleast one major port. It is to be seen how they take it forward in the face of resistance from trade unions.

Modi government started pushing reforms agenda in the electricity distribution sector, beginning end of the first term. After coming back to power for a second the government took it up more aggressively than ever.

Currently run by State governments, the distribution utilities (DISCOMS) of the country are main cause behind the unviable returns to generation sector, that witnessed huge private investment in the last decade, leading to the piling up of bad date in the banking sector.

The government is already preparing a policy document to open the space for private sector entry in a big way, invite open access, promote use of prepaid smart metres etc. The Budget 2020, had put a timeline to implement these initiatives.

It is a pity that despite availability of highly efficient private sector generation units, which use way less coal to produce same volume of electricity, the State utilities are still running some rickety power stations in the interest of a distorted financial model, where cash losses are met with bank loans.

The Budget has rightly prioratised the need for retiring old power stations.

( Article by Pratim Ranjan Bose. Views expressed above are his own. )