Hyderabad : The presentation of the interim budget on February 1, 2024, on the eve of Lok Sabha elections (in April-May 2024) should normally be a muted affair. But the precedent of the interim budget of 2019 has set a new benchmark when a much needed, but entirely new scheme of direct income support, PM Kisan Samman Nidhi, was not only announced but it was also made applicable from December 2018. The first PM-Kisan installment was disbursed to a large number of land holders before the 2019 elections.
Opinion: High expectations on Union Budget 2024 for agriculture sector
Published : Jan 27, 2024, 4:37 PM IST
|Updated : Jan 29, 2024, 8:49 PM IST
Major agriculture challenges that the Union Budget 2024 needs to address include directed credit at subsidised rates, expansion of crop insurance, incentivising innovative farm practices, higher allocations to mobile soil testing labs, import substitution and cutting back imports of edible oils. Adoption of technology and incentivising agri start-ups are among other important aspects. Writes Paritala Purushotham.
Union Budget 2024: Challenges in agriculture sector
Should we expect a similar announcement this year? Here are the major expectations from the Union Budget on agriculture.
- What the budget can do at the ecosystem level? Cheap credit to farmers is the key. The budget must look at directed credit at more subsidized rates for purchase of equipment, irrigation and other long term investments. Focus has to shift out of expendables funding into long-term funding. Secondly, crop insurance is the key to agricultural growth and build buffers. Budget must focus on expanding the crop insurance scheme.
- It is time to bite the bullet on incentivizing innovative farm techniques. Drip irrigation can make a huge difference in a water-scarce country like India. Special incentives, tax breaks and easy credit are called for. Similarly, a boost to lift irrigation and vertical farming can go a long way in addressing the problem of scarce farm land. Budget 2024 needs to incentivize such innovations.
- There is not enough investments happening in pre-sale and post-sale infrastructure. For example, quality checks and monitoring of soil is a key data point. This can be enabled by bigger allocations to mobile soil testing labs. In addition, there is inadequate warehousing, cold storage, low wastage transportation etc. Unless that happens, supply chain constraints will plague the agri ecosystem. Government can incentivize setting up of warehousing facilities, cold storages, primary pack-houses, refer vans via PPP. Agricultural infrastructure can also be tax incentivized.
- Import substitution must be a major theme in this budget. There is still too much of import dependence on pulses, edible oils and vegetables. India is projected to import around one million tonnes of tur dal in the marketing year 2024-25 in order to fulfil the domestic demand. This decision stems from the anticipation of a drop in domestic production due to the declining acreage of pulses crops. Here it is important to understand the crisis in tur dal (kandi pappu). India's trouble with tur dal lies in low domestic production, leading to the country's heavy reliance on African countries. Maharashtra, Karnataka and Uttar Pradesh are top three producers of tur dal in India, and all three states are bearing the brunt of the erratic monsoon this year. As per the third advance estimate released by the government, the tur dal production in India for the year 2022-23 amounted to approximately 3.4 million metric tons (MMTs), 19 per cent lower as compared to the previous year's production of 4.2 MMTs. Although, it is slightly better than 2019 when the production was as low as 3.3 MMTs but the trend in Indian tur crop production has been on a downward trajectory since 2018. The pulse cultivation area for the current kharif season also witnessed a dip this year standing at 122.57 lakh hectares as of September 2023 as compared to 128.49 lakh hectares recorded during the same period last year, according to data from the agriculture ministry. Tur is one of the pulses that often experiences heavy price fluctuations, and these fluctuations can have a ripple effect on the prices of other pulses as well. Since pulses are a crucial component of the Indian diet, any significant price increase in tur dal can lead to broader implications for overall food affordability and inflation in India.
- Similarly, due to the shortage of edible oils, the country is compelled to import edible oils to the tune of $10 billion annually. Ironically, India had achieved self-sufficiency in edible oils as early as 1990. The Budget must focus on regaining India's domestic strength in edible oils to cut back imports.
- Incentivise farmers to diversify their income sources. For example, organic farming has seen rapid growth post the pandemic. The budget must offer clear incentives to farmers for crop diversification into sustainable areas. Budget can incentivize farmers to diversify into resilient and nutritious crops like sorghum and millets. This should help achieve targets under the Paris Agreement.
- India's fertiliser mix is strongly in favour of Urea as opposed to potassic and phosphatic fertilizers. That is largely due to low cost of Urea. This had a negative impact on soil health. The budget must tweak the DBT (direct benefit transfer) scheme to incentivize reducing excess dependence on Urea. The budget must make a start by giving a big push to agricultural research. As a share of agricultural GDP, India spends just about 0.35% on agricultural R&D. China spends 0.80% and most of Asia and other emerging markets spend much higher than India does. A recent CGIAR report has underlined a cost-to benefit ratio of 10:1 from an increase in agricultural R&D (benefit of Rs 10 on spending of Rs one). The positive impact of higher agricultural R&D spending is visible not only in soil quality and output, but also in agricultural incomes. One thing that the markets are expecting from the Union Budget is more clarity on the status of the Farm Bills, especially with respect to marketing of farm produce. The 2 year long farmer-agitation is over and the government has withdrawn the bills. However, for the economy, the agricultural reforms are still the key. Farmers need to be given a choice rather than just tying them down to designated mandis, where the large brokers dominate price setting. Budget 2024 needs to provide clarity on this subject, especially on giving a wider marketing choice to the farmers.
Use of technology and entrepreneurship in agriculture- The points mentioned above are important and have been parts of most routine budgets in some form or other. Budget 2024 must effect a quantum shift in the use of technology and entrepreneurship in agriculture. Here is how.
- Greater information sharing with farmers on weather, all-India prices and government policy can go a long way in making farmers more aware and in making better decisions.
- For a long time there was talk about helping farmers sell their produce through the futures market. The budget must put the action plan in place.
- Above all, it is time to create agri-entrepreneurs. There are already enough agri start-ups in the market. Budget 2024 must focus on incentivizing these start-ups for extending many of their pioneering services to actually benefit the farmers.
Hyderabad : The presentation of the interim budget on February 1, 2024, on the eve of Lok Sabha elections (in April-May 2024) should normally be a muted affair. But the precedent of the interim budget of 2019 has set a new benchmark when a much needed, but entirely new scheme of direct income support, PM Kisan Samman Nidhi, was not only announced but it was also made applicable from December 2018. The first PM-Kisan installment was disbursed to a large number of land holders before the 2019 elections.
Should we expect a similar announcement this year? Here are the major expectations from the Union Budget on agriculture.
- What the budget can do at the ecosystem level? Cheap credit to farmers is the key. The budget must look at directed credit at more subsidized rates for purchase of equipment, irrigation and other long term investments. Focus has to shift out of expendables funding into long-term funding. Secondly, crop insurance is the key to agricultural growth and build buffers. Budget must focus on expanding the crop insurance scheme.
- It is time to bite the bullet on incentivizing innovative farm techniques. Drip irrigation can make a huge difference in a water-scarce country like India. Special incentives, tax breaks and easy credit are called for. Similarly, a boost to lift irrigation and vertical farming can go a long way in addressing the problem of scarce farm land. Budget 2024 needs to incentivize such innovations.
- There is not enough investments happening in pre-sale and post-sale infrastructure. For example, quality checks and monitoring of soil is a key data point. This can be enabled by bigger allocations to mobile soil testing labs. In addition, there is inadequate warehousing, cold storage, low wastage transportation etc. Unless that happens, supply chain constraints will plague the agri ecosystem. Government can incentivize setting up of warehousing facilities, cold storages, primary pack-houses, refer vans via PPP. Agricultural infrastructure can also be tax incentivized.
- Import substitution must be a major theme in this budget. There is still too much of import dependence on pulses, edible oils and vegetables. India is projected to import around one million tonnes of tur dal in the marketing year 2024-25 in order to fulfil the domestic demand. This decision stems from the anticipation of a drop in domestic production due to the declining acreage of pulses crops. Here it is important to understand the crisis in tur dal (kandi pappu). India's trouble with tur dal lies in low domestic production, leading to the country's heavy reliance on African countries. Maharashtra, Karnataka and Uttar Pradesh are top three producers of tur dal in India, and all three states are bearing the brunt of the erratic monsoon this year. As per the third advance estimate released by the government, the tur dal production in India for the year 2022-23 amounted to approximately 3.4 million metric tons (MMTs), 19 per cent lower as compared to the previous year's production of 4.2 MMTs. Although, it is slightly better than 2019 when the production was as low as 3.3 MMTs but the trend in Indian tur crop production has been on a downward trajectory since 2018. The pulse cultivation area for the current kharif season also witnessed a dip this year standing at 122.57 lakh hectares as of September 2023 as compared to 128.49 lakh hectares recorded during the same period last year, according to data from the agriculture ministry. Tur is one of the pulses that often experiences heavy price fluctuations, and these fluctuations can have a ripple effect on the prices of other pulses as well. Since pulses are a crucial component of the Indian diet, any significant price increase in tur dal can lead to broader implications for overall food affordability and inflation in India.
- Similarly, due to the shortage of edible oils, the country is compelled to import edible oils to the tune of $10 billion annually. Ironically, India had achieved self-sufficiency in edible oils as early as 1990. The Budget must focus on regaining India's domestic strength in edible oils to cut back imports.
- Incentivise farmers to diversify their income sources. For example, organic farming has seen rapid growth post the pandemic. The budget must offer clear incentives to farmers for crop diversification into sustainable areas. Budget can incentivize farmers to diversify into resilient and nutritious crops like sorghum and millets. This should help achieve targets under the Paris Agreement.
- India's fertiliser mix is strongly in favour of Urea as opposed to potassic and phosphatic fertilizers. That is largely due to low cost of Urea. This had a negative impact on soil health. The budget must tweak the DBT (direct benefit transfer) scheme to incentivize reducing excess dependence on Urea. The budget must make a start by giving a big push to agricultural research. As a share of agricultural GDP, India spends just about 0.35% on agricultural R&D. China spends 0.80% and most of Asia and other emerging markets spend much higher than India does. A recent CGIAR report has underlined a cost-to benefit ratio of 10:1 from an increase in agricultural R&D (benefit of Rs 10 on spending of Rs one). The positive impact of higher agricultural R&D spending is visible not only in soil quality and output, but also in agricultural incomes. One thing that the markets are expecting from the Union Budget is more clarity on the status of the Farm Bills, especially with respect to marketing of farm produce. The 2 year long farmer-agitation is over and the government has withdrawn the bills. However, for the economy, the agricultural reforms are still the key. Farmers need to be given a choice rather than just tying them down to designated mandis, where the large brokers dominate price setting. Budget 2024 needs to provide clarity on this subject, especially on giving a wider marketing choice to the farmers.
Use of technology and entrepreneurship in agriculture- The points mentioned above are important and have been parts of most routine budgets in some form or other. Budget 2024 must effect a quantum shift in the use of technology and entrepreneurship in agriculture. Here is how.
- Greater information sharing with farmers on weather, all-India prices and government policy can go a long way in making farmers more aware and in making better decisions.
- For a long time there was talk about helping farmers sell their produce through the futures market. The budget must put the action plan in place.
- Above all, it is time to create agri-entrepreneurs. There are already enough agri start-ups in the market. Budget 2024 must focus on incentivizing these start-ups for extending many of their pioneering services to actually benefit the farmers.
Last Updated : Jan 29, 2024, 8:49 PM IST
