The last 10 years have seen the country’s agricultural output boom from 129.32 million tonnes in FY14 to 330.5 million tonnes in FY23. Agricultural exports too hit a historic high in value terms of $50 billion in FY23 from $37.29 billion in FY14. Over the same period, the budget allocation to the sector rose fivefold, from Rs 22,652 crore in FY15 to Rs 1.15 lakh crore in FY24.
The government’s main theme in successive budgets has been an attempt to double farmer incomes and put money directly in their hands. “We need to think beyond food security and give back to our farmers a sense of income security,” then finance minister Arun Jaitley had said announcing the budget of 2016-17.
Schemes such as PM Kisan Samman Nidhi announced in 2019, which gives farmers up to Rs 6,000 per year as minimum income support via direct benefit transfers, and the crop insurance scheme as well as the interest subvention scheme, which reduces farmers’ loan repayment burden have been vastly credited to support farmer income growth.
The change is evident from the most recent budget, where of the total allocation of Rs 1.24 lakh crore announced for FY24 for Department of Agriculture and Farmers’ Welfare, about 83 percent has been budgeted for three schemes ensuring money directly to farmers, with PM Kisan taking 55 percent of the total amount, followed by crop insurance or Pradhan Mantri Fasal Bima Yojana with about 13 per cent and interest subsidy for short-term credit with almost 16 per.
HITS
PM Kisan
The launch of the Pradhan Mantri Kisan Samman Nidhi, an income support scheme intended for farmers with small landholdings that provides Rs 6,000 per year in three equal instalments, has been the success story for the second term of the Modi government.
Since its launch, more than Rs 2.6 lakh crore has been released to more than 11 crore farmers, as per a Press Information Bureau (PIB) statement issued in August. The government claims that digital transfers have meant that the money reaches the end user.
The scheme, even if it translates into a mere Rs 500 a month for a farmer, is a tectonic shift to move from price policy to income policy, according to agricultural sector expert Devinder Sharma.
Since inception, the government has allocated over 50 percent of its total agriculture budget to this scheme with an allocation of as much as Rs 75,000 crore the very first time.
PM Fasal Bima Yojana
The crop insurance scheme was launched in February 2016 after rolling back earlier schemes such as the National Agriculture Insurance Scheme, Weather-based Crop Insurance Scheme and Modified National Agricultural Insurance Scheme.
The coverage of this scheme was increased from 30 percent of cropped area in 2016-17 to 40 percent in 2017-18 and 50 percent in 2018-19, as announced by Jaitley in his budget speech of 2017.
The scheme at its start was allotted Rs 5,500 crore but exceeded the disbursement amount to come to a total realisation of Rs 13,240 crore. The subsequent year saw the allocation rise significantly to Rs 9,000 crore, then to Rs 13,000 crore in 2018, Rs 14,000 crore in 2019 and to its highest of Rs 16,000 crore in 2020. The scheme allocations have since hovered around the same amount.
Interest subsidy scheme
Launched in 2006-07, the scheme provides short-term agri-loans to farmers for their working capital requirements, at a subvented interest rate of 7 percent per annum for loans up to Rs 3 lakh. Apart from the National Bank for Agriculture and Rural Development, regional rural banks and cooperative banks, the scheme applies to public sector banks and scheduled private sector banks that provide short-term credit to farmers at the subsidised rate.
The government under the scheme has also been providing an additional 3 percent subsidy for farmers who repay the loans on time, thus reducing the effective rate of interest to 4 percent per annum.
Renamed Modified Interest Subvention Scheme in 2022, the scheme has been attracting significant allocations since Budget 2016 with Rs 15,000 crore allocated in 2016-17. The allocations have slowly risen to stand at Rs 23,000 crore in the year 2023-24.
Farmer producer organisations
While a separate subhead for farmer producer organisations or FPOs had already existed in the budget rolled out 10 years ago, material funding only begun with Budget 2021, with the government focusing on “aggregation of small, marginal and landless farmers into FPOs to help enhance economic strength & market linkages of farmers for enhancing their income,”, said a PIB statement issued after the budget in 2021-22.
The government then launched a new central sector scheme with the stated aim of forming and promoting 10,000 new FPOs with a budgetary provision of Rs 700 crore. However, with a utilisation rate of less than 30 percent (Rs 250 crore) of the funds, the budget allocation was slashed to Rs 500 crore the following year. The funds usage picked up in 2022-23, and the allocation was raised to Rs 955 crore in 2023-24.
MISSES
Market Intervention and Price Support Scheme
Aimed at protecting the growers \from making distress sales in the event of a bumper crop during the peak arrival period when prices tend to fall below the cost of production, the scheme had seen continuous increment to allocations till Budget 2022 but saw only a token amount of Rs 1 lakh crore being allocated to it in FY24.
A similar scheme, the Price Stabilization Fund (PSF), had been launched in Budget 2015 with a corpus of Rs 450 crore. While initially the fund was proposed to be used for market intervention for onion and potato only, pulses were added subsequently.
While the fund saw increased utilisation of Rs 594 crore by 2016, it was discontinued soon after. The Ministry of Consumer Affairs, Food and Public Distribution, recently had to approach the finance ministry for Rs 5,400 crore for its PSF to procure onion and pulses for the rest of the financial year.
Lack of infrastructure
An Agriculture Infrastructure Fund, a central sector scheme, was approved by the Cabinet in July 2020 to provide medium- and long-term debt financing for investment in viable projects for post-harvest management infrastructure including freight and storage was launched in 2021-22, with a corpus of 900 crore. But low utilisation brought down the realised value to Rs 200 crore for the said year. A reduced amount of Rs 500 crore was allotted in 2022-23, of which only 150 crore was used. The government extended the same allocation of Rs 500 crore to 2023-24.
Irrigation cover
The country’s flagship scheme for irrigation, the Pradhan Mantri Krishi Sinchayi Yojana, launched in July 2015 to increase water-use efficiency and irrigation coverage, was dissolved in the budget of 2023-24, which merged 10 schemes into the Krishonnati Yojana.
Funds usage since inception was abysmal. In 2021-22, when the scheme had last been given a separate allocation, only Rs 2,000 crore of Rs 4000 crore allotted was used.
As per a May NITI Aayog report, of the total sown area in the country, as much as 45 percent continues to be rainfall dependent.
Climate change adaptation fund
It was in his budget speech in 2014-15 that then FM Jaitley, stressing on the need to adapt to climate change, introduced the National Adaptation Fund for Climate Change (NAFCC) with an outlay of Rs 100 crore. Eight years down the line, the fund has gradually shrunk. From Rs 118 crore in 2015-16, NAFCC funding came down to around Rs 20 crore in 2022-23. After Rs 118 crore in 2015-16, the government set aside Rs 94 crore under the fund for 2016-17, Rs 115.36 crore in 2017-18, Rs 109 crore the following year, and Rs 33.51 crore in 2019-20, before rising to Rs 43 crore and Rs 60 crore in 2020-21 and 2021-22, the, according to a reply by the Minister of State for Environment, Forest and Climate Change Ashwini Kumar Choubey in the Lok Sabha. In 2022-23, the government released around Rs 20.94 crore under NAFCC for five states and one Union territory, while in 2023-24, the grant to be released is yet to be specified.
Experts’ take
“While a larger outlay to agriculture and initiation of key policies in the sector are much welcome steps, bottlenecks in all areas of the sector, be it distribution, storage, freight or innovation, are persistent. These can only be met if the private sector is roped in”
Sandeep Sabharwal, group chief executive officer, Sohan Lal Commodity Management Pvt Ltd
“The focus of the next budget is going to be on ensuring cash in hands of farmers. The government has had to walk a tightrope between inflation and farmer remuneration. These export curbs have led to lower incomes for farmers, a key voter base. The government can thus look at prioritising schemes that give cash to farmers”
Pushan Sharma, director, research, Crisil
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