Budget 2021| Allocation for agriculture department flat at Rs 1,24,000 crore

In Budget 2022-23, the allocation for the department of agriculture and farmers’ welfare (under the ministry of the same name) remained nearly flat at Rs 1,24,000 crore from Rs 1,23,017 crore in FY22.

Some of the key schemes this ministry oversees saw similar or reduced allocations for 2022-23. The Pradhan Mantri Fasal Bima Yojana was allocated Rs 15,500 crore, down from Rs 16,000 crore in FY22, but the cash assistance scheme PM-KISAN saw a higher allocation at Rs 68,000 crore (Rs 65,000 crore).

For the department of agricultural research, the allocation mimicked FY22 at Rs 8,513.62 crore.

Given that the government had been forced to roll back three farm laws, the Budget was in focus in terms of what allocations the government would make to the politically significant sector, subsidies and spending with an eye on the forthcoming assembly elections. From BE allocations, it is clear that major schemes for agriculture and farmers are unlikely to be expanded this fiscal.

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The ministry has two departments—agriculture, cooperation and farmers’ welfare, and agricultural research and education. Nearly three-fourths of the ministry’s budget in 2021-22 was earmarked for three key schemes: PM-KISAN, the income support scheme, interest subsidy on short-term credit to farmers (15 percent), and the Pradhan Mantri Fasal Bima Yojana, the crop insurance scheme.

Agriculture has been one of the bright sparks in an otherwise gloomy economic growth story during these COVID-19 times. The first advance estimates for 2021-22 have pegged growth in gross value added (GVA) at basic prices for agriculture at 3.6 percent in 2020-21 and 3.9 percent in 2021-22. Agriculture is one of just two sectors of the economy to register growth in both these years.

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Not just its growth potential, the importance of agriculture in economic policymaking comes also from the political weight this sector carries. The recently concluded farmers’ protests and the repeal of the controversial farm laws have ensured that farmers, agriculture and income from farming have remained centre stage for most of this fiscal year.

In her 2021-22 budget speech, Sitharaman made the following proposals regarding agriculture:

1) An agriculture and infrastructure development cess was announced on certain goods for financing agricultural infrastructure and other developmental activities. These goods include certain imports such as cotton, coal, gold, silver and alcoholic beverages, and petrol and diesel.

2) The Agriculture Infrastructure Fund was to be made available to the agriculture produce market committees for augmenting their infrastructure facilities. She had also said that 1,000 more mandis will be integrated with the electronic National Agriculture Market (e-NAM).

3)  Operation Green Scheme, which presently provides a subsidy on the storage and transportation of tomatoes, onions and potatoes, was to be extended to cover 22 perishable goods to boost value addition and exports.

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As per latest available data, the average income of agricultural households in India was just Rs 10,218 per month in agricultural year (AY) (July-June) 2018-19. While this is an almost 60 percent increase over 2012-13, the fine print of the government’s findings (contained in the latest Situation Assessment Survey) indicates mounting income stress for India’s farmers during these six years.

Farmers are now earning more from wages than from crop cultivation, indicating that cultivation is becoming less lucrative. Then, nearly every second farming household remained indebted in 2018-19 (much like 2012-13) but the indebtedness or amount owed has increased significantly. Also, an overwhelming majority of farmers continue to hold minuscule areas of land, with only 0.2 percent of rural households owning more than 10 hectares in AY2018-19.

There is no data after AY2018-19 on average income of farming households and the pandemic has probably worsened last-mile delivery of several schemes the Centre has announced over the years to augment farmer incomes.

In the Budget for 2021-22, to augment farmers’ income:

1) Sitharaman had said that the MSP regime has already undergone a “sea change” to assure price that is at least 1.5 times the cost of production across all commodities, as procurement has also continued to increase at a steady pace. This has resulted in increase in payment to farmers substantially.

2) The agricultural credit target had been increased to Rs 16.5 lakh crore for FY22 and the minister had assured increased credit flow to animal husbandry, dairy and fisheries.

3) The allocation to the Rural Infrastructure Development Fund was increased from Rs 30,000 crore to Rs 40,000 crore.

4) The corpus of the Micro Irrigation Fund had been doubled to Rs 10,000 crore.