- Allocation for agriculture remains largely in line with February 2019 Budget
- Direct incomes support for marginal farmers
- Interest rate subvention to support allied farm activities
- Allocation for urea subsidy up
- Benefits from schemes would rest on prudent implementation
Amid several macro-economic and geopolitical challenges, the Centre came out with a Budget focussed on infrastructure development and financial sector reforms. Allocations for the agri sector remained largely in line with the ones announced in the February 2019 Budget with some marginal tweaks.
While a lot would depend on the actual implementation of the schemes, allocations indicate a future boost for rural incomes, which would ripple through as a boost in demand for farm inputs and rural consumption.
A recap of major agri allocations
Income support scheme - Allocation to PM Kisan scheme is aimed at providing structured incomes support to poor and rural farmers of Rs 6,000 per year for farmers with land holdings below two hectares. This benefit is to be transferred directly into the bank accounts of beneficiary farmers in three equal instalments of Rs 2,000 each and will be funded directly by the Centre. This scheme will benefit around 12 crore farmers and will cost the government around Rs 75,000 crore, the allocation for which has been made in the Budget.
Fertiliser subsidy - Budgeted allocation for the fertiliser subsidy programme of the government has been increased by around Rs 8,000 crore. While allocation for the nutrient-based subsidy remained largely flat, there was increased allocation for urea-based subsidy, higher than the allocations made in February 2019. The move is expected to provide support to the government's direct benefit transfer (DBT) scheme and quicker clearing up of outstanding subsidies of fertiliser companies dealing in urea-based fertilisers.
Interest rate subsidy – Allocations for interest rates subsidies for short term credit to farmers are the same as the February Budget, up by Rs 3,000 crore from last year's. The allocation is aimed to provide a two percent interest subsidy to be given to farmers involved in animal husbandry and farm allied activities via the kisan credit card scheme. An additional three percent subsidy has also been announced on timely payment of loans. This move would help encourage and support animal husbandry and allied farm activities, thereby developing alternative income sources on farms.
Crop insurance scheme - The February Budget hiked the allocation for the crop insurance to Rs 14,000 crore, an uptick of Rs 1,000 crore over last year. This additional allocation would help in promoting crop insurance penetration in the country and help protect farmers in times of crop failures.
Minimum support prices – Allocation for the MSP implementation scheme has been raised to Rs 3,000 crore. Allocations for crop procurement to FCI and decentralised procurement have also seen a sharp uptick. Prudent use of these allocation could enable a better implementation of the announced MSPs.
OutlookWhile the companies operating in this space were looking for drastic actions to completely overhaul the agriculture sector and holistically address the issue of agri distress, what came out was more of the same announcements with little tweaking here and there. Agri input companies will now be looking up to the progress of the monsoon to ascertain their near-term business outlook.
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