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Last Updated : Jan 04, 2018 04:17 PM IST | Source: CNBC-TV18

Budget Wishlist: Dairy sector should be given priority sector status

In an interview to CNBC-TV18, RS Sodhi, MD of Gujarat Cooperative Milk Marketing Federation (GCMMF), S Sivakumar, Group Head-Agriculture & IT Business at ITC and VP Mahendra, VC & MD of VST Tillers Tractors discussed about what one should expect if one is getting a farm focused Budget.

CNBC TV18 @moneycontrolcom

In an interview to CNBC-TV18, RS Sodhi, MD of Gujarat Cooperative Milk Marketing Federation (GCMMF), S Sivakumar, Group Head-Agriculture & IT Business at ITC and VP Mahendra, VC & MD of VST Tillers Tractors discussed about what one should expect if one is getting a farm focused Budget.

Sodhi said Indian farmers are in distress due to decline in commodity prices.

He further said that 30 percent of agriculture contribution is made by animal husbandry. Therefore, growth in farmers' income is due to increase in animal husbandry.

He also mentioned that there should higher budget allocation to animal husbandry to improve farm income.

According to him, dairy and animal husbandry sectors should be given priority sector status.

ITC's Sivakumar said that the government has already launched good schemes and one should now focus on implementation.

He further said that the new model of agricultural produce market committee (APMC) Act is a positive move. Therefore, upcoming Budget should enable states to implement the new model act.

According to him, food processing should be zero rated under goods and services tax (GST) regime.

He also mentioned that higher minimum support price (MSP) would be unsustainable as government has to keep a leash on inflation.

Talking about DBT, he said fertiliser direct benefit transfer (DBT) won't raise productivity but will reduce cost.

Income from animal husbandry should be exempt from income tax, he added.

VP Mahendra of VST Tillers said DBT requires a little fine-tuning as some farmers misuse funds.

Below is an excerpt of the interview.

Latha: If you were to ask the government for a farm focused Budget, what exactly would you want from them? What would be your Budget wish list?

Sodhi: What is happening today in Indian farmers, they are in distress. Reason is that it is not pertaining only to India. All over the world, commodity prices are declining. Unfortunately, we had two years drought, this year production is good, but prices are lower so farmers' income has reduced. Now coming to our expectation from the Budget, agriculture contribution to the national gross domestic product (GDP) is around 17-18 percent. Out of that, 30 percent is contributed by animal husbandry.

What we expect is that animal husbandry on which 80 percent are dependent are landless and marginal farmers. If you take total rural India, 80 percent landless or marginal farmers are dependent on animal husbandry. But if you see the central budget, or the state government budget, whatever kitty they keep for agriculture, central budget will keep maximum 5-6 percent for the animal husbandry out of the agriculture budget whereas it should be minimum 30 percent. Now if you take farmers' income and the growth, maximum growth in rural India, in the farmers' income is coming from animal husbandry.

If you take last 10 years' data, growth in agriculture is 2-3 percent, but in animal husbandry income growth is 14 percent. So if you want farmers' income to double in five years, then we have to see budget is also allocated in that ratio to the maximum people that is the landless and marginal farmers. So what we want is that government should give more allocation, more schemes where maximum people in rural India can be evolved.

Latha: So something like an animal husbandry budget would work perhaps as a sub-heading itself, is that what you are saying?

Sodhi: Yes, if you want maximum people to get the benefit, you have to give to where people are involved maximum. When you give any money for the cultivation, it goes to the big farmers who have got land. You give for irrigation, you give for seeds, you give for fertiliser, you give for crop loan. It is going to the 20 percent farmers. 80 percent people are not getting the benefit.

Latha: So what exactly would you want from the government?

Sodhi: What we want is the government to allow, like we are giving priority sector benefit to the cultivation or to the agriculture, dairy or animal husbandry should be included in the priority sector. When you give crop loan or interest subvention to agriculture, it should be given to the dairy farmer also. He or she should also be able to buy even cow or buffalo with an interest subvention. Similarly, when they seek loan for working capital, that also should be given at a very concessional rate.

And third biggest thing is, very few people know, let me tell you, there is no income tax on agriculture income. But in that agriculture income, animal husbandry is not included. If a farmer is having 50 acres of land and he is earning Rs 30 lakh in a year, he is not to pay income tax. But if a farmer is having 10 cows or buffaloes and he is earning Rs 6 lakh, he has to pay income tax. So small farmer is liable to pay income tax, big farmer is not liable. So what we expect, animal husbandry should be treat at least on par with the agriculture.

Sonia: What do you think the Budget should focus on this time around to improve farm income?

Sivakumar: A couple of areas. One is several flagship schemes have been announced over the last couple of years, so continuing the allocation and focusing on the implementation is one aspect. Things like crop insurance, irrigation, efforts to change fertiliser and food subsidy to direct benefit transfer, related to dairy Sodhi already talked about, stepping up short-term credit. I think several of these have been done. They are all good schemes and one must continue and focus more on implementation so that they are on the ground translating into reality of the intent with which they have been started.

The second and more important, as just heard that despite good crops in 2017, that good production is not enough for farmer incomes and in fact, they have been adversely impacting and consequently the criticality of agricultural marketing reforms is brought to the fore by 2017. Goods and services tax (GST) has already been done. That is good compared to the value added tax (VAT) regime. The unscrupulous players do not have a distorted playing field in their favour with agricultural being at zero.

So the critical thing which still needs to be done is the whole agricultural produce market committee (APMC) Act. The new model act has been recommended in 2017. That is a good piece that segregated the role of regulator, they also said Essential Commodities Act will not be enforced on supply chain players as opposed to hoarders or speculators.

The Budget should find a mechanism to ensure that states start adopting the new model act so that the role of private sector in a market oriented economy can this produce to the market is recognised and whether its private sector as in businesses coming in and doing it or farmers from organisations doing it, that does not really matter so long as the consumers' demand is met through in a more seamless kind of fashion.

The other area is options have been allowed. Exchanges need to roll out these contracts and they must get integrated to the spot market so that linked transactions can happen, farmers can hedge the price risk at the time of planting itself. And one critical bit is also, the importance of food processing in dealing with the perishability of crop and value addition.

So I think first step is really making processed food affordable and much the way agriculture has been put at zero rate, it is useful for some time to put food processing also at zero GST and by exceptions maybe a few things can be at 5 percent. And the GST Council responded last year to the industry's request and some items have been brought down from 18 to 12 and some from 12 to 5 percent. But still, in order to step up food processing, there needs to be zero or by exception 5 percent. It is quite important to add value and then bring that larger bit back to the farmers.

Latha: One repeated point we keep getting from farm leaders is the minimum support price (MSP) be raised and raised significantly to match what the Swaminathan Committee recommended. Both of you spoke about even in a good farm year, prices have not risen and so farmers have not benefitted. Is a higher MSP something that you want and should be done?

Sivakumar: Higher MSP is unsustainable because simultaneously, obviously government has an obligation to managing food inflation also. You raise MSP on one side and want to keep the consumer price on the other side, expanding Food Security Act to more and more consumers around the country, the amount of Budgetary resources you need is just impossible to manage in the long run. So I think the productivity improvement matching with taking value added products to the consumer is how one must get the farm incomes rising. But just saying that cost and you do cost plus then there is no responsibility that will ensure that the consumer price is also managed.

For entire discussion, watch accompanying video.
First Published on Jan 4, 2018 11:21 am

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