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Budget 2021| Big infra, tech push likely for agriculture to boost farmer income

Investments in agri-tech startups or agri-based innovation labs, organic farming, digital tools and technology will give a big boost to the farm sector.

January 31, 2021 / 08:27 AM IST

The ambition to double farmer's income by 2022 continues to be on the government's agenda. Given the coronavirus outbreak and the farmer unrest, there is an increasing expectation that the Budget will focus on the overall wellbeing of farmers and crop productivity.

Following past trends, focus on schemes such as PM Kisan Samman Nidhi, MNREGA and Pradhan Mantri Fasal Bima Yojana will continue to gain traction even this year. Below is a quick outline of some Budget announcements that we can expect for the agriculture sector:

1 Focus on yield improvement

Apart from providing soil health cards to farmers, several efforts could be made to provide adequate water for smart and modern irrigation and advanced farming techniques. We can also expect funds for promoting research, which can improve the yield of major crops. Also, the budget may look to provide support for MSP and allocate additional funds for infrastructure to support the implementation of the new farm laws. Expanded role of e-NAM in supporting farmer incomes and farm laws implementation will be key.

2 Reduce input cost and weather protection

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We anticipate concerted efforts towards incentives or subsidies or creating state-owned infrastructure to provide cheaper inputs to farmers such as seeds, fertilizers, pesticides, etc. This will help contain costs and increase profitability on produce, The budget will likely continue to expand allocation towards fertilizer subsidies or also provide a direct benefit scheme for the sector.

Scope and coverage of crop protection or agri insurance could continue to be a major focus for protecting farmers from vagaries of nature and help them with faster closures for losses. Lastly, improving soil health and rationalisation of import duties on key input materials like phos acid and ammonia is also expected.

3 Rural infrastructure push

Development of roads, electrification and irrigation as part of the rural infrastructure development can attract huge investments. Making sufficient water available with support for drip irrigation and non-farming agriculture, especially fisheries, can play an important role in the Budget.

Cold chain and storage infrastructure development

Keeping Aatmanirbhar Bharat push at the centre, we expect the Budget to provide infrastructure funds at lower interest rates and extend this scheme by allocating incremental funds. The recent Kisan Rail for transportation of farm produce to consumption centres is a stellar example of efforts towards reducing logistics costs for farmers. We are hopeful that the Kisan Rail and Krishi Udaan schemes will be expanded to includ support for farm produce cold chain. It will be important to augment storage infrastructure for farmers to hold produce for non-peak seasons without crops getting damaged, thereby ensuring profitability for farmers.

5 FPOs to occupy centre stage

A farmer producer organization (FPO) is a platform where a group of farmers can come together and sell produce at a better price. FPOs are one of the pillars of the three farm laws. Further thrust on FPOs by way of loans, cheaper fund access, relaxed regulatory norms, tax exemptions, capital funding for setting up FPO and channels to ensure easy market access may be taken up on priority.

6 Food safety gaining importance

We can expect the budget to focus on the introduction of food safety initiatives across the ecosystem—APMCs, logistics providers, etc, through training and education programmes across the value chain. Another area that can gain traction is quality standards, especially for dairy segments.

7  Financial support schemes for farmers

a) PM Kisan Samman Nidhi: Since the Direct Benefit Transfer provides immediate benefit to farmers, the government may try to increase the limit of Rs 6,000 per annum. b) Farm credit: The government may provide subsidised loans to farmers either through banks or through kisan credit card and may look to extend limits under existing schemes, which will help farmers to access more credit at cheaper rates.

8 Impetus to food-processing, exports

Given the potential that the food-processing sector offers, we expect incentives for food set-ups and storage facilitation centres. Measures to encourage food exports will continue to be a key focus area. Hence, easy and simple compliance procedures for increasing exports is key.

9 Embracing technology to deliver quality

Due to COVID-19, the focus could on the fine details of demand-supply for each raw material at a micro level to maintain parity for better rates by optimised supply chain. Predictive analytics tools, smart irrigation, technology for agricultural support, marketing support, weather forecast and crop decision-making techniques will need to be implemented on a larger scale.

The Budget will aim to augment rural consumption by supporting farmers via new technology, export incentives, robust implementation of initiatives and schemes to ensure that money moves into the farmers' hands. Investments in agri-tech startups or agri-based innovation labs, organic farming, digital tools and technology will bring additional impetus to the sector.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Harsha Razdan is Partner and Head of Consumer Markets & Internet Business at KPMG in India.
first published: Jan 31, 2021 08:27 am

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