Being the mainstay of the rural economy, the agriculture sector has been a priority area for the government as was reflected in a host of announcements made last year and the three new farm laws.
In view of the impasse over the farm laws, the budget is a golden opportunity for the government not only to ensure measures for smooth implementation of the reforms but also to address the age-old structural issues of low productivity, quality and value-addition.
The government can focus on these areas while finalising the agriculture budget for FY22:
1) Improve productivity
Agriculture inputs: The government can think of reorienting the fertiliser subsidy to encourage farmers to maintain a healthy balance of various kinds of fertilisers such as urea, nitrogen and potassium in the right proportion. This can go a long way in maintaining the soil health and facilitate sustainability of agricultural practice. Furthermore, an increased allocation may be directed towards creating mobile soil-testing labs, which will benefit a large section of small and marginal farmers.
Irrigation: There may be increased allocation under Prime Minister Krishi Sinchayee Yojana (PMKSY) to promote and enhance the adoption of drip irrigation. The availability of water is a challenge for most parts of the country. This has been accentuated by erratic weather patterns and climate changes. The budget may consider allocation for water conservation near the cultivation area to address the problem of scarcity.
Increased outlay for crop insurance: To help farmers mitigate the challenges posed by an erratic climate, higher allocation for crop insurance may enable a large section of farmers to avail of this incentive and enable adequate coverage.
2) Strengthen infrastructure, incentivise value addition
Credit incentives: To incentivise developing the basic infrastructure and enable farmers for long-term investment on equipment, irrigation or infrastructure creation related to farming, rather than focussing on recurring expenditures such as weeding, harvesting, sorting and transporting, the budget may look at credit guarantee schemes for the sector on the lines of the MSME segment.
Cluster development and focus on implementation: Government initiatives to promote around 3,500 commodity-specific FPOs over the next three years under the "One-Product-One-District" concept are likely to play an instrumental role in establishing linkages within clusters. However, given the implementation is mainly done by states, the budget should earmark equitable allocations for states to address this issue.
Encourage private public partnerships: Given the pro-market nature of the agriculture bills, the budget may consider options of supporting the private sector in co-creating assets that would stand to benefit the agriculture sector in the long run.
3) Focus on upgrading, monitoring quality
While traceability has been adopted for various agriculture and horticulture products, there are challenges in large scale implementation, given the fragmented nature of Indian farming. A dedicated corpus can be allocated for enabling this under the aegis of a nodal agency. To boost exports, the budget can look at incentivising growers (especially the smaller farmers / FPOs) to comply with the relevant certifications of the importing countries. Additional support may be earmarked for promoting organic production and exports. The budget may consider modernising and strengthening the existing laboratories along with setting up new ones on PPP basis.
4) Increase funding for research and development
Given there is a significant dependence on imports of major commodities such as vegetable oils and pulses, it is important to enhance the domestic production of these commodities and additional funds need to be allocated for this purpose. It is important to note that livestock farming is one of the key pillars for augmenting farmers’ income through non-farm related activities.
While the sector has immense potential, one of the big impediments for development is the prevalence of various diseases, which affects mortality, productivity and overall production. The supply of vaccine is not adequate to address the growing demand. Funding for the development of vaccines and creating necessary infrastructure would be required in this budget. Given there is an increasing shift in food preferences of consumers towards proteins and fibres, the budget should earmark allocation under R&D to develop alternative sources of plant-based proteins and cultivate it on a large scale and explore ways of augmenting supply of conventional protein.
5) Focus on agri-tech
Agri-tech models related to marketplaces, farm advisory, mechanisation; logistics and storage including cold chain solutions, contracting procedures, predictive analytics for weather forecasting, pricing, market linkage through farm-to-fork supply will see greater adoption. Budgetary allocations will help in driving investments and accelerate adoption in the much-needed agriculture sector that is on the cusp of transformation.
(Anand Ramanathan is the Partner at Deloitte India and Soumyak Biswas is the Associate Director at Deloitte India.)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.