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Saturday, October 23, 2021

2021-22 Budget and farmers’ agitation

This article is an attempt to analyze the 2021-22 budget with reference to the agriculture sector and also to explore the possibility of putting an end to the current farmers’ agitation.

MSP

Only 6% of the farmers in Bharat get an MSP for their crops. As of now, CACP (Commission for Agricultural Costs & Prices) recommends MSPs of 23 commodities, which comprise 7 cereals (paddy, wheat, maize, sorghum, pearl millet, barley and ragi), 5 pulses (gram, tur, moong, urad, lentil), 7 oilseeds (groundnut, rapeseed-mustard, soyabean, seasmum, sunflower, safflower, nigerseed), and 4 commercial crops (copra, sugarcane, cotton and raw jute). 

year  MSP Value (Crs)

wheat

No. of farmers covered

(Lakhs) 

Wheat

MSP Value (Crs)

Paddy

No. of farmers covered

(Lakhs)

Paddy

MSP Value (Crs)

cotton

No. of farmers 

covered (Lakhs)

Cotton

MSP Value (Crs)

Jute

No. of farmers covered (Lakhs)

Jute

MSP Value (Crs)

pulses 

MSP Value (Lakhs)

Oil seeds & copra 

2019

-20 

62802.88 35.57 14198.08 124.59 28500 21.5 56.24 0.55 8284.45 8305.06
2020

-21

75059.60 43.36 172752** 154** 25974* 18.26* 2.99 0.01 10530.20 3647.11

(*Upto 27.01.2021, ** estimated value, Source-Budget 2021-22)  

Financial support extended through loans from NSSF (National Social Security Fund) under extra budgetary resources not forming part of the budget-

Under The Department of Food and Public Distribution the financial support extended through loans from NSSF to Food Corporation of India was Rs. 1,10,000 crores in 2019-20, which was estimated at Rs. 1,36,600 crores in 2020-21 but reduced to Rs. 84,636 crores (revised estimates) for the year 2020-21.

The food subsidy originally allocated to FCI in 2020-21 budget was Rs. 77,983 crores which was revised subsequently to Rs. 3,44,077 crores in order to knock off the loans taken by FCI from NSSF.

As a consequence the funding support to FCI will be henceforth done by the government directly under the budgetary allocations and FCI will not resort to borrowing from NSSF and accordingly in the budget 2021-22 the allocation of food subsidies to the FCI stands at Rs. 2,02,616 crore. 

In line with this in the budget 2021-22 no provision is made for FCI under the head extra budgetary resources. One of the major issues in the current farmers’ agitation is that the currently passed three farm laws do not have any mention of MSP and the government can withdraw the protective cover of MSP anytime since it is not a statutory obligation though it is in vogue as a matter of convention.

By allocating funds to FCI in the 2021-22 budget Rs.2,02,616 crores the government has continued the convention which gives some temporary comfort to the agitating farmers.

Rural infrastructure

In 2021-21 budget there is an enhancement in the allocation to the Rural Infrastructure Development Fund from the originally proposed Rs. 30,000 crores to Rs. 40,000 crores. This is part of the overall rural infrastructure fund proposed for Rs. 1 lakh crores having a 10 year scheme.

Under this scheme banks and FIs will provide loans with a credit guarantee cover up to Rs. 2 Crores for a maximum period of 7 years. This scheme is intended to finance viable projects for post-harvest management infrastructure and community farming assets. 

Finance Minister in her 2021-22 budget says around 1.68 crores farmers are registered and Rs. 1.14 lakh crores of trade value has been carried out through e-NAMs and 1,000 more mandis will be integrated with e-NAM.   

Agriculture Infrastructure and Development Cess on import of specified goods (12 items) ranging from 2.5% (gold, silver and dore bars) to 100% (alcoholic beverages) has been proposed in budget 2021-22.

Additionally Agriculture Infrastructure and Development Cess (AIDC) of Rs. 2.5 per litre has been imposed on petrol and Rs. 4 per litre on diesel in the budget 2021-22. 

The above measures indicate the concern and commitment of the government to bring a significant improvement in the rural infrastructure, particularly to strengthen the post- harvest management.

Rural credit

The agricultural credit target is enhanced to Rs. 16.5 lakh crores in budget 2021-22 as against Rs. 15 lakh crores in budget 2020-21. The FM says the government will focus on ensuring increased credit flows to animal husbandry, dairy, and fisheries with the aim of enhancing the farmers’ incomes. 

The Micro Irrigation Fund, with a corpus of Rs. 5,000 crores has been created under NABARD in 2020-21 gets another Rs. 5,000 crores funding support in 2021-22 budget. Micro irrigation is a modern method of irrigation in which water is irrigated through drippers, sprinklers, foggers and by other emitters on surface or subsurface of the land.    

To boost value addition in agriculture and allied products and their exports, the scope of ‘Operation Green Scheme’ that is presently applicable to tomatoes, onions, and potatoes, is being enlarged to include 22 perishable products.

‘Operation Green Scheme aims to promote Farmer Producers Organizations (FPOs), agri-logistics, processing facilities and professional management for integrated development of value chain in specified perishable products.  

The Finance Minister also said that this year’s Budget will boost the income of people and enhance their purchasing power, adding that the government committed to doubling farmers’ income by 2022.

Fertilizer Subsidy

Fertilizer subsidy was budgeted at Rs. 71,309 crores in 2020-21 which was subsequently revised to Rs. 1,33,947 crores. In 2021-22 budget, the fertilizer subsidy is kept at Rs. 79,530 crores. Maintaining stable basic MRP of urea for the past few years is the reason behind this marginal increase of fertilizer subsidy in the 2021-22 budget. 

On an overall analysis of the budget 2021-22 with regard to the agriculture sector it is evident that the government has continued its commitment to MSP as a matter of convention though the government may revisit the MSP mechanism and decide on its continuance or withdrawal in due course.

The budgetary allocation to rural infrastructure and rural credit is only incremental without a significant quantum jump. If one reads this along with the major provisions of the recently passed farm laws it appears that the government is determined to provide entry to the corporates to have back ward linkages from market to farm yard and procure the farm produce directly from the farmers.

Through this major initiative the government hopes that the farmers will get remunerative prices and their incomes would increase substantially to realize the goal of the government to double the farmers’ incomes by 2022-23 (base year 2015-16).

However, in order to gain the confidence of the agitating farmers the government has to consider the following:

1. Amending the section 5 of The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 to link the farm price to MSP or market price or any other bench mark price to protect the farmer’s interests. In case the government does not want to include MSP in the law it could at least include a floor price to ensure remunerative prices to the farmers. 

2. Further Amending the Section 3 of the Essential Commodities Act, 1955 which was amended in the recent past giving scope for the processor or value chain participant to install very huge capacity of processing in order to circumvent the regulation for stock limit and effectively resort to hoarding. Therefore, this clause has to be suitably amended further in order to enable the government to retain the discretion of deciding the ceiling on installed capacity of processing of the processors or value chain participants.

This will put a check on the hoarding and also give scope for more number of players to become processors and value chain participants infusing competition which in tune will lead to greater choice to the farmers in negotiating fair prices for their produce.  

Let us hope the government will initiate the required steps in this regard to put an end to the ongoing farmers’ agitation which will boost the agriculture sector, which is the only sector that has registered positive growth even during the Covid period giving hopes for an early recovery of the economy. 

Reference-

  1. https://pib.gov.in/PressReleasePage.aspx?PRID=1624153     
  2. https://mofpi.nic.in/Schemes/operation-greens
  3. https://niti.gov.in/writereaddata/files/document_publication/DOUBLING%20FARMERS%20INCOME.pdf

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Dr. B.N.V. Parthasarathi
Ex- Senior Banker, Financial and Management Consultant and Visiting faculty at premier B Schools and Universities. Areas of Specialization & Teaching interests - Banking, Finance, Entrepreneurship, Economics, Global Business & Behavioural Sciences. Qualification- M.Com., M.B.A., A.I.I.B.F., PhD. Experience- 25 years of banking and 14 years of teaching, research and consulting. 100 plus national and international publications on various topics like- banking, global trade, economy, public finance, public policy and spirituality. One book in English “In Search of Eternal Truth”, two books in Telugu and 20 short stories and 27 articles published in Telugu. Email id: [email protected]

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