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Union Budget 2018: Farming For The Farmer

The new characteristics that the Budget imparts to agriculture are, that the farmers must be allowed to capture maximum value on their produce; that foodgrains constitute only a sub-sector of the larger sector; that growth is conditional upon adequacy of credit and capital formation; and that the sector as a whole needs to be liberalised

As anticipated, the year 2018 has been positioned as an inflection point in the march of Indian agriculture, by the Union Budget 2018. It marks a clean break from the past by recognizing agriculture as an enterprise, and the nation’s commitment to the welfare of the farmers.

The new characteristics that the Budget imparts to agriculture are, that the farmers must be allowed to capture maximum value on their produce; that foodgrains constitute only a sub-sector of the larger sector; that growth is conditional upon adequacy of credit and capital formation; and that the sector as a whole needs to be liberalised.

The farmer was always constrained from selling the produce, the way he wanted to. The liberalisation of the markets got a fillip with launch of eNAM (an electronic platform for online trade) in 2016 and Model Agricultural Produce and Livestock Marketing Act, 2017. And the soon to be released Model Contract Farming Act, 2018 will further open up the sector. This story line is taken forwarded by the new support for an innovative market architecture, that organically links Gramin Agricultural Markets (GrAM) with the global markets via an efficient wholesale market structure. The upgradation of 22,000 rural haats into centres of aggregation and direct producer-seller platform integrates the small and marginal farmers with agri-supply chain. The farmer preferably as a member of an FPO can also trade on eNAM platform. The Budget talks of a new export policy, with favourable duty structure for the agri-commodities. With growing production surpluses, leveraging the global market will bring in remunerative prices on the farmers’ produce.

The Budget also recognizes that agricultural markets can never be perfect, and hence offers a minimum MSP of one and half (1.5) times the cost of cultivation on all notified commodities. Even on Cost A2 (all paid out costs) + Family Labour (an imputed value), it marks a cataclysmic change. It covers all notified crops, which account for about 85 per cent of net cultivated area. More importantly, the Government declares its obligation to honouring the MSP, for which a new instrument will be designed in consultation with the state governments. Hitherto, there has never been such an open commitment to transferring of MSPs, even when prices crashed in the market.

The universe of agriculture gets expanded, with the Budget appreciating the critical role of non-crop sectors and providing a budgetary support to cluster based horticulture and non-budgetary facilitation of a Rs.10,000 crore corpus fund for dairy & livestock (the small ruminants in particular), fishery & aquaculture. This huge push along with emphasis on large cluster based organic cultivation and aromatics and medicinal plants (Rs.200 crore of allocation) will essentially link agriculture with value chain & processing and generate additional farm and non-farm jobs.

The Budget also addresses basic structural weaknesses that emanate from land division and fragmentation, unrecognized land lease and poor access to institutional credit, and declining public sector investments. Income tax exemption on profits earned by Farmer Producer Companies, as now available to Cooperatives, will incentivise mobilization of small and marginal farmers for scales of economy. The proposed Model Land Cultivators License Act will bring in inclusiveness of the actual tiller. Contract farming will also attract private sector investments.

The capital formation in agriculture gets a shot through Infrastructure Development Funds for agricultural markets, fisheries, animal husbandry and command area development. The farm credit target moves up vertically at Rs.11 lakh crore and horizontally to cover dairy and fishery farmers. Other initiatives encompass an allocation of Rs.500 crore for ‘Operation Green’ to normalize price volatility of sensitive trio – tomato, onion and potato (TOP); institutional arrangement for price & demand forecast; Rs.1290 crore for ‘National Bamboo Mission’; and Wi-Fi hot spots, which will help farmer access relevant data.

The allocation for Food Processing Ministry is doubled, and that for Ministry of Agriculture stands increased by 12.61 per cent to Rs.58,050 crore for 2018-19. The programmes of other Ministries inclusive of huge allocation of Rs.14.34 lakh crore for rural India, Rs.5,750 crore for National Rural Livelihood Mission (NRLM), and universal health care covering 10 crore poor families etc., will cater to welfare of farmers too.

The challenge now lies in efficiency of implementation, to translate the logical theme into reality. For these, changes in the governance framework are underway. All these initiatives can make farmer a true entrepreneur.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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Dr Ashok Dalwai

The author is CEO, National Rainfed Area Authority (NRAA), Ministry of Agriculture and Farmers’ Welfare, Government of India

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