The Gist of Kurukshetra: July 2014

The Gist of Kurukshetra: July 2014

Need for bigger outlay for agriculture

The performance of the agriculture sector in India is reasonably good and as per the latest information from Ministry of Agriculture, the total foodgrain production in 2012-13 was 255.36 million tonnes and the estimate for the current year (2013-14) is 263 million tonnes. India is the first in the world in the production of milk (132.43 million tonnes in 2012-13), pulses, jute and jute-like fibres, second in rice, wheat, sugarcane, groundnut, vegetables, fruits and cotton production, and is a leading producer of spices and plantation crops as well as livestock, fisheries and poultry. The latest estimates of production of sugarcane, cotton, pulses, oilseeds and quality seeds point to new records. Agriculture exports in 2012-13 stood at USD 41 billion versus imports of USD 20 billion. In 2013-14, agriculture exports are likely to cross USD 45 billion. Agricultural credit is likely to touch Rs. 735,000 crore, exceeding the target of Rs.700,OOO crore. The agricultural GDP growth increased to 3.1 percent in the five year period of UPA-I and further to 4.0 percent in the first four years of UPA-II. In the current year, agricultural GDP growth is estimated at 4.6 percent and to sustain the 4 percent growth target set for agriculture and allied sectors in the Twelfth Five Year Plan (2012-17) and it is good sign for policy planners and big relief to ruling Government.

Fertilizer Subsidy

Subsidies, which are absolutely necessary should be chosen and targeted only to the absolutely deserving. On fertilizers, Nutrient Based Subsidy regime has been working well in the P & K sector. What is now urgently required are certain pricing reforms in the urea sector with an immediate price correction for urea. This is not only essential from viewpoint of the size of the subsidy bill but also from the viewpoint of balanced use of N, P & K nutrients. Over long-term, Government will be working towards increase in indigenous production of fertilizers which will help reducing dependence on imports and make prices much more stable.

Budget Impact

Domestic gas prices are expected to double to around $8 per mmBtu in 2014-15, increasing the fertilizer subsidy burden to an estimated Rs. 77,500 crore in 2014-15 from the budgeted Rs. 68,000 crore. There will be a subsidy spill-over of Rs 33,000 crore to 2014-15. Thus, the total increase in subsidy rollover to 2015-16 is likely to be around Rs 41,000-42,500 crore. This will push up interest burden on working capital requirements by about Rs 1,000-1,100 crore (assuming a rate of 12%).

Service Tax Relief

By virtue of the definition of ‘agricultural produce’ in Finance Act 2012, read with the Negative List, storage or warehousing of paddy was excluded from the levy of service tax. Rice was not. The distinction is somewhat artificial. Hence, Finance Minister proposed to exempt loading, unloading, packing, storage and warehousing of rice from service tax in the presented interim budget 2014-15. This initiative is welcomed by all the rice growers, rice processors, rice traders and also consumer since the will pay less due to the service tax relief.

Agricultural Credit

Agricultural credit is the driver of agricultural production and timely availability of agricultural credit at reasonable rate, especially for small and marginal farmers is crucial for agricultural-sector growth. Government has taken several measures for improving the flow of agricultural credit:

  1. The Kisan Credit Card (KCC) scheme has been effective for extending agriculture credit. A revised KCC scheme was introduced in March 2012 in which the KCC passbook has been replaced by an ATM-cum-debit card to all eligible and willing farmers in a time-bound manner.

  2. The Finance Minister, P Chidambaram acknowledged the yeomen services rendered by our banks in reaching Government’s policies and programmes to the people. This year, banks will exceed the target of Rs. 700,000 crore of agricultural credit allocated for the year 2013-14.

  3. The Finance Minister made a provision to set a target of Rs. 800,000 crore for distribution to the farmers through KCC for 2014-15 in the interim budget proposed. He also reminded the members that an interest subvention scheme was introduced in 2006-07. There is a subvention of 2 percent and an incentive of 3 percent for prompt payment, thus reducing the effective rate of interest on farm loans to 4 percent. While presenting the interim budget for 2014-15 he informed the house that so far Rs. 23,924 crore has been released under the scheme and he also proposed to continue the scheme in 2014-15.

Considering the due importance of the credit for the need of the farmers, especially small and marginal the Finance Minister proposed to increase the target to Rs 800,000 crore for 2014-15 in the interim budget as against the target of Rs 700,000 crore fixed for 2013-14. This is an appreciable step taken by the Finance Minister, since the input prices are increasing consistently and farmers are in dire need to buy the inputs from the open markets especially, seeds, P & K and micronutrients fertilizers, insecticides and pesticides for their crop production and other enterprises related to agriculture.

National Agro-Forestry Policy

Government has approved the National Agro-Forestry Policy2014 which has multiple objectives including employment, productivity, conservation and adaptation. A mechanism for marketing minor forest produce has been introduced, and the budget has allocated Rs 444.59 crore to continue the scheme in 2014-15 as per the information made in the parliament by the Honorable Finance Minister at the time of interim budget presentation.

Funding Scientific Research

Government of India has passionately espoused the cause of science, promoted scientific research, and supported scientific applications and inventions. The Income-tax Act allows deductions for expenditure on scientific research, but it is limited to direct funding. Now, Government of India has reflected on a new approach to funding scientific research. The Union Finance Minister, Government of India proposed to set up a Research Funding Organization (RFO) that will fund research projects selected through a competitive process. Contributions to that organization will be eligible for tax benefits. This will require legislative changes which can be introduced at the time of the regular Budget as announced by the Union Finance Minister while presenting the interim budget. This is welcome step by the scientific community and will have long-term benefits and sustainability to the research and development activities including agricultural research in the country.

Food Security

Food security is as much a basic human right as the right to education or the right to healthcare. The main objectives of food management are procurement of foodgrains from farmers at remunerative prices, distribution of foodgrains to consumers, particularly the vulnerable sections of society, at affordable prices, and maintenance of food buffers for food security and price stability. The instruments used are MSP and central issue price (CIP). The nodal agency for procurement, distribution, and storage of foodgrains is the Food Corporation of India (FCI). Procurement at MSP is open-ended, while distribution is governed by the scale of allocation and its off-take by beneficiaries.

National Skill Development Corporation

Union Finance Minister had promised an ambitious programme to skill millions of young men and women and had tasked the National Skill Development Corporation (NSDC) to implement the programme in the last budget (2013-14). The National Skill Certification and Monetary Reward Scheme were launched in August 2013 and have been widely hailed as a success. At last count, 24 Sector Skill Councils, 442 Training Partners and 17 Assessment Agencies had joined the programme. The 204 job roles have been finalized and the 168,043 youth had enrolled and 77,710 have completed their training. While presenting the interim budget 2014-15 in the Parliament the Finance Minister informed the house that he had set apart Rs. 1,000 crore for the scheme. The whole of that amount will be transferred to the NSD Trust and he proposed to transfer another sum of Rs. 1,000 crore next year (2014-15) to enable the Trust to scale up the programme of NSDC rapidly.

Proposed Central Plan Outlay

Agriculture and Allied activities have got approximately only 1.89 to 3.42% allocations of funds in the Central Outlay Plan, which is not justified considering the importance of this sector in Indian economy. If, our government set the target that agriculture should grow at 4 per cent in the Twelfth Five Year Plan, then we must invest more money in this sector. In our opinion, at least 4% Central Outlay Plan is much needed for Agriculture and Allied Activities to grow at desired pace.

Highlights of Agriculture and Cooperation Plan in Interim Budget of 2014-2015

The Rashtriya Krishi Vikas Yojana (RKVY) was launched in 2007-8 with an outlay of Rs 25,000 crore in the Eleventh Plan for incentivizing states to enhance public investment. States were provided Rs 22,408.79 crore under the RKVY during Eleventh Five Year Plan. The RKVY format permits taking up national priorities as sub-schemes, allowing the states flexibility in project selection and implementation. Allocation under the RKVY for 2012-13 was Rs 9,217 crore. The RKVY links 50 percent of central assistance to those states that have stepped up the percentage of state plan expenditure on the agriculture and allied sector. A total of 5,768 projects were taken up by states in the Eleventh Plan of which 3,343 had been completed till December end 2012. The Rashtriya Krishi Vikas Yojana is intended to mobilise higher investment in agriculture and for this programme the Finance Minister proposed to provide Rs 9,864 crore in the interim union budget of 2014-15 as against the Rs. 9,954 crore made in union budget of 2013-14. This is again relatively less money made available for this important programme of the agriculture sector, which is matter of concern for the agriculturists, including farmers and farm women.

National Food Security Mission

To enhance the production of rice, wheat, and pulses by 10, 8, and 2 million tonnes respectively by the end of the Eleventh Plan through area expansion and productivity enhancement; restoring soil fertility and productivity; creating employment opportunities; and enhancing farm-level economy to restore the confidence of farmers of targeted districts, a centrally sponsored National Food Security Mission (NFSM) was launched in 2007-8 with three major components, viz. NFSM-Rice, NFSM-Wheat, and NFSM-Pulses. During the Eleventh Five Year Plan, NFSM-Rice was implemented in 144 districts of 16 states, NFSM-Wheat in 142 districts of 9 states and NFSM-Pulses in 468 districts of 16 states. In 2012-13, six north-eastern states, viz. Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, and Sikkim were included under NFSM-Rice and the hill states of Himachal Pradesh, and Uttarakhand under NFSM-Rice and Wheat and J&K under NFSM-wheat.

Mission for Integrated Development of Horticulture

The National Horticulture Mission (NHM) covered 18 states and three UTs during the Eleventh Plan. The scheme aims at the holistic development of the horticulture sector by ensuring forward and backward linkages through adopting a cluster approach with the active participation of all stakeholders. During the Eleventh Plan period 16.7 lakh ha of land was brought under horticulture / high value horticulture crops.

National Mission for Sustainable Agriculture

Climate change poses a major challenge to agricultural production and productivity. The National Mission for Sustainable Agriculture (NMSA), under the aegis of the National Action Plan on Climate Change (NAPCC), seeks to address issues related to ‘Sustainable Agriculture’ in the context of risks associated with climate change. It hopes to achieve its objectives by devising appropriate adaptation and mitigation strategies for ensuring food security, enhancing livelihood opportunities, and contributing to economic stability at national level. The NMSA has already been accorded ‘in-principle’ approval by Prime Minister’s Council on Climate Change. During the Twelfth Five year Plan, climate change adaptation and mitigation strategies will be operationalized by restructuring the existing programmes. The Finance Minister proposed to provide Rs. 1,898 crore in the interim budget of 2014-15 for this key flagship programme of the union government of India.

Conclusion

The present challenge in agriculture sector is how to maximize agricultural income while adopting a more sustainable agricultural strategy. The concerns here are land and water degradation due to soil erosion, soil salinity, water logging, and excessive application of nutrients. There are concerns arising also from over-exploitation of water resources, especially in the Green Revolution belt. Measures must be taken to promote use of quality seeds, cultivation of drought resistant varieties of crops, judicious use of available water, balanced use of fertilizers, farm mechanization to improve efficiency levels, and wider use of irrigation facilities. Expenditure on agricultural research also needs to be stepped up substantially. We would like to conclude that it would be possible to sustain the 4 percent growth target set for agriculture and allied sectors in the Twelfth Five Year Plan, provided that future elected government make provision at least 4% Central Outlay Plan in the full-fledged Union Budget 2014-15.

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