Indianfarmers

Will Budget Allotments Stimulate 4% Farm Growth? - K. Ramasubba Reddy

Abstract:

Very unlikely. While the moves are welcome and are in the right direction, token allocations made will not serve the purpose of improving yields to attaining 4% agri growth and reducing wastage.

A comprehensive scheme with massive investment package of about Rs 100,000 crore during the next four years is called for. Revenue foregone for the financial year 2009-10 went up by Rs88,000 crore (from Rs 414,000 crore to Rs 502,000 crore). Revenue foregone as % of aggregate tax collection in 2009-10 went up to 80% compared to 69% during 2008-09.
A part of this amount could have been utilized for development of Agriculture to ensure 4% growth and food security instead of doling out as increase in concessions to corporate sector allowing lesser payment of corporate taxes, excise and customs duties.

	Increase in Plan allocation for Agriculture& allied activities is only Rs 2,200 crore from Rs 10,123 crore to Rs 12,308 crore (just a megre allotment of 2.34% of the total plan outlay), way below the requirement for reaching 4% agri growth.
	2468-Integrated watershed management
	1062 National Horticultural Mission
	1350 National Food Security Mission
	1000 Macro Management of Agriculture
	1000 Minor Irrigation
	950 National Agri Insurance Scheme
	500 oil seeds ,pulses and Maize development
	703 Animal Husbandry, Dairying & Fisheries
	2006 Agri Education & Research

Right Direction but Little Funding

	Efforts directed at extension of Green Revolution to the eastern region are welcome aiming at lifting agriculture in the region from its stagnant state. This position of poor yields has been pointed out by CIFA time and again.
	While the national average of rice yield is two tonnes a hectare, in Assam, Bihar, Orissa and Madhya Pradesh rice yield is close to just one tonne; and these four States account for 16 million hectares or about 40 per cent of total area under rice (45 million hectares). In these four States, if rice output is raised to even the current national average of two tonnes / ha, we will have additional rice production of 15-16 million tonnes. This analogy can be extended to other crops too.
	However, the provision of Rs 400 crore for the initiative is not sufficient to achieve the desired objective of doubling farm yields in that area. In order to achieve this revolution of doubling the yields, concerted efforts in the next four years with an outlay of about Rs 40,000 crore may be necessary.
	Similarly, promoting dry-land farming of oilseeds and pulses in 60,000 villages located in rain-fed areas, under Rashtriya Krishi Vikas Yojana, is a welcome move which CIFA has been advocating tirelessly.
	But the token allocation of Rs 300 crore does not at all serve the purpose. An expenditure of Rs 50,000 per village will be gobbled up by the beauracratic machinery for their visits alone.
	Dry land farming accounting for 60% of total farming and 40% of production is in dire need for improvement. Hence a massive investment of over Rs60,000 crore for the next 4 years is called for. And the number of villages covered should be extended every year to cover at least 2 lakh villages in the next 4 years
	The Budget recognises declining soil health, water shortage and biodiversity preservation for promoting conservation farming as causes for conern. The modalities of implementation are to be spelt out. However, the megre allotment of Rs 200 crore for this purpose does not even touch even the fringe of the problem solution.
	Given that Indian wheat and maize are at the limit of heat tolerance and global warming could potentially affect yields over time, climate-resilient agriculture initiative must include researching heat-resistant varieties of wheat and maize.
	The proposal to extend the guarantee period of Food Corporation of India using private warehouses for a period of 7 years (from 5 years) is inadequate. Going by the economics of it, a guarantee period of 15 years is essential.
	Reduction in import duties for agricultural machinery is a welcome measure especially in the context of labour shortage.
	The additional provision for rural development is just Rs 3,936 crore — a rise from Rs 62,201 crore in the current year to Rs 66,137 crore for the coming year. This translates to a rise of 6.3 per cent for the coming year over the current year.
	The estimated rise in the GDP for the coming year over the current year is estimated at 12.5 per cent. It means that the rural sector does not even get half of the rise in the prosperity of the country in the coming year. The rise in the NREGS in the coming year is just 2.5 per cent. Contrast this with the rise of — believe it or not — 146 per cent in NREGS for 2009-10 over 2008-09. So much for the Finance Minister's claim of inclusive growth! KRSR/010310
Annexure1: Budget Proposals Relating to Agriculture 2010-11
Fertiliser subsidy

A Nutrient Based Subsidy policy for the fertiliser sector has been approved by the Government and will become effective from April 1, 2010. The nutrient based subsidy is expected to help fertiliser makers widen their product basket, customise their products to specific crops and regions and reap the benefits of more efficient operations.

The actual fertiliser subsidy bill for 2009-10 has overshot original estimates by Rs 3,000 crore, and stood at Rs 52,980 crore.

This is expected to lead to an increase in agricultural productivity and better returns for the farmers, and overtime reduce the volatility in demand for fertiliser subsidy and contain the subsidy bill.

Agriculture Growth

Government has spelt out four-pronged strategy:

(a) Agricultural production

Rs. 400 crore provided to extend the green revolution to the eastern region of the country comprising Bihar, Chattisgarh, Jharkhand, Eastern UP, West Bengal andOrissa.

Rs. 300 crore provided to organise 60,000 “pulses and oil seed villages” in rain-fedareas during 2010-11 and provide an integrated intervention for water harvesting, watershed management and soil health, to enhance the productivity of the dry landfarming areas.

Rs. 200 crore provided for sustaining the gains already made in the green revolution areas through conservation farming, which involves concurrent attention to soil health, water conservation and preservation of biodiversity.

(b) Reduction in wastage of produce

Government to address the issue of opening up of retail trade. It will help in bringing down the considerable difference between farm gate, wholesale and retail prices.

Deficit in the storage capacity met through an ongoing scheme for private sector participation – FCI to hire godowns from private parties for a guaranteed period of 7 years.

(c) Credit support to farmers

Banks have been consistently meeting the targets set for agriculture credit flow in the past few years. For the year 2010-11, the target has been set at Rs.3,75,000crore. Farmers who have been regular with repayments will now get loans at 5 per cent.

In view of the recent drought in some States and the severe floods in some other parts of the country, the period for repayment of the loan amount by farmers extended by six months from December 31, 2009 to June 30, 2010 under the Debt Waiver and Debt Relief Scheme for Farmers.

Incentive of additional one per cent interest subvention to farmers who repay short-term crop loans as per schedule, increased to 2% for 2010-1

(d) Impetus to the food processing sector

In addition to the ten mega food park projects already being set up, the Government has decided to set up five more such parks.

External Commercial Borrowings to be available for cold storage or cold room facility, including for farm level pre-cooling, for preservation or storage of agricultural and allied produce, marine products and meat.
Appropriate Banking facilities to be provided to habitations having population in excess of 2000 by March, 2012.

Rural Development:Rs. 66,100 crore provided for Rural Development.

Allocation for Mahatma Gandhi National Rural Employment Guarantee Scheme stepped up to Rs.40,100 crore in 2010-11.

An amount of Rs.48,000 crore allocated for rural infrastructure programmes under Bharat Nirman.

Annexure2: Budget Allotments needed to ensure 4% Agri GDP growth and Assured Food Security:
- K. Ramasubba Reddy

1.Accelerated Irrigation Benefit Programme

CIFA urged for one time release of Rs 1 lakh crore to complete all pending irrigation projects.

Data shows from 2004-05 up to March 2009 only Rs 34,783 crore was released creating irrigation potential of 54 lakh Hectares

The amount released is less than what AP State alone had spent on irrigation projects (About Rs 50,000 crore) for the past 6 years and is planning to spend another Rs 15,000 crore in FY 2011.

Hence doubling of allocation under AIBP is needed.

2.NRAA

CIFA proposes empowerment of NRAA to develop rainfed farming effectively

The survey merely says that “NRAA has issued common guidelines and is in consultations with the states for its implementation”

Empowerment of NRAA will facilitate implementation of the guidelines.

3. Declining Public Investments in Agriculture

The main reason for stagnation in Agri production is decline of public investment in agriculture in real terms during VII TO IX PLANS (1985-2002). It was Rs 64,000 crore in the VI plan but declined to Rs 42,000 crore during IX plan. Bank credit to Agriculture too declined from 18% to 12-15% during that period. Small agri loans too declined from 50% to 10%.

The key growth drivers of agriculture — science and technology, irrigation and availability of power on regular basis — received low priority in government spending and had taken a back seat.

The share of public investment in agri was 20.5% in 2004-05, which has declined to 17.6% in 2008-09.
Share of Agriculture & Allied Sectors in total GCF which was 11.7% in 2001-02 declined in 2008-09 to 9%.

CIFA suggested doubling of public investment in agriculture.

Investments in Agri which was 3.34% of the aggregate GDP in 2008-09 needs to be doubled being proportionate share in investments of 35% in the entire economy. Agriculture share in GDP is 17%. Proportionate share for agri works out to 6%. This is the minimum.

Currently, the capital output ratio is about 2.4: 1. If we assume that the capital-output ratio will rise to 2.5 in the coming years, for a growth rate of 4 per cent in broad agriculture, we need a capital formation proportion to GDP in agriculture of at least about 10 per cent. This proportion was about 4.7 per cent in 1950-51 and moved up to 11 per cent by 1978-79. But, thereafter it has been declining and currently it is about 3-4 per cent. We need to step up the ratio about 50 per cent if we want a growth rate of 4 per cent in broad agriculture. Only then increase in agri productivity and production is possible to ensure food safety

4.	CIFA demanded that mandated 18% agri loans with out including indirect finance and 10% credit to weaker sections must be extended without fail.

The Survey data shows that during the period April 09 to Nov 09, increase in outstanding agri credit was a megre Rs 4,400 crore (4% of increase in Non-food Bank Credit-The increase should have been 18% as mandated).

Data as on March 09 reveals that there was a gap in mandated agri credit to the extent of Rs24,000 crore and credit to the weaker sections to the extent of Rs 28,000 crore. Private Banks are the laggards.

It should be ensured that the lagging Banks make up the shortfall and also extend mandated credit to Agriculture and weaker sections during this financial year 2010 too.

5.RIDF up to Dec 2009
Sanctions Rs 1,00,000 crore
Disbursals Rs 63,000crore
Shortfall Rs 27,000 crore

The shortfall should be disbursed during 2010.

6.Agri Sector-Plan outlays (As % to total Plan Outlay)

VI Plan	Agri 5.8	Irrigation	Total
VIII Plan* 1992-97	5.2	7.5	12.7
IX Plan* 1997-2002	4.9	6.5	11.4
X Plan* 2002-07	3.9	6.8	10.6
XI Plan** 2007-12	3.8		8.55

*At 2001-02 prices - **@2006-07 Prices Source: Plan Documents

During the VI Plan outlay to Agriculture was 5.8% of the total outlay. It gradually got decreased for each plan period and for XI plan Agri plan outlay is only 3.8%. In the case of irrigation the outlay was 7.5% during the VIII Plan which got reduced to 6.8% for the X Plan. Combined outlay for Agriculture and irrigation declined from 12.7% During VII Plan to 8.55% during XI Plan.

There is a good case for doubling the allotment to Agriculture in the Budget. KRSR/250210

Annexure 3: Budget Allocations to Agriculture 2009-10

	The total Central plan outlay for the agriculture and allied sectors has been raised from Rs 10,074 crore (budget estimates) in 2008-09 to Rs 10,629 crore for 2009-10. This is Rs 660 crore higher than the 2008-09 revised estimates of Rs 9,969 crore.
	Budget Allotment Agriculture

2008-09 Rs 10,150crore

2009-10 Rs 11,915crore ( an increase of 17% over 2008-09)

* AGRICULTURE AND COOPERATION

- 1100 for National Horticulture Mission.
- 1350 for National Food Security Mission.
- 950 for Macro Management in Agriculture.
- 430 for Micro Irrigation.
- 644 for National Agricultural Insurance Scheme.
- 320 for Integrated Oilseeds, Oil Palm, Pulses & Maize Development.

* AGRICULTURAL RESEARCH AND EDUCATION

- 1584 for Agricultural Research and Education.
-252 for World Bank Aided National Agricultural Innovation Project in 31 suicide prone districts

	The farm sector attracted Rs 67,864 crore investments(1.6 % of the GDP) in 2007-08. Out of which, Rs 46,837 crore was invested from private firms and Rs 21,027 crore from public sector, according to data submitted in Parliament. Private investment exceeded the public sector.
	A 30 per cent increase in allocation for the agriculture ministry’s flagship scheme, Rashtriya Krishi Vikas Yojna (RKYJ). Assistance is provided under this scheme to the states to cover the critical gaps in the process of agricultural development.
	The outlay for the Accelerated Irrigation Benefit Programme (AIBP) too has been stepped up by 75 per cent to help achieve the objective of bringing more area under assured irrigation.
	Flow of institutional credit to farmers targeted Rs3,25,000 crore, a 13% increase at interest rate of 7 per cent for crop loans up to Rs 3 lakhs by offering interest subvention to banks and financial institutions. Actual disbursal Rs 2,87,000 crore in 2008-09, A 13% increase over the previous year. Additional subvention of 1 per cent if loans are repaid within time.
	The outlay for RKYV has been earmarked at Rs 4,100 crore for 2009-10, up 30 per cent from 2008-09. This is in accordance with the recommendation made to this effect by the National Development Council to ensure sustained 4 per cent annual growth in agriculture in the 11 th Plan.
	AIBP, which aims at speedy completion of on-going irrigation projects held up for paucity of funds, has been given an additional Rs 1,000 crore over the interim budget estimate, marking an increase of 75 per cent over the 2008-09 allocation.
	Allocation of Rs7,000 crore to rural electrification.
	Investment-linked tax incentive for setting up warehousing and cold chains.