The Union Budget 2021 will be presented by Finance Minister Nirmala Sitharaman on February 1 amid the COVID-19 pandemic.
The central government is expected to continue its focus on agriculture and allied sectors. However, given the government’s objective of increasing farmer incomes, sharper focus is needed on development of farm gate infrastructure, formulation and strengthening of farmer collectives.
What we got from Budget 2020-21
- The budget outlay for agriculture in fiscal 2021 was Rs 2 lakh crore. The bulk of the allocation was for short-term cash incentives and subsidies (PM-KISAN accounted for 35 percent and fertiliser subsidy 34 percent). Limited funds were allocated for the structural development of the sector.
- The government had made additional allocation for infrastructure development during the first Atmanirbhar Bharat programme.
- Rs 1 lakh crore Agri Infrastructure Fund for financing farm gate infrastructure for farmers. The first sanction of Rs 1,128 crore has been made to around 2,280 farmer societies.
- Assistance of Rs 10,000 crore for the formulation of micro food enterprises.
What we expect from Budget 2021-22
The focus on agriculture and allied sectors is expected to continue. However, given the government’s objective of increasing farmer incomes, sharper focus is needed on development of farm gate infrastructure, formulation and strengthening of farmer collectives, and food processing for improvement in real prices realised by the farmers.
The formation of 10,000 new farmer producer organisations (FPOs) as proposed for fiscal 2021 can cater to only seven percent of the farming population. Also, the existing FPOs lack capacity, leadership and basic infrastructure for effective market participation. Therefore, there is a need to increase allocation towards strengthening of existing FPOs and addition of more FPOs in order to improve access to market and establish market linkage for small farmers (85 percent of farmer population)
Allocation of funds towards fast-tracking of existing projects in rural infrastructure development, such as rural roads and irrigation, and addressing the execution challenges should continue, especially as only 51 percent of the country’s total cropped area is irrigated at present.
Allocations towards development of storage and warehousing facilities such as primary packhouses (we have only 250 packhouses today, against a requirement of 70,000), warehouses, cold storage and refer vehicles (we have only 9,000 against a requirement of 62,000 refer vans).
With the withdrawal of private players from crop insurance, additional funds need to be infused by the government under the Pradhan Mantri Fasal Bima Yojana to mitigate risks for farmers.
- Effective disbursement of funds allocated for agriculture infrastructure and micro enterprises under the Atmanirbhar Bharat programme.
- Allocation for fertiliser subsidy, which is expected to be lower given the additional infusion of Rs 65,000 crore in fiscal 2021 and prevailing lower raw material (gas) prices.
- The government had in May 2020 proposed to ban 27 pesticides, of which only three are in the extremely toxic (red) category and six in the highly toxic (yellow) category, while 11 are moderately toxic (blue) and six slightly toxic (green) in nature. As a large number of these pesticides are generic in nature, have low per-unit price, and higher share in volume consumption, the ban would result in significant revenue deterioration for pesticide manufacturers and also increase the per-hectare expenditure by farmers on crop management as they would be forced to switch to higher-priced substitutes.