Budget 2017: Focus on connecting farmers to markets
Amid robust crop production and a pickup in farm growth in a normal monsoon year, the budget gave a strong push to agriculture marketing reform—in a bid to connect more farmers to the market—while pitching for a new law on contract farming that states can adopt. Alongside, it increased funds for irrigation and crop insurance to help farmers deal with weather-related risks.
The government wishes “to integrate farmers...with agro-processing units for better price realization and reduction of post-harvest losses,” finance minister Arun Jaitley said in his budget speech, adding, “a model law on contract farming would therefore be prepared and circulated among the states for adoption.” Further, Jaitley reiterated the centre’s push to bring more regulated mandis (wholesale markets) on the electronic National Agriculture Market (e-NAM) platform launched last year. He added that states would be urged to delist perishables from these mandis, allowing farmers to sell to any buyer and “get better prices”.
In addition, the budget also proposed to set up a committee to suggest commodity market reforms to benefit farmers. “An expert committee will be constituted to study and promote creation of an operational and legal framework to integrate spot market and derivatives market for commodities trading,” Jaitley said, adding that e-NAM would be integral to it.
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The budget continued its thrust on risk mitigation via flagship crop insurance and irrigation schemes. Funding for crop insurance was raised from Rs5,500 crore in 2016-17 (budgeted estimate or BE) to Rs9,000 crore in 2017-18 with a target to bring 40% of cropped area under insurance cover. However, the allocation for next year is less than what was already spent in 2016-17, a staggering Rs13,240 crore.
For irrigation, the budget envisaged a larger role for the apex rural bank, National Bank for Agriculture and Rural Development (Nabard), which was provided an additional Rs20,000 crore for the long-term irrigation fund set up last year with a similar amount. It also announced creating a dedicated micro-irrigation fund with a corpus of Rs5,000 crore under Nabard.
Further, Nabard is now tasked with a dairy development fund (Rs8,000 crore) to diversify farm incomes, and a special scheme to bring cooperative banks under the core banking system (Rs1,900 crore) to “ensure seamless flow of credit to small and marginal farmers”.
To provide farmers with adequate and timely credit, the budget raised the target of agricultural loans to Rs10 trillion in 2017-18, up from a targeted Rs9 trillion in the previous year.
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Overall, the budget allocated Rs51,026 crore in 2017-18 for the agriculture ministry, a rise of 6% compared to the revised estimate of Rs48,072 crore in 2016-17. This includes an interest subsidy of Rs15,000 crore (for short-term crop loans) that was transferred from the finance to farm ministry in last year’s budget. However, despite highlighting the government’s goal of doubling farm incomes within five years in his budget speech, the finance minister did not give a blueprint to achieve the target.