Photo: Aniruddha Chowdhury/Mint
Photo: Aniruddha Chowdhury/Mint

Budget 2016: Allocation math for agriculture sector doesn’t add up

The agriculture sector saw a 94% increase in allocation, but an analysis of the numbers suggest that the real hike is a modest 27%

New Delhi: In a bid to revive growth in agriculture and improve farm incomes, at a time when rural India is weathering a protracted period of distress, the Union Budget presented on Monday placed a renewed focus on the farm sector by increasing funds for crop insurance and irrigation schemes.

Farmers and rural India will get the government’s immediate attention, and the priority is to provide additional resources, said finance minister Arun Jaitley, adding that the government will aim to double farm incomes in the next five years.

The overall budget for the agriculture sector was raised by from 22,958 crore in 2015-16 (revised estimate) to 44,485 crore in 2016-17 (budget estimate)—a jump of nearly 94%.

In reality, the allocations are not that generous. An analysis of the budget for the ministry of agriculture shows that the increase is due to a rise of over 20,000 crore for the Department of Agriculture and Cooperation (DAC).

The increase in funding for the Department of Research and Education (DARE) and Department of Animal Husbandry, Dairying and Fisheries (DAHDF) was a modest 1,350 crore.

The rise in DAC’s increased budgetary allocation—from 15,810 crore in 2015-16 (revised
estimate) to 35,984 crore in 2016-17—is largely due to an additional head of interest subvention, or interest subsidy to farmers, on short-term credit.

The budget shows an estimated 15,000 crore for interest subvention that has been added this year in DAC’s budget, raising the overall spending.

Earlier, like last year, the revised estimate of 13,000 crore of interest subvention was part of the finance ministry’s budget.

The real hike in this year’s budget for the farm sector, therefore, is a decent 6,257 crore, or an increase of 27%, compared to the inflated 94%, as the budget shows.

“Interest subvention was never part of the agriculture ministry’s budget, and the inclusion of 15,000 crore is the reason for the unusual spike in this year’s numbers," said Himanshu, an associate professor of economics at Jawaharlal Nehru University, Delhi, and a Mint columnist.

“The real increase is in crop insurance and irrigation schemes, which will be implemented by other ministries (water resources)," he added.

Still, there is renewed focus on several schemes in this year’s budget. For instance, funding for the recently launched crop insurance scheme Pradhan Mantri Fasal Bima Yojana (PMFBY) has been more than doubled from 2,589 crore in 2015-16 (budget estimate) to 5,500 crore for 2016-17.

The other focus area is irrigation. Finance minister Arun Jaitley, in his budget speech, said that 2.85 million hectares will be brought under irrigation through the flagship Pradhan Mantri Krishi Sinchayi Yojana (PMKSY) scheme in 2016-17. Further, 89 projects under the Accelerated Irrigation Benefits Programme (AIBP) that are languishing will be fast-tracked.

This will help irrigate nearly 8 million hectares, Jaitley said, adding the centre will spend 17,000 crore on these projects next year, and 86,500 crore in the next five years.

The government has made irrigation a priority after two consecutive monsoon failures in a country where over half of the farm lands are rain-fed.

The budget created a dedicated long-term irrigation fund under Nabard (National Bank for Agriculture and Rural Development), with an initial corpus of 20,000 crore.

The budget also gave rural credit a boost, from a target of 8.5 trillion in 2015-16 to 9 trillion next year, and allocated 412 crore and 500 crore, respectively, towards organic farming and increasing production of pulses.

To help farmers get remunerative prices, the budget said an online national agriculture marketplace would be launched in April connecting 585 regulated wholesale markets across the country. Jaitley added that 12 states have already amended their farm produce marketing laws and more states are expected to join the e-platform.

The centre will also strengthen procurement at support prices across the country, Jaitley said, adding that an online procurement system will be introduced by the Food Corporation of India.

The budget introduced a farmer’s welfare cess of 0.5 percentage points on all taxable services.

The emphasis on irrigation and crop insurance comes on the back of consecutive monsoon failures, and after the centre faced flak for ignoring the distress in rural India.

While repeated crop failures led to a spate of suicides across the country, farm incomes were also hit by low prices of key crops like rice, wheat and cotton, and lower exports due to a global slump in commodity prices.

Reviving the farm sector is a major challenge for the government. Agricultural output contracted 0.2% in 2014-15, from a 4.2% growth in 2013-14.

For 2015-16, the growth rate is estimated to be a dismal 1.1%, and is likely to be revised down if the winter crop yield take a hit.

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