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The likely move to address rural distress comes in the backdrop of two consecutive failed monsoons, and unseasonal rains ahead of the winter harvest in 2015. Photo: Reuters
The likely move to address rural distress comes in the backdrop of two consecutive failed monsoons, and unseasonal rains ahead of the winter harvest in 2015. Photo: Reuters

Union Budget set to boost farm sector

Spending on irrigation, crop insurance to be doubled; e-platform to be developed for farm produce

New Delhi: The government is set to double annual spending on irrigation and crop insurance, and develop a national digital platform for farm produce in order to ensure better prices for farmers, as part of a push to reduce rural distress following the first back-to-back drought in India in three decades.

“We’re expecting that the new crop insurance scheme—Pradhan Mantri Fasal Bima Yojana (PMFBY)—will get more than double what previous insurance schemes got in the budget," a senior farm ministry official said, requesting anonymity.

Finance minister Arun Jaitley, who will present the Union budget on 29 February, is likely to increase the allocation for crop insurance by more than 3,000 crore, the official added.

Indian farming remains overly dependent on the monsoon, with farmers lacking access to irrigation and crop insurance to mitigate weather-related risks. The inability of farmers to protect their crops against the extreme weather has led to rising cases of suicides. The government’s efforts are aimed at reducing rural distress and boosting farm production, which is projected to grow at a dismal 1.1% in the year to 31 March.

“The renewed focus on the farm sector is a welcome step, though it comes a bit late in the day," said T. Haque, director of the Delhi-based Council for Social Development, and a former head of the Commission for Agricultural Costs and Prices.

The centre’s allocation for insurance, for example, is expected to increase substantially during the next fiscal as more farmers opt for the insurance scheme. The scheme aims to increase coverage—from 23% now to 50%—of all farmers in the next three years. The centre is expecting at least 30% enrolment in the first year, the official cited above said.

Allocation for other farmer welfare programmes, including the Pradhan Mantri Krishi Sinchayi Yojana (PMKSY) for irrigation, will also see a substantial increase in the budget, the official said.

In July 2015, the government said it will spend 50,000 crore on the scheme in the five years to March 2020. The PMKSY programme was alloted 5,300 crore for the year ending 31 March. This could mean that the allocation for the programme may have to be doubled if the government is to meet its five-year target.

“The centre’s strategy to revive the farm sector is three pronged: reduce cost of cultivation by providing access to irrigation, insure farmers against weather risks, and help them get better prices through a national agriculture market," the official said.

Jaitley’s third budget will come on the back of two failed monsoons, which recorded deficits of 12% and 14% in 2014 and 2015, respectively, hurting crop production and crimping farm income. In addition, unseasonal rain just ahead of the winter harvest in 2015 damaged crops across the country.

The three consecutive crop failures resulted in an agricultural growth rate of minus 0.2% in 2014-15.

The farm ministry received about 25,000 crore in the budget last year. The centre also spent more than 12,700 crore from National Disaster Response Fund under the home ministry to provide financial assistance to states hit by drought in 2015.

Last year, as many as 10 states, including Maharashtra, Uttar Pradesh and Madhya Pradesh, declared a drought and sought more than 38,000 crore in central relief.

To boost farm production, the government also needs to revive the long-term investment credit, said Haque.

“The government should concentrate on reviving long-term investment credit in agriculture by lowering of interest rates," he added. “Also, I’m expecting some funds in this budget for digitization of land records, as the success of many programmes will depend on it."

Long-term investment credit allows the farmers to invest in machinery, irrigation, etc.

While the El Niño weather phenomenon that led to successive droughts in India has passed its peak strength, and the southwest monsoon this year could well be a normal one, the collapse in global farm prices may impede a revival in agricultural growth.

Global food prices hit their lowest in seven years in January and this has hurt India’s farm exports. Numbers show that value of agriculture exports from India declined by 21% in April to November 2015 compared to the same period in 2014. Low prices of rice, wheat and cotton are likely to hit farm incomes this year.

The government expects the National Agriculture Market, the online platform to sell agricultural produce, to help ensure that farmers get the best price.

On 18 February, Prime Minister Narendra Modi said the trading platform will be launched on 14 April. It will connect mandis, or wholesale markets, across the country, giving farmers a wider choice of markets to sell their produce in, and this will help them get better prices, he said.

The states and the centre have come together to make this a reality, according to the farm official cited above.

“Fourteen states have sent their proposals, and eight states have already amended their marketing laws. We spent the past one year bringing states on board and have also given them financial assistance to upgrade their information technology infrastructure in mandis," the official said.

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