SEPARATE BUDGET FOR AGRICULTURE              

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Context

• The government said in Lok Sabha that there was no need to have a separate budget for agriculture.

Do you know?

In August 2021, Tamil Nadu became the third state, after Karnataka and Andhra Pradesh, to have a separate agricultural budget.

Background

• The genesis: The tradition of having an exclusive Budget for agriculture was started by Karnataka in 2011-12 followed by Andhra Pradesh in 2013-14.
• Tamil Nadu in 2021: Tamil Nadu government was inspired to opt for a separate Budget, due to its high rate of indebted agriculture households, which is 83 per cent, third only to Andhra Pradesh (93 per cent) and Telangana (89 per cent). (Agricultural Statistics 2020).
• Andhra - A success story: Going by the sector’s contribution to the state’s economy, the Andhra experiment was a success story. The gross value added by the economic activity in agriculture increased 52 per cent from 2012-13 to 2018-19, much more than the sector’s contribution nationally. During the same time, the GVA at Basic Prices (Base Year: 2011-12) Constant Price saw an increase of 28 per cent nationally.

The recent demand

• There were a lot of expectations of Farmers with the Budget 2022-23 which were not met.
• Therefore, the farmer community seeks a separate budget for the Agri sector.
• Demand: Each State should formulate a separate agriculture budget, with the Centre too bringing out a separate agriculture budget, akin to the Railway budget in the past.

Need for a separate Agricultural Budget

• Concurrent Subject: Agriculture is a concurrent subject with the Union government taking care of research, marketing, education, and exports while farming per se, and extension are the responsibilities of the States.
• Too diverse: Agriculture is too diverse a subject for it to be compressed into a sub-section of the regular budgets of the Centre and States.
• Right balance: When States budget for agriculture, there is scope for the right balance between the resources and expenditures consistent with their respective agro-climatic zones.
• Allied sectors: Agriculture requires a distinct budget at the state and national levels since it encompasses more than just agricultural production. It also covers animal husbandry, beekeeping, aquaculture, forestry, hill cultivation, and horticulture.
• Farm Sector was left out: When India initiated wide-ranging reforms in 1991, unfortunately the farm sector was left out.
• Disappointment in 2022 Budget - Some key statistics:
• There has not been any considerable and commensurate increase in the allocation towards capital investment, especially for promotion of rural infrastructure and marketing facilities.
• Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA) experienced a significant reduction to only one crore as against the allocation of Rs 400 crore in 2021-22.
• The distribution of pulses to States for welfare schemes has also been reduced to Rs 9 crore as compared to the Rs 50 crore of FY 2021-22.
• India’s AOI Index: India’s AOI index (38 in the world) is one of the lowest, reflecting that the spending towards the agricultural sector is not commensurate with the sector’s contribution towards GDP.
• Government Spending: In terms of government spending in agriculture, India (7.3%) lags behind several low-income countries such as Malawi (18%), Mali (12.4%), Bhutan (12%), Nepal (8%), as well as upper middle-income countries such as Guyana (10.3%) and China (9.6%).
• Status of Agriculture in India:
• Workforce

The agriculture sector employs nearly half of the workforce in the country. However, it contributes to 17.5% of the GDP (at current prices in 2015-16).

• Contribution to GDP

Over the past few decades, the manufacturing and services sectors have increasingly contributed to the growth of the economy, while the agriculture sector’s contribution has decreased from more than 50% of GDP in the 1950s to 15.4% in 2015-16 (at constant prices).

• Production and Agricultural Yield

India’s production of food grains has been increasing every year, and India is among the top producers of several crops such as wheat, rice, pulses, sugarcane and cotton.

It is the highest producer of milk and second highest producer of fruits and vegetables.

However, the agricultural yield (quantity of a crop produced per unit of land) is found to be lower in the case of most crops, as compared to other top producing countries such as China, Brazil and the United States.

Although India ranks third in the production of rice, its yield is lower than Brazil, China and the United States. The same trend is observed for pulses, where it is the second highest producer.

• No governing laws: Most holdings are small and marginal and large farmers lease out their farms to marginal and tenant farmers. There are produce transfers and resource transfers among them with no law governing them.

Concerns associated with a separate Budget

Andhra: A concoction of success and bitter experience

• The higher percentage of indebted farmers in Andhra Pradesh, despite the state's separate budget.

Political move

• Experts are of view that it is more of a political move. What it does is that it consolidates all the spending made for agriculture and allied under various heads under one roof and then it obviously will show an inflated number.

Populist measure

• Budget for agriculture will include the crop loan targets, for populist measure.

Misleading in nature

• Budget for agriculture should not include the crop loan targets as it will be totally misleading.
• The money lent by the banks should have no place in the Budget as it is depositors and investors’ money.

Deteriorate Credit culture

• It would further increase the demands for loan waivers, deteriorating the credit culture.

Way ahead

Fund allocation to the sub-sectors of agriculture

• Universities engaged in Agriculture, Animal Husbandry and Horticulture and NABARD should prepare a profile of the State in terms of soil, climate changes, emerging technologies and the pitfalls or inadequacies of the present system.
• At least a week in advance, the results should reach the Finance department of the State.
• And they should be circulated a day ahead of the presentation of agriculture budget to the Legislative Assembly.

Sub-categorization

• Irrigated farming and rain-fed farming should be separate components as much as livestock, horticulture, apiculture, and aquaculture.
• The Budget should contain only those resources that flow from the governments and not from the credit institutions.

Shining example:

The Telangana government has shown the way with an integrated approach. In the Rythu Bandhu, Rythu Vedika and Rythu Bima Yojana, the State pays the premium — irrigation and power being the key components. The State’s agriculture growth is the highest in the country at 17 per cent at the current prices in 2020-21.

Income and Insurance

• It must envisage how income security should be provided and how the insurance mechanisms should function.

Further Suggestions

Separate Farm Contract Act

• There should be a separate Farm Contract Act that should specify the contracts between farmers, between farmers and traders and between farmers and industry. Farmer producer organizations would draw strength from such legal facilitation.

Use of technology in agriculture

• While countries like Israel, Vietnam, China etc., have been spraying pesticides in a regulated manner through sprayers from the sky, Indian farmers to a large degree are spraying them manually.
• There is a need for adoption of robots, artificial intelligence and machine learning even in small agri-sectors and not only high income agri sectors. In this context, it is time to introduce agricultural income tax.

Scrapping subsidies

• The perverse subsidies in farm sector, like for fertilizers, should also be scrapped.
• Balancing the food system with environment and renewable or alternate energy systems are essential to build resilient food production system.

Recast Commodity Boards

• Commodity Boards in India are not democratic.
• It is time to recast them, give them clear agenda to function in a manner that they deliver the right income to the farmer. Investors are searching for the food system transformers.

Final thought

• Any transition in agriculture should be beneficial for the farmers and farm workers. It is imperative to give a helping hand to the farm sector, given the crucial role it performed during the pandemic. Also the farm sector continues to be the largest employer.

https://www.thehindubusinessline.com/opinion/agriculture-needs-a-separate-budget/article38116021.ece

https://prsindia.org/policy/analytical-reports/state-agriculture-india

https://www.business-standard.com/article/economy-policy/tamil-nadu-to-become-third-state-to-present-separate-agricultural-budget-121081101678_1.html#:~:text=The%20tradition%20of%20having%20an,greater%20focus%20to%20the%20sector