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India Budget 2019: Agri sector hopes for a shower of reliefsqrcode

Jul. 5, 2019

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Jul. 5, 2019

India Budget 2019: Agri sector hopes for a shower of reliefs

As Finance Minister Nirmala Sitharaman raises to present the budget on Friday she will have to carefully consider the impact of deficit rains on the economy this year. The agriculture sector is likely to be a priority area for this budget. The sector had reported distress for a long time and a dip in rural demand have left large FMCG firms in the docks this year.
Seeking fresh oxygen for the sector, the government this year wants to go all out in reviving rural India. A higher MSP announced for Kharif crops this year would also definitely bring some cheer to farmers and millers. The government, however, realises that there is scope to do more development, particularly on a bad rain year.

"The monsoon deficit might go away but in the foreseeable future, the weather will become more unpredictable. We need to prepare our farmers and the economy to face these risks," said Rajiv Kumar, vice chairman, Niti Aayog, in a talk hosted recently by industries body CII.

Kumar said that resilience is the key and that it will need efforts of the government in promoting water conservation, micro-irrigation and safe agricultural practices. Faced with countrywide farmers protests and political pressure, the interim budget in February announced the PM-KISAN scheme, which offered Rs 6,000 annual benefits first to marginal and small farmers and later broadened to include all landowners. The scheme was implemented with retrospective effect from December 2018.

Introduced to address the distress of farmers and subsidise their cost of farm inputs, the scheme, however, has failed to address the problem. "Beneficiaries under the scheme are doubtful as their names and bank details often do not match. A similar problem was noticed with the Rythu Bandhu scheme in Telangana," said Kiran Vissa, a Telangana-based social activist working with farmers in the region.

A finance ministry official said that after the somewhat enthusiastic response to the scheme in releasing the first of the three annual installment payment to about 2.3 lakh farmers across the country, they have gone slow on the scheme for now. On instructions from Prime Minister Narendra Modi to make the scheme foolproof, the Central Board of Direct Taxes has worked out a new plan to assess scheme beneficiaries on the basis of their bank accounts and tax returns submitted against those accounts, before releasing the scheme benefits.

Meanwhile, the agriculture trade is keen for relief from differential GST rates which are as high as 18 per cent on farm inputs and services like warehousing or storage of agri-commodities. Organised agri-warehousing firms have been seeking a parity in tax rates since GST was implemented two years back.

"While customers have to pay an 18 per cent GST on our warehousing leases, they would not have to pay that if they chose unorganised sector players over us. That is a loss of revenue for the government," said Sandeep Sabharwal, Group CEO of Sohan Lal Commodity Management (SLCM). "This ends up making agri-produce more expensive for the consumer," he adds.

Like Agri-warehousing, farm input is also under an 18 per cent GST rate whereas farm produce attracts only 5 per cent. “A parity in GST tax rates is needed for the benefit of farmers. They should be brought down to five per cent in line with fertilisers and other agri-products. This would be in farmers interest," said R.G. Agarwal, Chairman of Dhanuka Agritech, and an industry veteran.

Agarwal said that the budget should address the critical problem for urban market access for farmers. He said that the government should announce measures to help farmers transport their fresh produce through four-wheelers and be able to sell their produce directly to consumers in the cities. "Such a system can bypass middlemen," Agarwal said on his long-standing dream and in an industry wish-list to the finance minister.

Two major agrarian states, Maharashtra and Haryana, will face elections this year. This would be another reason why the mandarins of North Block would have to pay special attention to mitigating distress and risks associated with the agriculture sector. Agriculture growth skidded to a low of 2.9 per cent this year from a 5 per cent growth in the year ago period.
Source: the week

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