Tax, duties concessions expected for agro processing equipment

The Union Budget will be presented at a time when the UPA government is in election mode and has put a blanket cap on spending by Ministries unless a project is part of its “flagship programme”, particularly the cash transfers scheme. In the food, agriculture and food processing sector, this signals a support to the National Food Security Bill, despite all its inherent weaknesses and limitations, and a big push to farm mechanisation and small farmers collectives to facilitate contract and lease farming for the mega hyperlinks that will arrive with the opening up of multibrand retail markets.

There is no visibility yet on push to the backward-forward linkages between farmers and markets or on rural infrastructure/cold chain units or on the issue of farm credit in the informal sector or on land reforms. It is as if these burning issues will on their own disappear once the international hyperlinks appear on the scene, to cater for Indians but really to use India — with its poorly paid farmers and cheap and abundant labour —as a marketing hub and for lining their deep pockets.

It is expected that the Budget will ease duties and taxes on agro machinery and farm equipment, machinery for food and seeds processing, labs for testing seeds etc., for cold chains, refrigerated storages and warehouses and processing of agriculture produce, including horticulture, dairy, poultry, marine and meat products.

For the sugar industry, the Budget might bring news of decontrol, which will most likely make the sweetener expensive under the public distribution system for below the poverty line (BPL) consumers. Either this or the Centre will pass on the subsidy for discounted PDS sugar to the States.

A formula is being worked out under which industry will be freed of its 10 per cent levy obligation and the government (either the Centre or the States or both) will bear the cost of subsidy.

On average, the agriculture and allied sectors grew by 3.3 per cent in the 11th Plan period (against a target of 4 per cent), compared to 2.4 per cent average GDP in the sector during the previous Plan. Much of the growth, however, is attributed to the livestock and dairy sector.

If anything, the fisheries sector has fallen short of the 6 per cent growth target and on average, there has been a perceptible fall in the production of pulses, coarse cereals and oilseeds. But for maize, which is largely required for poultry feed etc., the government’s attention is dwindling from policy intervention to encourage growth of coarse cereals, particularly the rain-fed nutritious jowar, bajra and small millets.

Combined with depleting forests, this has had a huge impact on availability of fodder and feed for livestock and has hit hard the supplementary incomes of small and marginal farmers. A reason for farmers’ suicides is lack of supplementary income at times of crisis such as failed crop with the additional cost of maintaining livestock. This is an area of neglect that needs attention, along with a shift from the unabashed push for genetically modified crops.

Record foodgrains production

Foodgrains production last year was a record, nearly 260 million tonnes, and though it is expected to be lower at 250 million tonnes this year largely due to kharif drought, it is at the same time an achievement and a concern for lack of storage spaces.

The Rashtriya Krishi Vikas Yojna, which provides flexibility to the States to plan out their projects in agriculture and allied sector has paid rich dividends, although the spending on livestock and fisheries sector is not much.

Likewise, there was a shift two years ago in focus from the Indo-Gangetic belt to north-eastern States be it in horticulture or floriculture or other potentials. But in the last year, the allocation to this region has dwindled perhaps due to lack of adequate marketing infrastructure and connectivity.

Despite the highest-ever grains production, the prices of essentials have largely remained high during the year. Food inflation now stood at 11 per cent. The prices of pulses, sugar, milk, edible oils, atta and tea have been consistently rising, not to speak of other commodities.

Normally this is attributed to supply-side problems but clearly there are several issues that need to be addressed, including need to bring more area under irrigation, evolving newer technology and invigorating the extension services to prepare farmers for the erratic monsoon which is now becoming a pattern.

There was a loss of about 10 million tonnes of production last kharif owing to drought in just five States, the worst being Maharashtra, Karnataka and Tamil Nadu, which also suffered drinking water problem. Yet, the Centre has put a blanket ban on expenditure on irrigation projects.

This will not only impact the agriculture and food sectors in the immediate term but red tape will put back the momentum and continuity in crucial development projects by a couple of years.