Agri Business

Steps to check production prices are positives for farm sector

| Updated on March 01, 2011

Mr Naveen Mathur

Mr Naveen Mathur, Associate Director – Commodities&Currencies, Angel Broking: The Government's resolve to reign in high inflation through improvements in agri-productivity and removal of supply bottlenecks in the agriculture sector has seen various budgetary provisions from increasing warehousing facilities, higher credit flow to the sector, interest subsidies, allocation for improving productivity and distribution of pulses, cereals and oilseeds, development of 15 mega food parks, storage facilities, cut in import duties, etc, which would aid in attracting higher investments into this long-neglected sector.

Mr Amarsingh Deo, Head Commodities Research, Aditya Birla Money: The Finance Minister , as expected, has reinforced a strategy to keep agriculture growth on a new trajectory. He has mentioned that the growth in agricultural sector is the key to India's development. As expected, emphasis has been laid on measures to check the prices of agricultural products to curb inflation. In a scenario where the inflation rose to an average rate of 9.43 per cent in 2010 against an average inflation rate of 2.1 per cent in 2009, the Finance Minister has done a praiseworthy job to lay down measures to keep a check on agricultural product prices, help develop the storage and supply chain of agricultural products and help the Indian farmers.

From a commodity futures market perspective, the Budget may lead to bearish sentiments for agricultural commodities as an initial reaction as traders are bound to avoid holding long positions from a short-term. However, from a long-term perspective, the demand-supply fundamentals shall remain the key drivers. Introduction of Food Security Bill is a key measure to curb inflation. One of the best positives for the development of spot market mandis and proper storage of agriculture produce is to give infrastructure status to the cold storage chains.

This will make way for proper storage of foodgrains which today, to a certain extent, go waste because of sub-standard storage facilities. Providing interest rate subsidy will allow farmers to take benefit of the credit flows allowed for the agricultural sector.

However, the budget was not able to meet the high expectations to curb inflation in the agricultural sector by removing specific taxes like mandi tax, reduction in import duty of edible oil, etc. But it can be said that overall the budget is a positive one for the agricultural sector as it is aimed at improving the overall conditions of the farming community.

Dr Hanish Kumar Sinha, Head – Trade and Commodities Intelligence, NCMSL : The UPA Government has finally tried to give impetus to the long standing demand of the agricultural sector after confronting daunting challenges of recent surging prices of agricultural commodities. The need to address the supply concerns in cereals, pulses and edible oil sector found support with specific programmes launched for each.

The plan for creation of 60,000 pulses villages in rain fed areas, bringing 60,000 hectares under oil palm plantations and pushing the green revolution to the eastern parts of the country by promoting rice-based cropping system with an aggregate plan allocation of Rs 1,000 crore is quite a welcome step. Inflation had been the key concern areas for the common man as well as the policy makers. The budget seems to address this issue by focusing on the increase in supplies of the essential food articles.

Comprehensive plans have been drawn to tackle the problem of shortage of vegetables, millets (Bajra, Jowar, Ragi), animal protein (through livestock development, dairy farming, piggery, goat rearing and fisheries) and fodder with an allocation of Rs 1,200 crore. The Government also proposes to promote organic farming methods, combining modern technology with traditional farming practices such as green manuring, biological pest control and weed management. The reduction of the basic customs duty on micro-irrigation equipment from 7.5 per cent to 5 per cent is expected to help the dry land farming in a big way.

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Published on March 01, 2011
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