BJP’s election manifesto promised many things for farmers. Now that it is clear that the NDA-led coalition is going to be back in power, companies in the agri space — manufacturers of seeds, fertilisers, agro-chemicals and farm equipment — will stand to benefit.

However, do not expect fireworks immediately.

Had it been UPA, the promised farm loan waiver across the country would have given a booster shot to sentiments and there would have been instant lift in demand for agri inputs and FMCG.

Now, with NDA, there is not much benefit that may flow immediately. But for the Pradhan Mantri Kisan Samman Nidhi Yojana which promises to put some cash in the hands of every farmer, all other promises made by BJP are measures that will bear fruit only in the long term.

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The BJP manifesto had promised doubling income of farmers by 2022. For this, it has outlined an investment of ₹25 lakh crore to improve farm productivity and build an efficient storage and transport mechanism for agri produce. It further promised to create at least 1,000 farmer producer companies, digitise land records by setting a deadline date and expand the PM Krishi Sinchayi Yojana to realise 100 per cent irrigation potential. There was also a promise to give a helping hand to farmers by providing interest-free loans up to ₹1 lakh on KCC (Kisan Credit Card).

In the last five years, the NDA led government’s new schemes including eNAM, PM Krishi Sinchayi Yojana and Soil Health Card, have seen good progress.

If the NDA does well in the next five years by addressing the gaps in its old schemes, executing the new schemes well and boosting exports, it may pull farmers out of distress and put the rural economy back on growth track.

This will help all agri companies see improved demand and also give them the ability to pass on raw material price increases to customers through price hikes. Most of the stocks in this space including Rallis India and Insecticides India are at a reasonable valuation from a long-term perspective.

Income-support scheme

In most large agriculture States, there has been a sharp decline in farm income in the last one year observes a report by JM Financial. This includes Gujarat, Maharashtra, Rajasthan, Karnataka, Telangana and Tamil Nadu. The report explains that the fall in income was because of a drop in mandi prices and lower-than- expected procurement in pulses and other crops by the government.

However, 2019-20 should be better. The income support scheme of the government should improve the buying power of farmers to some extent at least. A report by JM Financial indicates farm income growth — for a small peasant (holding of 2.7 acre) — of 5.4 per cent in 2019-20 aided by the income transfer scheme. Large farmers may draw benefit from higher prices at the farm gate this year. Given that the south-west monsoon is expected to be sub-par, prices of farm produce may scale up. For a large farmer, income growth is expected to be around 6.2 per cent, helped by improved prices according to JM Financial.

Rallis India, Insecticides India, Coromandel Fertilisers, United Phosphorous, Kaveri Seeds and Jain Irrigation are some companies that will stand to benefit from increased demand for agri inputs.

While most of these companies did not fare well in the December 2018 and March 2019 quarter because of below -normal monsoon that impacted demand and higher raw material costs hitting margins, the year 2019-20 may be better.

For the rural-India picture to change and farm incomes to improve significantly from the current levels, there is a need for revival in both demand and prices of agri commodities.

The schemes of NDA including eNAM, and measures taken to support FPOs and setting up storage and warehousing facilities for farmers in the village will take time to bring a meaningful difference in income of farmers.

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