It was a glut in various agri-commodities that impacted farm incomes in 2017, even as the government has set an ambitious target of doubling agricultural incomes by 2022. Uncertainty and high price volatility hurt farmers more than a decline in crop due to monsoonal vagaries.

As the government is almost certain to give the farm sector a major boost, what should be the three big business expectations?

Private investment

Capital is the major driver of growth and currently, private sector constitutes almost 85 per cent of the capital formation in agriculture. Public investment in agriculture is on the decline.

This needs to be corrected as public investment crowds in private investment.

There is need for public sector investment in irrigation, roads and bridges to set the base for accelerated private sector capital formation in agriculture.

Alongside, there is a need to create an enabling environment through a well-thought-out PPP framework along the entire value chain.

This would call for a balanced policy on seeds, pesticides and fertiliser in place of an over-regulated framework in several areas. Facilitating land leasing and contract farming are other areas in which much more needs to be done on the policy front. These changes — along with marketing reforms — can provide the private sector an enabling environment in which it will bring in more capital and have the space to invest in R&D and extension.

Marketing reforms

Major initiatives are needed to reform the physical agriculture markets. The revised model APMC Act may have the same fate as the old Act, with most States adopting such legislation in a piecemeal fashion. The only sure way to ensure the concept of a unified agriculture market is to bring agricultural marketing into the Concurrent List. This would provide the legal basis for a uniform marketing law. The e-NAM has not seen much activity on the ground. Even in the 455 APMC markets that have seen the introduction of electronic trades, business continues as usual with farmers unable to access buyers beyond the closed group of the traditional commission agents.

There is also a need to look at developing and facilitating private mandis with modern infrastructure.

Rationalisation of GST

In a World Bank study, India has successfully jumped 19 positions in the Logistics Performance Index (LPI) just after the implementation of GST. However, notwithstanding this overall benefit, the agri-warehousing industry is facing challenges, ironically because agri storage is now on the exempt list. The implication is that while the warehouse service providers do not charge GST from customers, they are still required to pay GST for input services such as for renting a warehouse under the “reverse charge” without being able to claim input tax credit. This has increased the cost of storage.In the erstwhile tax regime, there was exemption from payment of service tax in respect of construction of warehouses. This exemption also stands removed, which means the cost of warehouse construction would go up Import of modern warehousing equipment such as silos is no longer exempt and, therefore, such project imports now will have to bear additional 18 per cent GST, besides the existing 5 per cent customs duty. This will act as a dampener to the private sector for building modern warehousing complexes. The government needs to quickly address these challenges. Otherwise, farmers may find storage costs exorbitant and, therefore, take recourse to distress sale. By fixing these loopholes, the full benefit of GST can translate into greater efficiency and cost reduction for the agri-storage sector that is vital for giving a fillip to farmer remuneration.

The writer is MD & CEO, National Collateral Management Services. Views are personal.

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