Budget 2020

Agri-business: No funding cheer

Rajalakshmi Nirmal | Updated on February 01, 2020 Published on February 01, 2020

What Changed

Farm experts were looking for a bounty from the Finance Minister this year again, either in the form of higher allocation for PM-KISAN or increased spending on food and fertiliser subsidy. But neither happened. In fact, fertiliser subsidy for 2020-21 has been cut by 10 per cent. Agri credit has been increased to ₹15-lakh crore, but this may go toward regular farming expenses and not boost consumption significantly. The revival in spending in rural India, especially among farmers, looks difficult. That said, some of the announcements could bear fruit in the long run. One is bringing more warehouses under WDRA and letting eNWRs (electronic Negotiable Warehouse Receipts) trade on eNAM. Also, there has been a promise to build cold chain facilities for perishables. The Budget has made an allocation of ₹500 crore for FPOs (farmer producer organisations).

An increase in subsidy to settle the over ₹45,000 crore that is pending on the subsidy bill to fertiliser companies had been hoped for; this didn’t happen. The Finance Minister, on the contrary, said the government will encourage the balanced use of fertilisers and try to change the prevailing incentive regime that results in excessive use of chemical fertilisers.

Background

The year 2019 was not a happy one for farmers despite many Central schemes that handed them a bounty in the form of income support and higher MSP. While the prices of horticulture crops and pulses shot up on a drop in output in the kharif season following monsoon rain damage, and pushed up the returns for farmers, the stress from debt taken in the previous years and higher cost of inputs continued to weigh on them. The PM-KISAN scheme disbursed the amount it promised, but not everyone benefited, since tenant farmers and sharecroppers were excluded from the scheme. Also, many States were not able to give details of all their farmers to the Centre within the deadline.

The other Central schemes, including the PM Fasal Bhima Yojana (PMFBY) and eNAM, failed to reach farmers across the country. In PMFBY, the irregularities observed in the previous years continued. In eNAM, no new mandis were added during the year. In the existing mandis, however, more lots were assayed and more payment was done online to farmers. Under the MSP scheme, though prices of many crops were increased, procurement was not significantly higher. Therefore, despite the significantly higher allocation to agriculture in 2019-20, there wasn’t a comparable improvement in the lives of farmers.

The Verdict

The solution to farmers’ woes doesn’t lie in subsidies or doles. Maybe the Centre realised it this time. But it would have helped if food and fertiliser subsidy were rationalised. Had urea been moved under NBS, many companies would have benefited. For now, it’s status quo. Also, with the cut in fertiliser subsidy, players with presence in the urea space including Nagarjuna Fertilizer & Chemicals, Chambel Fertiliser & Chemicals and GSFC may face working capital woes in the next fiscal, too. The plight of other agri input companies, including Coromandel International, Rallis India and Dhanuka Agritech, will depend on the monsoon.

Takeaways
  • No increase in allocation under PM-KISAN
  • Creation of more warehouses under WDRA
  • Cold chain facility for perishables

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Published on February 01, 2020
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