Agri-commodities at centre-stage

Aarati Krishnan | Updated on February 26, 2011

Workers assorting Nandini milk packets at the Mysore Milk Dairy in Mysore. (file photo)   -  M_A_SRIRAM+SEP+THE HINDU

The Budget is likely to see quite a few tariff and trade-related measures to lift domestic availability of key agri-commodities or food products that are in short supply. These could take the form of reductions in import duty on crucial food items, cuts in import duty for machinery used in food or diary processing, relaxation of curbs on imports of such items or even new curbs on exports of some of the commodities on the hotlist.

Runaway prices of onions, pulses, milk and vegetables have been in the news in recent weeks. The government has already responded by fixing a minimum export price for onions. With milk prices looking to soar over the next year, an outright ban in export of milk powder, milk products and casein has already been imposed, but measures may be in the offing to augment duty-free imports as well. Dairy product makers have been seeking duty-free status for machinery imports and curbs on cattle feed exports to help tackle soaring input costs.

For the sugar sector, where the jury is still out on this season's output, the government has been dragging its feet on allowing 5,00,000 tonnes of exports under the open general licence.

If allowed, this may spell relief from excess inventories, especially for sugar producers with coastal units and refineries. It may also lead to a tighter domestic sugar balance this year, lending support to prices.

This apart, the Budget may also put in place certain medium-term measures to tackle supply constraints or promote yield improvements in agriculture. Interest rate subvention for farm loans may be extended or increased, subvention may be offered to ancillary industries such as dairy or food processing.

Investments in agri-logistics and cold storage chains may receive fresh attention.

With the food grain output rebounding even as pulses remain in short supply, the government may look to restructure the public distribution system and push through the Food Security Bill.

Agricultural inputs too may receive a fillip. A weighted deduction of 200 per cent on any expenditure incurred on R&D in agriculture is one expectation. Higher allocations for rural irrigation and infrastructure building schemes are also a possibility.

Published on February 26, 2011

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