Incentivising a Forward-Looking Vision For Agriculture

Given the food security needs of the country, the government has taken a sensible approach

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In her introduction, the finance minister emphasized how the 2022 Budget will pave the way for India for the next 25 years. While the overall thrust of the Budget was focused on infrastructure, the agricultural sector has been given its due share of attention. The theme of the Budget seems to be incentivizing a forward-looking vision for agriculture.

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Earmarking INR 2.37 lakh crore, towards direct payments for minimum support price (MSP) to wheat and paddy farmers, is a good signal by the government for the continuity of the MSP regime. While the implication is assured income to the farming sector, the transmission of this must be effective. One measure could be to involve the private sector for building efficiency in MSP procurement and also spread MSP procurement to non-traditional areas in eastern India. The demands of the farmers to provide a legal guarantee of MSP remains pending, but the hope is that a practical solution will be hammered out during the course of the financial year.

Given the food security needs of the country, the government has taken a sensible approach to first try out chemical-free natural farming in select areas along the river Ganga as a pilot and then examine the feasibility of wider adoption of this approach. While the specifics of the scheme are yet to be announced, it is hoped that intensive efforts will be taken to educate farmers and give them assistance to shift to this new system of cultivation. While making this shift, compensating them for any reduction in production and income will also have to be accounted for. Lessons learned during the spread of the Green Revolution, especially the research back-up and extension systems, should be incorporated here.

In terms of addressing areas of priority, the announcement of extending support to the millet producers and declaring 2023 as the International Year of Millets, is a welcome step. The current schemes catering to these crops are inadequate. The majority of millet farmers are small and marginal located mostly in rainfed regions. The support extended to them must be anchored in good research, extension, and critical infrastructure. It is imperative to ensure the growth of integrated value chains so that the benefits of these nutritious crops can be low back to primary producers and are not cornered by middlemen. A scheme for domestic oilseeds production is another such welcome announcement. The country imports $10 billion worth of edible oil annually and raising domestic production is key to stabilizing prices and ensuring availability. Though details of the scheme are awaited, the design must incorporate steps to incentivize domestic processing capacity and also address tariffs by balancing the needs of consumers, farmers and industry.

As a blueprint for the next 25 years, there is a multitude of announcements in the Budget that will enable agri 4.0 to take off.

The role of digitization has been explicitly recognised as a tool to transform agriculture. It is also a nod to the rapidly growing agritech sector, where many start-ups are working on solutions to reach the farmer at lower cost and higher efficiency. Digital technologies can provide a cross-cutting impact, ranging from production to harvesting and marketing of agri produce. Innovative PPP and other forms of the partnership will have to be devised to rope in the dynamism of this sector for achieving the desired objectives.

One key highlight of the Budget is the plan to strengthen and revitalize state agricultural universities that are currently under-resourced. These institutions have a profound impact on education, research, training, and extension within the agricultural sector at the state level. The focus should ideally be to create new capacity in high growth sub-sectors such as dairy, livestock, horticulture, and fisheries and promote crop diversification.

Encouraging kisan drones for the purpose of land records digitization, spraying, and crop assessment will herald transparency and efficiency in key farm interventions literally take-off, the sector needs a light-touch regulatory framework for ease of doing business. There is also a need to develop a trained cadre of drone operators and assessment staff which can boost employment in rural India.

In the matter of investments, the blended finance fund being set up through NABARD will be pivotal to promoting investment in agriculture. A market-oriented approach by NABARD to judge investment opportunities; and collaboration with private funds with experience in this area will be central to the success of this fund. To ensure sustainability, norms for application and appraisal of projects should be notified quickly and the Fund should aim to attract private venture capital in addition to government funds. The provisions of the Ken-Betwa Link project; show reassuring continuity and one can hope that the project can move to early completion. As it is an ongoing project, the success will determine how the ive new projects, for which DPRs have been drafted fares.

Providing support to States to adopt improved varieties and modern cultivation technology in the fruits and vegetable sector is an excellent decision that will promote crop diversification away from field crops. Extension support in horticulture is lacking in most states and the assistance by the government will help both in area expansion as well as a productivity enhancement. It is equally important to include post-harvest infrastructure to reduce high losses in F&V and promote integrated value chains in this sector.

The budget has addressed the near-term pain points of the agricultural sector while also setting up the vision for the future of agriculture to a great degree. Key areas such as crop diversification and promotion of domestic oilseeds production are important breakthrough ideas and can have long-term benefits. The new focus on agritech, drones, and digital technology is a sign that the government seeks to encourage the accelerated use of modern technology to transform the sector. Overall, the theme seems to be incentivizing a forward-looking vision for agriculture.