Union Budget 2014: FM must bring back agriculture lending as a priority for banks
Jang Bahadhur Singh Sangha July 1, 2014These are my primary expectations:
1. The UPA government and its Planning Commission committed some serious blunders impacting the future of Indian agriculture. The Commission focused on select MSP crops, practically leaving the rest in the lurch. In agriculture, the effects of any policy, whether positive or negative, normally takes two to five years to manifest themselves. Prices of fertilizers (ammonium (Nitrogen), phosphorus, and potassium}, diesel and labour (owing to MNREGA) have risen sharply in the past four to five years as compared to output prices, squeezing farm profitability and increasing debt.
The production cost of high input crops rose drastically compared to staples. The Planning Commission seemingly considered the production cost of MSP crops as the benchmark and failed to evaluate the impact of escalated input cost on other crops. Further, prices of perishables fluctuate more sharply but the benefit of higher prices don't reach the producers. Production of these perishables is more vulnerable to weather and incidence of diseases and pests. What India is witnessing in terms of volatility in commodity prices is destined to increase sharply unless the government acts quickly.
Thus two things are required. A) Price Stabilization Fund to bring parity, and B) More investments on research, markets and post harvest technology
2. Ministry of Food Processing Industry: There is great need to create value chains for different crops. The ministry should encourage customized value-chain proposals for different crops in their respective production hubs. The budget of this ministry needs to be increased manifold as this should be a priority area.
The current policy for Food Processing & Integrated Cold Chain is not inclusive even though that may be the intention. The policy requirement should be to empower the farmer and make him a partner in the value chain. Currently, the farmer gets paid according to the daily auction price of one or two reference mandis/markets for the fair average quality which is normally sold in these markets. For sorted and graded high quality produce, farmers need to take precautions from the pre-harvest stage till the post-harvest stage. The farmer would only be willing to do that if he would be rewarded for all the extra effort. The contracting companies that engage farmers for producing commodities normally give a list of precautions and minimum standards and provide Extension Training and Agronomic advice to the farmers. These companies like to save by minimising the wastage (from the quoted 25-40% wastage figure) but do not share the gains with the farmer. That does not ensure a long-term relationship.
3. It is time to move from "Jugaad" to Hi-Tech precision based Agricultural Equipment. The mechanization Indian Agriculture has witnessed since the Green Revolution has been patchy and lacked vision. It is time to put Indian Agriculture in all its dimensions at par with global benchmarks.
Under MOA, a new Mission needs to be set up for investing in latest technology from land preparation till harvest. Globally, the land preparation equipment is focused at efficiency, accuracy, high online percentage (zero downtime) and other features as operator comfort. There are equipment available that can prepare the seed bed and plant the seed in one or two operations while conserving the sub-soil moisture without the need of a pre-irrigation. An equal water saving is possible from the selection and use of appropriate equipment as from the use of efficient irrigation technologies such as drip & sprinkler.
Specialized machinery is needed to promote fruits & vegetables and crops other than wheat and rice.
4. Hand holding of Farmprenuers to explore international markets in the initial stages.Capacity building of farmers and extension workers in modern agriculture and natural resource management as well as farm level value addition.
5. Centre's of Excellence being established for different focus areas all over the country under MOA need to be strengthened with special budgetary provisions as the purpose is defeated in establishing such Centre's if they are not result oriented.
6. The Ministry of Science and Technology and Ministry of Agriculture need to be aligned. India needs to have a long term Water Management strategy for irrigation.
7. Having a sub-surface pressurized irrigation grid linked to water saving irrigation technologies should be encouraged. The farmer should be able to utilize the water as per his need on chargeable basis. Having a centralized irrigation grid using the river waters supplemented by pumping underground water would be a highly efficient system saving both water and power used for pumping privately. Because of the high cost, this strategy needs to be implemented in phases, especially where sub-surface water level is fast diminishing. But it is better to have a wholistic approach than having a patchy one.
8. Agri lending, though prioritized, needs to be re-examined. RBI changed the lending norms since June 2010 making it impossible for Financial Institutions to lend to farmers amongst others below the base rate. Financial institutions are making huge profits if one looks at their balance sheets, yet they cannot lend at sub-Base Rate beyond 3 lakh per farmer. Why? Because RBI on the advise of Finance Ministry in 2010 decided to forbid lending below base rate. It is highly contradictory to have an agenda of increasing Agri Lending yet break the beneficiaries into categories which is illogical. Agricultural credit should be available in India below 6% looking at the miserable growth figures of agriculture.
Jang Bahadur Singh Sangha is the country's biggest potato and maize farmer