Budget 2016: At the time of deepening distress, govt's rural push may not be adequate

By Nilachala Acharya

The preliminary reactions of many people after the Budget presentation gave the impression that farm sector got a boost in terms of a significant increase in budget outlays for the sector. But a closer look reveals that behind this apparent increase is the accounting adjustment of funds for interest subvention, earlier reported under the Ministry of Finance, now shown under the Ministry of Agriculture.



In 2014-15, actual spending by the Department of Agriculture, Cooperation and Farmers’ Welfare was Rs 19,255 crore, which is projected to be Rs 20,984 crore, excluding allocation for interest subvention, in the current budget. On the face of it, allocation for the crop insurance scheme, Pradhan Mantri Fasal Bima Yojana has seen an increase from Rs 2,598 crore in 2014-15 actuals to Rs 5,500 crore. But this is accompanied by cuts in Rashtriya Krishi Vikas Yojana (RKVY) from Rs 8,446 crore in 2014-15 to Rs 5,400 crore,and in Krishi Unnati Yojana from Rs 9,823 crore in 2014-15 to Rs 7,580 crore.

There are other things too we need to know about. While pulse production in the country got renewed focus, Krishi Unnati Yojana witnessed decreased allocation under National Food Security Mission (NFSM) from Rs 1,873 crore to Rs 1,706 crore. Moreover, funding of Rs 500 crore as incentive for enhancement in pulses production under the National Food Security Mission which will cover 622 districts is nothing but reprioritisation of Budgetary allocation within different missions of NFSM, and in absolute terms, spending for the mission got reduced to the tune of Rs 167 crore.

Many of these schemes are to be financed as per the restructured formula of the Centrally Sponsored Schemes where the States would be contributing more towards implementation. Amidst the competing priorities of States, the sector may not receive adequate attention in their budgets.

The government’s thrust to reorient its interventions to double the income of the farmers by 2022 seems very appealing. The Budget speech promises doubling the “income security” to farmers in the next five years. However, there are questions around the timeline and whether the government intends to double the farmers’ income from the present level that need to be resolved. The government came to power with a promise of implementing the Swaminathan Commission’s recommendation on minimum support price at cost of cultivation plus 50 percent as income to the farmers. The Budget does not indicate a clear roadmap for fulfilling this promise within the remaining period of its term.

As the increased funding to Prime Minister Fasal Bima Yojana (PMFBY)is directed towards subsidising premiums for the existing insured farmers,it will go to the insurance companies, rather, it should have targeted to bring a bigger number of farmers under the scheme. A point worth mentioning here is that about 95 percent of farmers cultivating paddy and wheat do not have insurance and case of cotton cultivating farmers it amounts to 85 percent. Rs 15,000 crore allocated for interest subvention is a marginal increase over last year’s allocation of Rs 13,000 crore and won’t be able to meet the requirements of the large farming community. Further, since the benefit of interest subvention only accrues to a few farmers who have access to formal sources of credit; it won’t help tenant farmers and sharecroppers who are excluded from bank loans.

The irrigation schemes did not get any push; allocation for the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) has been reduced from Rs 3,530 crore in 2015-16 BE to Rs 3,427 crore in 2016-17 BE. It however, has registered a higher allocation of Rs 540 crore under the Department of Agriculture, Cooperation and Farmers’ Welfare in the current budget compared to last year’s Budget allocation. An important fact to note, as per a CAG report is that Rs 920 crore allocated for PMKSY in the River Development and Ganga Rejuvenation was not even touched during FY 2014-15.

Proposals regarding Krishi Kalyan Cess of 0.5% on all taxable services for financing initiatives relating to improvement of agriculture and welfare of farmers, and the Krishi Kalyan surcharge to impose 7.5 percent on undisclosed income towards agriculture and rural economy are welcome. While cesses are meant for complementing or supplementing the additional requirement for a specific purpose, government has been using cess money as a replacement of the existing allocation rather supplementing.

Despite a prolonged drought last year which affected the sector very badly and led to highest number of suicides by farmers ever, the Budget has ignored this distress and proposals for the farming community are inadequate. The present level of budget allocation for the sector would only be able to address the symptoms and not the root causes of farmers’ distress.

(The author works with Centre for Budget and Governance Accountability (CBGA), New Delhi. He can be contacted at nilachala@cbgaindia.org. The views expressed are personal)

Updated Date: Mar 04, 2016 17:28 PM

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