Five points Budget should take note of to jump-start rural agriculture economy

The government has shown it means business. After a bold decision through demonetisation, expectations from the forthcoming budget 2017 are high. The economy has already taken the first steps towards a cashless economy with transparency and ease of doing business as its hallmark. The budget is expected to further cement the gains and take the Indian economy, which is today at an inflection point, on the growth path.

After the failure of the monsoon in the last two years and a below normal monsoon this year, there is an urgent need for jump-starting the rural agriculture economy. There is an increasing pressure to migrate from rural to urban areas and urgent action is required to stem this and promote the rural economy.


India’s import of refined vegetable oils, especially refined palm oil, has been rising on the back of a duty differential between crude and refined vegetable oil of only 7.5 percent. Also Malaysia and Indonesia have a tax on export of crude higher than that of refined by 5 percent. This makes the landed cost of refined palm oil (RBD olein) the same as that of crude palm oil (raw material). Duty differential in India has to be made variable so that it is in line with the differential duty prevailing in Malaysia/Indonesia. The differential duty has to be increased to at least 15 percent from 7.5 percent to help the domestic refining industry which is currently facing a crisis due to under-utilisation of capacity and is on the verge of closure. This would in turn affect farmers, the crushing industry, the oil refining industry and a large population of labour that is employed in the factories.

 Five points Budget should take note of to jump-start rural agriculture economy


The import duty on Refined Palm Olein should be increased from 20 percent at present to 27.5 percent or the duty on Crude Palm Oil should be reduced from 12.5 percent to 5 percent. Import duty on by-products, Palm Stearin and PFAD needs to be reinstated to give a level playing field for domestic crushers and refiners. This will boost the ‘Make in India’ campaign envisioned by our honourable Prime Minister.


While the green revolution has resulted in increase in wheat and rice production, other crops like oil seeds and pulses need to be promoted and their growth enhanced. We expect the budget to announce an expanded outlay for investments in irrigation and agri-markets coupled with schemes for a more transparent procurement of grain by official agencies.

Opening up the sector for direct procurement of produce from the farmers with suitable safeguards in place to prevent exploitation would go a long way in improving the lot of the farmers. The cooperative model such as Amul in Gujarat can be replicated with suitable changes for other agri commodities. Investments in improving the connectivity from farm to market, improving the rural infrastructure including electricity and roads should be on priority.


To combat the continuing slump in the agri-economy, the government should open up FDI in agricultural sectors other than those where it is already allowed. This would help jump-start the sector through investments in technology and technical expertise, irrigation infrastructure, and modern agriculture practices.


Subsidies and incentives for palm oil plantation will go a long way to increase area under cultivation.


While the Pradhan Mantri Fasal Bima Yojana was launched in January this year, the report on its implementation should throw light on how effective it has been in addressing the farmer’s woes. We look forward to tweaks in the same to increase benefits to affected farmers keeping in line with their normal annual incomes.

(The writer is Founder & Managing Director, Ruchi Soya Industries Limited)

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Updated Date: Jan 20, 2017 17:44:46 IST