The changes

The Budget had several ground-breaking measures for the farm sector, but, some lacked clarity. First is the favourable tax treatment for FPOs (farmer producer organisations). These organisations have been wanting a tax-relief for a long time. Though farm income is not taxed, farmer groups that organise themselves as FPOs and register as a company, had to pay tax on profits, if any, they make. But now, the FM has given 100 per cent deduction on profits made by such companies. This benefit is applicable on profits of all FPOs with a turnover of up to ₹100 crore.

e-NAM, which has been stuck on poor implementation by the States and lack of infrastructure, is set to draw benefits from the ₹2,000 crore allocated for ‘Agri-market infrastructure fund’. Currently, each of the 470 markets under e-NAM gets a cash assistance of ₹75 lakh to set up the necessary infrastructure. But, many States find this insufficient. The FM also indicated that the 22,000 rural haats (small agri markets) will be developed into Gramin Agriculture Markets and linked under e-NAM. This will help small farmers in selling their produce directly to buyers by by-passing commission agents.

The FM also assured cost plus 50 per cent on all crops including those that are sown in kharif. But, irony is that already, for rabi crops, the CACP has been fixing MSP at over 100-150 per cent of cost (which gives a 50 per cent profit margin), and farmers are unhappy. In gram, for instance, the MSP is 112 per cent over the actual paid out cost of the farmer; in lentil it is 165 per cent. So, what worries farmers is – first, there is very minimal procurement at MSP. Though the price support is announced for 22-plus crops, only in paddy and wheat, it is effective to some extent and in fruits and vegetables there is no procurement at all. The FM has said that it will be ensure that there is effective procurement at MSP across crops, but, what is also crucial is the strategy to dispose these stock. If the Centre sells the bulk of the crops in the market, market will destabilise. Another reason why farmers are unhappy with current MSP is that the CACP cost estimates are not always right. The cost of production differs from State to State and from farmer to farmer. Take, for instance, labour costs. In 2016, the daily wage rates for agri labour was ₹180-200/day in Madhya Pradesh, but ₹360-380/day in Haryana and ₹660-670/day in Kerala.

The background

The Centre has been under immense pressure to uplift the farm sector. The agri-GDP growth in the last four years averages to 1.85 per cent. But, many of the farmer welfare schemes launched have made only a slow progress.

The Verdict

The intention is good, but for the success of the schemes, execution support from States is needed.