Surinder Sud: Dryland farming

FARM VIEW

The Budget promises to do a lot for agriculture but doesn't follow up its words with money on the ground.

With agriculture being in focus for its under-performance, causing inflation-boosting supply-side constraints, it was hoped that the 2007-08 Budget would attempt to pep it up. But reading the fine-print of the Budget indicates that it does not come up to expectations regardless of several reassuring remarks in the Budget speech. Much of what Finance Minister P Chidambaram said was regarding the on-going programmes. The proposed new initiatives are not only few but also not supported by adequate outlays.

Let us take some of the major issues which the finance minister chose to highlight in his speech. At the onset, he said agriculture must hold the first charge on our resources. But this is not reflected in the Budget proposals. The provision for several sectors is higher than that for agriculture.

The Central Plan outlay (CPO) for agriculture and allied activities (Rs 8,558 crore) constitutes merely 2.6 per cent of the total CPO (Rs 319,992 crore) for 2007-08. This is lower than 2006-07 revised estimates where the agriculture's share in the total CPO worked out to over 3 per cent. It is also below this year's original budget estimate which mooted 2.9 per cent of the total CPO for this sector.

In the case of agriculture credit "" the paucity of which is generally linked with farmers' suicides "" the finance minister's claim that the goal of doubling farm credit in three years has been achieved in just two years, is well placed. So is his move to pitch the next year's target at a high of Rs 2,25,000 crore. But even after doubling, agricultural credit comes to just 12 per cent of the gross bank credit disbursed in 2006-07. In the early 1970s, when the green revolution was taking roots, over 20 per cent of the total institutional credit used to go to the farm sector.

No doubt, it can be argued that the agriculture's share in the GDP has dropped sharply to 18.5 per cent and so its share in institutional credit had to fall. But at the same time, it is worth realising that the credit requirement of modern agriculture is quite high and, unless it is met, it may be difficult for this sector to rebound.

To mitigate the risk element in agriculture "" another cause for farmers' suicides "" the budget has mooted induction of milch animals in 31 selected suicide-prone districts. Theoretically, this is a well-conceived move as the income from livestock usually comes in handy in case of crop failure. But the outlay proposed for this purpose is only Rs 153 crores, which comes to less than Rs 5 crore per district. Considering that a good milch animal costs Rs 15,000 to Rs 20,000, the proposed funds can finance hardly 2,500 to 3,000 animals per district, benefiting only a handful of farmers.

For agricultural insurance "" by far the best way to cover the risks "" the Budget has mooted continuation of the existing insurance scheme for one more year besides trying out weather-based crop insurance, another on-going measure, on a relatively larger area on a pilot basis. Indeed, none of the several farm insurance models used since 1984 has proved successful. The outcome of the rain-based insurance, too, is still uncertain though the finance minister has described it as a more promising measure.

The proposed hike in the outlay for the Accelerated Irrigation Benefit Programme (AIBP), especially the grant component of it, is another significant move. But, here again, going by the past performance of the AIBP, the gains may be only limited. For, since 1996-97, about Rs 20,600 crore of central funds and around Rs 15,000 crore of state funds, are reckoned to have gone into this scheme. But the additional irrigation created by it has been a meagre 4 to 5 million hectares "" only around half a million hectares a year. Even if this rate is pushed up, the impact may be only marginal.

Programmes concerning recharge of groundwater and repair and renovation of water structures are on-going ones, though the proposed fresh impetus is well placed.

The emphasis on raising the production of seeds of pulses and other crops is well intended. But this has already been conceptualised under an elaborate seed production programme approved by the Cabinet earlier.

For fertilisers, the budget does not provide enough funds for subsidy payment. Some Rs 12,000 crore of arrears payable to the industry are likely to be carried forward to the next fiscal. The proposal to pay fertiliser subsidy directly to the farmers is well-intended though how it is done is yet to be seen.

sud@business-standard.com