Budget 2021: What Agriculture Sector Can Expect from Upcoming Budget amid Prolonged Farmers Protest

The farmer’s agitation has entered into nearly two months and thousands of farmers mainly from the state of Punjab are still fighting for their rights staying firm on their demand of repealing contentious farm laws.

However, amid this turmoil, Finance Minister Nirmala Sitharaman will present Union Budget 2021 on February 1. This budget will be significant for farm and agri sector as the farmers across the state and mainly Punjabi farmers are throwing their anger against the central government’s decision.  So, it is hoped that this budget might end the disappointment of farmers and bring back their smile.  

The central government is expected to continue its focus on agriculture and allied sectors. However, given the government’s objective of increasing farmer incomes, sharper focus is needed on development of farm gate infrastructure, formulation and strengthening of farmer collectives. 

 What Agriculture Sector Got from Budget 2020-21 

1. The budget outlay for agriculture in fiscal 2021 was Rs 2 lakh crore. The bulk of the allocation was for short-term cash incentives and subsidies (PM-KISAN accounted for 35 percent and fertilisersubsidy 34 percent). Limited funds were allocated for the structural development of the sector. 

2. The government had made additional allocation for infrastructure development during the first AtmanirbharBharat programme. 

3. Rs 1 lakh crore Agri Infrastructure Fund for financing farm gate infrastructure for farmers. The first sanction of Rs 1,128 crore has been made to around 2,280 farmer societies.

4. Assistance of Rs 10,000 crore for the formulation of micro food enterprises.

What We Can Expect from Budget 2021-22 

“Budget provides a golden opportunity for the government to allay fears of various sections of the farming community,” told Arvind Sharma, Partner, Shardul Amarchand Mangaldas & Co.  

Given that the farm laws are projected as new options presented to farmers as opposed to old laws being replaced, Budget 2021 could provide for allocating MSP for key crops and funds for effective and seamless implementation of the farm laws, Arvind Sharma added.  

While the upcoming budget will be presented by Finance Minister on February 1 this year, all eyes will be set on what the government has for the agriculture sector. It is also believed that the government has already rolled out a slew of measures for the farm sector and thus no major decision can be taken.  

“The government has already implemented a number of schemes for agriculture such as direct benefit transfer under PM Kisan, MGNREGA scheme for farm workers, Rs 1 lakh crore agriculture infrastructure fund, and interest subvention,” Sameer Narang, Chief Economist told to media. 

The formation of 10,000 new farmer producer organisations (FPOs) as proposed for fiscal 2021 can cater to only seven percent of the farming population. Also, the existing FPOs lack capacity, leadership and basic infrastructure for effective market participation. Therefore, there is a need to increase allocation towards strengthening of existing FPOs and addition of more FPOs in order to improve access to market and establish market linkage for small farmers (85 percent of farmer population) 

Allocation of funds towards fast-tracking of existing projects in rural infrastructure development, such as rural roads and irrigation, and addressing the execution challenges should continue, especially as only 51 percent of the country’s total cropped area is irrigated at present. 

Allocations towards development of storage and warehousing facilities such as primary packhouses (we have only 250 packhouses today, against a requirement of 70,000), warehouses, cold storage and refer vehicles (we have only 9,000 against a requirement of 62,000 refer vans). 

With the withdrawal of private players from crop insurance, additional funds need to be infused by the government under the Pradhan Mantri Fasal Bima Yojana to mitigate risks for farmers. 

Effective disbursement of funds allocated for agriculture infrastructure and micro enterprises under the Atmanirbhar Bharat programme. 

Allocation for fertiliser subsidy, which is expected to be lower given the additional infusion of Rs 65,000 crore in fiscal 2021 and prevailing lower raw material (gas) prices.