15th FC may recommend farm export incentives for states in Budget session

To help agriculture exports reach the goal of $60 billion by 2022, the 15th Finance Commission (FFC) is expected to recommend special incentives for states that perform exceedingly well on this count. Sources said the commission in its segment on performance-based incentives might include a section on providing special grants to states that perform well on agriculture exports.

The final report is expected to be tabled in Parliament during the Budget session that begins on Friday.

In its interim report submitted last year, the commission had recommended six indicators to measure states’ performance —implementation of agriculture reforms (the two model laws framed by the Center was the criteria), development of aspirational districts and blocks, power sector reforms, enhancing trade, education, and promotion of domestic and international tourism. The FFC had constituted a high powered panel to suggest measurable performance incentives for states to encourage agriculture exports and promote crops that can help in import substitution. It comprised of senior representatives from industry, academicians and former bureaucrats.

The panel has identified the crop value chains along and a list of over 340 commodities that need to be developed to help India increase its agriculture exports from the current $40 billion to over $70 billion in the next few years.

This push will enable an estimated investment of around $8-10 billion in inputs, infrastructure, processing and other demand enablers that will create an estimated 7-10 million additional jobs in turn. Such a boost is also expected to lead to higher productivity and farmer incomes. The other items identified for value chain development include shrimp, buffalo meat, raw cotton, grapes, pulses, mangoes, banana, potatoes, honey etc. 

The panel also advised creation of a state-led export plan, with the private sector playing an anchor role and the Centre acting as an enabler. It was of the view that the private sector had a pivotal role to play in ensuring demand orientation and focus on value addition, ensuring project plans are feasible, robust, implementable and appropriately funded.

That apart, the panel also said the government needs to ensure a higher pool of surplus rice is available to exporters to boost non-basmati rice exports, by suitably modifying Food Corporation of India’s (FCI’s) procurement strategies. It said FCI is the largest buyer of rice in the domestic market as it procures for the Public Distribution System (PDS) – about 40 million tonnes annually. And, the increase in Minimum Support Price (MSP) every year is leading to smaller export surplus and uncompetitive pricing in the international market for Indian non-basmati rice. Rice is among the biggest agriculture exports from India along with buffalo meat and cotton.

Overall, India’s agriculture exports in the last few years have been hovering around $40 billion — a far cry from the high of $43 billion in 2013-14, and far below the $60 billion goal.

Experts said poor logistics in sea ports and airports along with stringent phytosanitary norms sometimes act as non-tariff barriers, along with frequent changes in laws, such as the recent one for onions, are some of the major impediments in achieving the targeted growth in farm exports.