Drought-hit Indian farmers seek support in budget

By Manoj Kumar

NEW DELHI (Reuters) - India needs to increase budgetary allocations for irrigation projects and offer higher procurement prices for crops to support farmers hit by two years of drought, farmer associations said on Monday.

Drought in many parts of the country has hit production of rice, cotton and other crops, hurting the popularity of Prime Minister Narendra Modi, whose party recently lost village council elections in Gujarat, a state he ran for over a decade.

In a pre-budget meeting with Finance Minister Arun Jaitley, farm leaders urged him to implement Modi's promise of ensuring higher income for farmers.

Jaitley indicated an increase in allocations in the budget, and said India faced a challenge of raising farm productivity through high yielding seeds and efficient water utilisation.

"There is a need for more investment in agriculture sector," a finance ministry statement said, quoting Jaitley.

During his victorious 2014 election campaign, Modi promised to raise public investment in the farm sector to ensure a minimum profit margin of 50 percent over the cost of production.

Jaitley, who will present his 2016/17 budget at the end of February, has promised to spend nearly 500 billion rupees ($7.5 billion) on irrigation projects over a period of five years.

"A bad monsoon and low international commodity prices have aggravated the misery of farmers," Ajay Vir Jakhar, Chairman of the Farmers' Forum India, told reporters after the meeting.

Growth in farm output, which contributes nearly 13 percent to India's $2 trillion economy, fell to 2 percent in the first half of the current fiscal year from 2.4 percent a year ago.

Jakhar said more funds should be allocated to improve weather forecasts for farmers besides a state-funded insurance scheme for all crops.

Farm experts say profit margins for producing major crops have fallen to less than 5 percent following a collapse of global commodity prices, from around 20-30 percent about three years ago.

Last month, the government slashed its economic growth forecast to 7-7.5 percent for the fiscal year ending in March 2016, citing lower farm output and weak global demand. That was sharply lower than an 8.1-8.5 percent growth estimated last February.

Farm experts also favoured the transfer of fertiliser subsidies - estimated at nearly 700 billion rupees a year - directly into farmers' bank accounts to cut down leakages in the system.

"Farmers are feeling short changed by the Modi government," said Satnam Singh Behru, president of the Indian Farmers' Association, adding that more than 15,000 farmers had committed suicide in the last year. "Many farmers have lost faith in the government."

($1 = 66.3850 rupees)

(Editing by Douglas Busvine and Susan Fenton)