Budget 2018: FM Jaitley reiterates BJP's poll promise of MSP at 50% of cost

Funds created for aquaculture, farm marketing; farmer produce organisations get a tax boost

Presenting the last full Budget of the Narendra Modi-led government, Finance Minister Arun Jaitley on Thursday reiterated the BJP’s poll promise of providing minimum support prices (MSPs) equal to 50 per cent more than the production cost, but did not specify which cost of production would be used for calculating the MSP.

Jaitley also announced creation of separate dedicated funds for aquaculture and animal husbandry totaling around ~100 billion, but details revealed much of these would be routed through NABARD as has been the case in earlier Budgets, perhaps reflecting the strained financial position.

The MSPs set by the government have been lower than 50 per cent of the comprehensive cost (C2), which is all paid-out expenses incurred plus the imputed value of unpaid family labour along with rentals and interest forgone on owned land and fixed capital. This is generally higher than A2+FL, which broadly is all paid-out expenses both in cash and kind along with the derived value of unpaid family labour.

Farmer produce organisations (FPOs) received a big leg up with 100 per cent tax deduction on profit in excess of Rs 1 billion for a five-year period starting from 2018-19. FPOs will be involved in promoting organic farming and upgradation of 22,000 rural haats into Gramin Agriculture Markets, or GrAMs. An announcement allocating Rs 20 billion was made for an agriculture marketing infrastructure fund to create these GrAMs, but without a significant matching grant. “On the whole, it looks like a promising Budget with a lot of announcements on schemes and funds, but in the absence of strong budgetary allocations there could delays in framing schemes to operationalise those funds,” Shiraj Hussain, a former agriculture secretary, told Business Standard. The delay in preparing formal schemes through which these funds can be made operational sometimes leads to inadequate offtake.

A special programme, called Operation Greens for providing logistical support, storage and transportation to potato, onion and tomato farmers through FPOs, was also announced with a grant of Rs 5 billion.

The allocation to the Price Support Fund (PSF) under the food ministry, meant to push states to intervene in the agriculture markets in the event of a price fall, was reduced from Rs 36 billion in revised estimates for 2017-18 to Rs 15 billion in the budget estimates for 2018-19. Overall, the agriculture ministry’s budget went up by around 15 per cent in budget estimates for 2018-19 from revised estimates for 2017-18 with much of the increase due to the Pradhan Mantri Fasal Bima Yojana (PMFBY) and interest subvention on short-term crop loans. The latter was transferred to the agriculture ministry from 2015-16.

The Budget also announced that NITI Aayog along with states would work out a mechanism through which a wider basket of crops could be procured under the MSP. This essentially means states may be free to choose their versions of programmes like Madhya Pradesh’s Bhavantaar Bhugtaan Yojana, or the proposed Market Assurance Scheme (MAS), or Telengana’s model of direct payment of subsidy based on crop-holding.

The finance minister also announced expanding the farm credit target for 2018-19 by 10 per cent to Rs 11 trillion and a mechanism to ensure that lessee farmers, too, receive the benefits of institutional credit. The allocation under the National Bamboo Mission has been enhanced while a special policy on agriculture credit is being framed. Jaitley said 470 out of 585 mandis (wholesale markets) have been electronically linked in the e-NAM (National Agriculture Market) programme. The rest will be linked by March 2018.

He also doubled the allocation of the food processing ministry to Rs 14  billion. “This is big let-down for farmers, who have been on the warpath for the last few years demanding better prices for their produce. The government perhaps does not understand the plight of farmers or maybe does not want realise the gravity of the situation,” said Yogendra Yadav, founder of Jai Kisan Andolan. He said there should have been a mention of a loan waiver and also some concrete announcements on how the government planned to provide the enhanced MSP to farmers.

Allocation for livelihood mission up 32%

The budgetary allocation for the livelihood mission under the rural development ministry was increased by almost 32 per cent, but the flagship Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) was left untouched at Rs 550 billion, same as the revised estimate of 2017-18. Though officials said they would manage with the existing level of allocation for MGNREGS and, if required, additional funds could be provided through supplementary demand for grants, civil society activists said the allocation was grossly inadequate if pending dues and liabilities were taken into account.

A budgetary allocation of around Rs 800 billion was needed to wipe off all the dues, they said. The allocation for the National Social Assistance Programme (NSAP), under which the Centre gives pension to the poor along with state governments, was raised to Rs 99.75 billion in 2018-19 (BE), a rise of about 14 per cent from the revised estimate but a marginal increase from the BE of 2017-18.

“After three years of keeping the budget for the National Social Assistance Programme (NSAP), stagnant for three years at Rs 95 billion, the government has increased it by a mere 5 per cent in nominal terms to Rs 99.75 billion. This is overall a decline in real terms. We would like to point out that a paltry sum of Rs 200 a month as pension can hardly be classified as ‘caring for those who care for us,” representatives of Pension Parishad said in a statement. For Pradhan Mantri Gram Sadak Yojana, an allocation of Rs 190 billion was made as against the 2017-18 RE of Rs 1.69 billion.