Will the Union Budget’s focus on farmer issues and boosting agriculture attract private sector investment?

By Ranjit Bhushan

When Shivraj Singh Chauhan, the new Union Minister of Agriculture and Farmers’ Welfare and Rural Development, said the Centre is committed to procure tur, urad and masoor pulses at Minimum Support Prices (MSP) to ensure crop diversification and achieve self-sufficiency in pulses production, he was bang on target and addressing one of the major paradoxes plaguing Indian agriculture being addressed by the Union Budget.

While there is an increase in pulse production — 27.69 million tonnes in 2021-22 compared to 25.46 million tonnes in 2020-21 — it is unable to meet surging demand for pulses today, compelling the ministry to import pulses even when India remains the biggest producer and consumer.

Worrisome for the Union Finance Minister Nirmala Sitharaman is not just the increased reliance on imports of pulses but inflationary pressures across domestic markets which the Budget has to address, year after year.

In fiscal year 2023-24, pulse imports doubled to almost 45 lakh tonnes, costing the exchequer an estimated USD 3.74 billion. The government’s Budget is attempting to meet domestic demand as well as control prices; pulses being the staple diet in every Indian home, are now pinching the pockets hard with inflation as high as 17% in March 2024. It’s an ongoing litmus test for the Finance Ministry’s policies packaged in the Budget.

On his part, the new Agriculture Minister declared the launch of e-Samridhi portal through the National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) and National Cooperative Consumers’ Federation of India Limited (NCCF) for registration of farmers. The government, he said, is committed to procure pulses at MSP for farmers registered on the portal even though MSP is merely only one of the burning issues which has made Indian agriculture unremunerative for farmers, big and small.

Once again, the question raised is whether Digital India can satisfactorily address issues which have brought lakhs of farmers, especially in north India, on the warpath since December 2020, relentlessly protesting legislative reforms to liberalise agriculture, the contentious issues of minimum support prices (MSP), and overall decline in the share of Gross Value Added (GVA) of agriculture in the economy, despite the Ministry of Agriculture’s budgetary allocation of almost Rs 125,000 crores. Even with higher allocations, more subsidies and free distribution of foodgrains, the new Budget needs to provide the healing touch for the farming communities.

The Agriculture Infrastructure Fund (AIF), according to the ministry’s annual report 2022-23, is the star mission: a much-touted central sector scheme of financing facility, operational from 2020-21 till 2032-33 with Rs 100,000 crores earmarked for loans to be provided by banks and financial institutions. It has the noble aim of creating ‘infrastructure at the farm gate’; with the stated mission of providing debt financing facilities for viable projects, especially for post-harvest management infrastructure.

As per the ministry website, till date Rs 44,860 crores have been sanctioned by 481 lending institutions, with Rs 28,751 crores disbursed for projects to a host of Primary Agricultural Credit Societies (PACS), Marketing Cooperative Societies, Farmer Producers Organizations (FPOs), APMCs, Self Help Groups (SHGs), farmers, Joint Liability Groups (JLG) and Multipurpose Cooperative Societies. There is room to meaningfully involve agri-entrepreneurs, startups and Central/State agency or local body-sponsored Public Private Partnership Projects, especially when the focus is on post-harvest management. The Union Budget is making room for greater flexibility and possibly higher allocations for positive outcomes on the ground.

Post-harvest losses

Ministry officials have publicly highlighted how India loses approximately Rs 100,000 crore every year through food losses; the need for adequate and sustainable cold chain infrastructure is paramount to reduce post-harvest losses of foods, it can also significantly reduce the country’s carbon emissions.

“Food that is lost and wasted accounts for 38 percent of total energy usage in the global food system. Further, when food is lost/wasted, all resources that go into the production of that food, including land, water, energy human capital, are all wasted,” said FA Kidwai, Additional Secretary, Ministry of Agriculture and Farmers’ Welfare at the Post-Harvest and Logistics Summit organised by the Confederation of Indian Industry (CII) in New Delhi on 23 June 2023. He added that the Ministry is committed to the development of cold chain through the Mission on Integrated Development of Horticulture (MIDH) providing several incentives to interested stakeholders and promoters.

In its July 2024 report on ‘Technology & Innovations for Sustainable Agriculture’, the ICRIER team led by Dr Ashok Gulati highlighted the role which foreign technology had played in agriculture. “In India, innovations in agriculture in the past came through transfer of foreign technology and its adaptation to Indian conditions through public research. Case in point is the ushering in of the Green Revolution. But later on, innovations in dairy, fishery, and fruits and vegetables have come from the cooperative, public and private sectors’ efforts. Research and innovation by private industry have led to the yield increase and boom in cotton exports, generic pesticides, and agricultural machinery,” it said.

The ICRIER studies have confirmed that every rupee invested in agriculture research returns more than ten rupees. “Yet, funding of agricultural research and development (R&D), both public and private, as a percentage of agricultural GDP has decreased over the years. In 2008-09, the agriculture research intensity (ARI) of the country was 0.75 percent, which is at 0.43 percent in 2020-21 and very much below the target of 1 percent recommended by the Government of India and the United Nations Food and Agriculture Organization (FAO).” It is a challenge for the Budget of the Modi 3.0 government to make this a reality.

“About 80% of the agriculture sector is driven by private companies. But given the involvement of 138 million farmer families, more needs to be done to provide them with technology on the field and ensure remunerative prices,” Dr Ashok Gulati had observed as chairman of the Commission for Agricultural Costs and Prices.

Through PPP

World Economic Forum (WEF) reports have lauded India’s plan to deliver agricultural technology services to farmers through public private partnerships to boost the country’s farming sector and address the challenges of sustainability, efficiency and inclusivity. The country expects to unlock an economic value of USD 50-65 billion through digital agriculture by 2025, according to Purushottam Kaushik of the Centre for the Fourth Industrial Revolution, WEF.

“Leveraging technology will be critical to mitigating the impacts of climate change and ensuring farmers are financially resilient. Public and private bodies should work together to pool resources and funds to leverage agricultural technology. The Indian government’s proposal to deliver hi-tech services to farmers through public private partnerships (PPPs) is likely to offer critical support for the agricultural sector at a time when it is greatly needed,” he said.

From the private sector too, there are promising developments to address Indian conditions, especially the huge post-harvest losses. In New Delhi, Bootes Cold Chain and Cargo People recently announced its association with URBS, a global fund from Sweden, for sustainable technologies and finance required in the Indian cold storage sector. Investment of USD 2 billion is expected by 2026, with the strategic aim to transform India’s cold storage landscape with Net-Zero technology and infrastructure and Cargo People’s expertise in the supply chain space.

“The initiative has the impact of bringing down electricity consumption costs by 60 per cent, offsetting 80 per cent of carbon emissions for this planet, and aligns with the 2070 Net-Zero goals of India,” said Deepak Rai, founder-MD at Bootes. “There will be an unmatched rise in temperature in the coming decade, energy consumption will be higher than ever, and approximately 60% of crops might get wasted in India. Cold storage is expensive in India; a farmer cannot afford expensive cold storage systems, which is why Net-Zero cold storage is the need of the hour.”

Private sector majors acknowledge the potential for investments and healthy returns from agriculture. The Indian cold chain market, which the ministry and industry bodies have underscored, is projected to reach approximately Rs 400,000 crores by 2028.

“Private seed sector companies adopt innovation and uniqueness to capture or protect market shares and makes substantial investment in R&D at their end,” acknowledges Dr Ashok Gulati in the ICRIER bulletin, adding, “Initially, the Indian seed sector was dominated by the public institutions that include National and State Seed Corporations, Public Sector Undertakings, National Agricultural Research Education and Extension System including ICAR-Research Institutes and Central and State Agricultural Universities (SAUs). After the introduction of ‘New Policy on Seed Development, 1988, the private seed sector growth accelerated, involving both national and multinational seed companies. In 2020, the Indian seed industry was valued at USD 3.6 billion and has emerged as the fifth largest seed market across the globe.”

Will the thrust of the new Budget, efforts of the new Agriculture Minister, innumerable missions of Ministry of Agriculture and Farmers Welfare, burst of energies in the private sector herald more productive and profitable times in the vast Indian countryside?

This article has been republished from The New Indian Express.