The finance minister desires to be complimented for bringing transparency in the Union Budget, at least in agri-meals space. The meals subsidy was the largest challenge. Year just after year, a substantial component of the meals subsidy was becoming place below the carpet by means of rising borrowings of Food Corporation of India (FCI), which had crossed `3 lakh crore. No one believed that the budgeted figure of `1,15,570 crore in FY 21 reflected the accurate image of meals subsidy. Now the FM has revised this figure for FY21 to `4,22,618 crore, a whopping enhance of `3,07,048 crore. The revised estimate (RE) for FY21 is 3.66-occasions the budgeted figure, indicating practically all borrowings of FCI have been cleared. This is certainly a historic step towards transparency in the Union budget. And, for FY22, the budgeted estimate is `2,42,836 crore.
Another important step for which the FM desires to be complimented is to clear off all the arrears of the fertiliser sector. Against the budgeted figure of `71,309 crore for FY21, the revised estimate (RE) is `1,33,947 crore, an enhance of `62,638 crore. For FY22, items will smoothen with a spending budget provision of `79,530 crore.
The third largest expenditure in agri-meals space is Pradhan Mantri Kisan Samman Nidhi (PM-Kisan), which decreased from a BE of `75,000 crore in FY21 to a RE of `65,000 crore, and the exact same quantity is now budgeted for FY22.
And there are other things like Pradhan Mantri Fasal Bima Yojana, which is budgeted at `16,000 crore for FY22, not considerably diverse from the RE of FY21 (`15,307 crore) interest subsidy on brief term credit to farmers (`19,468 crore in FY22 against a RE of `19,832 crore in FY21), and so on.
Decoding Finance Minister Nirmala Sitharaman’s Union Budget 2021
For policy objective, beyond the transparency in numbers, one has to note that there is a substantial bias in allocating sources in agri-meals space towards subsidies (meals and fertiliser, PM-Kisan, crop insurance coverage and interest subvention) vis-à-vis investments in agriculture, particularly investigation and improvement (R&D). The allocation for agri-R&D is just a meagre sum of `8,514 crore in FY22 against a RE of `7,762 crore for FY21. This is bewildering as the marginal returns in terms of agri-development from expenditures on agri-R&D are practically 5- to 10-occasions larger than by means of subsidies. India spends not even half of what a private international corporation like Bayer spends on agri-R&D (practically `20,000 crore/year). No wonder our development momentum in agriculture remains subdued and India keeps spending on freebies with sub-optimal final results.
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Two important policy points need to have to be debated: (1) in meals subsidy, FCI’s financial expense of rice is `37/kg and wheat about `27/kg. This financial expense is roughly 40% larger than the procurement price tag. Why not give a selection to the beneficiaries of the public distribution technique for direct money transfers to their accounts to the tune of procurement price tag plus 25%? This will generate more diversified demand supporting diversification in agriculture. Further, in meals subsidy, it is time to revise the challenge costs for the beneficiaries. While antyodaya (most marginal) category can retain getting grains at `2 or `3/kg, all other individuals must spend at least half of the procurement price tag, if meals subsidy has to be brought to manageable levels. Further, one must debate whether or not the coverage of meals subsidy must be 60 or 67% population or must it be brought down to 40% of the population.
And (2) in the case of fertiliser subsidy, once again, huge subsidisation of urea to the tune of practically 70% of its expense, is major to its sub-optimal usage. It is time to move towards direct money transfers to farmers based on per hectare basis and cost-free up costs of fertilisers. This will aid decrease leakages and imbalance in fertiliser usage of N, P and K, bring efficiency, equity, and environmental sustainability.
Overall, what is required is that the expenditure on agri-R&D desires to be doubled or even tripled in next 3 years, if development in agriculture has to provide meals safety at a national level, and subsidies on meals and fertilisers need to have to be contained and reduce down. Can our policymakers do it? Only time will show.