A worker holds a handful of onions while harvesting the crop on a farm near Chandwad, Maharashtra, India. (Photographer: Kuni Takahashi/Bloomberg)  

Union Budget 2018: Government To Raise Support Price For Kharif Crops

Finance Minister Arun Jaitley proposed higher support prices for kharif crops and an increased farm credit target in the Budget for 2018-19 to ease the stress in the rural economy.

Decisions announced in the Budget include:

  • An increase in the support price for the Kharif season to 1.5 times of the crop’s cost.
  • Liberalising agricultural exports.
  • Strengthening the e-national agricultural market network.
  • Increasing the limit for agricultural credit to Rs 11 lakh crore from Rs 10 lakh crore last year.

The measures are part of the government’s focus on the agricultural sector and the rural economy, said the finance minister.

Across various schemes and departments, the government will spend Rs 14.34 lakh crore on rural infrastructure.

“Nominal agriculture GDP has declined in just three years—FY76, FY03 and now. Against that backdrop, the government’s promised handouts to rural India make a lot of sense,” an Ambit Capital report said. “As expected, the government has given a massive price support to farmers in an election year.”

Ranen Banerjee, partner and leader, public finance and economics, PwC India, agreed that 1.5 times the input costs as the minimum support price would give a lot of assurance to farmers. “Setting up rural agri markets and keeping them out of APMC is a great move. The cluster model for horticulture produce is innovative.”

Details of allocations to individual schemes show no increase in the outlay for the flagship rural employment scheme but a jump in the money set aside for the rural roads programme.

  • Allocation for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is set at Rs 55,000 crore—unchanged from the previous year’s revised estimate
  • The rural roads scheme (Gram Sadak Yojana) has been allotted Rs 19,000 crore compared to a spend of Rs 16,900 crore last year.
  • The allocation for the flagship housing scheme (Pradhan Mantri Awas Yojana) has been reduced to Rs 27,505 crore from a revised spend of Rs 29,043 crore last year.
  • The crop insurance scheme has been allotted Rs 13,000 crore compared to Rs 10,698 crore in the revised estimates of 2017-18.
Union Budget 2018: Government To Raise Support Price For Kharif Crops

The rural economy has thrown up conflicting signals over 2017-18. The agriculture segment faced the brunt of a sharp fall in perishable prices in the aftermath of demonetisation. In addition, segments like pulses saw prices plunge due to a spurt in production. A good monsoon also did not provide much relief. Uneven rainfall meant that both kharif and rabi output have been lower than expected. Advance estimates released by the Central Statistical Office peg agriculture growth at 2.1 percent in 2017-18.

The government has committed to doubling farmer income by 2022. Achieving this without steep increases in minimum support prices, which can be counterproductive as they spark inflation, is seen as a tall order. Increasing allocation to programmes such as roads and housing eases pressure on the rural economy by providing job opportunities outside the agriculture sector.