Agriculture in Interim Budget 2024—oil seed farmers get a boost but FPOs lose steam

Nirmala Sitharaman’s speech outlined the success of the Modi government & reiterated its focus on four ‘castes’: women, poor, farmers and youth. But there were no big announcements.

A farmer spraying pesticide on mustard crops. Mustard is one of the old seed crops to get a boost in this year’s Interim Budget. | ANI

Finance Minister Nirmala Sitharaman presented her sixth Union Budget on 1 February 2024. The speech outlined the success of the government and reiterated its focus on four ‘castes’: women, poor, farmers and youth. Inter alia, it also gave a new full form to the economic indicator of gross domestic product, GDP— ‘governance’, ‘development’ and ‘performance’. It was a wonderful speech but it didn’t have any big announcements and changes. Announcing (and applying retrospectively) the PM-KISAN scheme in the 2019 interim budget, raised our hopes for major announcements in the agriculture sector this year too. But the speech and documents showed much restraint.

In the domain of agriculture, the budget announcements largely focused on women, dairy, bees, fish, green energy, logistics, value addition and technology.

Wins for women, oil seeds

1. PM Aasha scheme has been revived: The scheme was launched in September 2018 with a budget outlay of Rs 1,400 crore. It was reduced to zero in 2022-23. This year it has been revised upwards to about Rs 1,700 crore. The scheme ensures MSP to oilseed farmers.From the start of 2020 till the second half of 2022, inflation in the price of edible oils in the country was in double digits. To counter these rising prices, the government opened up imports of edible oils by pulling down import duties nearly to zero. While this helped the edible oil consumer, in it pulled down prices for mustard and soybean farmers.

   Now, more than 60 per cent of edible oil consumed in the country is imported. To reduce this import dependence, India has to ensure remunerative prices for its oilseed farmers so that they continue to produce them. Reviving this scheme is a critical step.

2. Atmanirbhar Oil Seeds Abhiyan: Under this mission, which is related to the above scheme, the government will focus on improving the production of five oilseeds: soybean, mustard, sunflower, groundnut, and sesame. It will be driven by initiatives around improving access to better seeds, widespread adoption of modern farming techniques, establishing market linkages, value-addition and access to crop insurance.
3. Ethanol from sugar: For the past few years, the government has provided assistance to Indian sugar mills for producing ethanol from cane-based derivatives. The budget allocation had risen from Rs 175 crores in 2022-23 to Rs 400 crores in 2023-24. This year it has gone up to Rs 450 crores. The government is steadfast on its E20 mandate (i.e. to blend vehicle fuel with 20 per cent ethanol by 2025-26) and sugarcane-based ethanol is a critical feedstock for this mission.This budget allocation involves extending the annual operational days of current distilleries through the installation of new incineration boilers. Additionally, it aims to augment ethanol production capacity by establishing new distilleries integrated with existing sugar mills.
4. Focus on logistics, infrastructure and value-addition: Across apiaries, fisheries, and dairy farms, the government is committing increased funds to promote deeper and more efficient value chains. Budget outlays for schemes and funds including Agriculture Infrastructure Fund (AIF), Rashtriya Krishi Vikas Yojana (RKVY), and Krishonnati Yojana have been expanded this year. 
5. Promotion of ‘drone didis’: Rs 500 crore has been budgeted this year under the new ‘NAMO Drone Didi’ scheme. This will provide drones to 15,000 women-led Self-Help Groups, who can rent them out to farmers thereby improving their economic viability.

FPO losing steam, disconnect in numbers

1. FPO scheme is losing steam: In 2021-22, the government launched the “Formation and Promotion of 10,000 FPOs” scheme with much fanfare and a budget outlay of about Rs  6,865 crore. The budget outlay for 2023-24 was about Rs 955 crore. This has been further slashed to Rs 582 crore in the 2024-25 budget.The scheme was designed to provide, among other things, Rs 18 lakh to newly created Framer Producer Organisations in three years. With a large slashing of its budget, it appears that FPOs and/or the scheme, have not been able to deliver.

   With close to 86 per cent of Indian farmers being small and marginal, an FPO offers the farmers opportunities to bargain on the input and the output side. It offers them greater agency over their produce. This scheme needs a revival and therefore a rethink.

2. Disconnect in poverty alleviation numbers and rations: In her budget speech, the Finance Minister spoke about raising 25 crore people out of multidimensional poverty since 2014. In the same vein, she reiterated the government’s commitment towards the 81 crore poor people in the country (Under the National Food Security Act (NFSA), 81.3 crore economically vulnerable were identified in 2013). They are now being given free monthly rations, she said. But the two numbers are not aligned. If the government has helped 25 crore people out of poverty, then ideally, a rethink on the number of NFSA (or now PMGKAY) beneficiaries is mandated. This could help rationalise some of its food subsidies too.
3. Proactive inflation management but no funds: In her budget speech, Sitharaman praised the government for “proactive inflation management”. Among other things, she could possibly be alluding to the role played by the string of policy actions taken by the consumer affairs, food and agriculture departments recently to manage high food inflation. Ironically, the budget allocation to the Department of Consumer Affairs’ “price monitoring structure” has shrunk from Rs 6 crore in 2023-24 to Rs 1 lakh in 2024-25.It is important for these key ministries to be able to monitor and evaluate market dynamics, and a price monitoring cell would be critical in that drive. As researchers, we have been writing about ad-hocism and knee-jerk reactions in policy making. Unless ministries are allowed to develop such monitoring and analysis cells, the problems of ad hocism will continue.
4. Operation Green fading away: 2023 saw high inflation for vegetables—first in tomatoes, followed by onions and then potatoes. The price movements have been cyclical, where high prices in a season encourage greater acreages which result in bumper crops leading to low prices, which in turn discourage acreages in the next season pulling up prices in the subsequent season. One of the ways to overcome this was to boost processing. The primary goals of Operation Green included: boosting the income of farmers cultivating these crops by fortifying production clusters and their FPOs (Farmer Producers Organisations), as well as establishing links and connections with the market and encouraging processing. While the price volatility continues to haunt each year, the scheme meant to address it is fading.

But this is only an interim budget, the full Budget will be presented in July 2024 after the Lok Sabha elections.

Shweta Saini is an Agricultural Economist and CEO, Arcus Policy Research. Views are personal.

(Edited by Theres Sudeep)