Farmers’ Protests And Budget 2021: Great Expectations From Modi Government

In the light of the ongoing farmers’ protests, both agriculture companies and experts feel that the forthcoming Budget will have a slew of schemes and benefits for the farm community.

These may include a higher allocation for agriculture, increased cash subsidies to the croppers, an emphasis on the continuity of MSP (minimum support price), and legal tinkering to hike the use of farm inputs.

Although this government, as well as past ones, announced several measures for agriculture, the allocations have remained subdued. In the last Budget, while the quantum of money kept aside was a wee bit higher, it was lower in terms of the percentage of the total Budget expenditures.

Experts say that a conscious effort has to be made to hike the outlays, even if it disrupts the fiscal deficit.

Finance Minister Nirmala Sitharaman chairing pre-Budget consultations with Finance Ministers of all States and Union Territories on January 18/Finance Ministry

Months before the previous national elections, the government announced cash subsidies for the farmers and poor households. However, the croppers now complain that this amount, Rs 6,000 a year, is not enough to finance their purchases of farm inputs. In fact, calculations show that the amount is enough for two crops on just an acre of land. Any farmer with more land has to spend a higher amount.

Thus, Nirmala Sitharaman, the finance minister, may need to hike the cash subsidies, as well as the overall allocations for agriculture. The latter has to be in actual terms and not merely by clubbing schemes that are operated by different departments.

MSP is the most contentious issue among the farmers, and one of the foremost reasons for the ongoing protests. But the government insists that although it will continue, it will remain an executive decision. The farmers want it to be a part of legislation so that MSP does not depend on the whims and fancies of the bureaucrats on a seasonal basis.

In her Budget ’21, the finance minister can evolve a mechanism, or put forth some future system, whereby the MSP regime can be made more effective and concrete. Although the government will not agree to make it an Act of Parliament, it may juxtapose a set-up whereby the procurement of crops under MSPs will be surer.

Legal tweaks in the tax laws are the demand of several business segments. For example, some contend that the tax break on R&D investment needs to be hiked back to 200 per cent, as was announced in 2010-11 Budget rather than 100 per cent now.

“Considering the relevance of R&D investment for Indian economy and agriculture we request for restoring 200 per cent income tax deduction for R&D expenditure in the seed industry,” said Ram Kaundinya, DG, Federation of Seed Industry of India, as per media reports.

Another contention of the seed segment is that the GST regime acts against the interests of the companies. At present, there is no GST on the final product, seeds, but the companies need to pay GST on “accessory materials such as packing materials, chemicals, processing charges, and other services”. These cannot be recovered or claimed back because of nil GST on the final product. This has to change.

On both the above counts, Sitharaman may agree, and change the tax laws accordingly to help the companies.