Adequate Crop Insurance A Must For Agriculture Sector, Says Deloitte

Budget 2021: Low levels of insurance coverage can be attributed to low awareness levels among farmers.

The agriculture sector outlay, which is ~5 per cent of the total budget of the Union government, increased markedly in the last budget, primarily due to the higher allocation towards the Kisan Samman Nidhi (income support scheme for farmers). It is important to note that ~94 per cent of the total allocation was towards the Department of Agriculture, Cooperation and Farmers’ Welfare, while the remaining was for the Department of Agricultural Research and Education.

“The allocation for research and development (R&D) had been low as a significant percentage of the allocation was mostly towards the salaries, pensions, and various administrative expenses in central research institutes,” Deloitte India said. “The allocation towards promoting R&D activities is significantly low compared with global standards. This has affected the sector’s overall productivity. In addition, for several schemes, allocation needs to go up substantially to address the challenges in the agriculture landscape and benefit stakeholders. Given that agriculture in India suffers from the age-old problems of productivity, quality issues, and value addition, the government should consider increasing the budget for addressing a few of these pertinent issues.”

1. To improve the sector’s productivity, the Union budget should allocate more for the following thrust areas:

• Interest subsidy on agriculture credit for long-term loans — To help farmers with long-term investment on equipment, irrigation, or infrastructure creation related to farming, rather than focusing on recurring expenditure, such as weeding, harvesting, sorting, and transporting

• Crop insurance — To help farmers mitigate the challenges posed by the frequent climatic changes and unpredictable weather; low levels of coverage currently can be attributed to low awareness levels among farmers; and higher allocation can bring a large section of farmers under the ambit of this scheme and enable adequate coverage

• Irrigation — To help address the issues related to availability of water and incentivise adoption of drip irrigation

• Introduction of new scheme on vertical farming, given the scarcity of land, support can be designed for promotional campaigns and incentives on investments such as new equipment, systems, and allied infrastructure

2. Allocations should be increased for quality maintenance, monitoring, and upgrading. In this regard, focus should be given on maintaining soil health through the balanced use of urea and other fertilisers. The increased allocation may be focused towards creating mobile soil testing labs that can benefit a large section of the small and marginal farmers who might not have testing labs near their regions. Increase in outlay can help modernise the existing testing labs and create new ones, given the increasing thrust on food safety and stringent norms imposed by importers.

3. Increased funding on research and development should be a priority in this budget. Given India’s significant dependence on imports of major commodities (such as vegetable oils and pulses), enhancing the domestic production of these commodities is important and additional funds might be allocated for this purpose. It is important to note that livestock farming is one of the key pillars for augmenting farmers’ income through non-farm related activities. While the sector has immense potential, one of the big impediments for development is the prevalence of various diseases that affect mortality, productivity, and overall production. Supply of vaccine is not adequate to address the increasing demand. Funding for developing vaccines and creating necessary infrastructure would be required in this budget.