Budget expectations: Direct benefit to farmer

In the Budget, the Finance Minister is expected to increase the total allocation to the farm sector significantly.

The agriculture sector is likely to get top priority in the Budget. Slowing agri-GDP growth has shaken the roots of the rural economy. For the full year 2017-18, CSO estimates agri-GDP growth at 2.1 per cent, which is less than half of 4.9 per cent registered for 2016-17.

The annual increase in farm income needs to be around 10 per cent between 2015-16 and 2022-23 for the Prime Minister’s dream of doubling farmers’ income to come true. But, at the current pace, it looks a challenging task.

In the Budget, the Finance Minister is expected to increase the total allocation to the farm sector significantly.

On the cards
  • Bump-up in allocation to Modi’s pet agri schemes
  • Boost agri credit, provide interest subvention on long-term loans
  • Extending direct benefit transfer for fertiliser pan-India

In 2017-18, the total allocation to the Ministry of Agriculture and Farmers Welfare was ₹51,026 crore — an increase of 6 per cent from the revised estimates of 2016-17. But given the thrust to Modi’s pet schemes — the Pradhan Mantri Krishi Sinchayee Yojana (allocation last year – ₹7,377 crore), the Pradhan Mantri Fasal Bhima Yojana (₹9,000 crore), the electronic National Agriculture Market and others, there is likely to a bump-up in allocation this year.

It is also expected that the government may increase the agriculture credit further from the record level of ₹10 lakh crore set for 2017-18. There may be interest subvention on long-term agri loans to promote investments into warehouses and cold storages. Currently, interest subvention is only available on short-term crop loans payable within one year for amount up to ₹3 lakh. There may be news on also extending direct benefit transfer (DBT) for fertiliser on a pan-India basis.

If the Budget moves to help farmers earn better returns, minimise their costs and give them cheaper credit, it will be good for companies in the agro chemical, fertiliser and seeds space. Rallis India, Insecticides India, Coromandel International, Bayer Cropscience, Monsanto India and Kaveri Seed Company are some that may stand to benefit. If DBT in fertiliser will come-up on a pan-India basis, the Centre may clear-off all outstanding dues to fertiliser companies first. Chambal Fertilisers and National Fertilisers may also stand to benefit. Once implemented, the DBT scheme promises to disburse the subsidy in seven days after sales. This will reduce working-capital requirement of fertiliser companies.

However, investors need to note that the above stocks have been rallying for some time now, expecting positive measures in the budget. So, even if the budget turns out to be positive, there may not be much rally in these stocks.

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