BUDGET 2009-10 COMMODITIES
The nuisance called CTT (Commodity Transaction Tax) has been put to rest. The momentum was which murdered and the fundamentals which got flawed have been put back on the rails. Immediately after the last budget, the national exchanges as well as FMC, the regulator, pitched for withdrawal of CTT. The prime minister’s economic advisory council promptly examined the matter and the government apparently buckled under the legitimate reasoning of the commodity industry. The abolition of CTT will allow futures markets to play a more meaningful role in helping India’s farmers to do a price discovery for their produce. Robust price discovery is essential for creating the conditions conducive for such investment in commodity and most importantly in agricultural infrastructural sector.The agriculture sector faces several challenges. Like the previous years the govt has not done any stimulus policy package announcement for boosting acreage and production.
Investments in warehousing, storage facilities and testing laboratories have also been left out. Only investment on setting and operating of businesses of ‘cold chain’ warehousing facilities for storing agricultural produce tax incentives has been announced for. The issues of farm-gate losses have been conveniently ignored with the announcement of cold-chain incentive which is likely to benefit certain corporate rather than farmers in general. Micro-warehousing at the farm-gate is something which all governments have ignored and the losses are equivalent to 10% of the production which in monetary terms shall be equivalent to India’s food and allied product imports.
Allocation under accelerated Irrigation Benefit Programme (AIBP) increased by 75% BE 2008-09. Allocation under Rashtriya Krishi Vikas Yojana (RKVY) stepped up by 30% in B.E. 2009-10 over B.E. 2008-09. However in absolute terms for a country like India these are very small outlays.
To ensure balanced application of fertilizers for increasing agricultural productivity, Government intends to move towards a nutrient based subsidy regime so as to cover larger basket of fertilizers with innovative fertilizer products available in the market at reasonable prices. The government also intends to move to a system of direct transfer of subsidy. With unique identity number (UID) to be rolled out in 12 to 18 months, the intended system is unlikely to be executed immediately.
The icing on the cake in the budget is the increase in farm credit flow to Rs 3.25 trillion. Assuming that there is 10% real growth (instead of 13.25% targeted growth) from the current level of Rs 2.87 Trillion, the credit flow will benefit a large number of additional households, agri-based corporate and farmers in general.
To borrow from the FMs speech quoting Kautilya…….. perhaps in the interest of the prosperity of the country, a King (FM) shall be diligent in foreseeing the possibility of calamities, try to avert them before they arise, overcome those which happen, remove all obstructions to economic activity and prevent loss of revenue to the state.
