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Finance Commission holds meeting with the Ministry of Agriculture and Farmers’ Welfare states to be incentivized on their Agricultural Reforms agenda

The 15th Finance Commission headed by Chairman, Shri N. K. Singh including its Members today held a meeting with the Minister for Agriculture and Farmers’ Welfare, Shri Narendra Singh Tomar and senior officials of his Ministry.

In view of fact that in the third tranche of Rs 20 lakh crores fiscal stimulus package, Government of India had announced various measures to boost agriculture to strengthen Infrastructure Logistics and Capacity Building for Agriculture, Fisheries and Food Processing Sectors and in order to re-orient its proposed formulation on the agriculture reforms and incentives for exports in the light of para 7 of the ToR, FC-XV had called for this discussion with the Union Minister of Agriculture and Farmers’ Welfare and hence this meeting.

 

Earlier the Fifteenth Finance Commission had also constituted a Committee on Agricultural Exports under the chairmanship of Mr Sanjeev Puri, CMD, ITC. Some of the key points related to Agri-exports discussed in the Committee meetings so far are given below:

 

·        India is the second highest agriculture producer in the world and world leader in many significant agriculture categories. It has competitive advantage over other countries in agriculture as its diverse agro-climatic conditions created diverse crop portfolio potential; two main cropping seasons (Kharif and Rabi) and relatively low cost of labour and manufacturing.

·        However, given the Competitive edge, India is only ranked 11th globally in terms of agriculture exports.

·        Despite India’s global advantage in terms of hectares of arable land, it significantly lags smaller countries in export $ per hectare, driven amongst other things by (a) Lower yields and farm productivity (b) Low focus on value addition, allowing it to be captured by others such as Vietnam (c) Larger domestic market.

 

·        India’s processed exports have been steadily improving, but still has a higher global share of raw commodities than processed goods.

·        India’s agricultural exports have been volatile for the last 10 years, but have flattened more recently.

·        Due to effect of fall in global prices and back to back drought during 2014, 2015 and 2016, exports dropped by 10% CAGR Recent growth rates show that agri-food production is rising faster than growth in domestic demand, and volume of surplus for export is witnessing accelerated growth. This offer scope and opportunity for capturing overseas markets to earn foreign exchange and enable producers to earn higher prices for farm produce.

·        India’s top 50 commodities and agriculture products make up 75% of its total exports

·        India exports 70% of its agriculture value to 20 countries; opportunity to export more to Europe and the Americas.

·        While India imports over $20B in agriculture products, it still maintains a significant trade surplus of $18B.

 

Today’s discussions focused on the recent announcements (post-Covid) made by the Government related to agriculture sector which would be taken into consideration by the FC-XV for its award period from 2021-22 to 2025-26. Primary among them are:

 

·        Details of the agriculture related reforms as part of the fiscal stimulus package.

·        Amendment to Essential Commodities Act.

·        The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020′.

·        The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020.

 

A detailed presentation was made by the Ministry which included the recent steps taken by the Union Government for the upliftment of the sector.  The Commission was also made a ‘presentation’ on the implementation and budget requirement of Department of Agricultural Research and Education (DARE)/ ICAR Central Sector Schemes during 2021-22 to 2025-26.

The meeting also held discussions on the framework/recommendations given by FC-XV in its report  for  2020-21 regarding performance grants to States for agricultural reforms.  In a significant move the Finance Commission alongwith the Ministry of Agriculture has been  set up a Group consisting of  Member XVFC (Shri Ramesh Chand), Secretary (Agriculture) and   Secretary (DARE) to devise mechanism for incentivisation of states in areas of agricultural reforms agenda for the purpose of inclusion in the Commission’s recommendations in its final report.

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