Ref. No.: BKS/AFM-3/2019/12/92

Date: 17th December, 2019

Dear Smt. Nirmala Sitharaman Ji,

Suggestions for the Finance Minister’s Pre-Budget Meeting 2020-21

Considering the limited latitude for budgetary allocations by the ministry of finance, we are suggesting options for augmenting resources and interventions that will lead to structural changes to improve livelihoods of rural communities. Additionally, will help retrieve the situation arising out of extremely low inflation over last few years, which has adversely impacted terms of trade for farmers.

  1. Bring Alcohol, an agricultural produce under the ambit of GST at the highest tax slab. Even after the states are reimbursed for giving-up revenues collected from alcohol, the central government should have an annual surplus of over Rs. 50,000 crores.
  1. Design a new crop insurance and compensation scheme or more importantly a “Farmers Disaster and Distress Relief Commission”. Till such time, scrap the Pradhan Mantri Fasal Bima Yojana and save over Rs. 20,000 crores annually.
  1. Often government and farmers are criticized about the quantum of agricultural subsidies, specifically fertilizer subsidy. Suggest a forensic audit of each fertilizer manufacturer, including a review of items qualifying for calculation of subsidy. A system where Subsidy is given in the name of the farmer, can objectively be reviewed when farmer organizations form a part of the review process. Savings could be in thousands of crores.
  1. Scrap the proposed DBT of fertilizer subsidy which has only one winner; the fertilizer industry. Everybody else will be a looser; the government, the farmers & India itself. It is solely designed to transfer burden of collecting subsidy from the industry to the farmers.
  1. Finance a long-term study to a consortium of farmer organizations for development of a measurement metric for Farm Eco-System Services. A systems approach is radically different from the present structure, and it also is beyond the capacity of the Ministry of Agriculture & Farmers Welfare or other ministries working in silos to successfully develop.
  1. Agriculture supply response (increase & decrease in production) is tremendously fast which most times creates shocks to the economy and the society. To offset the adverse consequence, India desperately requires robust farm level data collection, assessment and a ‘nationally consistent database’. The states are incapable of creating a market intelligence system; the central government must establish an autonomous body, similar to USDA under the aegis of the Ministry of Agriculture & Farmers Welfare.
  1. Reduce GST on processed foods and Dairy products to 5% and allow GST set-off on processed food/dairy to food operators (no refund) or the GST for food operators be increased to 12% and the set-off allowed.
  1. Remove provision of income tax on ‘Dairying’. Alternatively, specifically clarify that the provision does not apply to dairy farmers. Agriculture is a state subject.
  1. Promote backyard poultry by sourcing eggs from such units for mid-day meal.
  1. A separate skill registry for agricultural workers be planned.
  1. Prioritize investment in human resources. States are financially constrained to even tap into central government sponsored schemes or unable to prioritize public investments as needed. There are over 50% vacancies in sanctioned posts in agriculture research institutions and state agriculture extension across India. Extension for animal husbandry is completely missing. Must finance to fill the vacancies and double funding for agriculture research. Considering the crises in rural India; Change the funding ratio for central government sponsored schemes for agriculture to a 90:10 ratio where the central government bears 90% cost (as earlier) for a period of 5 years.
  1. Various ministries face significant barriers to addressing the existing challenges and the system naturally resists changing the status quo. The ministry of agriculture, food processing or likewise which impact farmer livelihoods can’t be expected to objectively self-evaluate. A statutory farmers’ commission headed by a farmer, comprising of an IAS officer as a full-time member-secretary and agriculture secretary as an official member must be set up. It’s mandate must include to review existing interventions, recommend new initiatives, repurposing of existing subsidies and allocation of resources.

With warm regards.

Yours Sincerely,
(AJAY VIR JAKHAR)
CHAIRMAN

Smt. Nirmala Sitharaman Ji,
Hon’ble Minister of Finance,
Government of India
North Block, New Delhi-110001