Budget 2024: Agriculture and consumer goods sectors seek better infrastructure, technology to help farmers combat climate change and inflationary pressures

The agriculture and consumer goods sectors have asked the government to use the budget to address the challenges they face due to drought, climate change and inflationary pressures. The requests were made during pre-budget consultations with Finance Minister Nirmala Sitharaman. The minister is scheduled to present the Union Budget on July 23, after presenting an interim budget in February due to the Lok Sabha elections.

Ashok Kumar, Associate Director, Farm Prosperity, Transform Rural India (TRI), tells ET Digital that a robust crop insurance mechanism is of utmost importance for farmers as weather risk has become a major threat due to climate change. The budget should also focus on safe food production practices and support production of chemical-free products that are safe to consume. “Value addition and procurement needs to be facilitated near farms. This will lead to higher incomes. Investments need to be announced for access to quality power on farms and processing of primary agro-based products. Solar PV systems can be a potential solution to meet the energy requirements of the agri-sector,” says Kumar.

Support for agricultural infrastructure

Rajesh Aggarwal, Managing Director, Insecticides (India), says the agriculture sector is eagerly awaiting increased investment in rural infrastructure. Other comprehensive reforms that are important include strengthening the road network, irrigation facilities and storage infrastructure. “These are key to minimising post-harvest losses and increasing farmers’ access to market. This initiative not only increases productivity but also generates employment, catalysing the rural economy. Collaboration between the government and the private sector is essential, facilitating integration of advanced technologies and efficient farming practices. Improved supply chain management, supported by public-private partnerships, ensures streamlined operations and availability of quality agro-inputs, including crop protection products like insecticides and biologicals,” says Aggarwal.

Industry experts and stakeholders say the budget must prioritise funding for climate-smart agriculture to promote innovations such as solar-powered irrigation and rainwater harvesting.

The FMCG sector will be more stable in 2024
Representatives of FMCG companies that rely on agriculture remain optimistic and predict greater market stabilization in 2024.

Manish Aggarwal, Director, Bikano, Bikanervala Foods, says that programmes are needed to boost rural consumption, supporting a stable market in 2024. “We also envisage policies to protect oil farmers and the oleochemical industry. Moreover, we expect the government’s focus on capital expenditure and private sector manufacturing and services to drive income generation and economic activity. Increasing funding for the Agriculture Accelerator Fund is crucial to improve farming practices through new technologies and better storage solutions.”

Interestingly, India’s agri exports touched $53 billion in fiscal 2023, up almost 6% over fiscal 2022. Rice, marine products and sugar are the three major contributors. However, there have been a lot of challenges in agri exports in the recent past, such as products not meeting the minimum residue level (MRL), says Anand Ramanathan, partner and sector leader, consumer products and retail, Deloitte India. “Effective policies and strong government support are required to tap the larger market for agri exports.”

Most of the Farm Producer Organisations (FPOs) are inactive or unable to achieve success, mainly due to poor operational and financial management. It is important to introduce capacity-building measures to ensure the longevity of the FPOs to ensure continued benefits to their farmer members, he says.

Awareness of the benefits of technology
The government also needs to focus on raising awareness about the benefits of technology in agriculture, and improving the implementation and scale of these solutions through appropriate incentives. India has the largest arable land in the world, 157 million hectares (2021), and is one of the largest producers of agricultural products in the world, with a gross agricultural output (GAO) of $480 billion in fiscal year 2022. India is the largest producer of pulses and fruits and the second largest producer of rice and milk in fiscal year 2022. However, it lags behind in processing.

“The current level of processing is estimated at around 10%, much lower than in developed countries where it is more than 50%. The Indian government has recognised this potential and has launched initiatives like Pradhan Mantri Kisan Sampada Yojana to strengthen infrastructure, provide financial assistance and promote food parks. The focus now needs to be on micro-processing clusters and ensure value transfer to farmers,” says Ramanathan.

Every year, about 16% of fruits and vegetables, 10% of oilseeds, 9% of pulses and 6% of cereals are lost after harvest, mainly due to poor storage conditions. To curb these losses, there should be sufficient steel silos and warehouses equipped with modern sensors and monitoring systems. “In addition to packing sheds, a network of micro-cold stores should be set up to help reduce on-farm losses of fruits and vegetables and give farmers an extended sales window and prevent distress sales,” says Ramanathan.

India is the world’s leading milk producer, accounting for about a quarter of global production. The country has seen a 58% increase in milk production from 2014-15 to 2022-23. Despite this growth, low animal productivity remains a challenge, especially for smallholder farmers. “To address this, it is necessary to address issues such as feed and fodder shortages, poor sanitation and veterinary care, high input costs, and inefficient marketing channels for non-cooperative farms,” notes Ramanathan.

Aggarwal of Bikano’s Bikanervala Foods agrees that better infrastructure eases market access, reduces transportation costs and improves quality of life, making it easier for FMCG companies to reach out to consumers in rural areas.