In Union Budget 2016-17, Union finance minister Arun Jaitley has announced relaxation of norms for FDI in food retail. The minister has said that 100% FDI will be allowed through FIPB or Foreign investment Promotion Board route, which provides a single-window for investment, in marketing of food products produced and manufactured in India.
While presenting the Budget in Lok Sabha here, Jaitley announced changes in FDI policy. He stated, “100% FDI is to be allowed through FIPB route in marking of food products produced and manufactured in India. This will benefit farmers and give impetus to food processing industry besides creating vast employment opportunities.”
It is pertinent to mention here that during the pre-budgetary meetings, Union food processing minister Harsimrat Kaur Badal urged the finance ministry for a relaxation of norms with respect to FDI in food retail. Reacting to the Budgetary proposal, the office of the minister stated that it was a welcome step and a big thing had happened. It will benefit farmers and create forward linkages and boost infrastructure, which are greatly needed.
MoFPI hike
Further, the ministry of food processing and industries’ Budget also got a hike from previous Rs 487 crore to Rs 600 crore on taxation front, the corporate income tax rate for the next financial year of relatively small enterprises i.e., companies with turnover not exceeding Rs 5 crore (in the financial year ending March 2015) is proposed to be lowered to 29% plus surcharge and cess. The new manufacturing companies which are incorporated on or after March 1,2016, are proposed to be given an option to be taxed at 25% plus surcharge and cess provided they do not claim profit-linked or investment-linked deductions and do not avail of investment allowance and accelerated depreciation.
Mixed reactions
Reacting to the Budget, Piruz Khambatta, chairman, Rasna, said that FDI in food retail was a welcome step. The focus on rural infrastructure will benefit in normalisation of food prices. "What happens that the food sector growth is propagated by retail, foreign stores come and sell Indian products, of course Indian products will grow, this caveat of 100% products of Indian origin is a good step," he said.
But the CAIT has reacted sharply to the proposals. Praveen Khandelwal of CAIT said in his reaction that FDI in food processing retail would enable MNCs to control and dominate the food sector and none would get benefit.
Price Stabilisation Fund
Meanwhile, the finance minister has set aside a corpus of Rs 900 crore for Price Stabilisation Fund. The minister stated that the Price Stabilisation Fund has been provided with a corpus of Rs 900 crore to support market interventions. Jaitley said that monitoring of prices of essential commodities was a key element of good governance. A number of measures have been taken to deal with problem of abrupt increase in prices of pulses. Government has approved creation of buffer stock of pulses through procurement at Minimum Support Price and at market price through Price Stabilisation Fund.
Sunil Duggal, chief executive officer, Dabur India Ltd, in his reaction stated, finance minister Arun Jaitley’s nine-point-agenda Budget is a balanced statement that seeks to move away from offering freebies to promoting investments. It is highly encouraging to see that fiscal discipline has been given priority in this year's Budget, with an emphasis on improving the quality of life in rural India.
“The Union Budget 2016-17 was going to be a tough balancing act for the finance minister, given the strong headwinds on both the global and the domestic economic front. And he has managed it well. With a plethora of announcements, be it in the form of greater focus on farmers and rural development, promoting investments in infrastructure and health care and opening up FDI in food processing, the finance minister has taken positive steps that would not just boost overall confidence, but also go a long way in generating employment.
Agriculture and farmers’ welfare
His focus, this year, has clearly been the farmers and people in the hinterland, who have been in the woods in the recent years, by doubling the income of farmers in the next five years. “Improving connectivity from farm to market, fast-tracking irrigation projects, provision towards interest subvention for farmers and a crop insurance scheme are also steps in the right direction. These steps will help our millions of farmers recover from the rough patch they have been going through and go a long way in boosting confidence and fuelling consumerism in rural India.”
The total allocation for agriculture and farmers’ welfare is Rs 35,984 crore in this year’s Budget. Stating that the ‘Pradhan Mantri Krishi Sinchai Yojana’ has been strengthened and will be implemented in mission mode, Jaitley said that 28.5 lakh hectare will be brought under irrigation under this scheme. He also underlined that the implementation of 89 irrigation projects under AIBP, which have been languishing will be fast-tracked.
The finance minister announced creation of a dedicated Long Term Irrigation Fund in NABARD with an initial corpus of about Rs 20,000 crore. In order to achieve all these, a total provision of Rs 12,517 crore has been made through budgetary support and market borrowings in 2016-17.
In the Budget, special focus has been given to ensure adequate and timely flow of credit to the farmers. Against the target of Rs 8.5 lakh crore in 2015-16, the target for agricultural credit in 2016-17 will be an all-time high of Rs 9 lakh crore. To reduce the burden of loan repayment on farmers, a provision of Rs 15,000 crore has been made in the BE 2016-17 towards interest subvention.
Reforms in irrigation and crop insurance
Reacting to the budgetary provisions, Ajay Kakra, leader, food and agriculture, PwC India, stated that the Budget provides a good start by announcing structural reforms in the irrigation and crop insurance sector thereby demonstrating long-term commitment of the government towards the agricultural sector. “The initiatives such as organic value chain development and initialisation of nationwide e-trading platform also look at systematic development of the sector. Further, a similar focus is required on agricultural research for providing a quantum boost in agricultural productivity,” he said.
Also, according to dairy industry experts, Union Budget 2016 was agriculture-centric and this was good news for the dairy sector. There are many reasons to cheer. First is the government’s initiative towards ensuring that farmer income doubles, second is the much required connectivity from farm to market, third is the 100% electricity by 2018 and most important, the much-needed investment in animal husbandry, livestock breeding and cattle.
R S Khanna, chairman, Kwality Limited, stated, “In a nutshell the road ahead looks positive and even good news for the already booming dairy sector. We are aware that the livestock sector accounts for 28-30% of GDP of agriculture and the government’s announcement of Rs 850 crore on animal husbandry, cattle and livestock breeding will bring in relief for the farmers. This when fully incorporated, will help increase milk production and our target of achieving an upward of 20% year on year growth will be easily reached. In short, Budget 2016 indeed is a huge ray of hope for the farmers as we can target that the business of milk farming remains viable and feasible.”
