‘Need higher capex in irrigation, hike in urea prices’

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With the Budget just two weeks away, expectations are running high that Finance Minister Arun Jaitley will present a Budget for Bharat to boost agriculture. Bloomberg TV India caught up with A Vellayan, Executive Chairman of the Murugappa Group, to sense the pulse at the ground. India needs a concerted agriculture advisory group at the PMO level to look at region-specific, crop-specific and soil-specific issues and recommend steps which improves the yield and productivity at the farm level, he said.
The fertiliser sector is watching this Budget very closely especially on the subsidy front. What according to you can be done to improve the efficiency and plug leakages as far as the fertiliser subsidy is concerned?

See, actually the government has announced at the Cabinet level that they are merging the freight with the subsidy so that companies have to make only one claim. Right now, it is a very laborious process where you make the claim for the product and then you make a claim for freight and there is verification. So the whole concept of “ease of doing business” can be actually made much simpler. And I think that was the intention of the Cabinet. It has not flown through the industry and the market.

Are you seeing any recovery in gas-based fertiliser plants in the back of the revival in gas supply and also a reduction in the cost of gas supplies to fertiliser companies?

I think this pooling of gas is an extremely good idea and has been well implemented. I think the idea of neem-coating of urea is also extremely good and is well implemented. So, there are some positives, which have happened and I think this gas-based pooling and supply has actually brought down the overall cost. Yes, international prices have also come down. That is because of surplus gas and urea available from China and other parts of the world. So, prices of urea, which were around $400 per tonne, are down to less than $200 now. But within India, I think gas pooling and gas supply has really helped the industry to keep our production growing.

Let us talk about the growing expectations that the government may roll out to rural India a specific Budget. In fact, we are calling it a Budget for Bharat. In your opinion, what is the need of the hour and will that come about?

I think large parts of India, which are agrarian, are still working on the basis of rain-fed crop. So, I think huge allocation and emphasis on irrigation should be there—irrigation of the size and nature that is being done in Punjab and Gujarat have a scope to be done in Andhra Pradesh, Maharashtra and Karnataka. And I think this big fillip will make a big difference. Secondly, I would like to suggest that just like we have an economic advisor and a defence advisor, I think there is need to have an agricultural advisor at the PMO. It could be extremely useful to focus on soil-specific and crop-specific areas. For instance, on urea price, I believe there is scope to increase price by 15 per cent every year, year-on-year for the next for years. We are so lagged behind in urea price compared to international price—we are at one-fifth the global level—and the whole soil health program has been a setback because of over use of urea. And the only way that will be corrected is if you start increasing urea price. This will also reduce your subsidy burden and make that subsidy quantum available for irrigation schemes and support schemes to farmers.

What about rural infrastructure then? There is a fear that clubbing rural infrastructure building with social spending will end up creating a non-productive asset. What according to you is the right way to go about it?

When we talk of rural infrastructure, we have to be specific. Irrigation is the need of the hour. We have to bring more and more of rural India under the irrigation scheme so they are less dependent on the monsoon. Second is soil health, which is really the infrastructure for the farm sector. And mechanisation support in the inadequate availability of farm labourers is becoming a critical issue. Of course, warehousing and cold storages flow with that. It is a question of prioritisation. A lot of Smart Cities are being planned and at the periphery you will find lot more emphasis on horticulture and fruits, and adequate infrastructure is required for that. A very concerted agriculture advisory group at the top could look at region-specific, crop-specific and soil-specific issues and can come up with recommendations which are implementable and ultimately which improves the yield and productivity at the farm level.