Union Budget 2020: Growth of Agriculture Sector is need of the Hour for Boosting Slowing Indian Economy

Publisher: The Insight Partners

The government has outlined its intention to make India a $5 trillion sized-economy and for achieving this target, growth of agriculture sector is of utmost importance. Despite having a central role in India's economy, the poor state of agriculture in India is a point of concern for everyone.

Agriculture remains a significant contributor to the national GDP and the main employment provider for most developing economies but one problem which is common to almost all developing economies is the high level of agriculture wastage; a bulk of which  takes place post-harvest at the storage and transportation stage.

There is a need for innovation in the agriculture sector and those innovations would be incomplete without incorporating the warehousing sector and agri finance. Steps like Inclusion of agri warehousing under priority sector lending, subsidy schemes, tax sops and the Warehousing Act have gone a long way in promoting the agriculture sector.

By incentivising private investments in warehousing and by introducing Private Entrepreneur Guarantee (PEG) Scheme, the government has ensured the growth of this sector but despite these initiatives, Indian Agri warehousing companies are fraught with challenges which range from the sourcing of funds to location specific challenges and policy shortcomings.

The government should pay attention to some of the prevalent anomalies enlisted below which are hampering the growth of the sector:

Rationalisation of indirect taxes on warehousing sector

One of the long outstanding demands of the agri warehousing industry has been the rationalisation of indirect taxes. When an organised player operating in the agri logistics and warehousing sector segment goes out to give agri-input services against a crop, it hires warehouses on lease and implements technology on it.

The leases of these warehouses are treated as a commercial lease and it has an 18% GST implication. On the contrary output services are devoid of any GST. So the 18% GST actually becomes a cost on the agri warehousing companies' balance sheet and which increases the overall costing. Under these circumstances, the operator is left with no other option but passing the fiscal burden to its customers.

This often leads to loss of business for the organised sector as the customers move to unorganised players who often do not charge them the GST. So one of the outstanding demands for the successive last three budgets has been that such leases should also be extended to commercial places which are actually used as agri-input place.

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