By Sreekumar Raghavan
The reactions to the second full budget presented by Pranab Mukherjee has been mixed. He has been criticised mainly for raising the excise duty on petrol and diesel that could have multiplier effects on the economy in terms of raising food inflation and general inflationary trends. On the other hand he has been hailed for making more allocation for education, infrastructure, the committment to bring down fiscal deficit, plans to expand the banking sector, increased allocation for rural development, the concept of a National Clean Energy Fund to support clean energy technologies which is in line with the new global thinking on reducing carbon footprint apart from a legislation for food security that will enable families to have 25 kg of wheat per month at subsidised rates.

On the other hand, one major issue which the Budget does not fully address is in dealing with food inflation and also that of non-food items. In the case of food inflation, commodity futures is always the first accussed, however, it does not find any mention in the Pranab's Budget speech. Two years back, it may be recalled that P Chidambaram created a furore by introducing the Commodty Transaction Tax which was finally abandoned due to oppostion from industry.

The vital issue of granting autonomy to commodity market regulator, Forward Markets Commission has not been touched upon the Budget The revival of banned tur, urad, sugar and rice futures also does not find any mention in the Budget. I think, those who expected some announcement on commodity futures reforms may have been disappointed on this count. I think the UPA government needs to look at commodity futures markets in its entirety and take further measures to leverage it for price discovery and hedging that ultimately could benefit stakeholders in agricultural sector.

Recently, Forward Markets Commission had said that commodity exchanges can increase their trading volume to Rs 80 lakh crore in 2010 from rs 70 lakh crore acheived last year provided banned futures are reintroduced and if options, indices were allowed after passing the FCRA Bill.

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It may be recalled that when UPA returned to power, commodity futures market participants were hopeful of speedy reforms paving the way for a stronger regulator and foreign fund participation, Forward Contracts Regulation Bill that gives more teeth to the regulatior and allows trade in options and non-deliverable commodities like weather, derivates and indices is still pending before Lok Sabha.

The Minister has blamed the poor monsoons for creating supply side botllenecks but is still silent on how in the short to medium term, food inflation can be curbed. At the same time credit must go to him for announcing some agricultural infrastructural changes that may have long term impact on agri-futures and food commodities. Several concessions granted for cold storage and refrigeration for agri-produce should be welcomed in this regard as it is aimed at reducing wastage and helping the nascent food processing sector to grow.

Pranab Mukherjee has allocated Rs 400 crore for 2010-11to extend green revolution the eastern region of the country comprising Bihar, Chattisgarh, Jharkhand, Eastern UP, West Bengal and Orissa, with the active involvement of Gram Sabhas and the farming families. Similarly the announcement to start 60,000 "pulses and oil seed villages" in rain-fed areas during 2010-11 and provide an integrated intervention for water harvesting, watershed management and soil health, to enhance the productivity of the dry land farming areas is ambitious and laudable. It has been included as an integral part of the Rashtriya Krishi Vikas Yojana. But is the allocation of Rs300 crore sufficient for this purpose? Ofcourse, any comment on this tcan be made only after examing those schemes in detail and whether private participation will be utilised to fund those ventures.Remember, the spices parks that was intented to create value addition, good farm gate prices and employment in various regions in the country a few years back is yet to take off except in one or two centres.

Ofcourse, UPA Government and Pranab Mukherjee will get ample support for their Debt Waiver and Debt Relief Scheme for Farmers which has been extended by another six months for repayment of loan amount. The government's strategy for development of food processing sector by setting up more food parks should also be lauded.
Machinery for plantation sector also gets duty concessions along with cold storage, refrigeration and agricultural machinery.Similarly, the impact of some concessions including exemption of service tax for testing and certification of agricultural seeds from service tax and transportation of cereals and pulses by road and rail from service tax may not be anything more than marginal because the problem of food inflation is supply side issues and that can be solved only with imports or increased production domestically.

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