Budget expectations of Agri warehousing, Agri logistics, and Agri NBFCs sectors

Rationalisation of Indirect Taxes on warehousing sector is one of the long outstanding demands of the Agri-warehousing industry. 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 which 18% GST is charged. However, output services have no GST. So the 18% GST actually becomes a cost on my balance sheet and increases my costing which I have to pass on to my customers.

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 per cent  GST  actually becomes a cost on my balance sheet and increases my costing which I have to pass on to my customers.

This often leads to loss of Business for the organized sector as customer’s moves on to the unorganised players who often do not be charged the GST. So one of the outstanding demands for the successive last three budgets has been that there has to carve out to such leases to such commercial places which are actually used as agri-input place. So that’s one important point I would like to make.

Agri Credit

Agricultural finance is a subset of rural finance dedicated to financing agricultural related activities such as input supply, production, distribution, wholesale, processing and marketing. The modern agriculture has increased the use of inputs especially for seed, fertilizers, irrigational water, machinery and implements, which has increased demand for agricultural credit.

Finance in agriculture act as a key to farmers. But farmers‟ money is always inadequate and he needs outside finance or credit. Because of inadequate financial resources and absence of timely credit facilities at reasonable rates, many of the farmers, are unable to go in for improved seeds and manures or to introduce better methods or techniques.

In the given situation, the role of agricultural NBFC's becomes extremely important. By bringing farmers to the financial system these NBFC(Non-Banking Financial Company) accelerates the process of financial inclusion in the country. We have seen in successive budgets that government has made cheaper credit pools available to institutions like NABARD who have further gone ahead and given those financing activity to agri-processing and agri-infrastructure but we have not such seen such cheaper pool of credit available to Agri-NBFCs.

Agri-NBFCs plays an important role in providing access to Finance for smallholder farmers and therefore if cheaper credit is made available to the Agri NBFC’s just like the way it is given to NABARD, I think it is going to go a long way in doubling farmer income also in making inclusive agri-growth environment.   Also if the government starts offering SOP’s to the Agri-NBFC sector, it will go a long way in helping the sector to flourish and will also help in fulfilling the government vision of doubling farmers' income.

Initiatives like e-NAM

Initiatives like e-NAM which talks about one mandi or one environment and one Agri credit market as well as one output market are good initiatives but they need to be backed by good physical infrastructure.  Agri companies which can provide end to end physical gambit of the agri-value chain should be encouraged for participating in this initiative.

 

Note: Sandeep Sabharwal, Group CEO, Sohan Lal Commodity Management Pvt. Ltd. The opinions expressed are the personal views of the author.