No significantly tight measures, which the market had expected, have been proposed in the futures trading in commodities in the Budget that Finance Minister P Chidambaram presented in Parliament on Wednesday.
Most analysts and market participants had expected that Chidambaram would come out with harsh measures in futures trading in agri commodities to curb the surging inflation.
But hours before the Budget was presented, the Forward Markets Commission, the apex commodity regulator, announced a ban on introducing new contracts in wheat and rice.
In the Budget, meanwhile, the Finance Minister proposed to set up a panel to study the impact of forward trading in commodities, especially edible oil and pulses.
One of the key budgetary proposals was to make edible oils more affordable, crude and refined edible oils to be exempted from additional CV duty of 4 per cent, and reduction in duty on sunflower oil, both crude and refined by 15 per cent.
Chidambaram pointed out that global commodity prices and supply constraints have exerted pressure on local commodities especially wheat, rice, pulses, sugar etc.
Therefore, he proposed a 'Mission for Pulses' - an integrated oil seeds, oil palm, pulses and maize development programme to be expanded with sharper focus on scaling up the production of breeder, foundation and certified seeds.
The government also would fund the expansion of Indian Institute of Pulses Research, Kanpur and offer other producers a capital grant for concessional financing to double production.
For strengthening the plantation sector especially rubber, coffee, spices, cashew and coconut, the Finance Minister proposed financial mechanisms for re-plantation and rejuvenation.
Following are the other key features on the commodities market in the Budget:
Agriculture
Average growth in agriculture during Tenth Plan estimated at 2.3%.
Training of farmers:
Indian Council of Agricultural Research to set up one teaching-cum demonstration model of water harvesting in each of 32 selected State Agricultural Universities and ICAR institutes; each institution to train 100 trainers and 1,000 farmers every year; interest free loan of Rs.3 crore to be provided to each institution to create a corpus fund.
Agricultural insurance:
National Agricultural Insurance Scheme to be continued for Khariff and Rabi 2007-08 with a provision of Rs.500 crore; a weather based crop insurance scheme to be started by Agricultural Insurance Corporation on a pilot basis as an alternative to NAIS; allocation of Rs.100 crore to be made in 2007-08.
Farm credit: Target of Rs 225,000 crore (Rs 2,250 billion) for 2007-08 with an addition of 50 lakh new farmers to the banking system; provision of Rs 1,677 crore (Rs 16.77 billion) for 2 per cent interest subvention for short-term crop loans; a special plan being implemented over a period of three years in 31 especially distressed districts in four states involving a total amount of Rs 16,979 crore (Rs 169.79 billion); of this, about Rs 12,400 crore (Rs 124 billion) to be on water related schemes; special plan includes a scheme with proposed provision of Rs153 crore (Rs 1.53 billion) for induction of high yielding milch animals and related activities.
Accelerated irrigation benefit programme: 35 projects likely to be completed in 2006-07 and additional irrigation potential of 900,000 hectares to be created; outlay to be increased from Rs.7, 121 crore to Rs.11, 000 crore including grant component to State Governments of Rs.3, 580 crore, an increase from Rs.2, 350 crore.
Rainfed area development programme: Proposed allocation of Rs.100 crore for the new Rainfed Area Development Programme.
Water resources management - Restoring water bodies: World Bank loan agreement signed with Tamil Nadu for Rs. 2, 182 crore to restore 5,763 water bodies having a command area of 400,000 hectares; agreement for Andhra Pradesh expected to be concluded in March 2007 to cover 3,000 water bodies with a command area of 250,000 hectares.
Ground water recharge: Hundred per cent subsidy to small and marginal farmers and 50 per cent subsidy to other farmers to be given to divert rain water into 'dug wells'; Rs 1,800 crore (Rs 18 billion) to be transferred to NABARD.
Extension system: New programme to be drawn up that will replicate earlier training and visit programme; Agriculture Technology Management Agency now in place in 262 districts to be extended to another 300 districts; provision for ATMA to increase from Rs 50 crore (Rs 500 million) to Rs 230 crore (Rs 2.3 billion).
Fertiliser subsidies: Based on study to be conducted, a pilot programme to be implemented for delivering subsidy directly to farmer.
National Bank for Agriculture and Rural Development: To augment its resources for refinancing rural credit cooperatives, NABARD to issue Government guaranteed rural bonds to the extent of Rs.5,000 crore with suitable tax exemption.
Climate Change: An expert committee to be appointed to study impact of climate changes on India and identify measures to be taken.
Tax proposals
Reduction in duty on polyester fibres and yarns from 10 to 7.5 per cent and on raw-materials such as DMT, PTA and MEG from 10 to 7.5 per cent; on cut and polished diamonds from 5 to 3 per cent; on rough synthetic stones from 12.5 to 5 per cent; and on unworked corals from 30 to 10 per cent.
To augment irrigation facilities and processing of agricultural products, reduction in duty on drip irrigation systems, agricultural sprinklers and food processing machinery from 7.5 to 5 per cent.
Reduction in duty on pet foods from 30 to 20 per cent.
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