Union Budget 2026: Agriculture Sector Seeks Tax Relief, Biofuel Push and Infra Boost

Ahead of the Union Budget for FY27, stakeholders across India’s agriculture and allied sectors have urged the government to announce tax relief measures, enhanced biofuel funding, infrastructure investments, and stronger farmer support, as the sector faces mounting climate risks, rising input costs, and income pressures.

Agriculture at the Core of India’s Long-Term Growth Plans

India is approaching the midpoint of its 2030 agriculture development goals, while simultaneously laying the groundwork for the Viksit Bharat 2047 vision. Industry representatives say sustained public investment in innovation, infrastructure, clean energy, and market reforms is essential for transforming Indian agriculture into a globally competitive growth engine.

Sugar Sector Reforms Take Centre Stage

AISTA Seeks Biofuel Funding and Energy Transition Support

In a formal representation to Finance Minister Nirmala Sitharaman, the All India Sugar Trade Association (AISTA) sought an allocation of ₹2,500 crore to promote advanced biofuels such as sustainable aviation fuel (SAF) and green hydrogen.

Integrated Bio-Energy Hubs for Sugar Mills

AISTA also demanded ₹25 billion to support financially stressed sugar mills in setting up integrated bio-energy hubs, aimed at accelerating the sector’s clean energy transition and improving long-term financial sustainability.

The association noted that India already imports vegetable oil, and ethanol could play a critical role in alcohol-to-jet technology for SAF.
It stated:

"Producing one kilogram of hydrogen consumes 70 units of electricity, and infrastructure using ethanol for hydrogen production would benefit the sugar industry,"

Challenges Faced by Cooperative Sugar Mills

Many sugar mills, particularly cooperative units in Maharashtra, Uttar Pradesh, and Punjab, lack distillation facilities and depend heavily on sugar and molasses sales to meet financial obligations such as cane price payments to farmers, wages, and salaries.

AISTA said:

"The financial help is necessary for them to install distillation capacities to produce ethanol, which is a value addition. It will definitely increase their capacities to pay remunerative cane prices to cane farmers,"

GST Relief and Ethanol Pricing Demands

AISTA further proposed:

• Reducing GST on flex-fuel and strong hybrid vehicles to 5%, from the current 18–40%, aligning them with electric vehicles

• Increasing ethanol procurement prices by ₹6–8 per litre

Sugar Pricing and Cane Remuneration

The association also demanded:

• A hike in the minimum selling price of sugar from the current ₹31 per kg, unchanged since 2019

• Linking the fair and remunerative price (FRP) of sugarcane to the minimum support price (MSP) on an annual basis

Fertiliser Sector Pushes for Structural Reforms

‘3D Reform’ of Fertiliser Control Order

Rajib Chakraborty, national president of the Soluble Fertiliser Industry Association, said Budget 2026 is expected to advance a “3D Reform” of the Fertiliser Control Order, focusing on:

• Digitisation

• Decriminalisation

• Deregulation

He said key expectations include promoting residue-free, nutrient-rich farming as part of an integrated national agriculture and health policy, and recognising non-subsidised soluble, organic, micronutrient and stimulant fertilisers as strategic inputs alongside subsidy reduction.

Capacity Expansion and Self-Reliance

Nishant Kanodia, chairman of Matix Fertilisers and Chemicals, said continued policy support for timely capacity addition and investment-friendly frameworks would strengthen domestic manufacturing, deepen self-reliance, and reduce external supply vulnerabilities.

Coffee, Crops and Climate Resilience

Coffee Sector Faces Climate and Cost Pressures

Rana George, managing director of Kelachandra Coffee, said India’s coffee industry is dealing with climate uncertainty, rising cultivation costs, and labour shortages, even as global demand remains strong.

He said Budget 2026 should prioritise:

• Improved irrigation infrastructure

• Expanded crop insurance coverage

• Long-tenure credit for replanting

• Greater support for farm mechanisation

George also highlighted the need for higher R&D investment to develop climate-resilient coffee varieties and a national digital traceability system.

Calls for Farmer Income Stability and Market Reforms

Simon Wiebusch, country divisional head of Bayer’s Crop Science Division for India, Bangladesh, and Sri Lanka, stressed the importance of:

• Stronger income and credit support for farmers

• Predictable trade policies

• Sustained investment in agri-logistics and post-harvest infrastructure

These measures, he said, are critical to stabilising the agriculture sector amid global and domestic volatility.

Commodity Markets and Risk Management

Arun Raste, managing director and CEO of NCDEX, called for:

• Rationalising or removing the Commodity Transaction Tax (CTT)

• Providing clarity on GST treatment of commodity derivatives

He said such steps would improve hedging tools and risk management options for farmers.

Drone Economy and Agri-Tech Expansion

Preet Sandhu, founder and managing director of AVPL International, urged the government to strengthen the ‘Drone Shakti’ initiative through incentive-led manufacturing policies. He said this would signal India’s transition from pilot programmes to large-scale expansion of the drone economy, particularly in agriculture and allied services.