A Good, but Ill-Timed Move: Farmers Paying the Price for Note Ban

Agriculture is hit by note ban with farmers struggling to recover cost of cultivation, writes Vivian Fernandes

Published
India
5 min read
In Dewas district of Madhya Pradesh, chickpea or <i>chana</i> sowing has been interrupted because farmers are unable to buy fertiliser. (Photo: Vivian Fernandes/ <b>The Quint</b>)

The withdrawal of high denomination currency notes from circulation has disrupted farming operations during a busy season and heaped difficulties on farmers and labourers. Some farmers are questioning the wisdom of draining the lake to catch the big fish, while others say the move is good but ill-timed; it should have either been advanced or postponed by two months.

Crops to Take a Hit

Demonetisation is creating friction in social relations; the bonds of trust are getting strained. It has happened with Pritam Singh of Urlana Khurd village in Panipat district’s Madlauda tehsil. The Indian Agricultural Research Institute (IARI) has made Singh a fellow for his progressive outlook. He grows quality rice and wheat seed for the IARI and private companies.

Currently, he has engaged about 50 workers. They cut basmati rice from 5 in the morning till 10 am, after which they thresh till 6 pm, following which they load the paddy on to trucks till 9 in the night. Syrupy tea, served three times a day, brings zest to this routine of tedium.

But Singh’s long-time grocer refused to sell him more than 10 kg of sugar on credit, when it is a bag of 50 kg he sought. Appeals to customer loyalty did not cut ice; the grocer said his supplier in turn was not accommodative.

Basmati has to be cut by hand as machine-harvested results in breakage of grain.

This is also the wheat sowing season. If not done within the next few days, wheat can face terminal heat next March, causing grain to shrivel and the output to decline. Singh also sells wheat seed, which he harvested in April. While he extends credit to known buyers, he is hesitant to accept cheques from strangers.



Pritam Singh’s long-time grocer refused to sell him more than 10 kg of sugar on credit. (Photo: Vivian Fernandes/ <b>The Quint</b>)
Pritam Singh’s long-time grocer refused to sell him more than 10 kg of sugar on credit. (Photo: Vivian Fernandes/ The Quint)

Drop in Daily Sales

At the other end of India’s geography, Senthil Kumar of Navakkarrai village in Tamil Nadu’s Coimbatore district has a similar tale to narrate. Daily sales at the retail vend of the Kovai Farmers Producer Company, of which he is the secretary, have shrunk from about Rs 15,000 to Rs 6,000, even Rs 4,000, he says, as lower denomination notes to pay for vegetables or to return as change have almost vanished.

The producer company was formed in 2013. Its farmer-members grow vegetables, mainly for export to neighbouring Kerala. Though their combined volume is about a 10 percent of Coimbatore’s daily trade in vegetables, they have been able to gain bargaining power over traders, who used to short-change them on weight and value.

The company, however, sells agro-chemicals to its members against cheque and cards.

People Willing to Bear the Pain

For S Mohan Raj of Vettaikaranpudur village in Coimbatore’s Pollachi taluk, the cash crunch is an “inconvenience.” He has shrunk household expenses and farming operations to conserve the money he has. Raj is chairman of the Kovai company. He grows coconuts and gourds. Some of his buyers are transferring money directly to his account; others have offered to settle later.

In Suttur village of Mysuru’s Nanjangud district, Arun Balamatti, the head of JSS Krishi Vigyan Kenda (KVK) has a different story to tell. The KVK, initiated by a local religious leader in 1994, has gone beyond its mandate of providing agronomic advice. Since 2013, it has been selling plant nutrients, medicines and pest control potions after screening them for quality and affordability.

Balamati says its “agri-clinics” are visited by around 30 farmers a day and they buy stuff worth about Rs 500 on average in cash. Those that pay in demonetised currency are not turned back. This arrangement will continue till the local branch of State Bank of Mysore exchanges the currencies. There is a slight increase in the prices of vegetables in the local market, Balamatti says. In his view, people are putting up with the pain for the greater good of seeing black money flushed out.

The people he spoke to in and around Nimara village in Akola district’s Bashi Taki taluk approve of the government’s move to scrub the black economy but the move is ill-timed, says Ganesh Nanote, a progressive farmer. This is the time when pigeon pea or arhar flowers and pod borers attack. If spraying is not done timely, it can cause considerable damage.

Traders are selective in selling pesticides on credit, Nanote says. Sales of freshly-harvested soybean have also shrunk in Akola as farmers are unwilling to accept demonetised currency.

Tough to Recover Cost of Cultivation

In Dewas district of Madhya Pradesh, chickpea or chana sowing has been interrupted because farmers are unable to buy fertiliser, says Suresh Jat, who is into marketing and procurement for RamRahim Pragati Producer Company, a grouping of mainly small and marginal tribal farmers in Bagli taluk. After two years of deficient rains and lean harvest, the soybean crop was good.

Dinabai Rathod of Chandupura village, for instance, said she had harvested 50 quintals this year against 6 quintals last year. But prices have dropped to levels just above cost of cultivation. While soybean has been harvested, maize cutting has been disrupted by the cash crunch. Chana sowing has also been affected.



Senthil Kumar of Navakkarrai village in Tamil Nadu’s Coimbatore district says sales have shrunk due to non-availability of lower denomination notes. (Photo: Vivian Fernandes/ <b>The Quint</b>)
Senthil Kumar of Navakkarrai village in Tamil Nadu’s Coimbatore district says sales have shrunk due to non-availability of lower denomination notes. (Photo: Vivian Fernandes/ The Quint)

Spike in Price of Cotton

In cotton mandis, arrivals have shrivelled while prices have risen, says Pankaj D Mepani, a senior executive with a Mumbai-based cotton trading firm. Arrivals on 8 November, before demonetisation was announced, were 1,45,000 bales of 176 kg each. On 17 November, it was 74,000 bales. In Gujarat, arrivals of the benchmark Shankar 6 variety have declined from 30,000 bales to 10,000 bales during these days respectively. Rates of this variety ranged from Rs 3,78,000-3,88,000 a candy (356 kg) on 8 November. They are up by Rs 17,000-22,000 a candy. Farmers are holding back, unwilling to accept cheques.

Informal Economy Bears the Brunt

Cash rules in the country’s mandis. Even Karnataka, which initiated pioneering reforms in agricultural marketing in 2014, has had difficulty in getting farmers to open bank accounts and persuading traders to pay directly to them. Mandi officials say banks are unwilling to provide credit lines to traders. Samir Shah, MD and CEO of the National Commodities and Derivatives Exchange (NCDEX), says traders are unwilling to let go off pricing power. NCDEX has lined up banks like ICICI, which have designed trader finance products, but has faced opposition.

Demonetisation might help break the resistance.

While good may follow, farmers and those in the informal economy, which is lubricated by cash, are asking whether the vaunted surgical strike on black money should have been so blunt in its impact.

Aate ke saath gun bhi pista hai,” (beetles get ground with the flour) explains Pritam Singh, resignedly.

(Vivian Fernandes is editor of www.smartindianagriculture.in. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)

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