Caught in a price trap

Raosaheb Harak is helpless.

"We were forced to sell onion at ₹2 a kg, due to a glut in the market. But our cost of production is ₹6 per kg," says the farmer from Shivade village in Sinnar Taluk of Nashik, the country's main onion producing region.

Harak got ₹1.6 lakh for the 400 quintal of onion that he harvested from his two acres this March. Same is the case with tomatoes. The decline in exports to Pakistan, due to skirmishes at the border, has added to the farmers’ woes.

An increase in the output of onions and tomatoes in the region has dampened prices, hurting the farmers’ income. "We want a minimum support price (MSP) of at least ₹10 kg so that we can cover our costs and make a decent living," Harak adds.

Over 100 farmers had committed suicide in Nashik by April this year. The dire situation had prompted farmers to protest and they were eventually successful in securing a loan waiver from the Devendra Fadnavis Government.

In Uttar Pradesh too, the BJP Government had announced a loan waiver, fulfilling its poll promise. Taking cue from these developments, farmers across other states such as Madhya Pradesh, Gujarat, Haryana, Punjab and Rajasthan have raised a similar demand for waiver of their crop loans.

"If a farmer can’t even recover his production cost then he is bound to stage a protest on the roads. Rather than selling the onions at a throwaway price, he finds it more satisfying to throw the onions as a form of protest,” Harak said.

While higher labour rates have increased production costs, farmers have been spending more to protect plants against the vagaries of the climate. At Saade village, near Puntamba, where the latest farmer protest erupted, onion growers are shifting to alternatives such as maize. Ramakrishna Kotade, a 59-year-old farmer who owns 22 acres, hopes to make about ₹1,300 per quintal of maize, while onions on an average are still traded at ₹500-700 per quintal.

“Although I have a larger land holding of about 22 acres, high labour cost is making farming unviable. About ₹14,000 per acre is the labour cost. My current debts are about ₹3.5 lakh but I have no other option but to borrow more to plant maize and bajra,” he said.

Last year, Kotade had spent about ₹2 lakh in growing and storing onions. But as prices stagnated, he was forced to dispose the onions for mere ₹40,000.

Earlier, in similar dire circumstances, he could use ‘milk like an ATM card.’ Whenever he needed money, Kotade could sell milk. But today the milk business is not feasible because cattle feed prices have shot through the roof.

Even a 50 kg bag of feed cost about ₹1,800, versus ₹1,200 earlier. The veterinary doctor charges ₹4,000 for a visit. “Therefore our current procurement cost should at least increase to₹40 per litre, from the present rate of ₹25 per litre. Only then the dairy business will become viable,” says Kotade. A farmer’s story is not very different in India, be it Maharashtra, or in far-off Haryana.

Harish Sharma, a farmer in Furlak village near Karnal, grows rice and wheat in his four acres. Cost of cultivation has gone up tremendously because of the rise in input costs, which hovers around ₹17,000 per acre. Then there is the fast increasing labour cost. “The produce on an average fetches me ₹26,500 per acre. It doesn’t even cover the cost of labour. I also have a loan to repay. I often have to do odd jobs, ” Sharma adds.

As farming becomes unviable, farmers are taking the exit route. “Farmers have sold 40 per cent of the agricultural land in our village and moved to other jobs,” said Ajmer Singh, a farmer with 3-acre holding in Furlak. He is also the headmaster of the nearby government school.

"The Government may be upbeat about the bumper production this year. But farmers are very unhappy. The glut becomes a bane for them as it brings down the prices to such a level that it increases their debts,” says Rajinder Singh, who recently retired as an agricultural extension officer.

Prices of farm produce in the country are increasingly being determined by the global supply-demand scenario. To make things worse, the recent demonetisation of high value notes, which threw the commodity inventory management in disarray, had an impact on the prices.

“The present crisis has been in the making for a long time,ever since the late 1990s,” says farm economist Utsa Patnaik. She attributes the crisis to factors such as output instability, price uncertainty and the latest being demonetisation. “What the Government didn’t realise was that it was taking away the working capital, not only of producers but also of transporters and traders. So the farmers who have already planted and harvested, had nobody to transport their products. The impact of this (demonetisation) plays out over a long period of time,” Patnaik adds.

It's not just the onion or soyabean growers in Maharashtra or Madhya Pradesh who have faced a low-price situation. Farmers growing pulses in Karnataka, Telangana, Maharashtra; chilliesin Andhra Pradesh and turmeric in Tamil Nadu have also faced the heat of price crash this year.

Farmers are now suffering from three different types of risks, says Abhijit Sen, former member of the erstwhile Planning Commission. There is the risk to the output because of unpredictable weather; and the risk to the prices they get for their crops. “Also, a lot of farmers nowadays look for other employment – either run a shop or work at a construction site. So lack of employment opportunities is another risk, Sen adds. So, there is a need for the Government to think in terms of stabilising those farm incomes. "The problem is that they have to do something right now. There are some guys who say make investment in agriculture now. That will not help as the impact of such investments will be felt after 10 years," Sen adds

It didn’t help that the ruling BJP Government’s poll promises have come back to haunt it. The BJP in its 2014 General Elections manifesto promised a minimum of 50 per cent profit over the cost of production, cheaper agriculture inputs and credit.

“Loan waiver wasn’t a demand from farmers at all,” says Sen. In the run-up to the UP elections, Modi promised loan waiver to UP farmers and the new government announced it. Once that happened, farmers in other states said ‘if they can have it, we will also.’ Politically it is impossible for them not to give in to (farmers in other states),” he adds.

Finance Minister Arun Jaitley recently put the onus of loan waiver on the states, prompting a sharp response from the Opposition. “Government of India’s blatant refusal to own loan waiver, and leaving it as a sole responsibility of states, is the biggest betrayal of India’s farmers,” says Randeep Singh Surjewala, Congress spokesperson.

He adds that the ‘callousness’ with which the Prime Minister promised an MSP of cost plus 50 per cent, and backing off later by filing an affidavit in Supreme Court on October 22, 2015, is not understandable. “The consequence is that most crop are selling below MSP,” he said.

The latest situation is a spill over or a case of follow the leader – when one state (in this case Uttar Pradesh) does it and rest follow, said an economist. However, those closely associated with the government and also involved in varied capacities with the government counter this.

According to them Uttar Pradesh should not be taken as an example. Ask why, and they say “it was a state going to elections. It was purely political nothing to do with economics. The question is when the crops have been good should the incumbent governments do it.”

Good rainfall has led a rise in the overall farm output across the country, bringing down prices of almost every agriculture commodity. For the Modi Government, it’s time to focus beyond consumer inflation and addressing the main issue —price.

“If farmers are getting a good price for their produce and are given individual insurance cover (with the Government paying the premium) for crop losses, no farmer will come back with a begging bowl,” says P Ayyakannu, leader of Tamil Nadu farmers who held demonstration for 41 days in Delhi’s Jantar Mantar.

The food grain production is expected to reach a record high of 273.4 million tonnes in 2016-17. With the forecast of a normal monsoon, the Government is looking to for a higher output than last year. The higher output could aggravate the problem for farmers in the days ahead, unless the Government recognises the structural issue and takes some quick corrective measures. While the Centre has been promoting the e-National Agricultural Market, it may take a while to make an impact as many states are yet to come on board.

"It was surprising that the Government kept the import window for pulses open since last year, when prices had already started coming below the MSP levels. The Government should be rather quick in terms of responding to the ground realities by tweaking its trade policies," says T N Prakash Kammaradi, Chairman of Karnataka Agriculture Prices Commission (KAPC).

Better co-ordination between various ministries such as Agriculture, Food, Commerce and Finance is required to assess the demand-supply scenario on regular basis, Kammaradi says stressing upon the need for strengthening the market intelligence mechanisms.

Besides, there is a need for effective crop planning, at least in case of sensitive commodities such as onion, pulses and sugar. “There is a need for specific production policies for these crops. Also we need a policy on surplus management,” adds Kammardi. He says there is need to look for a legal approach on the MSP for crops. Citing the example of Karnataka, where only 42 per cent of the commodities were procured under MSP, the KAPC has commissioned a study by the National Law School to explore legal strategies to address the farmer distress over agriculture prices. The report is expected to be out by June-end.

Meanwhile, the farmers’ wait for a better price continues.

With inputs from Richa Mishra and Vishwanath Kulkarni