The Hindu Business Line : Mitigating the risks of farmers in a practical way

Debt trap
Tempted by huge profits, the farmers grow hybrid seeds and borrow money at high interest rates to plant in all the available area.
Majority of them have no idea of what schemes and credit facilities are available to them and prefer to borrow at high interest rates.

TENDING WITH CARE: A farmer tending to his organic paddy on his farm in Thanjavur, Tamil Nadu. Farmers in the area say organic farming helps them to get better returns and avoid taking risks. - M. J. Prabu

Chennai , Jan. 3

Farmers committing suicides have become a major issue today.

The main reason cited for these mass suicides is that crop failure and mounting debts have pushed them into deep debt.

The common thread, which runs in all these suicides, is that most of these farmers have grown pure crops in large areas.

Tempted by huge profits, they grow hybrid seeds and borrow money at high interest rates to plant in all the available area.

Majority of them have no idea of what schemes and credit facilities are available to them and prefer to borrow at high interest rates as bank loans are a far-fetched dream.

Rural banks prefer to play it safe and want the farmers to pledge his jewels or land documents for availing themselves of agriculture loans.

Even if the farmer gets a bumper harvest he prefers to spend the money on purchasing another piece of land or redeeming his pledged jewels or buying a new machinery rather than repaying.

By repaying the loan, his credit worthiness increases and next time he will be eligible to apply for more credit.

"If we are serious about preventing further suicides, farmers should be educated on hands-on risk management, working capital management, and marketing and social bravery issues," said Mr S. Balaji, an organic paddy farmer in the delta region.

Farmers have become lazy and prefer urea than cow's urine and dung to grow their crops, he said.

Some factors, which contribute to the risk include, high input costs, mono-cropping, market price fluctuation, pests and diseases, unpredictable weather and insufficient water for irrigation.

How does a simple farmer with limited resources manage and mitigate these risks?

Risk mitigation

Crop diversity, organic farming, native seeds, farm pond, milch cattle and planting trees are useful and significant components of a practical risk management plan, according to Mr Balaji.

Organic farming substantially reduces input costs. For example, a micro-organism culture based on fermenting pumpkin, papaya and banana fruits with jaggery, cow's urine and eggs will cost only Re 1 per acre for production.

A farm pond guarantees irrigation water for at least one crop in a year; in addition growing fish can be a valuable source of income, he said.

Mixed cropping reduces pests by as much as 75 per cent and also increases yields by 30-40 per cent. Native seeds are cheap, resistant to pests and diseases and withstand both drought and flood.

Growing trees contribute to wealth appreciation, reduces labour costs, irrigation requirement, working capital requirement, provide fodder and aid in water harvesting.

Keeping cattle assures a steady income and also retain and replenish the soil by their urine and dung.

As for working capital requirement, the farmer should only plant as much acreage as his resources will permit.

"Instead of spending Rs 10,000 per acre to cultivate hybrid crops and earn a gross revenue of about Rs 20,000 in six months, a farmer can spend Rs 1,000 per acre and grow multiple vegetables and earn a net income of Rs 15,000," said Mr Balaji.

Taking a loan at 60 and 70 per cent interest and investing the money on high-risk farming is a sure road to a debt trap, he added.

If a farmer has about 10 acres and only Rs 25,000, he should invest it on multiple crops in three-four acres and either let the rest of the land fallow or grow trees there. Allowing the cattle to graze in the fallow land is a wise investment. (A cow can graze all year round in one acre of occasionally irrigated land and produce 1,500-2,000 litres of milk in a year — it needs no other fodder), according to Mr Balaji.

Instead if he borrows another Rs 50,000 and invests Rs 75,000 in a single hybrid crop he is paving the way for his own peril, he said.