The Hindu Business Line : Why farmers bank on the ‘arhatiyas’

Forty-year-old Kewal Krishan is a ‘commission agent’ or an ‘arhatiya’ at the Moga grain mandi in Punjab. As farmers like Sukhdev Singh from nearby Dagru village bring their wheat to the mandi, it is Kewal Krishan who has the first right to auction it for procurement, either by the government agencies or private trade.

Why is it that only he has the right to auction the wheat brought by Sukhdev? Kewal Krishan’s reply is: “I have given a few lakh of rupees to Sukhdev. Therefore, only I can sell the wheat brought to the mandi by him,” he says.

Across Punjab and Haryana, the “arhatiyas” are the ones who have the right to the wheat brought by farmers to the mandis and auction the grains.

“We arhatiyas have a crucial role to play in the entire wheat chain, starting from production to harvest,” says Raj Sud, who functions from the Khanna mandi in Punjab.

In the case of Kewal Krishan, he extends loans up to even Rs 10 lakh to farmers based on their land holdings. “The land holding of the farmers is crucial to extending them the loan,” says Sud.

Before the sowing can start, these farmers approach the arhatiyas for loans. The loans sought need not necessarily pertain to buy only seeds and fertilisers or other crop inputs.

Farmers need money for a variety of reasons. Suppose, they have a function at their home, the banks are not going to extend them loans for it. Therefore, the arhatiyas are the ones who can meet their immediate needs for cash.

For instance, Gurcharan Singh of Gharonda village in Panipat district of Haryana has tried to get loans from banks against his land holding without success.

“I was told I had to pay a cut and I was ready to do so, but even three months after filing an application, I didn’t get one paisa. Therefore, I had to turn to an arhatiya to take a loan of Rs 1 lakh for the immediate needs of my family,” says Gurcharan. That happened when Gurcharan had sown rice; by the time he was set to harvest wheat, he had taken a loan of nearly Rs 2.5 lakh, at an interest rate of 24 per cent. This farmer from Gharonda looks after the affairs of a 20-member family that includes four brothers and, recently, he also took on lease 25 acres of land.

When the arhatiyas extend loans to farmers, there is an unwritten understanding that the former will have the right to auction the latter’s grain when it is harvested. For the loan that is extended, the arhatiyas charge 18-24 per cent interest a year. Besides, when the grain is auctioned, the arhatiyas get a 2.5 per cent commission for the sale.

The relationship between an arhatiya and a farmer extends over generations and that is one reason why there is such a good understanding between them. The relationship extends to levels where the arhatiyas are prepared to wait for repayment in the event of any crop failure.

Farmers need money to buy seeds. Then, they need cash for fertilisers and other crop inputs. In between, as the crop grows, they have to meet their family needs. No bank can take care of all these. It is here that the arhatiyas come in. Farmers look to them as an easy source of loans and they have no complaints even if they charge a higher interest rate.

“Suppose, there is a medical emergency in a farmer’s house late in the evening, no bank is going to help him. Today, if you try to admit anyone in a hospital in the North, you have to first shell out Rs 10,000. The farmer, in such circumstances, has no other go but to approach an arhatiya,” says Mr Sud.

Not just in a medical emergency, the arhatiyas also step in to help a farmer when there is a wedding in the family or some other event. In fact, it is the flow of cash from the arhatiyas that keeps things going for the farmer even as he waits to harvest his crop.

In short, the arhatiyas are crucial to the country’s wheat economy. Not surprisingly, the Uttar Pradesh Government decided to rope them in for procurement this year and has reaped benefits, procuring 28 lakh tonnes against the meagre quantity procured last year.

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