Agriculture ravaged by liquidity crunch

Demonetisation has hit agriculture like a guided missile. There is an unprecedented cash crunch. High value notes that were the mainstay of agriculture have become worthless. Low denomination currency is impossible to find. In any case one would need a sackful of them to get by.

The banks are the only recourse for the harried farmer. There are three ways of getting cash out of them, and all three have become dysfunctional. The ATMs, the most convenient of the three, have remained shut since day one, and no one knows when they will come to life. The second is exchanging high denomination notes for legal tender. This involves spending hours in a queue and what one gets at the end is a couple of illiquid two thousand rupee notes.

Money can also be withdrawn from a savings account. Banks will give ₹24,000 per customer, but they run out of cash in no time. And the only currency they have is the illiquid ₹2000. The manager of my bank was especially considerate. He brought out an enormous bundle of soiled low denomination notes and worked his way through them to give me change for ₹2000. Obviously, he has neither the time nor the currency to do this for every customer.

The banks, much like the farmer, have been hit by a tsunami. Customers who wait in the sun all day become edgy, but bankers are helpless. Their ATMs won’t be calibrated for days or weeks.

Limited cash in two thousand rupees is all they get. It is impossible to meet the expectations of the milling crowds with such meagre resources. In the face of such pressures my bank simply stopped across the counter exchange of demonetised currency notes. Sensing that the same guys were turning up every day to exchange demonetised notes, obviously for a commission, the manager decided to use his scarce resources to service genuine customers. That is the most an earnest bank manager can do in the given circumstance.

Already reeling under all kinds of pressures, the farmer is flummoxed. The market for his produce has collapsed. There are no buyers. The trader who buys green coconut from me with utter regularity has not shown up after demonetisation. Green coconuts will not remain green forever.

When the coconut ripens and the water turns into nut, the price drops by as much as 40 per cent. That is a loss I must bear till the trader shows up. I have to milk my cows come rain or shine, or else they will develop mastitis. I must also find the cash to buy cattle feed, or else they will starve. I hand over my milk to the cooperative but there is not a word from them about payment.

The cattle markets have closed down because there are no buyers. A cow fetches the best price just before she calves. Small farmers who raise cattle wait for this tiny window, usually no more than a week, to earn a living. With the markets closed they are stuck. Their cows can now be sold only to the butcher, which no farmer in good conscience can accept.

Even as my inflows have stopped, I must find the small notes to fund my outflow. It is time to pluck ripe coconuts. We have assembled the climbers who shin up the trees and the women who pick up the nuts and load them on to the tractor. Tree climbers are a rare breed with a specialised skill that few possess.

As a result they are both pricey and finicky. To keep them in good humour I must pay them by noon every single day. With money in hand, they head straight for TASMAC, the state controlled liquor vend, for their quarter of brandy. The women will wait until weekend but I must still find the cash. In the next few days I would have harvested some 5,000 coconuts of the best quality. Where are the buyers? They have no cash. The wholesale markets where they sell my produce are in disarray. The trucks that must carry my produce to the market are stranded on the highway. And what price will I get? Coconut prices have already dropped by 50 per cent in one year, and what awaits me now is a distress sale.

In the meanwhile, I am being advised by all kinds of busy bees ranging from politicians and financial experts to bureaucrats and market gurus on how to live in a cashless world. They are asking me to pay my climbers with plastic.

I don’t know whether to laugh or cry. And from the coconut trader whom I might never see again, they are asking me to accept a cheque. I need advice on how to ensure that a cheque from an untraceable trader is honoured.

Most farmers I know are not against demonetisation, but there will be an existential crisis if these blips are not ironed out soon.

The writer is a HR consultant and a farmer

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