Agri Business

A bitter harvest: low prices leave farmers seething

Vishwanath Kulkarni Bengaluru | Updated on January 27, 2018 Published on November 15, 2017

Wtih kharif harvest began a month ago, the prices of majority of the crops have slipped below the minimum support price.

Market rates have fallen below MSP levels due to demonetisation hangover, poor offtake

The Narendra Modi government is finding it hard to live up to its promise of doubling farm incomes by 2022 given the challenge it faces in addressing the unremunerative prices of farm produce.

The kharif harvest began a little over a month ago, and already the prices of a majority of the crops have slipped below the minimum support price (MSP). Indeed, average prices for farm produce across mandis were lower in November than in the previous month and the corresponding month last year (see table).

This decline in prices is despite the fact that output in many cases is either flat or marginally lower than last year; black gram and cotton are the exceptions, with an increase in output.

It isn’t just agricultural produce; even the procurement price of the milk that farmers supply dairies has dropped in Maharashtra and Karnataka.

This decline across farm produce categories has caused unrest among the beleaguered farmers, who are resorting to protests, albeit sporadic ones, in Gujarat, Maharashtra, Karnataka and Punjab.

The All India Kisan Sangharsh Coordination Committee, a coalition of over 180 farmer associations, had recently pegged the losses incurred by growers on account of the drop in prices against the MSP this kharif at a whopping ₹35,968 crore.

Note-ban impact

The poor demand from traders and stockists, who are said to be facing liquidity issues due to demonetisation, as a result of which their inventory management has been disrupted, and lack of export parity for commodities such as soyabean and maize, are said to be influencing the mandi prices.

“With liquidity not restored, traders are hesitant to take positions. Also the lack of a stable policy on stocking limits is seen influencing the prices,” said Tejinder Narang, a grain trade analyst.

“We are monitoring the prices,” said Ramesh Chand, member, NITI Aayog, attributing the lower prices to the “lack of competition from buyers in the mandis”. He, however, disagreed with the trade claim that liquidity issues were hurting market prices, while stressing upon the need for States to speed up implementation of market reforms to attract large buyers.

Though government agencies have begun procurement in several States, the exercise has not yet stabilised prices. Nafed has, so far, procured over 1.03 lakh tonnes of moong and about 47,000 tonnes of urad this season, a fraction of the estimated output of 1.32 million tonnes and 2.53 million tonnes, respectively.

“It is nothing, but a disaster,” said Ashok Gulati, former CACP chairman, referring to the sharp decline in prices of pulses and oilseeds.

Gulati blamed the current crisis in pulses on a combination of factors, such as a bumper harvest last year, export controls and stocking limits imposed by the government on private trade, and record imports.

Policy flip-flop

One way to wriggle out of this piquant situation is to jack up import duties, which the government has begun to do with yellow peas. “But this flip-flop policy won’t work,” said Gulati.

YK Alagh, former Union Minister, said the wrongly timed import of several items of produce, including edible oils and pulses, adversely affects pricing at a time when farmers have begun sowing the next crop.

The pressure on farmers to sell their produce to meet their immediate cash requirements is forcing them to sell at prices below market rates. In Gujarat, groundnut farmers are facing issues with payments, which are being made after 3-4 weeks.

In Karnataka, maize growers are battling falling prices in the absence of any clear signals from the government on procurement.

Kishor Tiwari of the Maharashtra State Task Force claimed that cotton and soyabean farmers in the State were facing losses to the tune of ₹10,000 crore due to pest attacks and low prices.

“The farm crisis is worsening by the year,” says Devinder Sharma, farm policy expert. “Earlier the debate was on low productivity and lack of improved technologies/varieties; but now, the focus is seen shifting to the income security of the farmers,” he added.

“The government should look at providing a stimulus package like the one it announced for the roads/highways sector recently,” Sharma said.

(With inputs from TV Jayan in New Delhi and Rutam Vora in Ahmedabad. This is the first in a series on farmers’ distress)

Published on November 15, 2017
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