Buttokrishna Dutta is one of the oldest and largest fertiliser distributors in the North Bengal district of Malda. Its daily turnover touches ₹70-80 lakh during October-January. Till November 8, the entire collection was in cash.
A month after demonetisation, the scene has changed dramatically. “Now 80 per cent of my collections are cashless,” says owner Subhasish Pal.
Demonetisation and the associated push to cashless transactions has ushered in many interesting changes in the rural economy. Financial integration of high-value agri-input retail sector is one of them.
More than half of the 50-60 active dealers of Pal didn’t have a bank account. Some managed occasional transactions in the past through savings accounts. Now all of them are busy opening current accounts.
The transition did come at a cost, though. As banks were more focussed on cash dispensation in the initial days after demonetisation, account opening was delayed. This, coupled with the overall cash squeeze, dented Pal’s collections by 20 per cent in November.
Now that the system is in place for non-cash transactions and cash availability has improved over the last week, Pal is witnessing higher sales in December.
According to him, non-cash transactions will help usher in a level-playing field in fertiliser trade through expansion of the tax net.
“Right now, there is no uniformity in the retail price of fertiliser. He who can flout the norm more gives deeper discounts, making it difficult for others to go by the book,” he said.
Subrata Ghosh, General Manager of HPM Chemicals and Fertilizer, whichis primarily into insecticides, confirms a similar trend with his dealer network. Non-cash transactions and rush to open current accounts are the order of the day.
Requesting anonymity, the manager of a public sector bank in the rice growing region of Bhatar in Burdwan confirmed the spike in current account openings. Large farmers are also taking this route to get higher cash withdrawal limits.
Money lenders outGhosh, however, has a concern. Demonetisation has thrown private moneylenders out of business.
Though they charge as high as 8-9 per cent a month, private lenders are approached by small farmers for easy availability of credit at the beginning of the season.
In the absence of moneylenders, sales of agri-inputs grew riding on lenient suppliers’ credit. Unless the credit flow resumes, fertiliser and pesticide dealers may see piling up of dues. Kuldip Maity, Managing Director of Village Financial Services, a large Bengal-headquartered micro-finance institution (MFI), is looking forward to fill the void. MFI loans are cheaper at 1.5-1.75 per cent a month.
Chandra Sekhar Ghosh, Founder of Bandhan Bank, however, is cautious. He gives priority to creditworthiness than opportunity. Bandhan has an MFI wing.
Freedom from fakeMeanwhile, agri-traders see demonetisation and cashless transactions as a means to tide over the fake currency menace.
“Two out of every 100 ₹500 notes I received in the past were fake, bringing home unexpected losses,” says Sriman Dhara, a trader at the large wholesale potato market at Singur in Hooghly.
His argument found immediate appreciation from a client, a small trader from Deganga in North-24 Parganas bordering Bangladesh.