I was unable to fathom his agony when he consumed pesticide last year; this year I might follow in his footsteps,"says Rahul Athole of Talavada village in Maharashtra’s Beed district as he recounts the events that forced his elder brother, Sahibrao, to take his life.
At 33, Sahibrao was full of beans. Within two years of managing his one-hectare (ha) family land, he proved wrong all those who said agriculture was not remunerative: he converted his mud house into a brick-and-plaster one and paid back the housing loan of Rs 1.5 lakh. In 2012, he borrowed Rs 2.1 lakh to grow cash crops. He planted sweet lime and watermelon on a small patch and cotton on the rest. Unfortunately, that year the rains failed. All the eight districts, including Beed, that make up the Marathwada region, faced one of the worst droughts in recent history. Sahibrao tried to recover the losses the next year, but 2013 did not prove to be a good year either. Freak hailstorm and unseasonal rains in March 2014 were the final straw. It flattened ready-to-harvest rabi crops, including wheat, pulses and cotton, across Marathwada. Sahibrao could not bear the shock. Newspaper headlines and the government coldly made him part of the growing list of farmers committing suicide in Marathwada, a region that is fast outpacing Vidarbha in cases of farmer's suicide.
Rahul manages the farm thereafter. Before he could start sowing, he had to borrow money to pay back his brother’s mounting debt and buy agricultural inputs. He could not have been more unlucky. The monsoon failed last year and the drought conditions continued for 16 months, well into the winter. This stunted the rabi crops, which require a couple of good showers between October and January for ensuring soil moisture. And then, as if an episode of déjà vu, freak unseasonal rains and hailstorms lashed the region again in March this year, damaging whatever little grew on the fields and killing hundreds of cattle. According to initial surveys of the government, most villages in Marathwada, which contributes significantly to crop production in the state, have lost 50 per cent of the crops. The region suffered crop loss in 0.4 million ha in the first fortnight of March.
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Rahul now faces the same uncertain future his brother did. “News reports say the monsoon will fail again this year. If that happens it would be the end of the world for my nine-member family,” he says.
From bad to worse
Such sense of imminent calamity envelops farmers in most parts of the country who are heading for a weak monsoon. On June 2, the India Meteorological Department (IMD) downgraded its monsoon rainfall forecast for this year and said the country is likely to get only 88 per cent of the normal rainfall this season, down from the 93 per cent forecast it had made a month earlier. Rainfall of less than 90 per cent is likely to result in a drought year. IMD downgraded its forecast due to the strengthening of El Niño system in the equatorial Pacific Ocean. “El Niño conditions are likely to strengthen further and reach moderate strength during the monsoon season. There is about 90 per cent probability of El Niño conditions to continue during the southwest monsoon season,” IMD statement said. The Australian Bureau of Meteorology, which monitors weather patterns across the tropical Pacific, has upgraded its monitoring of El Niño for the first time in five years, and warned that it is “likely to persist in the coming months”. This increases the risk of a poor monsoon two to three times.
A deficient monsoon does not bode well for farmers who are yet to pick up the pieces of their lives after five consecutive crop failures—either due to too little or too much rain (see ‘When freak becomes norm’).
Source: Based on state estimates
Source: Based on state estimates
In the hot and semi-arid Marathwada, 87 per cent of farmers, mostly small and marginal, depend on rain for agriculture. Since 2009, the region has received scanty rain and faced two severe droughts. To make matters worse, farmers are facing unseasonal rains and hailstorms for the past two years. After losing both kharif and rabi crops in consecutive years, farmers have been switching to cash crops like Bt cotton to recover losses. But these are capital-intensive.
“Frequent droughts combined with excessive use of chemical fertilisers have reduced the carbon content of soil from 1 to 0.3 per cent in the past decade, affecting productivity,” says S B Varade, soil scientist, formerly with Marathwada Agricultural University, Parbhani. Bt cotton farmers in Aurangabad told Down To Earth that the yield was high initially, but it is fast declining. This year, farmers could harvest only 100 kg of cotton from an acre (0.4 ha), which yielded up to 300 kg till three years ago. Cotton prices, entirely dependent on the international market, have also plummeted to a five-year low. “Five years ago, 100 kg of cotton would fetch Rs 7,000. Now it hardly sells for Rs 3,000. Thus, per unit production cost for cotton is often more or equal to the price a farmers gets for the crop,” says Shashi Kevadkar, a journalist in Beed. This is further pushing the farmers into the debt trap and distress.
A study by Maharashtra-based Dilasa Janvikas Prathishthan shows that 95 per cent of the farmers who committed suicide in the past year were cotton growers. Chief Minister Devendra Fadnavis has admitted that 800 farmers have committed suicide between January last year and the first week of April this year due to crop failure; at least 250 took their lives in the first four months of 2015.
Family of Sahibrao Athole, who committed suicide in June 2014, following consecutive crop failures since 2012
Family of Sahibrao Athole, who committed suicide in June 2014, following consecutive crop failures since 2012
Madhya Pradesh’s Bundelkhand region suffers from a similar predicament. Most farmers in this semi-arid region depend on agriculture for sustenance and grow only one crop a year. For this they need only a few showers of rain. But the region has been reeling from a long spell of drought in the past decade. Declining government support, like agriculture extension and irrigation provisions, have stripped the capacity of Bundelkhand farmers to continue farming. Yet they have not given up hope. Kishori Prajapati, a small farmer from Majhguan Kalan village in Chhatarpur district, is one of them. His entire crop withered last year due to poor rainfall. He still borrowed Rs 1.5 lakh to sow rabi crops, without realising that in the times of unknown weather events he is pinning his future on false hopes.
On March 30, something unusual happened while Prajapati was taking an afternoon nap to escape the dizzying midday heat. The clear sky suddenly turned black and within a few minutes a thick layer of lemon-sized hails covered his entire village and farms. The standing crops of wheat and gram on his two-hectare farm were crushed. He could not bear the shock and fainted. As he regained senses a few minutes later, Prajapati rushed to the hut, picked up a rope and headed towards a tree to hang himself. Though he was rescued, he keeps wondering how to pay back the loan and feed his family for a year. The freak hailstorm and rain damaged crops in 0.9 million ha across 43 of the 48 districts in Madhya Pradesh.
Unseasonal rains have also wreaked havoc in the Bundelkhand region of Uttar Pradesh, where farmers grow a variety of cash crops, including wheat, pulses and oil seed, in winter. These crops need good sunlight to flourish in January-March. Any rain in this period affects the growth of the grain. This year, it rained during most parts of February and March in the six Bundelkhand districts of Uttar Pradesh. In some areas, crops perished as fields remained water-logged for days, while in others, standing crops were flattened due to strong winds. “More than 70 per cent of wheat crops were blighted, and the entire crops of pulses and oil seeds were destroyed in the region,” says Raja Bhaiya of Banda-based non-profit Vidya Dham Samiti, which works with the farmers in the region. The crop loss has wiped out the whole year’s income of the farmers. Initial estimates of the state government put the crop loss at Rs 6,677.45 crore. More than 230 farmer deaths were reported from the region between March and April this year.
This year, Parmeshwar Kokat of Thakar Adgaon village in Beed, Maharashtra, harvested one-third of the cotton he used to get three years ago. He buys water from a neighbour at Rs 10,000 per month for irrigation. The crop is pushing him into the debt trap
This year, Parmeshwar Kokat of Thakar Adgaon village in Beed, Maharashtra, harvested one-third of the cotton he used to get three years ago. He buys water from a neighbour at Rs 10,000 per month for irrigation. The crop is pushing him into the debt trap
The state government has not officially admitted to such suicides, but both the state and Central governments have been trading charges over who is responsible for the deaths. “Most farmers killed themselves due to the shock of poor produce. This year’s rabi crop looked very good till it rained and farmers had high hopes on these crops to get out of their misery,” adds Raja.
In the first four months of this year, unseasonal rains have lashed 14 states, including Haryana and Punjab, two of India’s top grain producers. These states received up to 10 times more rainfall than what they normally receive during the period. The country as a whole received 80 per cent more rainfall than normal between March and May. As per IMD, the average rain received in March was 61.1 mm, nearly double the normal of 30.9 mm, making it the wettest March in 48 years. Close to 19 million ha of standing crops, accounting for 30 per cent of the total rabi acreage, have been affected. Going by government estimates, it is worth Rs 10,000 crore.
Now, these are the states that will be severely affected by the deficit monsoon. “Battered by consecutive crop losses, most farmers do not have money to take up kharif this season. They will have to borrow again. And the deficit monsoon will further push them into the debt trap,” says Sanjay Singh of Parmarth Samajsevi Sansthan, a non-profit working on agriculture in Uttar Pradesh. Given the already distressed condition, the future seems daunting. Estimates show that India’s foodgrain production would come down by close to six per cent.
Starting from panchayats to Parliament, the crop loss and the reported spate of farmers' suicides has dominated discussions in the last two months. The National Democratic Alliance (NDA) government faced a united opposition on the issue both inside and outside Parliament.
On April 8, Prime Minister Narendra Modi quickly widened the relief net by raising compensation amount by 50 per cent and by reducing the eligibility criteria to include those farmers who have faced at least 33 per cent crop damage. After a few weeks, he inaugurated insurance schemes for the poor, including farmers. Non-NDA ruled states like Uttar Pradesh have turned this into an opportunity of scoring political points. Congress vice-president Rahul Gandhi scripted his political return from a much talked about vacation using the situation. But, the more the government and political parties talk about farm distress, the more they highlight India’s disturbed track record in reaching out to farmers in times of crisis.
Clearly, the problem lies somewhere else that nobody likes to talk about.
`The crisis has been there for long'
Economist C P Chandrasekhar teaches at Jawaharlal Nehru University, New Delhi, and has authored several books on economic reforms. He speaks to Down To Earth on prevailing agrarian crisis
How do you interpret the recent dip in rural wage and slump in consumption in rural areas?
These are symptoms of an agrarian crisis. While some of the trends are recent, the crisis has been there for long. However, it could not be felt for some time because of consecutive good or normal monsoons. Underlying the crisis are growing unavailability of crops, the collapse of public investment and lowering expenditure in rural India, and the turn to unsustainable practices of depending on farm loans.
This has occurred in an environment of liberalisation in which global trends and fluctuations have influenced domestic prices and the pattern of domestic production. The consequence has been a combination of increased volatility in production and rising rural indebtedness, which increase vulnerability.
As a country, do we have the resilience to tide over consecutive crop losses?
Any shock that impacts production by constricting revenues earned by an already indebted and cash-strapped peasantry threatens a collapse into bankruptcy. This spells disaster in an environment where social protection is minimal or entirely absent. Moreover, with state policy increasingly biased in favour of corporate and the government financing that shift by cutting rural development and social expenditures, the protection that the state had earlier offered in times of crisis has virtually disappeared. There is little space for resilience here.
Is rising rural debt a systemic problem or just part of a long phase of transition?
If rural indebtedness increases at a time when the viability of crop production is under threat, the trajectory is unsustainable and the problem systemic. This is no process of "livelihood transition", though the peasant unrest it may precipitate could make it the trigger for policy transition or even structural transformation.
What's failing farmers
More than erratic weather, farmers find the government's relief and compensation mechanism stifling
Kishori Prajapati, a small farmer in Majhuguan Kalan village in Chhatarpur district of Madhya Pradesh, attempted suicide after losing his entire crop in the hailstorm of March 30, 2015AFTER SAVING Kishori Prajapati from committing suicide, the residents of Majhguan Kalan village did something unimaginable. Living in the drought-prone region of Bundelkhand, they knew it very well how difficult it is to get compensation for crop damages. They knew the officials would not visit the village to assess the loss. So the next day, when they discovered the hails were still intact in the fields, they heaped those in a tractor trolley and marched to the district headquarters of Chhatarpur. It had an impact. Three days later the patwari, or village accountant, reached the village with his team. When Down To Earth visited the tehsil office in the last week of April, officials were disbursing compensation to affected farmers of Majhguan Kalan and Jaitpur—the only two villages in Chhatapur that were hit by the freak hailstorm of March 30. Yet a sense of betrayal was palpable among the farmers.
While reasons for such freak weather are riddled with meteorological mysteries, the ways in which the government calculates the damage and disburses compensation are not simple either.
As per the damage report prepared by the patwari of Chhatarpur, 128 of the 294 farmers in Majhguan Kalan faced over 50 per cent crop loss; 55 suffered crop loss between 25 and 50 per cent; and the remaining 111 suffered less than 25 per cent loss. As per the state government norms, small farmers (owning less than two ha) who faced 50 per cent crop damage would receive Rs 15,000 per ha, while big farmers (who own more than two ha) would get Rs 11,000 per ha. Those who lost 25 to 50 per cent of crops would receive between Rs 9,000 and Rs 6,500 per ha, depending on the farm size. Those who lost 25 per cent crop are not eligible for compensation.
Farmers in Majhguan Kalan, however, claim that most families in the village lost 70 to 90 per cent of the crop, and complain that leaving out 111 families without any compensation is unfair. “The entire village was covered with hails. So how could the damage be different for different farms,” asks Arjun Kushwaha, a farmer.
Farmers also complain that the compensation is meagre. On an average, a farmer in Majhguan Kalan harvests 3,500 kg of wheat from a hectare. Selling the produce at the minimum Rs 1,200 per 100 kg, he would earn Rs 42,000. Yet the maximum compensation they receive is Rs 15,000 per ha, or 70 per cent less than the market value of the crop lost.
“Compensation should be calculated based on the income a crop generates for a farmer,” says Dayanand Punia, secretary of the All India Kisan Sabha (AIKS), Haryana chapter. On an average, a farmer harvests 4,000 kg of wheat or 2,000 kg of mustard from one hectare. Going by the government procurement rate of Rs 1,450 for 100 kg of wheat and Rs 3,200 per 100 kg of mustard, he would earn between Rs 58,000 and Rs 64,000 from a hectare. So, AIKS has demanded that the government should increase the compensation amount to Rs 50,000 per hectare for all the crops.
A farmer returns with blighted wheat crop in Kacchipurva village in Banda district, Uttar Pradesh. Most farmers in the state lost their ready-to-harvest rabi crop due to unseasonal rains in February and March this year
Increasing compensation rate would not help farmers until crop loss is assessed correctly. Unfortunately, the assessment solely depends on the whims and fancies of only one official: the patwari. “They still follow the manual assessment procedure introduced in the 11th century for revenue collection,” says JagveerRawat of LalaLajpatRai University of Veterinary and Animal Sciences, Hissar. Patwaris have no knowledge of crop varieties and how temperature and humidity impact crops, nor do they follow modern scientific techniques for assessing crop loss, Rawat says.
“There is no mechanism to guage crop loss due to natural calamities,” admits Nand Kishore, a patwari in Mathura district of Uttar Pradesh, one of the worst affected districts of the state during the hailstorm this year. "We rely on our years of experience and individual skill to determine the loss. Information provided by our contacts in villages also comes handy,” says Kishore, who is busy making sense of a 60-year-old village map made of fabric. Dense with rectangular markings, each representing a landholding, the map is the sole guide for him to figure out whose farm has to be marked for compensation. He has a problem: landholdings have fragmented at least hundred times in the past 60 years and the official record hardly takes note of that. Besides, on an average, a patwari has to assess 5,000-10,000 ha. With multiple landholdings and ownerships, this would take more than a month to physically verify the land and ascertain the damage. In this situation it’s an uphill task for any person to assess crop pattern, let alone crop loss. So, the crop loss assessment is pure guess work. Based on this guess work of the patwari, the Union Ministry of Agriculture decides crop damage and disburses compensation. No wonder then there is always contention on compensation and damage assessment.
Such archaic way of crop loss assessment also affects insurance claims. As per the government norms, banks must provide crop insurance to all the farmers who avail Kisan Credit Card (KCC) benefits. But most farmers complain that they do not receive the damages in case of crop losses. “The insurance is not meant to protect the farmer,” says S SRaju, principal scientist with the National Centre for Agricultural Economics and Policy Research (NCAP), Delhi. “Banks treat insurance premium as collateral security to the sanctioned credit. In case of crop loss, they directly deduct the credit money from the compensation money paid by insurance companies.”
The 70th round of survey by the National Sample Survey Organisation (NSSO) shows that more than half of agriculture households are in debt, but only four per cent of them have crop insurance coverage. This is despite the government running three flagship schemes for crop insurance.
“All the three schemes have their own limitations which do not encourage farmers to go for crop insurance,” explains Gopal Naik, who teaches agro-economy at the Indian Institute of Management, Bengaluru. The National Agriculture Insurance Scheme (NAIS), introduced in 1999, is ideal for small farmers as the premium is low. But it offers coverage against damages caused only between sowing and harvest, explains P C Sudhakar of Agriculture Insurance Company Limited (AICL). In 2007, the government introduced Weather Based Crop Insurance Scheme (WBCIS) and Modified National Agriculture Insurance Scheme (MNAIS), widening the coverage against damages caused during pre-sowing and post-harvesting period, and due to weather-related anomaly. But banks charge high premium for such schemes, and mostly cash farmers choose these schemes. “The issue with WBCIS is more complex as we do not have enough weather stations and infrastructure at the panchayat level,” says Raju.
These schemes have another flaw: they are based on the average crop loss reported in an area rather than the crop loss faced by individual farmers. Worse, these areas are demarcated as per administrative units, usually a block, a circle or tehsil, and not as per agro-climatic zones. This makes crop loss assessment difficult as administrative units may experience different weather conditions. “In urban areas, insurance companies have plans to cover individuals, houses and automobiles, but crop loss is assessed at the block level. Then why would a farmer buy crop insurance?” asks agriculture analyst Devinder Sharma.
“We do not have the infrastructure to take insurance to the panchayat or individual level,” says Surya Swaroop Saxena of AICL. Even the private insurance companies Down To Earth spoke to showed reluctance in insuring individual farmers. Naik says companies are reluctant because India does not have good data system of landholdings. M Mahadevappa, former Vice Chancellor of Agriculture University Dharwad, Karnataka, agrees. “The government should adopt new technologies like remote sensing to accurately assess crop damage and good data system of plots so that farmers can be insured at the individual level,” he suggests.
Lose-lose situation
The government claims it has mechanisms, right from compensation to insurance, in place to support farmers in case of crop loss. But ground reality differs
imageAssessment guessed
No scientific mechanism to assess crop loss.
Patwari, or village accountant, follows an archaic procedure laid out in the 11th century to assess the damage. Though it requires physical verification of fields, they hardly do it.
Damage report is prepared based on pure guess work. Some farmers bribe patwaris to bring crop loss at par with compensation norms.
Down To Earth's assessment shows about 50 per cent of beneficiaries do not figure in patwari's list.
This flawed data is then sent to Union agriculture ministry, which calculates compensation based on the "guess work" of patwaris.
"We rely on our years of experience to determine crop loss. Information provided by our contacts in the villages also comes handy"
– Nand Kishore, patwari, Mathura
imageMeagre compensation
Very few affected farmers get compensation for crop loss. Even fewer get it in time to overcome the hardship caused by crop failure, or to pay back loans, or invest in next season's crops.
Those who get it say the amount is meagre compared to the value of the crop lost.
Farmers and farmers' activists say even the maximum compensation amount is 70 per cent less than the market value of the crop lost.
The compensation amount is further divided if the farm is in the name of more than one person.
"The government should increase the compensation amount to Rs 80,000 per hectare"
– Dayanand Punia, All India Kisan Sabha, Haryana
imageFarce in insurance
Only 4 per cent farmers have insurance to cover crop loss risk; of them, 90 per cent buy policies as it's mandatory for availing loan.
The unwillingness is mostly because settlement of insurance claims takes 18-24 months.
Small farmers find the premium high, and the sum assured hard to come by. In case of a calamity, banks directly deduct the loan amount from the compensation money.
Crop loss is calculated on the basis of average loss incurred in an administrative area, and not by an individual. This leaves most affected farmers high and dry.
"Banks treat insurance premium as collateral security to the sanctioned credit" – S S Raju, National Centre for Agricultural Economics and Policy Research, Delhi
Mounting burden
The agrarian crisis has reached the tipping point, beyond which it will hit the national economy
Devi Singh of Pooth village in Bharatpur district of Rajasthan could harvest these few sacks of mustard and wheat after unseasonal rains battered his field early this year
RECURRENT DROUGHTS perpetuate poverty. More so in a country that is predominantly rural, with 60 per cent of the population relying directly on farming, and nearly two-thirds of fields fed only by rain. The consecutive crop failures, due to too much and too little rain, have already pulled down the agricultural growth rate to 0.2 per cent, from 3.7 per cent in 2013-14. Food prices have started to creep up. Finance Minister Arun Jaitley has said agriculture has become a sector of concern. But this is not a recent phenomenon.
Down To Earth highlights a few indicators that show that the crisis over India’s agrarian economy, and rural economy in general, has been brewing for many years and could be far more serious than it seems. These indicators also show where the government went wrong in its strategies.
Declining rural wage: The Economic Survey 2014 celebrated the fact that the rural wage growth had declined to 3.6 per cent in 2014 from 20 per cent in 2011. “If the trends continue, rural wage growth can continue to decelerate, moderating inflationary pressures,” noted the survey, which looked at development only from the perspective of inflation. But it was oblivious of the fact that the decline indicated a major dip in income for 400 million daily wagers (see graph).
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There is no way to explain the dip in rural wage rate. But indicators show that the slowdown in the real estate sector and construction industry in urban areas, which employ millions of migrant labourers, could be a major reason. According to Jayan Jose Thomas who teaches economics at the Indian Institute of Technology, New Delhi, construction has been the only source of non-agricultural employment for people in rural areas since mid-2000s. For rural men, it accounted for 70 per cent of the net increase in non-agricultural employment. But the slowdown has triggered a reverse migration. Villages are now flush with more labourers than before, bringing down the wage rate. The situation will worsen in the near future, as economists say 10 million people will move to rural areas after the urban economy starts slowing down.
Another reason could be declining interest in the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which guarantees 100 days of employment. Since the Act was launched in 2005, it has given a boost to the local wage rate. But fund allocations under the Act have reduced since the NDA government came to power. People in several rural pockets have been waiting for their wages for seven to eight months. This year, despite consequent crop failures, the Act registered 40 days of job demands—one of the lowest in recent years.
Declining food grain support price: In times of distress, the minimum support price (MSP), fixed by the government for a crop, should have come to the rescue. But the government's recent decisions point to downsizing official support for higher MSP. In the last three years, the increase in MSP for wheat and paddy has been 4-5 per cent, much less than the inflation rate (see graph). In fact, soon after IMD predicted that the monsoon season this year could witness a deficit rainfall, the Reserve Bank of India suggested that the government should limit the increase in agricultural support prices to control inflation.
The government offers the second level of support to farmers by procuring more food grains so that farmers earn maximum out of their reduced production. But in 2014-15, the government procured 51 million tonnes of wheat and paddy, which is 30 per cent lower than last year (see graph). The states are also using less food grains from the Central allocations under the Food Corporation of India. With farmers now selling their food grains in the open market, wholesale prices of paddy and wheat have crashed by 16 per cent and six per cent respectively. In several parts of Bundelkhand, farmers have sold wheat at one-eighth of MSP. In Punjab and Haryana, farmers are dumping stocks in front of government procurement centres.
Food price dip: Why did people spend more during high inflation years of 2011 and 2012, and are spending less now, a phase of unprecedented low inflation even touching zero per cent? In November 2014 the wholesale price index recorded zero. According to an analysis of consultancy company CRISIL, the year-round fall in food and fuel prices should have generated a saving of Rs 509 billion for Indian consumers in 2014-15; by 2016 it would have reached Rs 1.4 trillion. Such high savings should have delivered a big kicker to consumer spending. But this is not the case. The answer lies in declining rural spending due to less earning. During 2008-12, as per NSSO surveys on consumption expenditure, rural people spent much more than urban consumers, thus significantly contributing to overall national spending. The period coincides with rural wage boom. It was such a big contribution that the country could tide over the global economic recession smoothly.
This year food grain production is expected to lower by five per cent compared to last year. In an ideal situation, the prices would have gone up. But wholesale prices for paddy and wheat have crashed. The situation is not going to improve in near future as the global food prices are touching a historic low. The Food Price Index has fallen 22 per cent from its 2011 peak. Indian farmers are already feeling the pinch of this crash; farmers growing export-oriented commodities, such as cotton, rubber, tea and sugarcane, have plunged into crisis due to dwindling realisations and surplus stock. With domestic and global food prices dipping, it is going to be an economic mayhem for farmers.
Credit bubble: Rural credit lending is rising. Ideally, this should have been good news for farmers in need of the precious credit. But as the recent crop loss and unfavourable government policies increase the debt burden, it will lead to a situation where credit lending agencies will be crippled with bad loans. Consider this. India witnessed an unprecedented growth in farm loans last year. By January this year, says investment farm Emkay Research, banks’ agricultural lending grew by 17 per cent compared to last fiscal year; non-food credit grew by 10 per cent. This is not just a year-on-year increase. The 70th round of NSSO released in February shows that agricultural lending grew by 24 per cent during 2003-13. The agricultural GDP grew by just 13 per cent during the period. This is worrying as it indicates that while other growth factors like production and consumption remain stagnant or are declining, agricultural GDP is growing due to credit growth. If agricultural lending from all institutional sources like the public sector and cooperative banks is considered, farm credit is around 60 per cent of the agricultural GDP, according to Emkay's assessment (see graph).
In a way, it is a credit bubble waiting to burst. Since over 80 per cent of the borrowers are small farmers who don’t have the capacity to pay back, it leads to demands for loan waiver. This year, Maharashtra, Telengana and Andhra Pradesh governments have demanded the waiver of a loan of Rs 920 billion; in 2008-10, it was Rs 650 billion. This threatens banks’ ability to sustain lending.
All these indicators point to one thing: farmers are at a critical stage, worse than the situation of early 2000s that resulted in a spate of farmer suicides. The government must act before it’s too late.
by SORIT GUPTO
`Extreme weather, unfavourable market to be blamed'
M S SwaminathanNoted agriculture scientist M S Swaminathan headed the National Commission on Farmers. Way back in 2005, when the commission submitted its report, it had said that India was staring at an unprecedented agrarian crisis. Swaminathan speaks to Down To Earth about what has changed over a decade. Excerpts from the interview
Your report recommended how to improve farmers' condition. Do you see any changes in their condition?
Unfortunately, our recommendation, although collated as a national policy for farmers and placed in Parliament, remains yet to be implemented. We are witnessing one of the most distressing events as farmers, in life giving profession, are taking their own lives.
This distress is arising from extreme weather events and unfavourable market. In West Bengal, farmers who raised a good potato crop had to take their lives because of very low price offered to them.
What are the immediate steps to arrest the situation?
Assured and remunerative marketing holds the key to stimulating and sustaining farmers' interest in farming. While technology can help improve crop yield, it is only public policy that can make the economics of farming favourable to farmers. We, therefore, need synergy between technology and public policy.
Today, agriculture faces ecological degradation and land diversion. How do we revive agriculture?
Conserve prime farmland by setting up Special Agriculture Zones. Rainwater harvesting should be made mandatory both in farms and at homes. In case of small farms, community water harvesting will help. We can promote equity in water sharing through pani panchayat. Environmentally sound technologies should be devised for fighting pests, pathogens and weeds.
At 33, Sahibrao was full of beans. Within two years of managing his one-hectare (ha) family land, he proved wrong all those who said agriculture was not remunerative: he converted his mud house into a brick-and-plaster one and paid back the housing loan of Rs 1.5 lakh. In 2012, he borrowed Rs 2.1 lakh to grow cash crops. He planted sweet lime and watermelon on a small patch and cotton on the rest. Unfortunately, that year the rains failed. All the eight districts, including Beed, that make up the Marathwada region, faced one of the worst droughts in recent history. Sahibrao tried to recover the losses the next year, but 2013 did not prove to be a good year either. Freak hailstorm and unseasonal rains in March 2014 were the final straw. It flattened ready-to-harvest rabi crops, including wheat, pulses and cotton, across Marathwada. Sahibrao could not bear the shock. Newspaper headlines and the government coldly made him part of the growing list of farmers committing suicide in Marathwada, a region that is fast outpacing Vidarbha in cases of farmer's suicide.
Rahul manages the farm thereafter. Before he could start sowing, he had to borrow money to pay back his brother’s mounting debt and buy agricultural inputs. He could not have been more unlucky. The monsoon failed last year and the drought conditions continued for 16 months, well into the winter. This stunted the rabi crops, which require a couple of good showers between October and January for ensuring soil moisture. And then, as if an episode of déjà vu, freak unseasonal rains and hailstorms lashed the region again in March this year, damaging whatever little grew on the fields and killing hundreds of cattle. According to initial surveys of the government, most villages in Marathwada, which contributes significantly to crop production in the state, have lost 50 per cent of the crops. The region suffered crop loss in 0.4 million ha in the first fortnight of March.
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Rahul now faces the same uncertain future his brother did. “News reports say the monsoon will fail again this year. If that happens it would be the end of the world for my nine-member family,” he says.
From bad to worse
Such sense of imminent calamity envelops farmers in most parts of the country who are heading for a weak monsoon. On June 2, the India Meteorological Department (IMD) downgraded its monsoon rainfall forecast for this year and said the country is likely to get only 88 per cent of the normal rainfall this season, down from the 93 per cent forecast it had made a month earlier. Rainfall of less than 90 per cent is likely to result in a drought year. IMD downgraded its forecast due to the strengthening of El Niño system in the equatorial Pacific Ocean. “El Niño conditions are likely to strengthen further and reach moderate strength during the monsoon season. There is about 90 per cent probability of El Niño conditions to continue during the southwest monsoon season,” IMD statement said. The Australian Bureau of Meteorology, which monitors weather patterns across the tropical Pacific, has upgraded its monitoring of El Niño for the first time in five years, and warned that it is “likely to persist in the coming months”. This increases the risk of a poor monsoon two to three times.
A deficient monsoon does not bode well for farmers who are yet to pick up the pieces of their lives after five consecutive crop failures—either due to too little or too much rain (see ‘When freak becomes norm’).
Source: Based on state estimates
Source: Based on state estimates
In the hot and semi-arid Marathwada, 87 per cent of farmers, mostly small and marginal, depend on rain for agriculture. Since 2009, the region has received scanty rain and faced two severe droughts. To make matters worse, farmers are facing unseasonal rains and hailstorms for the past two years. After losing both kharif and rabi crops in consecutive years, farmers have been switching to cash crops like Bt cotton to recover losses. But these are capital-intensive.
“Frequent droughts combined with excessive use of chemical fertilisers have reduced the carbon content of soil from 1 to 0.3 per cent in the past decade, affecting productivity,” says S B Varade, soil scientist, formerly with Marathwada Agricultural University, Parbhani. Bt cotton farmers in Aurangabad told Down To Earth that the yield was high initially, but it is fast declining. This year, farmers could harvest only 100 kg of cotton from an acre (0.4 ha), which yielded up to 300 kg till three years ago. Cotton prices, entirely dependent on the international market, have also plummeted to a five-year low. “Five years ago, 100 kg of cotton would fetch Rs 7,000. Now it hardly sells for Rs 3,000. Thus, per unit production cost for cotton is often more or equal to the price a farmers gets for the crop,” says Shashi Kevadkar, a journalist in Beed. This is further pushing the farmers into the debt trap and distress.
A study by Maharashtra-based Dilasa Janvikas Prathishthan shows that 95 per cent of the farmers who committed suicide in the past year were cotton growers. Chief Minister Devendra Fadnavis has admitted that 800 farmers have committed suicide between January last year and the first week of April this year due to crop failure; at least 250 took their lives in the first four months of 2015.
Family of Sahibrao Athole, who committed suicide in June 2014, following consecutive crop failures since 2012
Family of Sahibrao Athole, who committed suicide in June 2014, following consecutive crop failures since 2012
Madhya Pradesh’s Bundelkhand region suffers from a similar predicament. Most farmers in this semi-arid region depend on agriculture for sustenance and grow only one crop a year. For this they need only a few showers of rain. But the region has been reeling from a long spell of drought in the past decade. Declining government support, like agriculture extension and irrigation provisions, have stripped the capacity of Bundelkhand farmers to continue farming. Yet they have not given up hope. Kishori Prajapati, a small farmer from Majhguan Kalan village in Chhatarpur district, is one of them. His entire crop withered last year due to poor rainfall. He still borrowed Rs 1.5 lakh to sow rabi crops, without realising that in the times of unknown weather events he is pinning his future on false hopes.
On March 30, something unusual happened while Prajapati was taking an afternoon nap to escape the dizzying midday heat. The clear sky suddenly turned black and within a few minutes a thick layer of lemon-sized hails covered his entire village and farms. The standing crops of wheat and gram on his two-hectare farm were crushed. He could not bear the shock and fainted. As he regained senses a few minutes later, Prajapati rushed to the hut, picked up a rope and headed towards a tree to hang himself. Though he was rescued, he keeps wondering how to pay back the loan and feed his family for a year. The freak hailstorm and rain damaged crops in 0.9 million ha across 43 of the 48 districts in Madhya Pradesh.
Unseasonal rains have also wreaked havoc in the Bundelkhand region of Uttar Pradesh, where farmers grow a variety of cash crops, including wheat, pulses and oil seed, in winter. These crops need good sunlight to flourish in January-March. Any rain in this period affects the growth of the grain. This year, it rained during most parts of February and March in the six Bundelkhand districts of Uttar Pradesh. In some areas, crops perished as fields remained water-logged for days, while in others, standing crops were flattened due to strong winds. “More than 70 per cent of wheat crops were blighted, and the entire crops of pulses and oil seeds were destroyed in the region,” says Raja Bhaiya of Banda-based non-profit Vidya Dham Samiti, which works with the farmers in the region. The crop loss has wiped out the whole year’s income of the farmers. Initial estimates of the state government put the crop loss at Rs 6,677.45 crore. More than 230 farmer deaths were reported from the region between March and April this year.
This year, Parmeshwar Kokat of Thakar Adgaon village in Beed, Maharashtra, harvested one-third of the cotton he used to get three years ago. He buys water from a neighbour at Rs 10,000 per month for irrigation. The crop is pushing him into the debt trap
This year, Parmeshwar Kokat of Thakar Adgaon village in Beed, Maharashtra, harvested one-third of the cotton he used to get three years ago. He buys water from a neighbour at Rs 10,000 per month for irrigation. The crop is pushing him into the debt trap
The state government has not officially admitted to such suicides, but both the state and Central governments have been trading charges over who is responsible for the deaths. “Most farmers killed themselves due to the shock of poor produce. This year’s rabi crop looked very good till it rained and farmers had high hopes on these crops to get out of their misery,” adds Raja.
In the first four months of this year, unseasonal rains have lashed 14 states, including Haryana and Punjab, two of India’s top grain producers. These states received up to 10 times more rainfall than what they normally receive during the period. The country as a whole received 80 per cent more rainfall than normal between March and May. As per IMD, the average rain received in March was 61.1 mm, nearly double the normal of 30.9 mm, making it the wettest March in 48 years. Close to 19 million ha of standing crops, accounting for 30 per cent of the total rabi acreage, have been affected. Going by government estimates, it is worth Rs 10,000 crore.
Now, these are the states that will be severely affected by the deficit monsoon. “Battered by consecutive crop losses, most farmers do not have money to take up kharif this season. They will have to borrow again. And the deficit monsoon will further push them into the debt trap,” says Sanjay Singh of Parmarth Samajsevi Sansthan, a non-profit working on agriculture in Uttar Pradesh. Given the already distressed condition, the future seems daunting. Estimates show that India’s foodgrain production would come down by close to six per cent.
Starting from panchayats to Parliament, the crop loss and the reported spate of farmers' suicides has dominated discussions in the last two months. The National Democratic Alliance (NDA) government faced a united opposition on the issue both inside and outside Parliament.
On April 8, Prime Minister Narendra Modi quickly widened the relief net by raising compensation amount by 50 per cent and by reducing the eligibility criteria to include those farmers who have faced at least 33 per cent crop damage. After a few weeks, he inaugurated insurance schemes for the poor, including farmers. Non-NDA ruled states like Uttar Pradesh have turned this into an opportunity of scoring political points. Congress vice-president Rahul Gandhi scripted his political return from a much talked about vacation using the situation. But, the more the government and political parties talk about farm distress, the more they highlight India’s disturbed track record in reaching out to farmers in times of crisis.
Clearly, the problem lies somewhere else that nobody likes to talk about.
`The crisis has been there for long'
Economist C P Chandrasekhar teaches at Jawaharlal Nehru University, New Delhi, and has authored several books on economic reforms. He speaks to Down To Earth on prevailing agrarian crisis
How do you interpret the recent dip in rural wage and slump in consumption in rural areas?
These are symptoms of an agrarian crisis. While some of the trends are recent, the crisis has been there for long. However, it could not be felt for some time because of consecutive good or normal monsoons. Underlying the crisis are growing unavailability of crops, the collapse of public investment and lowering expenditure in rural India, and the turn to unsustainable practices of depending on farm loans.
This has occurred in an environment of liberalisation in which global trends and fluctuations have influenced domestic prices and the pattern of domestic production. The consequence has been a combination of increased volatility in production and rising rural indebtedness, which increase vulnerability.
As a country, do we have the resilience to tide over consecutive crop losses?
Any shock that impacts production by constricting revenues earned by an already indebted and cash-strapped peasantry threatens a collapse into bankruptcy. This spells disaster in an environment where social protection is minimal or entirely absent. Moreover, with state policy increasingly biased in favour of corporate and the government financing that shift by cutting rural development and social expenditures, the protection that the state had earlier offered in times of crisis has virtually disappeared. There is little space for resilience here.
Is rising rural debt a systemic problem or just part of a long phase of transition?
If rural indebtedness increases at a time when the viability of crop production is under threat, the trajectory is unsustainable and the problem systemic. This is no process of "livelihood transition", though the peasant unrest it may precipitate could make it the trigger for policy transition or even structural transformation.
What's failing farmers
More than erratic weather, farmers find the government's relief and compensation mechanism stifling
Kishori Prajapati, a small farmer in Majhuguan Kalan village in Chhatarpur district of Madhya Pradesh, attempted suicide after losing his entire crop in the hailstorm of March 30, 2015AFTER SAVING Kishori Prajapati from committing suicide, the residents of Majhguan Kalan village did something unimaginable. Living in the drought-prone region of Bundelkhand, they knew it very well how difficult it is to get compensation for crop damages. They knew the officials would not visit the village to assess the loss. So the next day, when they discovered the hails were still intact in the fields, they heaped those in a tractor trolley and marched to the district headquarters of Chhatarpur. It had an impact. Three days later the patwari, or village accountant, reached the village with his team. When Down To Earth visited the tehsil office in the last week of April, officials were disbursing compensation to affected farmers of Majhguan Kalan and Jaitpur—the only two villages in Chhatapur that were hit by the freak hailstorm of March 30. Yet a sense of betrayal was palpable among the farmers.
While reasons for such freak weather are riddled with meteorological mysteries, the ways in which the government calculates the damage and disburses compensation are not simple either.
As per the damage report prepared by the patwari of Chhatarpur, 128 of the 294 farmers in Majhguan Kalan faced over 50 per cent crop loss; 55 suffered crop loss between 25 and 50 per cent; and the remaining 111 suffered less than 25 per cent loss. As per the state government norms, small farmers (owning less than two ha) who faced 50 per cent crop damage would receive Rs 15,000 per ha, while big farmers (who own more than two ha) would get Rs 11,000 per ha. Those who lost 25 to 50 per cent of crops would receive between Rs 9,000 and Rs 6,500 per ha, depending on the farm size. Those who lost 25 per cent crop are not eligible for compensation.
Farmers in Majhguan Kalan, however, claim that most families in the village lost 70 to 90 per cent of the crop, and complain that leaving out 111 families without any compensation is unfair. “The entire village was covered with hails. So how could the damage be different for different farms,” asks Arjun Kushwaha, a farmer.
Farmers also complain that the compensation is meagre. On an average, a farmer in Majhguan Kalan harvests 3,500 kg of wheat from a hectare. Selling the produce at the minimum Rs 1,200 per 100 kg, he would earn Rs 42,000. Yet the maximum compensation they receive is Rs 15,000 per ha, or 70 per cent less than the market value of the crop lost.
“Compensation should be calculated based on the income a crop generates for a farmer,” says Dayanand Punia, secretary of the All India Kisan Sabha (AIKS), Haryana chapter. On an average, a farmer harvests 4,000 kg of wheat or 2,000 kg of mustard from one hectare. Going by the government procurement rate of Rs 1,450 for 100 kg of wheat and Rs 3,200 per 100 kg of mustard, he would earn between Rs 58,000 and Rs 64,000 from a hectare. So, AIKS has demanded that the government should increase the compensation amount to Rs 50,000 per hectare for all the crops.
A farmer returns with blighted wheat crop in Kacchipurva village in Banda district, Uttar Pradesh. Most farmers in the state lost their ready-to-harvest rabi crop due to unseasonal rains in February and March this year
Increasing compensation rate would not help farmers until crop loss is assessed correctly. Unfortunately, the assessment solely depends on the whims and fancies of only one official: the patwari. “They still follow the manual assessment procedure introduced in the 11th century for revenue collection,” says JagveerRawat of LalaLajpatRai University of Veterinary and Animal Sciences, Hissar. Patwaris have no knowledge of crop varieties and how temperature and humidity impact crops, nor do they follow modern scientific techniques for assessing crop loss, Rawat says.
“There is no mechanism to guage crop loss due to natural calamities,” admits Nand Kishore, a patwari in Mathura district of Uttar Pradesh, one of the worst affected districts of the state during the hailstorm this year. "We rely on our years of experience and individual skill to determine the loss. Information provided by our contacts in villages also comes handy,” says Kishore, who is busy making sense of a 60-year-old village map made of fabric. Dense with rectangular markings, each representing a landholding, the map is the sole guide for him to figure out whose farm has to be marked for compensation. He has a problem: landholdings have fragmented at least hundred times in the past 60 years and the official record hardly takes note of that. Besides, on an average, a patwari has to assess 5,000-10,000 ha. With multiple landholdings and ownerships, this would take more than a month to physically verify the land and ascertain the damage. In this situation it’s an uphill task for any person to assess crop pattern, let alone crop loss. So, the crop loss assessment is pure guess work. Based on this guess work of the patwari, the Union Ministry of Agriculture decides crop damage and disburses compensation. No wonder then there is always contention on compensation and damage assessment.
Such archaic way of crop loss assessment also affects insurance claims. As per the government norms, banks must provide crop insurance to all the farmers who avail Kisan Credit Card (KCC) benefits. But most farmers complain that they do not receive the damages in case of crop losses. “The insurance is not meant to protect the farmer,” says S SRaju, principal scientist with the National Centre for Agricultural Economics and Policy Research (NCAP), Delhi. “Banks treat insurance premium as collateral security to the sanctioned credit. In case of crop loss, they directly deduct the credit money from the compensation money paid by insurance companies.”
The 70th round of survey by the National Sample Survey Organisation (NSSO) shows that more than half of agriculture households are in debt, but only four per cent of them have crop insurance coverage. This is despite the government running three flagship schemes for crop insurance.
“All the three schemes have their own limitations which do not encourage farmers to go for crop insurance,” explains Gopal Naik, who teaches agro-economy at the Indian Institute of Management, Bengaluru. The National Agriculture Insurance Scheme (NAIS), introduced in 1999, is ideal for small farmers as the premium is low. But it offers coverage against damages caused only between sowing and harvest, explains P C Sudhakar of Agriculture Insurance Company Limited (AICL). In 2007, the government introduced Weather Based Crop Insurance Scheme (WBCIS) and Modified National Agriculture Insurance Scheme (MNAIS), widening the coverage against damages caused during pre-sowing and post-harvesting period, and due to weather-related anomaly. But banks charge high premium for such schemes, and mostly cash farmers choose these schemes. “The issue with WBCIS is more complex as we do not have enough weather stations and infrastructure at the panchayat level,” says Raju.
These schemes have another flaw: they are based on the average crop loss reported in an area rather than the crop loss faced by individual farmers. Worse, these areas are demarcated as per administrative units, usually a block, a circle or tehsil, and not as per agro-climatic zones. This makes crop loss assessment difficult as administrative units may experience different weather conditions. “In urban areas, insurance companies have plans to cover individuals, houses and automobiles, but crop loss is assessed at the block level. Then why would a farmer buy crop insurance?” asks agriculture analyst Devinder Sharma.
“We do not have the infrastructure to take insurance to the panchayat or individual level,” says Surya Swaroop Saxena of AICL. Even the private insurance companies Down To Earth spoke to showed reluctance in insuring individual farmers. Naik says companies are reluctant because India does not have good data system of landholdings. M Mahadevappa, former Vice Chancellor of Agriculture University Dharwad, Karnataka, agrees. “The government should adopt new technologies like remote sensing to accurately assess crop damage and good data system of plots so that farmers can be insured at the individual level,” he suggests.
Lose-lose situation
The government claims it has mechanisms, right from compensation to insurance, in place to support farmers in case of crop loss. But ground reality differs
imageAssessment guessed
No scientific mechanism to assess crop loss.
Patwari, or village accountant, follows an archaic procedure laid out in the 11th century to assess the damage. Though it requires physical verification of fields, they hardly do it.
Damage report is prepared based on pure guess work. Some farmers bribe patwaris to bring crop loss at par with compensation norms.
Down To Earth's assessment shows about 50 per cent of beneficiaries do not figure in patwari's list.
This flawed data is then sent to Union agriculture ministry, which calculates compensation based on the "guess work" of patwaris.
"We rely on our years of experience to determine crop loss. Information provided by our contacts in the villages also comes handy"
– Nand Kishore, patwari, Mathura
imageMeagre compensation
Very few affected farmers get compensation for crop loss. Even fewer get it in time to overcome the hardship caused by crop failure, or to pay back loans, or invest in next season's crops.
Those who get it say the amount is meagre compared to the value of the crop lost.
Farmers and farmers' activists say even the maximum compensation amount is 70 per cent less than the market value of the crop lost.
The compensation amount is further divided if the farm is in the name of more than one person.
"The government should increase the compensation amount to Rs 80,000 per hectare"
– Dayanand Punia, All India Kisan Sabha, Haryana
imageFarce in insurance
Only 4 per cent farmers have insurance to cover crop loss risk; of them, 90 per cent buy policies as it's mandatory for availing loan.
The unwillingness is mostly because settlement of insurance claims takes 18-24 months.
Small farmers find the premium high, and the sum assured hard to come by. In case of a calamity, banks directly deduct the loan amount from the compensation money.
Crop loss is calculated on the basis of average loss incurred in an administrative area, and not by an individual. This leaves most affected farmers high and dry.
"Banks treat insurance premium as collateral security to the sanctioned credit" – S S Raju, National Centre for Agricultural Economics and Policy Research, Delhi
Mounting burden
The agrarian crisis has reached the tipping point, beyond which it will hit the national economy
Devi Singh of Pooth village in Bharatpur district of Rajasthan could harvest these few sacks of mustard and wheat after unseasonal rains battered his field early this year
RECURRENT DROUGHTS perpetuate poverty. More so in a country that is predominantly rural, with 60 per cent of the population relying directly on farming, and nearly two-thirds of fields fed only by rain. The consecutive crop failures, due to too much and too little rain, have already pulled down the agricultural growth rate to 0.2 per cent, from 3.7 per cent in 2013-14. Food prices have started to creep up. Finance Minister Arun Jaitley has said agriculture has become a sector of concern. But this is not a recent phenomenon.
Down To Earth highlights a few indicators that show that the crisis over India’s agrarian economy, and rural economy in general, has been brewing for many years and could be far more serious than it seems. These indicators also show where the government went wrong in its strategies.
Declining rural wage: The Economic Survey 2014 celebrated the fact that the rural wage growth had declined to 3.6 per cent in 2014 from 20 per cent in 2011. “If the trends continue, rural wage growth can continue to decelerate, moderating inflationary pressures,” noted the survey, which looked at development only from the perspective of inflation. But it was oblivious of the fact that the decline indicated a major dip in income for 400 million daily wagers (see graph).
image
There is no way to explain the dip in rural wage rate. But indicators show that the slowdown in the real estate sector and construction industry in urban areas, which employ millions of migrant labourers, could be a major reason. According to Jayan Jose Thomas who teaches economics at the Indian Institute of Technology, New Delhi, construction has been the only source of non-agricultural employment for people in rural areas since mid-2000s. For rural men, it accounted for 70 per cent of the net increase in non-agricultural employment. But the slowdown has triggered a reverse migration. Villages are now flush with more labourers than before, bringing down the wage rate. The situation will worsen in the near future, as economists say 10 million people will move to rural areas after the urban economy starts slowing down.
Another reason could be declining interest in the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which guarantees 100 days of employment. Since the Act was launched in 2005, it has given a boost to the local wage rate. But fund allocations under the Act have reduced since the NDA government came to power. People in several rural pockets have been waiting for their wages for seven to eight months. This year, despite consequent crop failures, the Act registered 40 days of job demands—one of the lowest in recent years.
Declining food grain support price: In times of distress, the minimum support price (MSP), fixed by the government for a crop, should have come to the rescue. But the government's recent decisions point to downsizing official support for higher MSP. In the last three years, the increase in MSP for wheat and paddy has been 4-5 per cent, much less than the inflation rate (see graph). In fact, soon after IMD predicted that the monsoon season this year could witness a deficit rainfall, the Reserve Bank of India suggested that the government should limit the increase in agricultural support prices to control inflation.
The government offers the second level of support to farmers by procuring more food grains so that farmers earn maximum out of their reduced production. But in 2014-15, the government procured 51 million tonnes of wheat and paddy, which is 30 per cent lower than last year (see graph). The states are also using less food grains from the Central allocations under the Food Corporation of India. With farmers now selling their food grains in the open market, wholesale prices of paddy and wheat have crashed by 16 per cent and six per cent respectively. In several parts of Bundelkhand, farmers have sold wheat at one-eighth of MSP. In Punjab and Haryana, farmers are dumping stocks in front of government procurement centres.
Food price dip: Why did people spend more during high inflation years of 2011 and 2012, and are spending less now, a phase of unprecedented low inflation even touching zero per cent? In November 2014 the wholesale price index recorded zero. According to an analysis of consultancy company CRISIL, the year-round fall in food and fuel prices should have generated a saving of Rs 509 billion for Indian consumers in 2014-15; by 2016 it would have reached Rs 1.4 trillion. Such high savings should have delivered a big kicker to consumer spending. But this is not the case. The answer lies in declining rural spending due to less earning. During 2008-12, as per NSSO surveys on consumption expenditure, rural people spent much more than urban consumers, thus significantly contributing to overall national spending. The period coincides with rural wage boom. It was such a big contribution that the country could tide over the global economic recession smoothly.
This year food grain production is expected to lower by five per cent compared to last year. In an ideal situation, the prices would have gone up. But wholesale prices for paddy and wheat have crashed. The situation is not going to improve in near future as the global food prices are touching a historic low. The Food Price Index has fallen 22 per cent from its 2011 peak. Indian farmers are already feeling the pinch of this crash; farmers growing export-oriented commodities, such as cotton, rubber, tea and sugarcane, have plunged into crisis due to dwindling realisations and surplus stock. With domestic and global food prices dipping, it is going to be an economic mayhem for farmers.
Credit bubble: Rural credit lending is rising. Ideally, this should have been good news for farmers in need of the precious credit. But as the recent crop loss and unfavourable government policies increase the debt burden, it will lead to a situation where credit lending agencies will be crippled with bad loans. Consider this. India witnessed an unprecedented growth in farm loans last year. By January this year, says investment farm Emkay Research, banks’ agricultural lending grew by 17 per cent compared to last fiscal year; non-food credit grew by 10 per cent. This is not just a year-on-year increase. The 70th round of NSSO released in February shows that agricultural lending grew by 24 per cent during 2003-13. The agricultural GDP grew by just 13 per cent during the period. This is worrying as it indicates that while other growth factors like production and consumption remain stagnant or are declining, agricultural GDP is growing due to credit growth. If agricultural lending from all institutional sources like the public sector and cooperative banks is considered, farm credit is around 60 per cent of the agricultural GDP, according to Emkay's assessment (see graph).
In a way, it is a credit bubble waiting to burst. Since over 80 per cent of the borrowers are small farmers who don’t have the capacity to pay back, it leads to demands for loan waiver. This year, Maharashtra, Telengana and Andhra Pradesh governments have demanded the waiver of a loan of Rs 920 billion; in 2008-10, it was Rs 650 billion. This threatens banks’ ability to sustain lending.
All these indicators point to one thing: farmers are at a critical stage, worse than the situation of early 2000s that resulted in a spate of farmer suicides. The government must act before it’s too late.
by SORIT GUPTO
`Extreme weather, unfavourable market to be blamed'
M S SwaminathanNoted agriculture scientist M S Swaminathan headed the National Commission on Farmers. Way back in 2005, when the commission submitted its report, it had said that India was staring at an unprecedented agrarian crisis. Swaminathan speaks to Down To Earth about what has changed over a decade. Excerpts from the interview
Your report recommended how to improve farmers' condition. Do you see any changes in their condition?
Unfortunately, our recommendation, although collated as a national policy for farmers and placed in Parliament, remains yet to be implemented. We are witnessing one of the most distressing events as farmers, in life giving profession, are taking their own lives.
This distress is arising from extreme weather events and unfavourable market. In West Bengal, farmers who raised a good potato crop had to take their lives because of very low price offered to them.
What are the immediate steps to arrest the situation?
Assured and remunerative marketing holds the key to stimulating and sustaining farmers' interest in farming. While technology can help improve crop yield, it is only public policy that can make the economics of farming favourable to farmers. We, therefore, need synergy between technology and public policy.
Today, agriculture faces ecological degradation and land diversion. How do we revive agriculture?
Conserve prime farmland by setting up Special Agriculture Zones. Rainwater harvesting should be made mandatory both in farms and at homes. In case of small farms, community water harvesting will help. We can promote equity in water sharing through pani panchayat. Environmentally sound technologies should be devised for fighting pests, pathogens and weeds.
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