Demonetisation: Agri market holding up

Ever since the Centre announced its demonetisation scheme, there have been countless reports on the farmers’ plight and how this bolt-out-of-the-blue move has brought the rural market to a standstill. Has there really been a collapse of the agri-market chain? BusinessLine spoke to a few people in the hinterland, who surprisingly don’t sound as dismal as many have claimed. While the short-term pain is visible in certain quarters, many are able to get by just fine.

There is not much evidence of a disruption in the farm produce supply chain or of demand from the retailer/consumer having suffered. Take the case of perishables, which ostensibly should have taken a larger price hit.

In Delhi’s Azadpur mandi, the country’s largest wholesale market for fruits and vegetables, price of apples (Royal Delicious variety) has been hovering around ₹60-61/kg in the last two weeks.

Though on the 9th and 10th, prices were down to about ₹43-59/kg, they recovered quickly. In banana, the modal price at the mandi declined by just ₹1/kg to ₹8/kg in the last two weeks. In guava, the price, in fact, has increased from ₹18/kg to ₹25.6/kg.

Retail level prices have also not moved sharply in the last two weeks in most places, including Delhi, Chennai and Ahmedabad, shows data from the Consumer Affairs Department. For instance, tomato prices have hovered at ₹28-29/kg in Delhi, at ₹20/kg in Ahmedabad, and at ₹9-10/kg in Chennai. Likewise, in non-perishables such as wheat (in Delhi), sugar (in Kolhapur), maize (in Nizamabad), mustard seed (in Jaipur), turmeric (in Nizamabad), jeera (in Unjha), prices have increased or decreased only by 1 or 2 per cent in the last two weeks, shows data compiled by NCDEX.

Trade and arrivals in the mandis have revived over the last week. In Karnataka, where 152 mandis are trading electronically through the platform provided by the Rashtriya e-Market Services (ReMS), data shows that there has been a pick-up in volumes traded at the mandis.

The number of lots traded was 72,533 between during November 2-8. This dropped to 42,000 lots between November 9 and 15. Now, in the recent week — between November 16 and 22 — the number of lots traded was 65,000. About 30-35 per cent of the payments were in cheque, 1 per cent in RTGS and the rest in cash (deferred payment).

Data from the Ministry of Agriculture shows that rabi sowing has been progressing normally. On Friday, the total area sown under all crops was 327.62 lakh hectares (241.73 lakh hectares as of November 18) versus 313.17 lakh hectares in the same time last year. In wheat and pulses, the area sown is up 8 per cent and under oil seeds, the area sown is up 14 per cent.

Sowing progress has not been up to the mark in coarse cereals and rice, but that can’t be blamed on the demonetisation move. The lower sowing in rice is explained by the poor rains in Tamil Nadu, Kerala and south-Karnataka belt, says N Chattopadhyay, Deputy Director General of the agricultural meteorology division at IMD. Between October 1 and November 23, rain in the south peninsula has been 69 per cent below LPA (long period average).

This region didn’t receive much rain from the south-west monsoon too. In coarse cereals, the area sown is lower because, “many farmers have switched to gram and mustard as they expect a better price realisation”, says Pukhraj Chopra, a large commodity trader in Bikaner, Rajasthan. This region is one of the key belts for coarse cereals.

For the key crops in the rabi season which is wheat, rice and coarse cereals (but for maize), most farmers use only their own seeds saved from last year. Also, since the state-owned co-operative seed stores and agriculture universities have been accepting old ₹500 and ₹1,000 notes since November 17, there is not much of a problem for farmers.

Ajith Singh Velasar, a farmer in Bikaner, Rajasthan, says, “There is not much difficulty for us. Both co-operatives and private seed stores here are accepting old ₹500 notes…” The private seed distributors, however, are charging a commission for accepting old notes, say farmers.

Servendra Kumar, a maize farmer in Purnia district in Bihar, says, “The seed packet of 4 kg costs ₹2,100, but, the shopkeeper wants ₹2,200. I am still fine, because this is a cash crop and I will make good returns…” For other inputs including urea and diesel for the tractors too, some farmers we spoke too didn’t have much of a trouble.

Ram Singh Thakur, CEO of Samarth Kisan Producer Company, which works with farmers in Agar Malwa district, Madhya Pradesh, says, “Farmers who need fertilisers are buying it from the co-operative societies, who give it on credit. Farmers can repay this after they harvest their crop…and for diesel, all petrol pumps are accepting old notes…”

Farmers who harvested crops in the last few weeks, however, have had problems. One, as many traders didn’t turn up at the mandis, farmers had to take back their produce. Even if some traders or commission agents were ready to buy, they offered payment through RTGS or cheque.

Now, while most farmers had a bank account, it was either a loan account with a nationalised bank or an account with a co-operative bank. Co-operative banks in most places were running out of cash ever since the first week of demonetisation, so, farmers were not happy asking for credits into their account at the co-operative banks. With nationalised banks, where it was mostly a loan account, the fear was that the banker may use it to set it off against the loan, so farmers didn’t want this too.

However, some farmers BusinessLine spoke to worked around this problem by asking the traders to pay after one/two weeks. Mavji, Sarpanch of a small village in Kutch district, Gujarat, said, “We have no problems, we know the agents well, we ask them to pay for 50 per cent right away, and the balance after a week or so when they get money…” But speaking to people in many markets across the country, we see that deferred payment is a norm practised even in normal circumstances. Servendra Kumar, the farmer from Purnia, says, “The payment from the Baniya (local commission agent) comes usually after a week or 10 days and it is also split into two-three settlements…”

The cash woes of farmers and traders will end in the next few weeks. While some recent measures, including the directive to Nabard to infuse more cash towards crop loans, will help, Manoj Rajan, Managing Director and CEO of Rashtriya e-Market Services, says, “Infusing liquidity at the traders’ level is also important. Banks should evaluate each trader and give him a cash credit limit, which they will in turn use to pay the farmers…this will go a long way in reducing the cash crunch and building a cashless system.”

And, now that the Centre has done its bit, Pravesh Sharma, former MD of SFAC, says, “The State governments have to co-operate now. They have to stop backing the commission agents. If they say that the commission agents will have to pay the farmers in the mandi only by electronic transfer, then that would be a huge step…”

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