No gains for farmers

High costs hurt farmers in lockdown year

Print edition : January 01, 2021

Drying paddy at a government procurement centre near Kothagudem in Khammam on December 9. The government fixed a minimum support price of Rs.1,888 a quintal for fine paddy and Rs.1,868 for the common variety. Photo: G.N. Rao

Although agricultural output has increased this year, greater operational costs and poor prices for produce have deprived the Indian peasantry of any gain.

The official account of Indian agriculture is that it is growing at a rather nice clip, despite the rest of the economy being in the doldrums since the COVID-19 pandemic. These claims appear somewhat ironic as farmers have been on a prolonged protest against the newly announced farm laws. That agriculture would lead the revival of the Indian economy out of the pandemic-induced economic slump is the optimistic official claim.

Nothing could be further from the truth. For a start, it is an utterly false notion that a good harvest automatically translates into “good” profits from farming. To make farming a profitable enterprise, we need to factor in two more variables along with higher production, namely the cost of cultivation and the price of the produce, and thus income and profit, that the peasant actually realises from the sale of his harvest.

It is true that kharif 2020 was marked by an expansion in the area sown; this would obviously lead to a higher production compared with the last season. The area under kharif crops in 2020-21 was 1,104.54 lakh hectares, an increase of 5.7 per cent over 2019-20 (as per the latest official statement released on September 11). The higher acreage has been attributed to a good and timely monsoon.

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According to the first advance estimate of crop production released by the Ministry of Agriculture on September 22, the production of foodgrains was estimated at 144.52 million tonnes, marginally higher than the 143.38 million tonnes registered in 2019-20. The production of pulses is expected to be 9.3 million tonnes, 20 per cent higher than in 2019-20.

The production of paddy, the main kharif crop, has been estimated at 102.4 million tonnes, marginally higher than the previous year.

Among non-food crops, oilseeds output is estimated at 25.7 million tonnes, about 15 per cent more than the previous year’s figure. The production of cash crops such as sugarcane and cotton is also expected to be higher this year.

FAS survey

Does this across-the board increase in production necessarily translate into higher farm incomes in rural India? A recent survey conducted by the Foundation for Agrarian Studies (FAS) showed that it has not and it presented some important findings in this regard. The recently-constituted Pandemic Studies Unit of the FAS conducted telephonic surveys to study the multifaceted and still unfolding impact of the COVID-19 pandemic on life, production, and work in rural India. The survey covered 164 households in 26 villages in 13 States across India. A detailed field note is expected to be published in the forthcoming volume of Review of Agrarian Studies (www.ras.org.in).

The survey, conducted in September and October, sought to identify changes in cropping patterns and the area sown under various crops. It also sought information on access to and the costs of cultivation arising from the use of inputs—seeds, fertilizer, pesticides, irrigation, human labour, machinery, and credit.

Of the total of 164 respondents, 129 belonged to farm households that worked the land for the cultivation of kharif crops. They represented a cross-section of village society—large landlords, rich peasants, poor peasants, agricultural and manual workers and others, including those engaged in non-agricultural activities.

The survey’s major finding was that the higher production of foodgrains did not translate into higher earnings for farmers, irrespective of the class of the peasantry. That is, neither the rich and large landholders nor the small peasants or agricultural workers appeared to have benefited from the expansion of area and the resulting increase in output. What then explains the increase in area and production? It would appear that region-specific factors, combined with a generally good and timely monsoon in most parts of the country, averted a full-blown agrarian slump and contributed to an increase in the production of foodgrains.

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What were these region-specific factors? In Bihar, for example, we see a food-and-distress-driven return to farming during the pandemic year. In two villages of northern Bihar where labour out-migration, especially of landless labour, is traditionally high, many migrant workers did not return to the cities for work during the lockdown. Instead, they took small areas of agricultural land on lease for personal cultivation.

In Nayanagar village in Bihar’s Samastipur district, a migrant worker who belongs to the Scheduled Caste informed the survey team that for the first time in his life he took on lease 10 cottahs of land (a cottah in Nayanagar is 0.04 acre) on a shared contract for paddy cultivation, solely for family consumption. In contrast, a capitalist farmer from Tehang village in Punjab’s Doaba region, who owns about 30 acres, said that because of the higher costs of cultivation during the pandemic, he increased the area sown under kharif crops by leasing in another five acres with the objective of enhancing his total income. Both examples suggest the prospects of diminished incomes from the kharif crop. In rain-fed or canal-irrigated villages, the good monsoon resulted in previously fallow or uncultivated lands being sown. For instance, in Palakurichi and Venmani villages in Tamil Nadu’s Nagapattinam district, where kharif cultivation is entirely dependent on water released from the Mettur dam across the Cauvery, farmers were able to cultivate the “kuruvai” crop (a short-duration paddy crop) for the first time in more than a decade. “This was because the Mettur dam was opened in early June this year,” a rich peasant from Venmani village told the team.

Rising cost of cultivation

The FAS survey also identified the reasons why, despite a good harvest, this year has proved to be a bad one for farmers. Most notably, the survey found a sharp increase in the cost of cultivation during the kharif season across the country, primarily on account of a rise cost of material inputs, machine use and hired labour.

First, the input costs of seeds, fertilizers, and pesticides. A poor peasant from Ananthavaram village of Guntur district in Andhra Pradesh reported that the fertilizer cost per acre for paddy this year was up at Rs.1,300 from Rs.1,150 last year, mainly because of limited availability with the local fertilizer dealer. In the villages of Bihar, a shortage of urea was reported, which resulted in urea prices increasing from Rs.350 for a 46-kilogram bag to Rs.400. Farmers from Hakamawala village in Mansa district of Punjab informed the team that the price of cottonseed had increased during the lockdown period by Rs.50 a packet. The cost of seed per acre had increased from Rs.2,400 to Rs.2,600.

Second, the hike in diesel prices ahead of the kharif season significantly pushed up cultivation costs across the country. The price of diesel in Delhi rose from Rs.69.39 per litre on June 1 to Rs.80.53 on June 30, an increase of 16 per cent. June is normally the busiest period during the kharif season when farmers are engaged in land preparation, irrigation, sowing/transplanting, and spraying, and most of these operations are largely mechanised in most States.

The higher cost of diesel meant that farmers incurred a higher cost right at the beginning of the season. It also disproportionately impacted marginal and small peasants who comprise the bulk of those who hire machines. For instance, the survey revealed that the increase in the cost of hired machines for ploughing ranged from 10 to 70 per cent this year compared to the last kharif season.

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Third, during the kharif season, like during the rabi, farmers also faced a shortage of labour. The movement of migrant workers—inter-State, inter-district or intra-district—was severely constrained during the lockdown, not just because of the lack of transport facilities but also by the fear of the virus and the threat of harassment. As a result, the cost of hired labour increased significantly in those villages with a significant dependence on migrant workers for certain operations.

In Tehang village in Punjab, for instance, where the highly labour-intensive paddy transplantation is traditionally performed by migrant workers from Bihar, Jharkhand, Uttar Pradesh and elsewhere, there was a huge shortage this year. As a result, the labour costs for paddy transplantation increased from Rs.3,000 an acre to Rs.5,000, an increase of 67 per cent.

A landlord from Gharsondi village in Madhya Pradesh told the survey team that he arranged his own transport to bring migrant workers from Bihar for paddy transplantation. Villages such as Ananthavaram and Bukkacherla in Andhra Pradesh, Nimshirgaon in Maharashtra, and Panahar in West Bengal, all of which depend on labourers from neighbouring villages or nearby districts, also faced labour shortages, which drove up wages for hired workers this year.

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A landlord in Panahar village in West Bengal’s Bankura district said that a group of workers from the western parts of the State who traditionally performed the paddy transplanting and harvesting operations did not arrive this year. This enabled local labourers to increase the piece-rate wages of paddy transplantation from Rs.3,000 an acre to Rs.3,500. Similarly, in Muhuripur village in Tripura, Bangladeshi migrant labourers who usually arrive for the transplanting and harvesting operations stopped coming after March.

Price realisation of kharif crop

Since harvesting operations had not yet commenced when the survey was done, the team could not gather information on the actual price realisation for kharif crops. However, previous village surveys under the FAS’ Project on Agrarian Relations in India (PARI) showed that farmers, especially small and marginal farmers, depend entirely on private merchants to sell their produce, and the realised farm harvest prices were generally far below the officially declared minimum support price (MSP) in most villages. In fact, farmers often sold their produce at prices below the cost of cultivation, actually incurring losses from the farming.

The COVID-19 pandemic added more misery for those engaged in agriculture, who already suffer from the lack of a good marketing system for their produce. A rapid assessment survey conducted by the FAS during the lockdown (April-May, 2020) revealed that the local market channels for the sale of produce had completely collapsed. This implied that the incomes of farmers, especially small peasants, had been gravely impacted. The disruption of supply chains led to a slump in the local farm harvest prices for most agricultural produce.

During this crisis, a higher MSP and higher procurement by the government could have ensured a reasonable income from farming to the large number of small and marginal farmers in the country.

Paddy procurement

The example of paddy, India’s main kharif crop, is illustrative. According to the latest available official data, only 38 per cent of the total national paddy output was procured in 2018-19. In addition, there was a wide variation in procurement across States and much of the procurement benefited Punjab and Haryana. In the three important rice-producing States of West Bengal, Uttar Pradesh, and Tamil Nadu, state procurement was below 20 per cent of the total production in 2018-19.

In the current kharif season too, according to data from the Food Corporation of India (as of December 7), 75 per cent of total paddy procurement was from Punjab and Haryana. This implies that a majority of the farmers from other States sold their kharif output to private traders at much lower prices.

Data from the government’s Agrimarket revealed that the harvested kharif crops such as paddy, bajra, maize, black gram and soyabean were selling far below the support price in most States.

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For instance, on December 8, maize was selling between Rs.1,200 and Rs.1,600 a quintal across States compared to the announced MSP of Rs.2,150. Similarly, bajra was selling at Rs.1,300-1,400 a quintal in Gujarat, Karnataka, Rajasthan, and Uttar Pradesh, about 37 per cent below the MSP of Rs.2,150.

The market arrivals of most crops after this year’s rabi harvest was also much significantly lower than last year. Market arrivals, of which public procurement is only a part, provide a fuller picture of how incomes may have fared. Agrimarket data revealed that between March and September this year, the market arrivals of all the crops across the country were much lower than in 2019. For wheat, the most important rabi crop in India, market arrivals were only 60 per cent of last year.

In the case of barley, cauliflower, potato, lentil, tomato, cabbage and okra, market arrivals this year were between 50 per cent and 80 per cent of market arrivals in 2019. What the significantly lower market arrivals this year indicate is that a significant proportion of the harvest of farmers did not make it to the regular markets. Ominously, they indicate that the prices realised by Indian peasants this year were significantly lower than last year.

More loans at higher rates

To meet the increasing costs of cultivation, poor peasants and manual workers across villages told the FAS team that they had taken loans to the meet expenses related to agricultural activities in the kharif season. Loans were taken from input shops, moneylenders, local traders, and friends and relatives. The interest rates were obviously very high, ranging from three per cent to six per cent per month, translating to 36-72 per cent a year..

There were instances of farmers being denied formal loans such as Kisan Credit Card loans because they had not repaid their previous loans taken during the lockdown. A poor peasant from Nayanagar village in Bihar reported that he had taken a loan of Rs.16,000 from a merchant and input dealer at 4 per cent a month, or 48 per cent in annualised terms.

Significantly, he said that the interest rate on informal loans had increased to four per cent a month from three per cent mainly because of the greater demand from poor people.

In sum, the survey highlights three main points, which effectively rebut the official narrative that the higher kharif production this year is a sign of agrarian prosperity.

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First, in some areas the increase in acreage and output was driven by food and income security in a pandemic year; this by no means implies that all is well with the peasantry. Second, the increase in the cost of inputs such as diesel and labour significantly increased the aggregate cost of cultivation in the kharif season. Lastly, the increase in the MSP between 2019-20 and 2020-19 for kharif crops was paltry in the context of the sharp increase in the cost of cultivation.

The government increased the MSP for paddy by 2.9 per cent, by 4.9 per cent for cotton, by 2-4 per cent for pulses, and by about 5 per cent for oilseeds—much below the increase in the actual cost of cultivation during the kharif season.

It is thus obvious that farmers, especially those with smaller holdings, have been squeezed by rising costs on the one hand and the collapse in output prices owing to tardy procurement on the other, and also because the increase in the MSP was paltry.

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Indeed, farm households are not going to benefit from the increased production during this kharif crop. If anything, their incomes might actually be even lower than in the previous year.

The solution to the problem of falling incomes obviously lies in a set of policies that are diametrically opposite to the ones the Union government has chosen to pursue through its recent pieces of legislation. Logically, it would appear that the government needs to regulate input prices, expand and smoothen the channels of access to formal credit, ensure higher procurement prices and guarantee state procurement. Only the pursuit of such a course would have ensured that higher agricultural production results in income gains for vast sections of the Indian peasantry.

Tapas Singh Modak is the researcher at the Foundation for Agrarian Studies, Bengaluru.

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