Agrarian crisis

Price is the rub

Print edition : August 05, 2016

Rubber tapping in progress at a plantation in Kerala. The majority of rubber cultivators are smallholders owning less than 0.55 hectare and employing skilled labourers for harvesting and processing. Photo: Johney Thomas

Trade liberalisation policies and integration of domestic and market prices of natural rubber have severely affected rubber cultivators of Kerala and Tamil Nadu.

A sense of anxiety and hopelessness pervades the rubber tracts of central Kerala and southern Tamil Nadu, where rubber growers speak with surprising clarity about how their lives are being ravaged by international crude oil prices, weakening currencies of rubber-exporting countries, a slump in the global demand for natural rubber, indiscriminate imports of the commodity and the business strategies of tyre companies.

Trade liberalisation policies and integration of domestic and world market prices of natural rubber since 1994 are among the reasons for the worst crisis facing the rubber plantation industry. Early this year, prices of natural rubber reached the lowest level in recent history, threatening the lives of more than 12 lakh small and medium cultivators, and labourers and traders engaged in the sector.

By 2005, when suicides among small and marginal farmers in many parts of India, including Kerala, were leading to debates about how liberalisation had adversely affected domestic prices of farm products, the rubber sector alone appeared to have somehow escaped the fate, witnessing a price boom after several years. The price of premium grade rubber sheets (RSS-4), for example, rose from around Rs.40 a kilogram a few years earlier to Rs.66 a kg in 2005 and fetched Rs.250 a kg by the middle of 2011, a record in the history of the commodity.

In key rubber-growing and trading centres in the south, during this period, suddenly there was money for everything. Aspirations went up, to send children to the best schools and/or professional colleges, to build houses, to buy vehicles. Huge houses, luxury car showrooms, hotels and resorts were built with boom-time money or with an eye on it, especially in the central districts of Kerala. Wages and input costs and prices of all other commodities too went up. But nobody cared. It was a time of plenty. Then the decline found the growers in deep shock. Rubber prices slumped to Rs.113 a kg by the end of 2014 to around Rs.95 a kg (for the RSS-4 grade) in the beginning of 2016. “Prices have come down, production and yield is down and cultivators are finding it extremely difficult to hold on. I used to deal in 50 tonnes of rubber sheets a day, now I struggle to get the same quantity in a week. I had 50 employees; now there are hardly 15,” A.C. Joseph, a rubber grower and dealer at Aymanam in Kottayam district, told Frontline.

According to V.K. Binu, a smallholder who also works in a rubber marketing and processing society at Kanjirappally, a large number of people in the locality have stopped harvesting or have reduced the frequency of tapping and have decided to leave their plots unattended. “Labour and input costs have become prohibitive, but the price is too low. Last financial year, the society’s procurement went down from about 400 tonnes to under 200 tonnes and the annual turnover went down from about Rs.12 crore to Rs.4 crore. Many, including prominent rubber marketing societies and rubber dealers, have closed shop. Seventy-five to 80 per cent of the farmers have stopped making rubber sheets and are just supplying rubber latex in order to cut down on labour costs.”

“The 1994 WTO [World Trade Organisation] agreement in Marrakesh [Morocco] removed quantitative restrictions on import of several commodities, but it gave member-countries the option to fix the ‘bound rates’, or the maximum import tariff allowed for each commodity. But unlike in the case of many other commodities such as tea or even some varieties of rubber [latex], where import tariffs were fixed at a high level, the bound rates for ‘dry rubber’ alone were fixed at a low of 25 per cent, obviously to help the tyre industry,” said P.C. Cyriac, a retired civil servant and former chairman of the Rubber Board.

Imports began to go up, gradually though at first. Soon, Indian growers found themselves at a disadvantage, with imported rubber being cheaper even with the duty of 25 per cent, and were distressed as a result, with domestic prices and production going down. “The impact is very high, and rubber growers are now in deep distress. But for the Kerala government’s support scheme that lets a large number of small farmers get a small amount as subsidy that ensures a price of Rs.150 a kg (just enough to meet cultivation costs), many rubber growers and labourers would have been in deep distress,” Cyriac said.

The majority of rubber cultivators are smallholders owning less than 0.55 hectare and employing skilled labourers for harvesting and processing. Growers say the cost of producing 1 kg of dry rubber would be about Rs.150 to Rs.160. “It is a gloomy period for growers as the price is staying below the cost of cultivation. Indebtedness is rising as any banker in the locality will tell you and people default on even small loans. All those with less than two hectares of rubber are affected,” said Mathai Chandy, a major rubber dealer based in Pala, part of Kerala’s rubber heartland.

Business is bleak

In the small town of Kulasekharam, in Tamil Nadu’s Kanyakumari district, adjoining Kerala, Stephen, who owns 80 cents of rubber plantation, said that it was a desperate situation for people like him. “Wages are very high. Tapping is done for a maximum of four days a week, and when prices were high I used to get Rs.600 a day selling the yield and used to spend Rs.350 on wages. Now I get Rs.350 worth of rubber and have to give Rs.600 a day for the labour. In Tamil Nadu, with no State government support price as in Kerala, the market price is lower, at Rs.102 a kg. I seek daily work elsewhere and can barely manage my family’s routine needs.”

“Just like the small towns of central Kerala, till about a decade ago, Kulasekharam and the surrounding areas within a radius of 15 km were a prosperous island of rubber wealth, with a handful of big plantations and a large number of smallholders owning one to two acres each, who built their wealth from the sumptuous rubber yield from their small gardens. The number of businesses that sprouted based on rubber income was amazing for such a small place. But in just about a few years, everything has changed. Life has become unbearable for many people. Business is bleak, and a large number of textile shops, hotels and medical shops cannot find enough customers. Even the number of operations in the many hospitals that had sprung up has come down,” said Mohan, a grower and proprietor of a small manufacturing unit making elastic bands.

There are those who try other options, like cattle rearing or growing fruits and vegetables in addition to rubber. But most such experiments also involve high costs and risks and do not fetch the expected returns. “Meenachil taluk is among the areas that give the highest yield for rubber. Other crops are not such a big hit here. So people cannot afford to leave rubber and go for other crops, even though rubber prices are going down and the prices of all other commodities are going up. For instance, when rubber prices were just Rs.25 a kg, you could buy a kg of sardine for Rs.2. Today sardines cost Rs.150 a kg and rubber is only Rs.125 to Rs.140.” Joseph said.

“Land value is very high in Kerala. So if you look at the capital locked up in this 30-year crop, rubber cultivation has become a huge loss-making venture,” Mathai Chandy said. According to S. Jayapalan Nair, a farmer and rubber dealer based in Nedumangad in Thiruvananthapuram district, when paddy cultivation became unviable, people switched over to rubber on a large scale. Today, people are leaving their rubber crop unattended or are slowly turning to other options. “Most of them survive because they are not full-time cultivators and have other jobs or income [another reason for poor production]. The number of people replanting rubber within the State is coming down, especially in hilly areas, for example, where the cost of cultivation is higher. Increasingly, near urban centres or on rubber estates near major roads, the real estate mafia has bought land which even a few years earlier had rubber.”

“On the one hand, the government asks farmers to increase production; on the other it encourages import of natural rubber in an indiscriminate manner. The impact is big and is felt by people involved in all activities connected with the commodity,” said Raju V. Jose, owner of a major rubber nursery in Kottayam.

Sebastian Mathew, grower and owner of a Vazhoor-based facility manufacturing high-quality rubber shades, said that for the past three years there had been no demand for his product as farmers had left their gardens untended. “I gave my own plot of rubber for slaughter tapping even though the trees would have given good yield for three or more years,” he said. “I hope that by the time it is replanted and starts yielding in about seven years, the price situation will be better.”

But most of the people Frontline spoke to are not that optimistic. According to Sasikumar, a planter in Kulasekharam, the adverse effects of climate change, the lack of interest shown by the younger generation in rubber cultivation, loss of skill among labourers, and even falling real estate prices are likely to impact rubber growers seriously in the coming days.

Krishnan Namboothiri, a traditional rubber cultivator in Kanyakumari district with over 40 years of experience, told Frontline: “If the government fails to provide protection to agriculture products from such trade agreements, farmers will be pushed further into poverty. Growing cash crops will soon become impossible in India. People are hesitating to replant rubber. Domestic production is down; but world production is rising, with more and more areas having similar climatic conditions but lower wages and other advantages being brought under rubber. Synthetic rubber [made from petroleum by-products], is increasingly being seen as an alternative, especially when oil prices go down. They have an advantage over us. It will soon reach a stage when we will be forced to import rubber for most of our needs, because the cost of production here is sure to remain high and cannot be brought down further.”

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