Bumper crop production proving to be a bane for Indian farmers

Recent trends show more farmers growing vegetables, setting off a vicious cycle of glut followed by
falling prices.

Indian farmers are currently faced with a problem of plenty. A bumper crop has led to procurement
prices plunging, pushing them deeper into the depths of despair.

The crisis has been compounded by inept state governments. Onion growers in Madhya Pradesh have
been on the streets for days demanding better prices for their produce, but the administration failed to
respond in time. It finally woke up after protests turned violent this Tuesday, leaving at least five
farmers dead.

Ironically, the bumper production which ought to have been a boon is proving to be a bane.

The agricultural ministry estimates that 273 million tonnes and vegetables will be produced this year,
but it is unlikely that either the farmers or the consumers will benefit. Only middlemen stand to gain
since the Agriculture Produce Marketing Committee laws bar farmers from selling their produce directly
in local markets. They can sell only through commission agents.

The Reserve Bank of India has already sounded an ominous warning, stating that the crisis could spread
further with the market price of pulses hovering well below the minimum support price (MSP).

Further, the horticulture sector is not even covered by the MSP system, leaving a vast majority of
farmers vulnerable. The Centre’s price mechanism covers only 14 of the 51 major crops. It includes
staple food items such as wheat, rice and cereals but not vegetables.

Vegetables are perishable and growing them entails a fair degree of risk. But recent trends show more
farmers growing vegetables, setting off a vicious cycle of glut followed by falling prices. Last year,
farmers in Madhya Pradesh, Maharashtra, Andhra Pradesh, Uttar Pradesh and Punjab dumped their
winter crops such as potato and tomato on the road. This year, farmers in Rajasthan and Maharashtra
are facing a similar desperate situation.

Farm sector still employs 60% of India’s population even though contribution of agriculture to gross
domestic product (GDP) has fallen from 18% in 2013-14 to less than 14% in 2016-17. The National
Institution for Transforming India (Niti) Aayog estimates a further fall to 10-12% by 2025, meaning that
the farm sector will expand at a much slower rate than the overall economy.

But data suggests that loan waivers are at best a temporary balm and cannot bail out farmers in the long
term. India has a capacity to store just 35% of its total produce and 40% of agri-produce worth an
estimated 96,000 crore rupees is wasted every year.

What can make the difference though are better storage facilities and steps to do away with
middlemen. Hard labour must be rewarded and the farmers certainly deserve better price for their
produce. They are the country’s backbone and we cannot continue to fail them.

2 .

Bumper productions are good news but without adequate infrastructure in place for the movement of
crops, a solution to farm distress can’t be found

A bumper crop production year after year seems to be India’s strength. Advance estimates released by
the Agriculture Ministry predict that the total horticultural production, including fruits, vegetables,
spices and flowers, until July this year will be 314.67 metric tonnes, as against 311.71 metric tonnes last
year. Yet, we hear a lot of news about subsidised irrigation water, power, seeds and fertiliser to grow
crops that often give surplus yield. Why do our farmers still need subsidies when their counterparts in
other countries, despite producing only a part of the “bumper production”, are more self-reliant? We
are circumspect whether it will augur well for the farmers or be yet another year of a struggle for right
prices. In my interactions with the farmers, I came to know that a few issues and aspects of mobilisation
of crops come up year after year. Discussing them in brief will give an idea of where we are lacking.

Need more and better warehouses: Typically, the demand-supply dynamics that rule the market ensure
that prices plummet during harvest and surge during the lean period. This means that the farmer
effectively gets less for the produce despite more than usual harvest. One of the most effective ways to
address this irony is to create an ecosystem of well-positioned and well-equipped warehouses across
the country. This will help farmers save the crops to deal with times when there is no harvest in spite of
the demand. In fact, one of the reasons why farmers in other nations have a better earning despite
lesser yield is that they have been able to monetise their limited harvest in the best possible manner.
Apart from enabling profitable access to the market, these storage centres can play an important role in
facilitating access of crops to food processing and packaging units. To be able to reach these units will be
a more commercially-viable option for the farmers and a good way to utilise the surplus crop.
Improve access to roads and vehicles: In continuation with the earlier topic comes the question, where
do we build these storage centres? Highways, one of the main routes to transport agri-produce from
one part to the other, can be a rather opportune site. Most farmers choose roadways over any other
means of transport. However, few can afford an air-conditioned transport that would save the produce
from the heat, moisture or cold. As a result, a part of the harvest is lost in transit. Locating warehouses
on the highway can ensure that the farmers are able to save their crops until a more favourable time to
sell them. However, access to these will depend on the condition of roads and availability of vehicles.
While most roads in the interiors of India have potholes and ditches peppered on them, getting the
vehicle can be challenge for the farmers. Such poor connectivity issue is one of the major reasons that
agri-produces struggle to find a way to the markets. India’s road network, too, is far from adequate.
According to available figures from the Statistical Year Book India 2017, out of a total highway (State and
national) length of 265,100 km, 263,263 km are surfaced while out of a total of Panchayati Raj and Rural
Roads of 1,831,043 km and 2,437,255 km, respectively, only 986,075 km and 1,486,069 km have been
surfaced or concretised. These roads are key to ensuring that farmers growing crops in the interiors of
the country can sell their produce, either through physical access to the markets or through e-NAM
(electronic National Agriculture Market).

Digital literacy to leverage e-NAMs is lacking: In a country where general literacy covers a sizeable
population and access to the internet has enabled an enviable smartphone penetration, digital coverage
among farmers remains questionable. These people still depend on age-old practices that are often
unproductive, if not counter-productive. As a result, the Government’s move to e-NAMs (National
Agricultural Markets) bore limited fruit. Physical access to mandis is a task for many farmers, especially
small and marginal ones. Only around 600 mandis are enrolled in the e-NAM system. There is an urgent
need to improve their performance to encourage sponsors to raise their bids and compete to enroll
farmers to secure input supplies. Farmers are yet to take advantage as many of them are not digitally
adept.

Historically, bumper productions are good news to statisticians, who can play around with the figures to
show how increase in production pushed down the wholesale price index (WPI) and consumer price
index (CPI), and thereby kept the dreaded inflation under check. Meanwhile, retail customers would be
flooded with choice, though we may doubt how useful that ultimately proves to be. Farmers are the last
ones to reap the benefit.The time to change it is here.
 3 .

Sugarcane farmers' crisis: bumper harvest turns bane

Thanks to a high yield sugarcane variety, India witnessed bumper harvests in the last 3 seasons, but
sugar prices have fallen and sugarcane farmers have been incurring heavy losses

For decades sugarcane was a darling of farmers. The crop can endure weather vagaries and gives fixed
returns because it is procured by sugar mills at prices fixed by the government. It is not sold in the open
market.

The situation, however, has changed in recent years. Thanks to a new seed variety, CO-0238, the
country has witnessed bumper harvests in the last three seasons, particularly in 2017-18. But sugar
prices have fallen because of the demand-supply mis-match and sugarcane farmers have been incurring
heavy losses. The variety was introduced in 2012 in Uttar Pradesh, which produces nearly half of India’s
sugarcane.

Down To Earth (DTE) travelled to Muzaffarnagar, Baghpat, Shamli, Bareilly, Sambhal, and Hardoi districts
in Uttar Pradesh and found that almost every farmer was cultivating this variety. Take the case of Ashok
Kumar, a farmer of Baghpat’s Malakhpur village. He started using the seed in 2017 and saw a 25 per
cent rise in the yield in the very first year. In 2015-16, the new variety was sown in a little over 0.4
million hectare (ha) in Uttar Pradesh and by 2017-18 the acreage increased threefold, to 1.21 million ha,
as per Lucknow-based Indian Institute of Sugarcane Research (IISR). Not only does the seed have a
higher yield, the recovery percentage of sugar from it is also higher than the other varieties. Sugarcane
production, consequently, saw quantum jump. According to the Uttar Pradesh Cane Development and
Sugar Industry Department, sugarcane production in the state increased from 148.7 million tonnes in
2016-17 to 182.1 million tonnes in 2017-18. The sugar production by mills also went up across the
country, due to which the sugar prices plummeted so much that the sugar mills in India cumulatively
owe Rs 22,000 crore to farmers for cane supplied in 2017-18. Was a seed that was supposed to be a
boon turn out to be a bane?

“Don’t blame the scientists,” says Bakshi Ram, director of Coimbatore-based Sugarcane Breeding
Institute. Ram is credited for introducing this variety in 2011. “A scientist’s job is to produce a good
product. If governments cannot manage it, how is the scientist at fault,” he asks. All India Coordinated
Sugarcane Research Project Coordinator, S K Shukla, working with IISR, explains Bakshi’s point. “The
bumper harvest could have been a boon had we invested resources to produce ethanol,” he says.
Ethanol is a biofuel extracted from sugarcane and is blended in petrol in different proportions,
depending on the volume produced by the country. In December 2009, the government announced its
National Policy on Biofuels, which called for blending petrol with 5 per cent ethanol. In 2015, the target
was raised to 10 per cent. But this was never achieved. According to a reply given by the Union Minister
for Petroleum and Natural Gas, Dharmendra Pradhan, in the Rajya Sabha on March 28, 2018, the
ethanol blending rate reached its highest in 2016, when the country-wide average was 3.3 per cent. This
is minuscule. The figure in Thailand is as high as 85 per cent. The minister also said that if the 10 per cent
target was achieved, it would have saved Rs 4,000 crore that India spends on importing petrol.
Moreover, it would have reduced 3 million tonnes of carbon emission, says the new National Policy on
Biofuels– 2018, released on May 16.

“Had we blended petrol with ethanol, our mills would not have owed huge arrears to the farmers. It was
a policy failure,” adds Shukla. He also cites the example of Brazil, the world’s biggest sugarcane
producer. The country depends on ethanol, and not sugar, as main revenue source from sugarcane and
blends 27 per cent ethanol with petrol.

The worst sufferers of this mismanaged policy are sugarcane farmers. Roshan Lal, a farmer of Hardoi’s
Kunwarpur Basit village, showed this reporter his wife’s earrings, which he said were the last gold items
in his house, and that he was going to mortgage them later that day. “I gave my sugarcane to Ajbapur
mill this year and they owe me over Rs 2 lakh. I took a loan from a bank to cultivate sugarcane, which I
have to repay. I also have to pay the labourers who helped me harvest. I have no option but to mortgage
the earrings,” he says.

Why mills owe to farmers

Every season, a district-level government officer surveys the sugarcane produced and, depending upon
the number and capacity of sugar mills in the area, gives a “supply ticket” to every farmer denoting the
name of the mill and the quantity of sugarcane the farmer is supposed to supply to the mill. After the
crushing season is over, the mill is supposed to transfer the money to farmers’ bank accounts within 14
days, failing which it should pay 15 per cent interest annually on the amount, says the Union
government’s Sugarcane Control Order of 1966. But mills rarely pay on time. In Uttar Pradesh, for
instance, the arrears for 2017-18 is Rs 13,486 crore, as per the Union Ministry of Consumer affairs, Food
and Public Distribution. According to the Uttar Pradesh Cane Development and Sugar Industry
Department, sugar mill owners in the state owe more than Rs 23,270 crore to farmers for 2012-13 to
2016-17. What’s worse, state governments are allowed to waive off the interest on delayed payment,
which they always do. For instance, Ram Kumar, a farmer of Muzaffarnagar’s Baroda village says that he
received his dues for 2016-17 one year later without interest. Uttar Pradesh is followed by Maharasthra
in the list of defaulting mills, which owe farmers over Rs 1,908 crore for 2017-18

Mill owners contend that arrears mounted because the sugar prices in the market crashed from Rs 37
per kg in 2017 to Rs 26 per kg in 2018. Farmers, however, do not buy this explanation. “If the price was
up last year, why did I receive payment for 2016-17 a year later in 2018,” asks Shishupal Singh of
Malakhpur. Malakhpur has the ignominy of being the village where mills have not cleared over 92 per
cent of payments for 2017-18 till May 12.

V M Singh, convener of Rashtriya Kisan Mazdor Sanghatan, also denies that the mills are incurring
losses. In 2014, he filed a public interest petition in the Allahabad High Court demanding that the
sugarcane farmers of Uttar Pradesh be paid their arrears with interest from 2012-13 to 2014-15. In its
judgement on March 9, 2017, the court agreed to the demand and asked the state government to
ensure compliance within four months. The government did not and is now facing contempt of court.

The farmers’ crisis has been aggravated by other factors too. In October 2016, Uttar Pradesh announced
the average sugarcane yield estimates for every district for 2017-18. These estimates are the basis on
which the mills buy sugarcane. Farmers say that these estimates have turned out to be much less than
the actual yield. Ammar Zaidi, a farmer of Hardoi district’s Pihani village, says, “The government has
declared that the average yield in Hardoi is 755 quintal/hectare (1 quintal equals 0.1 tonne) whereas I
produced 1,200 quintal per hectare. Since I cannot sell it to mills or in the open market,what will I do
with it.” In such cases, farmers illegally sell it to those who have “supply tickets”. “This will lead to black-
marketing of sugarcane,” says Zaidi. Farmers also told DTE that there are many cases where they did not
get a “supply ticket” despite having a standing crop.

“We organised several protests demanding remuneration, but got only assurances,” says Kishan Pratap,
a farmer of Baroda village. During one such protest in Baghpat, a farmer died of cardiac arrest on May
27. Ram Kumar of Baroda says farmers from his village have held protests every month at block-level
offices and even at the office of the district magistrate since December 2017.

To tackle the crisis, the Central government announced a Rs 7,000 crore relief package for sugarcane
farmers on June 6. The package has three components: the mills can take loans from banks
(cumulatively not more than Rs 4,000 crore) to boost their ethanol production capacity; Rs 1,332 crore
to be used for interest subvention on the loan taken; and, Rs 1,175 crore to create a 3 million tonne
buffer stock of sugar.

Is `package' the solution?

“The Rs 4,000 crore is just a misnomer. We are basically being asked to take a loan, which we will have
to repay. The interest rate is 12 per cent per annum. The government has said it will offer interest
subvention over five years, but how will it work out for individual mills is unclear,” says Abhinash Verma,
director general of India Sugar Mills Association.

The industry has welcomed the creation of buffer stock, but experts have also raised doubts about how
it will be implemented. “There is no clarity on how much will the government buy from which mill, or
where it will be stored,” says Abhijit Sen, member of the erstwhile Planning Commission. The
government press release, dated June 6, in which the package was announced says that
reimbursements under the scheme would be made on a quarterly basis and will be directly transferred
into farmers’ accounts. But details of how this would be done are unclear.

Sugar mills are also not enthusiastic about increasing the production of ethanol till its selling price is
increased. “Ethanol is bought by petroleum companies at Rs 40.85 per litre and the rate is decided by
the Central government,” says Verma. In India, ethanol is made from molasses, a by-product released in
the sugar-making process. It can also be made from cane juice, but the production cost will increase.
“The government has not allowed production of ethanol from cane juice. Till the mills are producing
ethanol from molasses, the current selling rate is okay. But producing it from cane juice is unviable till
ethanol prices are raised by 25 per cent,” Verma adds.

A joint study by the University of Petroleum and Energy Studies, Dehradun; Centre for Study of Science,
Technology and Policy, Bengaluru; and, Policy, Law and Regulation Chambers, New Delhi, published in
December 2016, says that two states—Uttar Pradesh and Bihar—impose an export duty of Rs 0.50 per
litre on ethanol, while 11 states impose import duties ranging from Rs 0.25-3 per litre. “Additionally,
there is an 18 per cent GST and transportation cost, which will mean that the mill owners will barely
make a profit,” says Verma.

Another key ingredient of the relief package is fixation of minimum selling price of sugar at Rs 29 per kg
to arrest the fall in prices. But the sugar mills are not happy with this either. “This is too less. The ex-mill
sugar price, taking into the current fair and remunerative price (FRP) of sugarcane of Rs 290 per quintal,
as decided by the Centre, works out to around Rs 35 per kg. To sell it at Rs 29 per kg will be a big loss,”
says Verma.

Fixation of FRP is another bone of contention between the Centre and sugar mills. The Centre decides
FRP annually and the states can hike it by issuing a state advisory price or SAP. But mills want the price
of sugarcane to be linked to the price of sugar. “We should be allowed to sell the sugar first and then we
can decide the price to be paid to cane farmers on the basis of our profits,” says an official associated
with a mill in Sambhal, requesting anonymity.

Think long-term

“The so-called package is another symbolic message,” says Sen. “There are some good years and some
bad years in cane production. So sharp planning is needed to balance the two. We have to diversify
crops and ensure that sugarcane production falls. This requires long-term investment, and the
government will have to encourage farmers to cultivate crops like pulses and oilseeds,” he adds.

V M Singh also says that all state governments need to make the mills pay the interest of 15 per cent in
case they delay in clearing arrears beyond 15 days. “If mill owners are forced to pay interest, they will
dare not hold payments.”

Different state, same concerns

Most sugar mills in Maharashtra are cooperatives, but face the same problems

Maharashtra has had cooperative sugar mills since the 1950s. The interesting feature of these
cooperatives is that they harvest the crop, says Suresh Jawade, a cane farmer from Kharnadwadi village
in Sangli district. But sugar price crash has impacted the farmers here too. In November 2017, the price
was Rs 3,000 per tonne, but months later it became Rs 2,500, says Amol Patil, a cane farmer from Sangli
district.
The problem is overflow of sugar. According to Sandeep Gidde, national core committee member of
Rashtriya Kisan Mahasangh, the sugar production this year was 60 per cent more than the consumption.
The government says that it will buy sugar from the mills, but where will this sugar go? Even the
international rate of sugar is lower than the domestic one.