<p>In the midst of what is likely to be a year for the struggle for existence for farmers, the Union government decided to opt for changes in the legal framework and encourage contract farming – which will have a medium and long-term impact rather than provide immediate succour. </p>.<p>Hopefully, the government will provide succour before the start of the next agricultural season. The government has done well to support petty commodity production and commercial crops but decided that it would rather prefer market-oriented measures that focus on private participation to public investments in agricultural infrastructure. If the package is the last of the support measures before the onset of the next season, the farmers may be faced with an existential crisis. </p>.<p>Agriculture and allied activities are not simply another occupations in India: It employs nearly 55 percent of the total workforce though contributes only about 18 percent of the country’s GVA. The net sown area is about 140 million hectares or about 43 percent of India’s total geographical area of which net irrigated area is about 69 million hectares. A total of 22 crops along with sugarcane have some sort of fair and remunerative price support mechanism. There are 146 million operational holdings of which small and marginal farmers (or those with less than 2 hectares) comprised about 86.21 percent while medium (2 to 10 hectares) were 43.61 percent and large holdings (more than 10 hectares) were 0.57 percent of the total holdings. </p>.<p><strong>Farmers’ troubles</strong></p>.<p>Every year, the start of the monsoon is the beginning of the travails of small and marginal farmers. It starts with the hunt for capital for inputs. Borrowing from the banks using the crop loan window is an important annual chore. Borrowing from the local fertiliser and pesticide shops is usually the norm rather than an exception. Informal lenders are an important source of credit for consumption and often for agricultural inputs.</p>.<p>Due to the lockdown and resultant shutdown in the mobility of labour, along with the shutting of market access, farmers producing vegetables and commercial crops are staring at huge losses. To this, post the first showers of monsoon rains, they now need to repay their crop loans and mobilise additional money for inputs to start their agricultural operations in the new season. </p>.<p>The lack of measure (till date) to reschedule old loans and concurrently offer new loans for the season means that most, if not all, the marginal and small farmers have to depend on alternative sources of credit – usually informal lenders. Invariably, the overall tightness in credit availability will mean that there will be an inevitable rise in the interest rates for borrowings from informal lenders unlike previous years. Thus, the fate of the small and medium farmers in the near future will be dependent on the monsoons, output and farm gate prices. Any crop failure due to erratic monsoon or collapse in agricultural prices during the next harvest season will be an unmitigated disaster.</p>.<p>The inevitable result of these developments is that farmers are likely to see smaller amounts of disposable income this year due to higher interest accrued due to borrowing from the informal markets – if the crop loans from the formal banking sector are not rescheduled and fresh loans disbursed. Hopefully higher levels of indebtedness will not lead to loss of land to moneylenders. Unfortunately, our history is replete with times when losing land to lenders was an immediate consequence of a major disruptive economic event. </p>.<p>Ironic as it may seem, the only factor that has the potential to change this down cycle for the farmers is the likely pressure on rural wages due to the massive return of migrant labourers to the villages that is presently underway. That may reduce the cost of cultivation. The conundrum could not have been worse: Either the incomes of the small and marginal farmers or that of agricultural labourers’ collapse. The rise in rural poverty may be a lasting impact of COVID-19. </p>.<p><strong>Possible solution</strong></p>.<p>Since the government has already announced that the number of Kisan Credit Cards (KCC) will be increased substantially, a possible solution to the immediate problems faced by the farmers is the conversion of existing 2.36 crore KCC accounts (which comprise of individual cultivating households whose outstanding crop loan total to Rs.4.136 lakh crores in March 2019) into term loans and granting of fresh credit for the forthcoming season. The interest cost on this may amount to about Rs 40,000 crores. Ideally, it would be of great help to farmers if the government meets this interest cost. This will save money for the farmers – money which can be deployed elsewhere or at least save them from more borrowings. </p>.<p><em>S Ananth is an independent researcher based in Andhra Pradesh. Views are personal</em></p>.<p><em>Disclaimer: The views expressed above are the author’s own. They do not necessarily reflect the views of DH.</em></p>
<p>In the midst of what is likely to be a year for the struggle for existence for farmers, the Union government decided to opt for changes in the legal framework and encourage contract farming – which will have a medium and long-term impact rather than provide immediate succour. </p>.<p>Hopefully, the government will provide succour before the start of the next agricultural season. The government has done well to support petty commodity production and commercial crops but decided that it would rather prefer market-oriented measures that focus on private participation to public investments in agricultural infrastructure. If the package is the last of the support measures before the onset of the next season, the farmers may be faced with an existential crisis. </p>.<p>Agriculture and allied activities are not simply another occupations in India: It employs nearly 55 percent of the total workforce though contributes only about 18 percent of the country’s GVA. The net sown area is about 140 million hectares or about 43 percent of India’s total geographical area of which net irrigated area is about 69 million hectares. A total of 22 crops along with sugarcane have some sort of fair and remunerative price support mechanism. There are 146 million operational holdings of which small and marginal farmers (or those with less than 2 hectares) comprised about 86.21 percent while medium (2 to 10 hectares) were 43.61 percent and large holdings (more than 10 hectares) were 0.57 percent of the total holdings. </p>.<p><strong>Farmers’ troubles</strong></p>.<p>Every year, the start of the monsoon is the beginning of the travails of small and marginal farmers. It starts with the hunt for capital for inputs. Borrowing from the banks using the crop loan window is an important annual chore. Borrowing from the local fertiliser and pesticide shops is usually the norm rather than an exception. Informal lenders are an important source of credit for consumption and often for agricultural inputs.</p>.<p>Due to the lockdown and resultant shutdown in the mobility of labour, along with the shutting of market access, farmers producing vegetables and commercial crops are staring at huge losses. To this, post the first showers of monsoon rains, they now need to repay their crop loans and mobilise additional money for inputs to start their agricultural operations in the new season. </p>.<p>The lack of measure (till date) to reschedule old loans and concurrently offer new loans for the season means that most, if not all, the marginal and small farmers have to depend on alternative sources of credit – usually informal lenders. Invariably, the overall tightness in credit availability will mean that there will be an inevitable rise in the interest rates for borrowings from informal lenders unlike previous years. Thus, the fate of the small and medium farmers in the near future will be dependent on the monsoons, output and farm gate prices. Any crop failure due to erratic monsoon or collapse in agricultural prices during the next harvest season will be an unmitigated disaster.</p>.<p>The inevitable result of these developments is that farmers are likely to see smaller amounts of disposable income this year due to higher interest accrued due to borrowing from the informal markets – if the crop loans from the formal banking sector are not rescheduled and fresh loans disbursed. Hopefully higher levels of indebtedness will not lead to loss of land to moneylenders. Unfortunately, our history is replete with times when losing land to lenders was an immediate consequence of a major disruptive economic event. </p>.<p>Ironic as it may seem, the only factor that has the potential to change this down cycle for the farmers is the likely pressure on rural wages due to the massive return of migrant labourers to the villages that is presently underway. That may reduce the cost of cultivation. The conundrum could not have been worse: Either the incomes of the small and marginal farmers or that of agricultural labourers’ collapse. The rise in rural poverty may be a lasting impact of COVID-19. </p>.<p><strong>Possible solution</strong></p>.<p>Since the government has already announced that the number of Kisan Credit Cards (KCC) will be increased substantially, a possible solution to the immediate problems faced by the farmers is the conversion of existing 2.36 crore KCC accounts (which comprise of individual cultivating households whose outstanding crop loan total to Rs.4.136 lakh crores in March 2019) into term loans and granting of fresh credit for the forthcoming season. The interest cost on this may amount to about Rs 40,000 crores. Ideally, it would be of great help to farmers if the government meets this interest cost. This will save money for the farmers – money which can be deployed elsewhere or at least save them from more borrowings. </p>.<p><em>S Ananth is an independent researcher based in Andhra Pradesh. Views are personal</em></p>.<p><em>Disclaimer: The views expressed above are the author’s own. They do not necessarily reflect the views of DH.</em></p>