COVID-19 impact on agriculture: Varied and devastating

It will vary widely across different regions and among producers and agricultural wage labourers; govt will need to put a contingency plan in place

The impact of COVID-19 on the economy is no doubt devastating. No sector has escaped its impact. Its impact on agriculture is complex and varied across diverse segments that form the agricultural value chain. Even among the different segments, its impact varies widely among different regions and among producers and agricultural wage labourers. This impact will reverberate across the larger economy and will linger longer than a few months.

A long list of problems

The problems in agriculture at the moment are primarily related to (a) labour availability and, (b) inability to access markets for produce due to issues in transportation as well operation of markets.

The non-availability of labour has hurt operations in many parts. Some parts of agriculture that have the luxury of deploying technology for harvesting, like Paddy and Wheat, are relatively more insulated since they often do not have to depend on large numbers of manual labour. The increasing use of mechanical harvesters for paddy has helped in the present circumstances, though their inter-state movement has been severely curtailed.

However, commercial crops are drastically hit as they tend to be more dependent on migrant labour. Consequently, the shortage of migrant labour has resulted in a sharp increase in daily wages for harvesting crops. In many areas, the rise is as high as 50 percent, making it unremunerative for producers since prices have collapsed due to either lack of market access including the stoppage of transportation and closure of borders. This is in contrast to areas where migrant labourers have returned home from urban areas and this has led to a sharp decline in agricultural wages.

Agricultural producers are particularly hard hit with returns on produce varying from one-third the usual or a complete loss. In a number of districts, inter-state trade in commercial crops or proximity to urban areas provides market access and better prices. These are often due to initiatives of individual farmers rather than direct state support. This is often the case of crops like onions, cotton, mango, inland fisheries, flowers and vegetables. The rise in labour costs and lack of access means that farmers are staring at huge losses and hence allowing crops to rot in the fields, a better ‘stop-loss’ mechanism. Those who have avoided a complete loss barely eke out any money to cover the cost let alone household maintenance or land lease rates.

Possible shortages ahead

An immediate consequence of this should make the government weary and alert to a possible sharp spike in the price of vegetables and other commercial crops due to large scale changes in cropping patterns. Large buffer stocks in paddy and wheat mean that food grains shortage due to poor harvest is unlikely, at least this year. The case of commercial crops and vegetables is more complex. The decision to plant these is largely dependent on realisation price in the preceding season. A collapse in returns means that farmers are likely to shift to another crop thereby substantially altering supply dynamics and with it prices. This, in turn, may have a bearing on food inflation.

Need for contingency plan

The end of the lockdown will not end the problems. On the contrary, they are likely to be compounded at the onset of the new agricultural sowing season. The most important issue that farmers have to surmount is the problem of repaying their crop loans and gold loans at least for those who have borrowed from the formal banking sector. Crop loans are repaid between April and May and a fresh loan is granted at the onset of a new season. Recent price collapse means that farmers are staring at huge losses and most of them are already highly indebted and hence unlikely to have the means to repay their loans.

Any failure to do so will mean that they will be forced to borrow money from the informal sector at high rates of interest for the new season. Hence, the government will be well advised to think of a rescheduling of loans wherein existing loans are converted to long-term loans payable over a three year period. There is also a greater need for government support in the form of support for other agricultural inputs. Lack of any relief will only make the agricultural crisis worse.

(S Ananth is an independent researcher based in Andhra Pradesh. Views are personal)

Disclaimer: The views expressed above are the author’s own. They do not necessarily reflect the views of DH.