Demonetisation 2.0: cash crunch hits farmers, again

More than creating financial crunch for upcoming sowing season, cash crunch is impacting the prices at which farmers are selling their produce

By Banjot Kaur
Published: Thursday 19 April 2018

While the Union government is promising that cash crunch in the market would end soon, the farmers have already started feeling the pinch badly. The fears of demonetisation have come back for them. They are in soup because not only is this the harvest season, but also because they soon need to prepare for next round of sowing.

The states, which are facing the worst crisis, include Telangana, Andhra Pradesh, Bihar, Madhya Pradesh and Gujarat. Down To Earth spoke to farmers and experts in three of these states.

Ramanjaneyulu GV, executive director of Hyderabad-based Centre for Sustainable Agriculture says the cash crisis is a double whammy for farmers. “The harvest season is on and whatever crop the state government procures, it pays the farmers through cheques. But when farmers are going to withdraw money from banks, they return empty-handed. So they are not able to fulfil immediate needs,” he tells DTE. Secondly, this is the time when farmers purchase seeds, fertilisers and equipment for next round of sowing, which starts in June-July. “If farmers don’t have the money, how will they buy all this,” asks Ramanjaneyulu. He also observes that the cash crunch in villages is not a recent phenomenon. “From the last two months, the bank branches in villages were facing the deficiency of hard cash. It has reached peak now,” he adds. Farmers are in complete dark because there is no word from the Telangana government as to how and when the situation would ease. 

Meanwhile, the governments of Andhra Pradesh and Telangana have claimed that they had informed the Centre about an impending cash crunch in February itself. Andhra Pradesh chief minister Chandrababu Naidu had written to Union finance minister Arun Jaitely on February 14, 2018 saying that Reserve Bank of India must provide cash worth Rs 5,000 crore to the state as it was facing huge crunch of lower denomination notes. 

“The effect of demonetisation is still being felt on this sector. Now, we have another round of cash crunch. The situation would be alarming for farmers if this problem does not gets resolved on ground in 10 days,” food and trade policy analyst Devinder Sharma tells DTE. He adds that more than creating financial crunch for upcoming sowing season, it is impacting the prices at which farmers are selling their produce. “You are already seeing a crash in onion prices. If not direct, the cash crunch is definitely an indirect causal factor for it,” he adds. The prices of crops had dramatically crashed, incidentally after demonetisation. In a blog penned by Sona Mitra for Centre for Budget and Governance Accountability, she quoted an Indian Express column by Harish Damodaran, which said that despite the fact that the farm output for the last quarter of 2016-17 was 2.3 per cent higher year-on-year, the fall in prices by 2 per cent over the same period, resulted in the value of agricultural production rising just 0.3 per cent.

In Madhya Pradesh, too, farmers are in deep trouble. Rashtriya Kisan Majdoor Sangh’s Hoshangabad district president Leeladhar Singh Rajput says, “Whatever transaction MP government does with the farmer, it is done through online mode. The money is transferred directly into the account of the farmers. Now farmers are travelling 10-15 kilometres everyday to go to banks and still they are not getting the money.  The farmers were already in debt as the government was late in disbursing the claims of Bhavantar Bhugtan Yojana (crop price deficiency scheme). Whatever has landed, farmers can’t withdraw that also.”

Besides creating the immediate problem of cash crunch for purchasing the capital for next crop, he says the cash crunch has increased the debt burden of farmers. “March 15 was the last date for farmers to pay the instalment of their Kisan Credit Card accounts, if they wanted to pay interest only at the rate of 4 per cent. Those who paid after that date, had to pay an interest rate of 7 per cent,” he adds. Reacting to the statement of MP’s finance minister Jayant Malviya, who had earlier this week said that the state government had specific inputs that notes of Rs 2,000 are being hoarded, he said, “We are not bothered by the fact as to who is hoarding. Even if hoarding is happening, it is happening due to mismanagement of the government. Why should farmers end up paying extra interest rates?” he asks. 

Farmers in Bihar, too, are livid. Talking to DTE, Nitish Kumar, a farmer in Darbhespura village of Nalanda district says, “We have started facing cash crunch for the last 20 days. Besides farming, this is season in Bihar when weddings take place. Farmers usually don’t keep much cash and now they are in huge trouble.” Nitish also adds, “The farming season in Bihar usually begins late. So, we start sowing only after July and do the necessary purchase from June. If the situation does not ease out, farming would be very badly affected.” 

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