Agra: In Agra’s wholesale mark-ets, the smell of decay sti-cks to everything. Everyw-here, huge mounds of potatoes rot, releasing an acrid smell. Farmers watch helplessly.
Farmers scramble to recover costs as potatoes perish
It was only two-three years ago that these farmers started cultivating potato, partly because it requires less water to grow than wheat and paddy, a major factor given the declining groundwater levels in the state.
But, to really make money off it they got into something they had never done—hedging the price of potato on commodity exchanges such as the Multi Commodity Exchange of India Ltd, or MCX, and National Commodity and Derivatives Exchange Ltd, or NCDEX.
The going was good to start with. As more farmers started growing potato, the crop output rose this year to 115.30 million tonnes (mt) in India’s most populous state, up 30% compared with a year ago. Uttar Pradesh accounts for more than 40% of the potato grown in the country, of which Agra alone contributes 30%.
But, on 7 May, the day the government imposed a ban on futures trading in potatoes, their luck ran out.
Rustam Singh, a farmer from Khandoli village in Agra district, who had hedged his position on 12,500 quintals of potatoes on commodity bourses for more than Rs60 lakh, doesn’t know what to do now with his produce lying in a cold store.
“The entire lot was slotted for delivery on 15 May. Now, I have no clue as to who will pick these potatoes and at what prices. I will have to find a trader. I am not expecting even Rs25 lakh for these potatoes,” said Singh.
Most farmers say it cost them Rs450 to produce a quintal, or 100 kg, of potato. The price of potatoes in Agra’s wholesale markets currently ranges between Rs435 and Rs450 a quintal, making it difficult for farmers to recover costs. NCDEX’s spot price on Wednesday was Rs422.50 per quintal.
Worse, the ruling Bahujan Samaj Party in the state has announced a low minimum support price of Rs250 per quintal, the price at which the state-run National Agricultural Cooperative Marketing Federation of India Ltd, or Nafed, will buy the commodity.
“Nafed has not been able to procure much because the government’s proposal is unremunerative,” said Satyendra Pal Singh Setia, a commission agent at Agra’s Sikandra Mandi.
Nafed officials also admit their inability to buy potatoes. “So far, we have not procured potatoes in the whole of Uttar Pradesh because the farmers are not ready to sell at such low prices. But, we have to go by the government’s decision and Nafed cannot, on its own, raise prices,” said a senior official of the agency in Lucknow, on the condition of anonymity.
Narayan Singh, the state’s horticulture minister, said, “Our government’s idea was to send potatoes from the state to other states and we offered a transport subsidy of 40% if potatoes were transported beyond 500km from Uttar Pradesh. This would have also brought up prices, but the farmers are not just ready to sell potatoes to us.”
Farmers, for their part, said potato prices have already started coming down in the futures market and there was no need for a ban. For instance, while the potato futures closed at Rs624 per quintal on 7 March, they closed at Rs486 a quintal on 7 May. “The price would have further come down on its own even if the government had not imposed a ban. After all, its a play of demand and supply,” said Setia.
Cold store owners, who rent out space at Rs100 per quintal, say the government should have at least taken care of the deliveries. “Most of the produce at my cold store was due for deliveries on 15 May. Now, there is nobody to pick these potatoes,” said Rajesh Aggarwal, who owns KP Cold Storage in Agra. He also said his clients had assured deliveries of 100,000 quintal between 15 May and 15 June.
While Uttar Pradesh produced 115.30mt of potatoes this year, cold stores in the state can store only 86mt.
Sonu Sharma, a small farmer from Arsena village, can’t decide what to do with 550 quintals of potatoes he has grown after taking a loan of Rs70,000 from Indian Overseas Bank. The ahrtiya, or the commission agent, is not able to get him even Rs400 a quintal because his potatoes are of inferior quality, or those which can’t be traded on commodity exchanges. Besides, he can’t afford to put them in cold storage because he can’t afford the rent. “I can’t even recover transportation charges of Rs20 a quintal for taking these potatoes to a mandi and my bank will declare me a defaulter. Though I plan to shift to wheat next season, my bank will not extend any credit. What will I do then?” asked Sharma.
Cold store owners, who help farmers to get loans against their warehousing receipts, are also complaining. “Loans have already been extended to farmers. But, I don’t know how they will be recovered with nobody to pick their potatoes now,” said Rajiv Aggrawal, an official at Agra’s Kansal Ice and Cold Storage.
Uday Vir Singh and Joginder Singh, both potato farmers from Dohrau village in Agra district, have run out of ideas.
“When the futures market was there, we would also get indications on spot prices of potatoes. We would then take out potatoes and sell them in the spot markets without getting duped by ahrtiyas,” said Uday Vir Singh. Both relied on Hindi dailies to find out about the prices.
Hedgers, who are new middlemen, are worsening the situation, said agricultural economist Himanshu, who uses only one name.
“There is only speculation, not real trading in the futures market. After the ban is lifted, it is going to be business as usual,” he said.