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Farm incomes dented as note ban drives down prices of perishables

Price of horticulture produce has tumbled over the past month with wholesale rates of potatoes hitting less than Rs5 per kg


In Karnataka, wholesale tomato prices fell to as low as Rs2.9 per kg in some markets last week. Photo: Priyanka Parashar/Mint
In Karnataka, wholesale tomato prices fell to as low as Rs2.9 per kg in some markets last week. Photo: Priyanka Parashar/Mint

New Delhi: The cash crunch in rural and agricultural markets after the centre’s surprise move to demonetise high-value currency notes has taken a toll on prices of perishable farm produce, denting farm incomes.

Price of horticulture produce has tumbled over the past month with wholesale rates of potatoes hitting less than Rs5 per kg, shows data from the National Horticulture Research and Development Foundation. Last week, in Karnataka, wholesale tomato prices fell to as low as Rs2.9 per kg in some markets, compared to Rs10-18 per kg in early October, while at the Agra mandi in Uttar Pradesh, potatoes were sold at Rs4.7 per kg on Monday compared to Rs10 per kg in early November. The slump is spread across winter vegetables: in major wholesale markets in Maharashtra, cauliflower prices ranged between Rs3.5-5 per kg on Monday.

“I am unable to find buyers for potatoes even at Rs2 per kg as no trader is willing to lift the produce,” said Rumal Singh, a farmer from Mathura in Uttar Pradesh, who grows potatoes in 40 acres. “The note ban has severely affected the incomes of vegetable growers as most of their produce is selling for less than Rs5 per kg at local markets,” he said.

Data released on wholesale inflation last week showed that food inflation decelerated significantly to 1.54% in November from 4.34% a month ago, and vegetable prices dropped drastically by 24%.

While this lowered retail prices for consumers, rural incomes have been hit as farmers are unable to sell their produce.

“Demonetisation has hit farmers more than what consecutive years of drought did. Not just perishables, prices have dipped for pulses, cotton and soybean too as trade is hit due to lack of cash,” said Devinder Sharma, a Chandigarh-based farm sector analyst. “In Himachal Pradesh, farmers have left their potatoes on the field as it won’t pay for labour costs of harvesting,” Sharma added.

In addition to collapsing farm gate prices, farmers and traders are unable to pay wages to labourers due to the cash crunch. The normal south-west monsoon was expected to boost production and improve farm incomes that were stressed due to consecutive years of drought in 2014 and 2015.

The price decline in perishable produce is significant as in the past few years, production of horticulture crops has exceeded that of foodgrains. In 2015-16, Indian farmers produced 30 million tonnes more of horticulture crops compared to foodgrains.

“While demonetisation has disrupted the buying pattern of horticulture produce, the collapse in prices is also due to the fragmented nature of agriculture markets,” said Pravesh Sharma, former head of Small Farmers’ Agribusiness Consortium, a specialized agency of the agriculture ministry. “The demand for vegetables did not collapse but the price dip at farm gates shows that the supply chain is highly unorganized and larger buyers should purchase directly from farmers.”

Prime Minister Narendra Modi has set a target of doubling farm incomes by 2022. However, there is scant data on farm incomes; a situation assessment survey published by the National Sample Survey Organisation in December 2014 showed that average income of a farm household is a little over Rs6,400 per month.

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