Demonetisation derails cashless plan at APMC markets

Farmers are getting paid for their produce by traders either by cheque, but many farmers are not able to encash the cheques due to currency shortages at banks


Government officials and office-bearers of the APMC markets say the situation will normalize only when banks have enough cash to dispense. Photo: AP
Government officials and office-bearers of the APMC markets say the situation will normalize only when banks have enough cash to dispense. Photo: AP

Mumbai: Nearly three weeks after the partial demonetisation of Rs500 and Rs1,000 notes, cashless contracts are running the trade at Maharashtra’s major agricultural markets, but problems with bank liquidity persist.

Farmers are getting paid for their produce by traders either by cheque or via the Real-Time Gross Settlement (RTGS) option. But many farmers are not able to encash the cheques due to currency shortages at banks, according to government officials and elected office-bearers of Agriculture Produce Marketing Committee (APMC) markets.

While both perishable and non-perishable agriculture commodities are still witnessing a moderate to high impact of the withdrawal of the notes, most APMC-regulated markets have started cheque and RTGS-enabled transactions.

Government officials and office-bearers of the APMC markets say the situation will normalize only when banks have enough cash to dispense.

“The impact on the producers and sellers of perishables like fruits and vegetables would be more severe in the sense that these commodities may not be able to cope with the transition from mostly cash transactions to cheque and online transfer of payments. Even for non-perishable like cotton, the situation will continue to be grim for those farmers who are getting paid by cheque due to very low liquidity in banks in rural areas,” said a senior government official with the Maharashtra State Agriculture Marketing Board. He spoke on the condition of anonymity.

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Maharashtra is the country’s second largest cotton producer after Gujarat.

According to the state-run Cotton Corporation of India, the country will produce 35.2 million bales of cotton (one bale is equal to 170kg) in 2016-17. The Maharashtra State Cooperative Cotton Growers Marketing Federation estimates that the state’s share in the yield would be around 7.5 million bales.

Cotton is a major cash crop for the regions of Vidarbha and Marathwada in Maharashtra, which account for nearly 85% of the state’s total yield.

Manoj Saunik, managing director of the Maharashtra federation, said APMC markets have been witnessing the arrival of nearly 1.5 lakh quintals of cotton per day, which he said indicated that the market situation was “normal”.

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“The very fact that farmers are not selling cotton to the federation at the government-appointed minimum support price (MSP) means they are selling it to traders at APMC for a better price,” he said. “At some APMC markets, they are getting Rs4,650-5,000 per quintal, which is better than the MSP of Rs4,160. Currency shortage has had little impact on cotton arrivals and transactions also because we started RTGS-enabled transactions in 2014-15 itself and most cotton growers and APMC-registered traders have bank accounts.”

Sudhir Kothari, president of the APMC in Hinganghat in Yavatmal district of Vidarbha, which is India’s biggest wholesale and regulated market for cotton, said cotton transactions are returning to normalcy due to cheque and RTGS usage, but pointed out that farmers were not getting money for their produce.

“The commission agent at APMC market is giving out the cheque immediately after cotton has been traded. But farmers cannot encash those cheques because banks do not have cash,” Kothari said.

Jaydatta Holkar, president of Lasalgaon APMC in Nashik district, India’s largest wholesale market for onions, said the market resumed operations on 17 November after remaining shut since the demonetization.

“We started online transactions from 17 November using RTGS and cheque facilities. Farmers who have bank accounts are accepting payments from traders through cheques and RTGS. The situation is coming back to normal for the fresh arrivals and we are getting around 9,000 tonnes per day. But the situation is turning serious for the old stock of red onions which needs to be cleared immediately. This variety can be stocked for five months, but it turns perishable after that. Currency shortage is directly impacting this old stock which is also losing its market value with every passing day and farmers need cash payments for this produce,” Holkar said.

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Red chilli arrivals at north Maharashtra’s Nandurbar APMC market have witnessed a drop due to the currency shortage, said Nandurbar APMC secretary Yogesh Amrutkar.

“Eight days back, the APMC market was receiving about 8,000 tonnes of red chilli, but it has now come down to 5,000 tonnes. But farmers are getting paid directly into their accounts using RTGS or cheque option,” he said.

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