After two years of deficient rains, this year’s good monsoon brought cheer not only to the agriculture sector but also to the country’s policy makers. But before it could capitalise on nature’s bounty, the demonetisation exercise delivered a body blow to agriculture and its allied sectors, which primarily deal in cash. The prices of vegetables – both at the wholesale and retail level -- have crashed, leaving farmers, especially the small and marginal ones, in a perilous situation. Most farmers are still dependent on cash for their daily dealings and those engaged in growing vegetables have no support mechanism to hold their crop for long as it is perishable. The result: Last week, at two wholesale markets in Madhya Pradesh, onions were sold for Re 1 per kilogramme. Similarly, tomatoes cost less than Rs 2 per kg in Andhra Pradesh and Chandigarh.
What is worse is that these farmers will not be eligible for any crop insurance schemes because those are valid only in case of natural calamities such as droughts and floods. Demonetisation is a new phenomenon and so it has never been factored into the list of events that are eligible for insurance cover. Agriculture and the allied sectors – forestry and fishing – account for about 16% of the GDP but more importantly, 60% of India is linked to agriculture. About 40% of the total agriculture loans go towards kharif crops while the rest is given for rabi crops.
In the last two years, the NDA government has undertaken a host of measures to support the farm sector: First, public sector banks have been given an agriculture credit target of Rs 9 lakh crore for 2016-17, up from Rs 8.5 lakh crore in the previous financial year; second, it has launched the national crop insurance programme, the soil health card and the Krishi Sichai Yojana. Third, the agriculture market committees are also being revamped. But these measures will need time to create the safety net that the farmers need. But the key question that remains now is this: Who will compensate the farmers for crop losses due to demonetisation?