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Monday, Nov 18, 2019

Soaring prices don’t spell better times for Maharashtra’s onion farmers

Prices went up in the first place because rains destroyed a lot of produce. So, most farmers did not have any onions to sell when prices went up.

india Updated: Oct 15, 2019 02:27 IST
Roshan Kishore
Roshan Kishore
Hindustan Times, Lasalgaon/Pimplegaon/Nashik
A worker sleeps on sacks of onions at the Vashi Agricultural Produce Market Committee (APMC) wholesale market in Mumbai, India, on Thursday, Oct. 3 2019. Onions in India are once more at the epicenter of a major controversy, pitting government officials who want lower prices against farmers that need extra income. Photographer: Dhiraj Singh/Bloomberg
A worker sleeps on sacks of onions at the Vashi Agricultural Produce Market Committee (APMC) wholesale market in Mumbai, India, on Thursday, Oct. 3 2019. Onions in India are once more at the epicenter of a major controversy, pitting government officials who want lower prices against farmers that need extra income. Photographer: Dhiraj Singh/Bloomberg(Bloomberg)
         

Lasalgaon is among the biggest markets for onions in India. Businesses, big and small, admit to being dependent on onion farmers for their incomes. Farmers bring their produce in tractors and trucks ferry onions across the country. At a time when the spike in onion prices has been making national headlines, one would expect exuberance in local markets. That is not the case. Lasalgaon is not an aberration. Hindustan Times also visited Pimplegaon, another big onion market 30 km away. Farmers have been getting Rs 28-30 per kilogram for their onions in both these markets. This is much more than what they normally get. So what explains the tepid sentiment? A conversation at the hair salon next to the onion and vegetable market makes things clear.

It emerges that not everybody gained from the onion price rally. Prices went up in the first place because rains destroyed a lot of produce. So, most farmers did not have any onions to sell when prices went up. Sure, some have gained. But it takes a mass jump in earnings to boost overall spending. When the produce was good last year, everybody lost out. And the government killed the current rally by banning exports, we are told.

Unlike what many people like to believe, stakeholders in Lasalgaon’s onion economy, both farmers and other businessmen understand the vagaries which India’s horticulture market subjects them to.

They are worried that most farmers will increase their onion cultivation next year in the hope of getting good prices. This is bound to create a glut and bring down prices. Only if the farmers could co-ordinate among themselves and limit production, will prices always be good, they lament.

Given the lack of an organisation or external mechanism to control cultivation, thousands of farmers reducing production to keep prices higher is a problem game theorists in economics would love. After all, any voluntary individual effort to curb production to keep prices high can backfire if others produce more and extract a bigger premium, which has come at a collective cost.

Then, there is another dilemma. Better seeds, pesticides, water sprinklers for irrigation etc. have all helped increase production. But they have also added a lot to costs. This was not the case earlier, a farmer in his sixties tells us. A small bottle of pesticide comes for Rs 500. The farmer has to spend an entire day spraying it in the farms. He can’t even come home for a meal, lest all the pests on his body infect his home. You don’t use these inputs and the yield suffers. There is also the labour cost of cultivation. The younger generation does not want to work in the fields. Onion cultivation is a labour intensive process unlike cereals such as wheat, where machines can take care of a lot of things. None of these — labour or material — can be adjusted for fall in prices. It is the farmer who is sole risk bearer.

But doesn’t everyone gain when prices of edibles are low? This is exactly what Girish Plave, Bharatiya Janata Party (BJP) president of Nashik town told us when we asked him whether or not the government’s efforts to control onion prices have robbed farmers a chance at earning more? If prices go up, it is people in just one district who gain, whereas low prices are in national interest, he said.

The proprietor of the salon disagrees with Palve’s reasoning. If a farmer earns Rs 1 lakh in a year, he will actually spend Rs 1.2 lakh. This is because he borrows the extra Rs 20,000. When a trader earns the same amount, he’ll put Rs 50,000 in his bank account, he adds. Farmers have not been getting food prices for years now. This has squeezed their spending and therefore everyone’s businesses, he explains.

Without any formal training in economics, this man is describing one of the basic concepts in macroeconomics. It is known as the marginal propensity to consume (MPC). MPC can be roughly defined as increase in consumption spending for every one rupee increase in income. It is a known fact that MPC declines with rise in income levels, as most basic needs are met and people tend to save for a rainy day. The salon owner is actually claiming that MPC for farmers actually exceeds one, basically suggesting perpetual debt financed consumption.

This is not very surprising. Most farmers in India are never able to fulfil what can be described as basic needs. This is not surprising. According to a National Sample Survey Office (NSSO) report, average incomes for agricultural households — those who derived majority of their incomes from farming — was just Rs 77,112 in 2012-13. The fact that the first Narendra Modi government announced an income transfer of Rs 6000 per year for farmers and expected to gain from it politically, speaks volumes about the financial status of India’s farmers.

So, what is to be done? The government ought to control input prices, one of the farmers tells us. What can we do, no one raises these problems in politics, another farmer chips in. Farmers should not be greedy and reduce cultivation, a commission agent in Pimplegaon says.

Will all this impact the elections? Lasalgaon is part of the Yelva assembly constituency (AC), which elected Nationalist Congress Party (NCP) heavyweight and former deputy chief minister of Maharashtra, Chagan Bhujbal with a comfortable majority, both in 2009 and 2014. Most people, including those who support the BJP, believe that he should sail through comfortably. He has done a lot for the area, we are told. But things do not look good for Bhujbal’s party in the future. The only customer in the salon, a man in his early 30s, was getting a facial done to get ready for a function. He has been an NCP worker and was going to join the Shiv Sena along with many others at a public event. Why are you deserting Bhujbal, we asked? He was sent to jail by the BJP government, they’ll do it again, the youth replied.

Farm gate prices are not the only thing which has been under squeeze in the last few years in Maharashtra. The opposition, especially its important leaders have been facing it too, both from the BJP organisation and investigative wings of the state government. While Bhujbal, who is 72 years old, still stands a chance in these elections, the onion economy of Lasalgaon does not see a pan-state, leave alone pan-India alternative to raise its concerns.