Despite an optimal monsoon, the sale of Rabi crops has not been good, which is leading to a liquidity crunch for the farm sector.
Mr. Vijay Mahajan, Founder of Basix, talks to us about the current crisis and outlines what could be the way forward for the Agri economy.
(BASIX is a livelihood promotion institution established in 1996, working with over 3.5 million customers, over 90% being rural poor households and about 10% urban slum dwellers.)
We start the conversation by asking him about the current state of affairs for the agriculture sector and especially about the plight of the small and marginal farmers.
Mr. Mahajan starts off on a fairly optimistic note about agriculture leading the way forward for India’s economic revival in the aftermath of the pandemic-forced lockdown. He attributes the optimism to three factors:
The first is the demand side, which has remained stable naturally because everybody needs food and it is not a discretionary spend that consumers can forego;
Secondly, there have been ample Rabi crops this year. And monsoon has also been better than normal, so we can also expect a good Kharif harvest.
Finally, the supply side is also in good shape without any disruption in the supply chain for bulk movement of food grains and fertilizers.
While all these factors indicate a silver lining for the Agri economy, the dark clouds still hovering over the heads of farmers at this point is the need for working capital from credit. The Kharif sowing season is around the corner and farmers need cash on hand to buy seeds and fertilizers. However, the sale of Rabi crops has not been good, which is leading to a liquidity crunch for the farm sector.
“Farmers would normally use the money from the sale of Rabi crops to sow the Kharif crop, particularly small and marginal farmers are facing that problem. So, if we want to benefit from the overall revival of the economy led by the agricultural sector, then we have to help solve the problem of working capital for the small and marginal farmers,” he adds.
According to him, if we want to benefit from the overall revival of the economy led by the agricultural sector, then we have to help solve the problem of working capital for the small and marginal farmers.
Currently, about 9 crore farmers have Kisan credit cards but there are over 2.5 crore farmers who do not have Kisan credit cards.
The Government is trying to support farmers and has provided Kisan credit cards, but 25% of the titled farmers ( who legally own land ) also do not have the credit cards, plus a significant number of typically small, marginal and tenant farmers, do not have access to this instrument. Tenant farmers are those who cultivate but do not own the land. Since many farmers are not eligible for bank loans, small, marginal and tenant farmers are the ones who urgently need working capital right now.
While the working capital need of these farmers could be as little as Rs. 2000, liquid cash in their hands is the desperate need of the hour. Being a Social Investor on the Rang De platform, Mr Mahajan applauds the Rang De India campaign, which has been launched to raise interest-free loans for small and marginal farmers to tide over this crisis.
He also gives a little overview of the risk assessment on the platform, ‘Instead of giving all your amount to one farmer they give it to several others. And similarly pool contributions from several people for one farmer. This methodology is fully transparent and computerized, in fact on my mobile I get the pictures and profiles of the farmers that I gave the money to Rang De. So, it is a seamless transparent process and very good risk management’.
In view of the current crisis, he adds ‘I personally feel that this is the best use of the money that the middle class and above people can make, instead of putting it in fixed deposits and earning 6-7% and then paying tax on it. You can just give it to our farmer friends and help them to be self-sufficient and help them to be truly ‘atmanirbhar’ and also feed the nation. There can’t be a greater act of altruism or patriotism at this point in time’.
When asked about the role of corporates and the role of the government going forward, he summarized by saying that corporates who are working in the agricultural sector can provide support services extended through their wholesalers and further extend that to the customers. But the number of farmers who do not have Kisan cards is relatively high and government intervention could be the way out.
One indirect way the government helps is by launching the MNREGA and coupling subsidized food grains to the public distribution systems. If farmers get some MNREGA wages and food grains they can manage till the next harvest comes, which is in the October- November period. While this is a temporary fix, it still does not solve the institutional problem of cash inputs which farmers need for growing crops.
His views on the sector in the coming months:
“It is difficult for everybody. But even more so for the small and marginal farmers, if some of them are growing vegetables in semi-urban areas then they can get a better cash flow, provided the logistics chains are open. But if they are into just cereal production and if they are in rain-fed areas then it is going to be hand-to-mouth.
When asked if the migrants going back to the villages would be of any help to the farmers, he responded by saying, “there are already too many workers in the fields. And the migrants who had left the villages and have now come back are better educated and skilled workers in other areas not necessarily in farming. His assumption is that these migrants may return to cities once the economy in urban areas starts to show signs of revival.”
While we also hope for agriculture to lead the way for the economic revival, the need for credit is huge for the small and marginal farmer community. We continue to raise interest-free loans for them, join us in this endeavour to revive not just the lives of the farmers but also look at the overall economic revival of the country.
To make your social investment in small and marginal farmers, visit rangde.in/india.