Agriculture Ministry Vs Moily Demonetisation Spat: What Facts And Figures Tell Us

Union Agriculture Minister Radha Mohan Singh and Congress leader Veerappa Moily, the head of the Parliamentary Standing Committee on Finance, are locked in a dispute on the effects of demonetisation in agriculture.

Moily has shared details of a report from the Agriculture Ministry to say that millions of farmers were affected by demonetisation. The ministry’s response on demonetisation to the committee has reportedly said farmers were unable to buy seeds, fertilisers, and other inputs.

Moily’s tweet and the report have been picked up by the mainstream media, which have put out reports saying demonetisation had a disastrous effect on agriculture. And these revelations come at a time when elections are scheduled in states like Rajasthan, Madhya Pradesh, Telangana, Mizoram, and Chhattisgarh.

Singh, on the other hand, has denied that farmers were affected. He has termed the media reports contrary to truth. The minister has also pointed to rabi production, as also that of wheat, during 2016-17 to support his point. Swarajya took a look at various facts and figures relating to the period, especially November 2016, when demonetisation was announced.

While criticising demonetisation, the charges against the move are that it came at a wrong time, especially when sowing for the rabi season was underway. What effect did demonetisation have on rabi crops? According to data from the Agriculture Ministry, production of rabi foodgrains was a record 136.78 million tonnes.

Of this, the output of wheat, the main rabi crop, was a record 98.50 million tonnes (mt), at least 6 mt higher than the previous year. Oilseed production, too, was higher than 2016-15 rabi at 97.62 million tonnes. There were reports of horticulture crop being affected. But this report by The Hindu BusinessLine, says production during 2016-17 increased 5 per cent.

However, it is a fact that demonetisation had an effect on the sale of kharif crops, which begin coming to market in October and could extend up to December. But demonetisation alone cannot be blamed for the lower prices for some crops during that period. So what was the effect on some of the harvested crop?

For example, prices of arhar (tur or pigeonpea) showed a zig-zag trend in November 2016. In the second week of November, when demonetisation had rendered most people clueless, its prices in Maharashtra, the main growing region, were an average Rs 6,702 a quintal. In the third week, it rose to Rs 7,010 before dropping to lower than the second week.

Compared to 2015, arhar prices were 46 per cent lower in 2016, but demonetisation was not the reason. In 2015, arhar prices had topped Rs 150 a kilogram due to short supply, and in 2016, many farmers opted to grow pulses, leaving them caught on the wrong foot. On its part, the central government also encouraged farmers to grow more pulses.

During demonetisation, reports of poor prices were coming in more from Uttar Pradesh, particularly for vegetables. Bhindi or lady’s finger prices were lower only in the fourth week. The price of cabbage, for which one report said farmers were unable to get good prices, tended to slacken in the third and fourth week, but was higher in comparison to the same period in 2015.

Potato price trend during the period was in line with what was visible for cabbage. A look at the trend the previous year also showed prices easing in the last week of November and first week of December, a period when the new crop begins arriving. Onion prices in Maharashtra showed a downtrend in the second week of November, rose the third week before dropping in the fourth week. But compared to the same period in 2015, prices were almost the half since there was a production glut that year.

In the case of cotton, prices in Gujarat, the largest producer in India, ruled easier in the second week of November, but gained by the fourth week. Compared with the same period in 2015, they were higher. Soybean prices, too, exhibited a similar trend in the oilseed’s hub, Madhya Pradesh, though they were lower compared to 2015.

Prices of paddy in Bengal, the largest grower, showed a declining trend as arrivals tend to pick up from the second week of November. Thanks to a higher minimum support price (MSP) announced by the centre, the rates were higher than in the same period in 2015. Nationally, the average price for paddy was up during the period.

The trend in maize, another crop for which government announces an MSP, was also taken into account. This price for the crop in Karnataka, a key state for the hard grain, showed an uptrend in the third week, but it slid in the fourth week. Prices were marginally lower than in the same period in 2015. Maize prices were under pressure due to record high production.

Looking into the charge that the sale of fertilisers, pesticides, and seeds were affected, there is a curious story. For example, on the seed front, one aspect is when demonetisation was announced, rabi sowing had begun. This means most of the farmers would have purchased their seeds. Still, an examination of one of the seed companies’ annual report shows no reference to the impact of demonetisation.

Nuziveedu Seeds, in its 2016-17 annual report, said its net sales dropped to Rs 907.23 crore from Rs 1,020 crore. But the company told its shareholders that its vegetable seeds saw its value realisation rise despite lower sales due to drought. On the other hand, a smaller seed firm, Mangalam Seed Limited, saw its sales rise to Rs 30 crore in 2016-17 compared to Rs 24 crore in the previous fiscal.

With regard to the sale of fertilisers, Coromandel Fertilisers, a unit of the Chennai-based Murugappa Group, said in its annual report that its sales were Rs 7,662 crore in 2016-17 against Rs 8,254 crore in 2015-16. The company dealt with demonetisation issues separately as “Combating demonetisation through digitization”. It said: “The suddenness of the announcement and the sheer scale of the cash-based economy made the rapid implementation of this initiative a challenge.”

The company said it worked in tandem with the State Bank of India and other government officials to install 800 debit card swiping machines in Karnataka, Andhra Pradesh, and Telangana. This facilitated intake of farm inputs by farmers using their Rupay and other debit cards.

Farmers were also helped to open bank accounts, while others were extended credit through a tie-up with banks and non-banking finance corporations. As a result of this, the non-cash sales at its stores or Mana Gromo Centres made up 60 per cent.

Another fertiliser firm, Deepak Fertilisers and Petrochemicals Corporation, said in its annual report that its sales were affected during rabi sowing due to demonetisation. Its October-December 2016 quarterly results showed its income from sales and operations slipping to Rs 1,058.78 crore from Rs 1,108.04 crore during the same period in 2015.

Another fertiliser firm, Gujarat Narmada Valley Fertilisers and Chemicals Limited, had no reference to demonetisation in its annual report. However, it showed an increase in its sales to Rs 4,944.81 crore in 2016-17 from 4,845.85 crore in 2015-16.

According to the Fertiliser Association of India, fertiliser consumption in 2016-17 was lower at 25.94 mt. But a closer look at the consumption trend shows that fertiliser offtake in the country has not been showing any consistent uptrend. In 2010-11, fertiliser consumption touched a record 28.11 million tonnes, but dropped five consecutive years after that before rising back again in 2015-16.

Rallis India is one of the top companies providing pest solutions like insecticides. Its annual report for 2016-17 doesn’t mention the demonetisation effect. Sales of its products increased in that fiscal to Rs 1,754 crore compared with Rs 1,613 crore in the previous fiscal. Insecticides India Ltd said demonetisation apart from weak rainfall and lower commodity prices affected the growth of crop protection markets. For the fiscal, its sales were up at Rs 1,189.44 crore against Rs 1,047.22 crore in the previous fiscal.

There is an additional aspect to be taken note of with regard to demonetisation. Despite reports of farmers being affected or facing acute crisis, the number of farmer suicides in 2016 dropped.

Radha Mohan Singh, responding to a Rajya Sabha debate on farm distress and suicides, said 11,458 farmers died by suicide in 2016 – the lowest in 21 years. The National Crime Records Bureau began recording farm suicides from 1995 and, since then, the highest number of suicides – 18,241 – was recorded in 2004, a year of severe drought.

All these facts and figures point out that prices of agricultural produce had changed based on demand and supply. If at all there were aberrations, they could have been minimal. Consumption of farm inputs seem to have been affected, but the companies in the business are not citing demonetisation as the sole reason in case of a drop in sales or poor performance.

Agriculture is a concurrent subject with states administering various rural markets or mandis. Farmers seemed to have handled the demonetisation impact well. But it isn’t fair to say that demonetisation had caused distress, going by these facts and figures.