Demonetisation: Note ban adds to cotton farmers' misery in AP and Telangana

Crop losses, mounting debts and a spate of pest attacks apart, the cotton farmers of Telangana and Andhra Pradesh now have to deal with the demon of demonetisation as well.

"The note ban has been a worse epidemic than the white fly or pink bollworm for cotton farmers," says Konda Surekha, a former minister from Warangal, one of the most prominent cotton-growing areas in Telangana. These farmers are sour that Prime Minister Narendra Modi had picked a wrong time for banning big currency notes — the harvest period of the Kharif season for cash crops like tobacco, tomato, groundnut, sugarcane and cotton. Now prices have fallen by 20 to 30 percent and they are unable to clear loans due to the ushering-in of the cashless regime in agricultural markets.

"My cotton stock withered at the market yard as traders said they had no cash to pay and offered cheques," said Jagarlamudi Anil Babu, a cotton farmer of Prakasam district. Farmers say that banks would rather adjust cheques towards loans and interest than disburse cash.

A variety of issues abound for the cotton and textile industry like the non-implementation of the promised loan waiver, the delay in institutional credit and fall in global demand.

Cotton farmers in five districts of Telangana and six districts of AP are wringing hands in distress as cotton prices crashed to Rs 4,100 per quintal from Rs 5,600 per quintal in the pre-demonetisation period. “Adding to our woes, the traders are asking us to accept payments in cheques or scrapped notes of Rs 500 and Rs 1,000,” says a cotton grower from Inkollur in coastal Andhra who deferred cotton-plucking for a week due to demonetisation.

 Demonetisation: Note ban adds to cotton farmers misery in AP and Telangana

Representational image of a cotton farmer in Warangal. AFP

The RBI decision to allow scrapped notes circulation among farmers in marketing their produce and also purchase of seeds and fertilisers has given them temporary relief, but Telangana’s farmers say that Modi should have chosen mid-January to February for demonetisation. A cascading impact is evident from the distress on cotton farmers — weddings, house warming functions and thread ceremonies are either low-key affairs or deferred. Besides cotton, the tobacco industry is dominated by 70 percent cash transactions in the vicious circle of growers, lenders, commission agents and exporters.

Andhra Pradesh and Telangana contribute to one-third of the country’s cotton trade. Chirala in Guntur and Siricilla in Karimangar are popular for their handloom and lungi markets and concentration of looms – they are considered the biggest in Asia for exports to Sri Lanka and Bangladesh.

According to the US-based International Cotton Advisory Committee (ICAC) the currency crunch in India has created shortages in domestic textile market and also hit exports to global markets. Cotton exports from Australia, Mali, Burkina Faso and the US could fill up the gap caused by Indian cotton in 2016-17. The ICAC report also blamed the note ban as an ‘untimely move’ detrimental to the Indian cotton market, which could have a domino effect for the next two years.

Officially 21 cotton farmers had committed suicide in 2016 from June to December. Unofficially though, 61 farmers have committed suicide since June and 12 more in the months of November and December.

Since its birth as a new state in June 2014, Telangana has recorded 1,269 suicides. The Hyderabad-based Centre for Sustainable Agriculture (CSA), estimates farmer suicides in Andhra Pradesh in the past 20 years (1995-2014) at 38,000. Lack of access to institutional credit and low crop insurance add to farmers' woes. “Besides, in anticipation of loan waivers, a large number of farmers did not repay loans last year, and banks have refused loans this year,” points out GV Ramanjeyulu, executive director of CSA.

“They take up crops in Kharif with high interest loans and high expectations to wipe off old dues but often end up adding to their debts and consequent suicides,” says K Changal Reddy, a farmers’ representative.

 Local common sense

In many parts of Telangana and Andhra the crisis has been tackled with local common sense. “Farmers are deferring payments to daily wagers but pay partly in the form of rice and also stood guarantee to small loans taken by them in the local grocery shops,” says Palaparthi Srinivasa Rao, a cotton farmer of Srikakulam. Traders linked payments to fertilisers and seed suppliers for the benefit of farmers. “We also tied up with lorry operators and hotels to pay their dues from the amounts due to them,” says Gopalakrishnaiah, a cotton exporter in Guntur market.

Kuvulu Rythu Sangam (Andhra Pradesh Tenant Farmers’ Association) state secretary N Ranga Rao says that for the Kharif crop season, farmers needed Rs 3,200 crores to take up harvesting in about 40 lakh acres. Another Rs 2,400 crores is needed for the Rabi season. “Since private money lenders also do not have valid currencies now, we depend on government to release crop loans early,” he said.

The monthly report of the Cotton Corporation of India (CCI) said the cotton market in Andhra Pradesh, one of the major producers in the country, has plunged into a deep crisis in the aftermath of demonetisation, as trade and export transactions have almost come to a halt and cotton prices have slumped by Rs 1,000 per quintal from Rs 5,000 to Rs 4,100 in just 40 days. Though the CCI has opened over 40 purchasing centres and offered cash payments in Rs 2,000 notes, the farmers are unwilling to sell and choose to suffer rather than sell at the current prices.

Arrears in loan waiver payments

Although both Andhra and Telangana government announced farm loans waiver as a poll promise, they have been paying dues to banks in installments. Telangana government had pegged arrears at around Rs 18,000 crores and Andhra had reduced the burden to Rs 36,000 crores. Banks were advised to issue new crop loans with the promise that loans as of June 2013 would be borne by the government. However, the RBI had opposed the bulk farm loan waiver initiative of both the states and advised banks to release only crop loans in a guarded manner and ensure that until clearance of arrears, farmers’ slates would not be cleaned.

As a result, banks refuse to give fresh loans until old loans are either paid by the farmer or by the state government. As a result, farmers had to take up farming with savings and loans from private money lenders. “My money lender wants cash and not cheque,” says Bharatakka, a cotton farmer of Ibrahimpatnam in Nalgonda district.

Cotton crop grown in Andhra is sent to the ginning mills of Guntur district which supply cotton to textile mills in Maharashtra, Tamil Nadu, Gujarat and Karnataka. According to market sources, almost 70-80 percent of transactions have come to a halt and the market has been hit hard. This has meant the denial of wages to over two lakh people engaged in cotton trading, spinning, ginning and harvesting activities in the state.

In Telangana too, the situation is similar. Traders are offering farmers sops now to get them to sell their cotton and accept cheques — trips to Mumbai, Shirdi and Tirupati are being offered. “If we deposit the cheques in the banks, the bankers will adjust it against loans and interest and the government will not reimburse it,” said Muthyala Reddy of Warangal.

“Cotton trade is always cash and carry activity and bank operations are hardly 10-15 percent. If we offer to pay online or through cards, our suppliers of seeds and fertilises will just reject,” says a cotton farmer, K Samaiah at Enumamula market yard in Warangal. “The ceiling on withdrawals had also made us delay payments. The government cap on withdrawal at Rs 24,000 per week has sandwiched the farmers,” says Phani Raj, a cotton trader at Chilakaluripeta.

Continuing trouble for cotton

The cotton crisis since 2014 in Telangana and Andhra Pradesh had led farmers to shift to other crops due to delay in institutional credit and an unending wait for farm loan waivers. The total area under cotton declined by 12 percent to 10.5 million hectares this year against 11.88 million hectares in 2015-16.

In 2015 and in early 2016 the crop was hit by the white fly and pink bollworm leading to 30 percent drop in yields. “We are asking the farmers not to use non-Bt cotton seed as refuge crop and reduce area under cotton,” says K Dhananjaya Reddy, commissioner for agriculture (Andhra Pradesh).

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Updated Date: Dec 26, 2016 19:17:22 IST