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LATEST NEWS UPDATES | The farm world still a land of cash -Vishwanath Kulkarni

The farm world still a land of cash -Vishwanath Kulkarni

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published Published on Nov 9, 2017   modified Modified on Nov 9, 2017
-The Hindu Business Line

Scars on agriculture supply chain remain a pain point for commodity prices

Bengaluru:
A year after demonetisation, the cash-intensive agriculture sector is yet to fully recover from the impact.

Cash continues to be the preferred instrument for rural and farm transactions, while alternatives such as cheques and bank transfers are seen making their presence felt in some quarters.

The cautious agri-trade is still seen struggling with inventory management, as the liquidity crunch that threw the supply chain in a disarray has forced many a trader to adopt a cautious stance amidst poor demand that has influenced the prices of various commodities. Hit by the note-ban, traders continue to buy on a “need-basis”, only to service their orders-on-hand.

“Unlike in the past, the trade is not keen on building inventory mainly because of the liquidity crunch and volatile price trends. The note-ban and GST rollout have affected the risk-taking ability of the traders,” says a trader at the Hubbali APMC (Agricultural Produce Market Committee). As a result, prices of many commodities continue to rule lower than last year’s levels, and also below the minimum support price (MSP) levels, despite the tight supplies (see table).

Eyeing better prices

Though farmers have mostly overcome the hardships created by demonetisation, they are hoping for better prices. The average Indian farmer, who sells his produce in APMC mandis to the private trade, expects to realise his payments in cash, on the spot. The realised cash is used to make purchases before heading back home.

“I need cash to pay the workers on my farm and for buying inputs such as seeds, pesticides and fuel and for daily household purchases,” says Venkata Reddy, a farmer from Sankarapuram in Chittor district of Andhra Pradesh. Traders of inputs insist on cash payments.

Cash is still king in rural India because banking/ATM facilities are mostly lacking there, and encashing cheques is viewed as a complex and time-consuming process.

“Cheque will take at least a week to get cleared,” says Hirjibhai Bhingradia, a farmer from Malpara village in Gujarat’s Bhavnagar district. “A farmer doesn’t usually prefer to wait that long after selling his produce. Secondly, the digital mode adopted by the state agencies too take long to reflect in the accounts.

This keeps farmers wary of cash-less payments.” He points out that traders also misuse the farmer’s helplessness at the mandis, often trying to discount the produce and pay a lesser amount if he insists on cash.

“This has become a new normal. If we want to sell cotton for cash, the rate will be less by about Rs. 100 per 20 kg than what we would get if we accepted cheque,” said Bhingradia.

While banking infrastructure still remains weak, it appears that a large section of farmers/villagers are being brought under the ambit of the banking system through schemes such as the Jan Dhan Yojana. Farmers say the government should focus on setting up bank branches at villages farther away from large towns and cities.

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The Hindu Business Line, 7 November, 2017, http://www.thehindubusinessline.com/economy/agri-business/the-farm-world-still-a-land-of-cash/article9947584.ece


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