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COVID-19 Lockdown: Impact on Agriculture and Rural Economy -Vikas Rawal, Manish Kumar, Ankur Verma and Jesim Pais

-Society for Social and Economic Research Monograph 20/3

Key Messages

Lack of planning and preparation by the Central government for tackling the COVID-19 pandemic has dealt a massive blow to India’s economy and has caused enormous hardships to working people of the country.

Harvesting of Rabi crops

• Unplanned and sudden imposition of the lockdown resulted in a massive and unprecedented disruption to agricultural activities such as harvesting, sale of agricultural produce, and purchase of inputs.

• The lockdown caused major disruption to the harvesting of wheat. Combine harvesters were not available in villages since the government took weeks to allow inter-state movement of harvesters. Consequently, a large part of the crop was harvested manually by farmers themselves or by using whatever labour was locally available.

• The post-harvest operations, such as threshing, winnowing, loading and storage were also very slow because of lack of workers in most of the places.

Perishables

• Demand for milk has fallen by 20–25 per cent. While the cooperatives continued to procure milk, many private dairies and informal milkmen sharply reduced purchase of milk from dairy farmers. Procurement price of milk fell in many States.

• Farmers who produce fruits, such as mangoes, litchis, melons and watermelons, have suffered massive losses because of disruption of exports and collapse of domestic demand.

• Poultry farmers incurred massive losses since February, because of rumours associated with the poultry products led to a collapse in demand for poultry products.

Crop losses

• Between March 1 and April 29, about 59 per cent of the area of the country had a large excess (over 60 per cent) of rainfall. The excess moisture at this stage of the crop is likely to have resulted in considerable losses to all crops, including wheat.

• Lack of availability of cold-storages for perishable crops such as potato, tomato and other vegetables and fruits resulted in massive losses to producers of these crops.

• The Finance Minister (FM) announced that claims of Rs. 6,400 crores have been paid through PM Fasal Bima Yojana during the period of the lockdown. This is misleading as the figure refers to settlements of pending claims for the previous seasons and not to losses during the current season. Under PMFBY, farmers contribute the major part of the premium. Payment of claims under PMFBY cannot be treated as support from the government.

Functioning of mandis

• The sudden imposition of the lockdown resulted in a disruption of supply chains and, the farmers could not take their produce to the wholesale markets and haats, and traders could not go to villages to buy the produce.

• There was a sharp drop in the number of mandis that were reporting market arrivals when the lockdown was first announced. The number of mandis reporting arrivals of wheat fell from 746 in the week ending March 22 to just 235 in the week ending March 29.

• Because of restrictions on the number of farmers who were allowed into the mandis and the quantity each farmer could sell on any day, there were long queues of farmers, waiting outside the mandi gates for hours and days.

• Because of these problems, many farmers have still not been able to sell their produce. During the first three phases of the lockdown, total arrival of wheat in the market was 38 per cent less than in the same period last year. The shortfall in market arrivals was 73 per cent for chickpea (chana), 61 per cent for mustard, 48 per cent for potato, 59 per cent for onion, 9 per cent for tomato and 12 per cent for cauliflower.

• Since the government did not make any arrangements for safety of traders, workers and farmers in the mandis, several mandis closed down again in the third phase of the lockdown because of spread of infections in many mandis.

Procurement

• Procurement was delayed by several weeks and, until May 15, was only 83 per cent of the total amount of wheat procured last year. Only a negligible amount of mustard and chickpea (chana) have been procured.

• 96 per cent of procurement of wheat has happened in just four States. In most other States, farmers have been left to sell the produce to private traders.

• The prices of wheat in major mandis in different States, shows that wheat was being sold at prices considerably below the MSP; this was because of delay in public procurement.

• In most mandis, prices of chickpea varied between Rs. 3,500 and Rs. 4,000 per quintal while the MSP was supposed to be Rs. 4,875 per quintal.

• In case of mustard, the prices during the lockdown varied between Rs. 3,700 and Rs. 4,000 while the MSP was Rs. 4425 per quintal.

• The FM claimed that Rs. 74,300 crore had already been spent on procurement by the government. This was a false claim. As per data available from the FCI, government agencies had procured only 283 lakh tonnes of wheat until May 15, amounting to a total purchase of Rs. 54,598 crores only.

Deregulation of agricultural markets

• Government is using this crisis to aggressively push for the reforms of APMC Acts and the Essential Commodities Act.

• The agenda is to use the restrictions on street protests during the lockdown to quickly introduce reforms that are likely to be unpopular among farmers.

• At the behest of the central government, several State governments led by BJP have used ordinances to amend their APMC Acts.

• Deregulation of agricultural markets is being done to facilitate corporate penetration in agriculture through systems such as contract farming. This will strengthen the monopoly power of corporate buyers, traders and commission agents, and open ways for them to purchase agricultural produce directly from farmers at low prices.

Inputs

• In the first few weeks of the lockdown, producers of vegetables and fruits were unable to get fertilizers and pesticides for their crops. Dairy farmers were unable to buy cattle feed. Delays in harvesting of rabi crops resulted in a disruption in the supply of fodder.

• The demand for fertilizers is likely to increase in June as farmers would need them for the Kharif crop. The disruptions in global supply chains could result in shortages in fertilizer availability during the kharif season.

Food insecurity and public distribution system

• On May 1, 2020, the government had stocks of 878 lakh tonnes of grain (including unmilled paddy), which was 668 lakh tonnes in excess of the stocking norms.

• In a period when people have been dying of hunger and demands for providing ration have been made from across the country, the government has increased the amount of grain it is hoarding in its godowns. The total distribution of grain under both the PMGKAY and the National Food Security Act was only 132.7 lakh tonnes. On the other hand, the government procured (until May 15) 283 lakh tonnes more of wheat.

• Instead of using the grain to feed the poor and hungry, government is letting this grain rot in its godowns. The government does not have proper storage facilities for stocking such a large amount of excess grain. Since much of this excess grain has been stored in sub-optimal conditions for long, a significant part of it has been damaged. In just four months, between January 1 and May 1, the stock of rice and wheat that was not “readily issuable”, which included partially spoilt as well as damaged grain, increased from 7.2 lakh tonnes to 71.8 lakh tonnes. This is more than the amount of grain that has been distributed through PM Garib Kalyan Ann Yojana in April and May to deal with the crisis of livelihoods and food insecurity created by the COVID-19 lockdown.

• While the grain is rotting in the godowns, more and more people are suffering from food insecurity and hunger. A database of distress deaths shows that out of 672 distress deaths reported in the media until May 24, 114 were directly because of economic distress or hunger. Another 168 deaths were of migrants who, out of economic distress, were using desperate means to return to their native villages and died on the way.

Employment

• Sudden imposition of the lockdown also put a stop to creation of employment in the Mahatma Gandhi Rural Employment Guarantee Scheme (MGNREGS). In April 2020, only 3 crore person days of employment were created in India as a whole. This was just 12 per cent of what was originally projected to be the level of employment creation in that month.

• In the 44 villages across 18 States that were covered in the India’s Villages during the COVID-19 Pandemic series, the MGNREGS was not functional in any village.

• The Finance Minister on May 17 announced that an additional allocation of Rs. 40,000 crore is being made for MGNREGS. With this additional allocation, the total budget available for MGNREGS this year is Rs. 90,000 crores.

• The Central government needs to allocate at least Rs. 246,0000 crores if all the active job card holders (8.23 crores in 2019-20) and an additional 1 crore households have to be provided 100 days of employment.

Please click here to access the study entitled 'COVID-19 Lockdown: Impact on Agriculture and Rural Economy'.