Dec 12, 2011

Potato glut: Looking beyond the markets

The clock has turned full circle. Some 25 years ago, potato growers in Punjab were forced to plough back the standing potato crop since it was more expensive to pull out the tubers from the soil. To demonstrate their indignation, some farmers had even dumped hundreds of bags of potatoes on the streets. Such was the glut in the market, potato prices had tumbled leaving farmers in an unprecedented distress.

Potato growers in Punjab are not an isolated lot. Farmers in Haryana, western Uttar Pradesh, West Bengal and Gujarat are also faced with an unprecedented glut. Cold storages in the northern region are dumping potato by the roadside or in the nallahs to make way for fresh arrivals. The tragedy is that this year the national production is up by 27 lakh tonnes, which is an increase of 7 per cent over last years's production. In other words, it means that even a 7 per cent increase in production causes an unmanageable glut.  

The fate of potato growers is not much different from what is being felt by basmati and cotton farmers in Punjab and Haryana. In anticipation of a better price this year, based on the price realised last year, there has been a marked shift in acreage under rice to cotton, and basmati. While acreage under cotton had gone up by 19 per cent, the area under basmati increased by 15 per cent. Price of both the commodities has crashed as a result. Farmers are known to be withholding the produce waiting for the market rates to improve. This brings me to the central question. How long will farmers remain at the mercy of the markets?

Faced with a similar situation, and with no potential buyers for even last year’s harvest of paddy, farmers in East Godawari and West Godawari districts in Andhra Pradesh had gone on a crop holiday. Uncertainty of the markets has forced 90 farmers to take their own lives in the past one and a half months in Andhra Pradesh. Over-production of cotton and resulting low market prices has seen over a dozen suicides in the suicide-prone region of Vidharbha in Maharashtra in the past fortnight. Every now and then we hear reports of tomato farmers, onion growers and even mustard farmers dumping their crop by roadside somewhere or the other. 

Returning back to potato in Punjab, in the past few days, newspapers are again full of reports of the massive potato glut that is forcing farmers to dump the harvested crop on roads. Saddled with 2.5 lakh tonnes of unsold harvest from the previous season, and in anticipation of a bumper crop this fortnight, the market has slumped. Against Rs 800 per quintal last year, farmers are able to realise merely Rs 100-150 this year. Such steep fall in prices has brought gloom in the potato belt.  

Twenty-five years, and nothing seems to have changed for farmers. I still recall the then Chief Minister Darbara Singh providing Rs 5-crore for setting up cold storages. Over the years, with steady investment the number of cold storages has increased to 500 plus. If cold storages alone could have addressed the problem, potato growers would have been a happy lot all these years. On the contrary, farmers are reluctant to lift the stored potatoes from the cold storages because of the highly uneconomical prices prevailing in the market.

Nearly 20 lakh quintals of potatoes are lying in cold storages. 

Following the newspapers over the years, I find quite a large number of editorials suggesting the way out from an unmanageable glut. Invariably, all editorials make three suggestions: provide additional cold storage space; encourage public/private investment for processing potatoes into chips and French fries; and finally some setting up plants for manufacturing vodka. I don’t blame the editorial writers alone, agricultural economists too haven’t looked beyond. They would obfuscate the issue by throwing in economic vocabulary that practically means little new.

Let us analyse these suggestions. Cold storages have been set up not only in Punjab but across the potato belt in northern India. Setting up more cold storages would certainly not help the farmers realise a better price at a time of glut. I have seen farmers being served legal notices by the owners of cold storages to lift the stored potatoes. A number of times I find farmers prefer to let the stored harvest lie in the stores than to sell it knowing well that it is not worth it.  

Increase processing facilities for making chips and French fries is a suggestion that finds many takers. Not many realise that the market for potato chips is already over-saturated and many popular brands have vowed out. Market for French fries is also limited because many big retail chains actually have been importing frozen potato fries, whose import is allowed as per the WTO norms. Setting up a few vodka plants however seems to a suggestion made more out of jest than any seriousness. In any case, a vodka manufacturing plant would not require any big quantity that can make a significant difference to the production.

When the going gets tough, irate farmers invariably fall back upon the government for help. Potato farmers for instance have time and again met the Punjab Chief Minister Prakash Singh Badal and have been asking for government’s help in selling 20 lakh tonnes of potatoes lying in cold storage. Cotton farmers on the other hand are demanding a higher procurement price. Surprisingly, no one has demanded big retail companies like Reliance Fresh and Bharti to purchase the surplus potato. Probably farmers are aware that big retail is only a fair weather friend. The question therefore is there any way to ensure that farmers remain insulated from the vagaries of the markets?

I have three suggestions to make. First and foremost, there is an urgent need to strengthen market intelligence. It is time to prepare a crop map for the country. It has to be based on the nation’s requirements as to how much of a particular crop is what the country needs. Department of Agriculture, State marketing agencies and the Growers Association must collaborate to go into mapping the production potential and monitor the area sown under the crops based on the production potential and what can be handled. An alarm needs to be sounded when the area sown exceeds the permissible limit thereby ensuring farmers do not bring any more area under the same crop. This must be accompanied by a vigorous campaign to educate farmers not to go in for monocultures. Multiple cropping must be encouraged so that farmers are able to reduce dependence on one crop, and thereby reduce risk. 

And finally, each state must set up a State Farmers’ Income Commission, which works out the monthly assured income package a farmer must receive based on production and irrespective of whether he is able to find a market or not. 


Prof. J. George said...

Indeed you are pressing the right button. The three suggestions you make needs to be put in perspective for Punjab at least. The Horticulture mission components needs a re-examination. Obviously the three pronged, namely,contract farming, private and direct marketing prescription of the APMC has miserably failed. So has the state Framers Commission in Punjab and Haryana. They need to be woken up from their Kubhakarna sleep.
With the state agencies having withdrawn in favour of PPP partners, pelf seeking is the primary objective function. Isn't growers association already aware of these ground realities? They are the best knowledge repository and educators of multiple cropping.
Punjab has a preponderance of semi-medium and medium farmers that is unique and at the last count (2005-06) they accounted for nearly 2/3rd of the total numbers and over 2/3rd in area under their control.In fact in association with the large farmers their writ rules over 92% of the area in the state.
Against this backdrop of the production landscape and hence dynamics may be you need to relook at the three suggestions for its applicability not only in Punjab per se but all those potato growing states in the country.
I think very firmly that we need to reexamine the role of ecological agriculture that the UN Special Rapporteur has been talking and advocating about for the last few years. The plagiarised wisdom of our economist has not only been dishonest but disastrous for our farm community no matter which category they belong to or are classified into.

andhra pradesh news said...

nice article about those thanx for it

samalochaka said...

The idea that small farmers need to make good money and the idea that food must be cheap are inconsistent. If food produce is cheap then the earning per unit area will be low, and hence "small farmers", i.e. those who own small pieces of land will have low earnings.

So either small farmers can earn well; or food will remain cheap; not both. The only other way to facilitate small farmer is wealth-redistribution.

Further you emphasize on equity and justice; what about Liberty? And you must also recall that liberty and equality are not necessarily compatible. Given that humans have diverse abilities, freedom WILL lead to inequality. If you force equality, you deny liberty.