Farmers caught in a vicious debt cycle



In the mid-afternoon, when most are returning home to rest, is sweating buckets on his farm in Uttar Pradesh’s Hapur district, searching for vegetables left undamaged after untimely rain a couple of nights ago.

Singh, 62, sporting a partly-torn kurta-pyjama, is distressed at the loss of his wheat crop. “This is what is left for us to eat,” says Singh, pointing to rotting and unripe crops of wheat and mustard in his field.

The damage caused by unseasonal rain has further hit the rural economy, already under the burden of falling prices. With prices of paddy, milk, etc, dropping in the past year, the incomes of farmers have dropped. Many attribute this to the “unfriendly policies” of the Bharatiya Janata Party (BJP)-led National Democratic Alliance government at the Centre.

The fall in prices has led many to take up farming, which experts say isn’t suitable to the climate of western Uttar Pradesh. Yet, farmers favour sugar cane because production of the crop is much higher than those of wheat and paddy. The minimum selling price for sugar cane, too, is much more than for any other crop.

Now, there’s a major problem in this segment, too. Mills haven’t paid farmers for last year, as well as the current one.

Lower incomes and unpaid dues have had a cascading effect on the – marriages are being delayed due to paucity of funds and many schools are turning away children due to non-payment of fees.

Tractor and two-wheeler sales, considered a barometer of rural spending, reveal the complete picture. In February, Mahindra & Mahindra recorded a whopping 38 per cent drop in tractor sales, while Escorts saw its sales plummet about 25 per cent (together, the two account for the bulk of India’s tractor market). In February, Hero Motors’ two-wheeler volumes fell four per cent year-on-year and 13 per cent month-on-month to 484,769 units. Bajaj Auto’s motorcycle sales volume fell 21 per cent year-on-year in February, primarily due to a drop in farm wages and low realisations from crops.

Many farmers are defaulting on (KCC) loans, electricity and water bills. Instances abound of farmers being issued notices by banks to auction their land and property for defaults. Many who haven’t been paid for sugar cane fear a vicious cycle of debt. They stare at the prospect of paying an extra three per cent interest on their loans, in addition to the usual four per cent.

The government gives a subvention of three per cent to farmers who make timely payments to banks for KCC loans; defaulters have to pay seven per cent interest. There have been unverified reports of farmer suicides and experts say these could rise after March 31, the deadline to repay bank loans.

“The mills can’t pay us for sugar cane; the wheat and vegetables can’t stand bad weather. What should we sow? We can’t grow paddy because its prices have dropped drastically since the new government has taken over,” says Rajiv Kumar Palania, 31, who lives close to the Simbhaoli sugar mill.

Data sourced from, the official portal to track prices of essential commodities, show paddy prices in the wholesale markets of have slumped 5-10 per cent in the past year, with western parts of the state bearing the brunt. In Hathras and Mathura, paddy prices are about 50 per cent less than last year, the data show.

Farmers claim the selling price of rice is down, though its input costs are increasing due to black marketing of urea. “Tension between the Centre and state government has delayed the supply of urea to the market. We were forced to pay an additional Rs 150 a bag,” says of Mawana, about 60 km from Hapur.

Farmers are concerned about the government’s intention to do away with the subsidy on fertilisers/urea. Though there has been an official denial of this, insiders said the Centre is keen to do away with the subsidy and shifting to a direct cash transfer.

Recently, the government had set up a panel to reform the Food Corporation of India. The panel, headed by former Union food minister Shanta Kumar, has suggested farmers be paid the fertiliser subsidy in cash and the sector be deregulated. Farmers such as Jagbir Singh fear if that is the case, urea prices will double compared to the current subsidised rate of about Rs 5,400 a tonne.

Urea is the most widely used fertiliser in India, about half the overall consumption.

Other factors that could play a spoiler are the sharp fall in selling prices of poplar trees and milk. “Poplar trees, too, are not giving good returns. Earlier, these would be sold for about Rs 800 a quintal; now, the market price is Rs 480 a quintal,” says Braham Pal Singh, a farmer in Ladpur village.

Earlier, farmers in Punjab, Haryana and western Uttar Pradesh preferred such trees to the ubiquitous eucalyptus, as poplar had more biomass growth and was more compatible with agricultural crops.

Farmers blame the fall in the prices of poplar on the central government’s decision to import the wood from China, where prices are low. “The has always been a party of traders. It always gives preference to traders over farmers,” alleges a farmer.