Farmers Suicides, Government, and the Weather God

Farmers committing suicide is not a new thing. Although it can happen for personal reasons, however, the economic ones gain prominence. Crop failures, inability to get the right price, and insurmountable debt are the factors that may drive farmers to take the extreme step. Interestingly, every time, in the wake suicides, the political class debate out the reasons. The ruling party argue that enough has been done in terms of farm loan waiver schemes, higher minimum support price (MSP), fertilizer subsidies, and a tax-free agricultural income, the opposition parties slam government as not much is happening on the ground. The fact of the matter is much of the factors leading to a farmer’s death are outside control of anyone. Why? Read on.

Woe 1: Crop Failures

World Bank data shows only 35 per cent of India’s agricultural land is irrigated (artificial application of water to land or soil). This means a huge 65 per cent of farming depends on rain, something on which government has no control. In fact, as Figure 1 shows, probability of a farmer committing suicide is more during bad-rain years. To have a meaningful comparison, we standardized rainfall and suicide data with respect to mean and variance, to make them unit free (read, std. rainfall and std. suicide).

Working with agricultural output and rainfall data we find evidence in favor of the association between them (N. Banik and B. Biswas, Food Price Inflation and Weather God, The Empirical Economics Letters, February 2013). Results from our regression analysis point out for the states of Bihar, Uttar Pradesh, and West Bengal, inadequate rainfall has a significant effect on lower crop production. This is also congruence with the fact that these three states lack in basic irrigation facilities. The dependency is less for the state of Punjab, with a relatively better irrigation framework.

To check  the robustness of our result, we did a counterfactual experiment by surveying market managers employed with the wholesale food and vegetable association in Chennai. Survey points out, in the event of poor harvest and bad rainfall the number of trucks bringing vegetables to the Chennai city wholesale market from neighboring Kerala and Karnataka fall drastically. There is a high correlation between the bad harvest/poor rainfall year and the number of trucks bringing produce to the wholesale market. In fact, there are instances of hoarding by big retailers and middlemen during bad harvest years.

Woe 2: Inefficient Supply Chain

In India, if farmers are to sell their produce, they can sell directly to the government. The Central government procures 24 essential food items from the farmers through its agencies such as National Agricultural Cooperative Marketing Federation of India Limited (NAFED) and Food Corporation of India (FCI).

However, in reality things are little different. Typically, MSP is higher than the market price, and one would think that farmers gain every time the government announces the MSP. However, seldom farmers are able to sell their produce at the MSP. Every village does not have NAFED or FCI outlets. FCI, currently procures a major portion of rice and wheat from a few selective states. 70 per cent of rice procurement is done from Punjab, Andhra Pradesh, Chhattisgarh, and Uttar Pradesh while 80 per cent of wheat procurement is done from Punjab, Haryana and Madhya Pradesh. Other major rice and wheat producing states like Bihar, West Bengal, Assam, and Orissa, have lesser presence of FCI.

Even if there is an NAFED or FCI outlets, the government may not procure if the farmers bring their produce before/after the dates of procurement. The government generally announces the dates of procurement, and many times the farmers are not aware of these dates. Worse still, sometimes, the government announces procurement dates a month or two after the harvest time.

In India, as much as 80 per cent of the farmers are small, with less than 1 hectare of landholding. These marginal farmers do not have access to cold storage (and hence waiting capacity), and have no option but to sell their produce to the middlemen or traders. It is impossible for them to get a space in the state godowns offering storage facilities without any political connection.

What about the items such as fruits and vegetables that typically the central government does not procure? Here the farmers have the option of taking these products to the nearby government-designated mandi. So that the farmers get a fair price, and are not exploited the Agricultural Produce Market Committee (APMC) Act was enacted. In reality, middlemen facilitating procurement through APMC forms a cartel, and at the time of auction offer a substantially lower price to the farmers. Many states do not want to bring in reforms to the APMC Act as such things will derail many of the middlemen who also happen to be full-time state-level party workers.

Woe 3: Higher Input Cost

Small and marginal also does not have access to institutional credit. Most of them depend upon village traders, who are also money lenders, giving them crop loans and pre-harvest consumption loans. The superior bargaining power of the village traders and the middlemen mean that the prices received by the farmers are low. Additionally, higher farm labor input price and depleting ground water resource (which means higher price of generator set) add to their woes.

Way out

There are many in the list, but the important ones are: First is to rise above party politics and ensure reforming the APMC Act. This will ensure farmers realizing the right price. Second is timely procurement through MSP. Third, imparting necessary skill. This will ensure adequate employment opportunities for 54 per cent of people dependent on agriculture. Fourth, instead of spending on subsidies, invest in rural infrastructures, such as electrification and building canals. Electrification will help setting up rural based small-scale industry, and canals will reduce dependence on weather god.