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Cash Crops In India Are Seeking Venture Capitalists


An Indian shopper examines pulses and food grains at a shop at the Agricultural Produce Marketting Committee (APMC) Yard in Bangalore on October 29, 2014. AFP PHOTO/Manjunath KIRAN (Photo credit should read MANJUNATH KIRAN/AFP/Getty Images)

The recipe for reviving any sick company starts by infusing capital to attract the right mix of talent, technology, scale, and services. Entrepreneurs pursuing a high risk-high reward strategy find them particularly attractive.

India’s 22 cash crops are similarly ailing. They are desperately seeking intrepid entrepreneurs who can stimulate production by offering new and better ways of doing things. But what appears a no-brainer for the rest of the economy is the biggest crisis in farming. Instead of inviting private capital, public policy is scaring it away.

Pulses are the perfect example of the conundrum of poor returns in a growing market faced by India’s ailing cash crops. No one is queuing to invest in pulses because the price signals sent by us don’t reach the value chain. Otherwise, farmers would eagerly invest in hybrid seeds, drip irrigation and crop protection chemicals as they did in cotton. That would attract agri-input companies. Modern processors and efficient supply chains would come forward. Traders would invest in warehousing production so that we can buy pulses throughout the year. Indian households would benefit from affordable protein supply. For pulses and indeed every crop, prices are the best fertilizer.

World over, commodity derivatives markets do the job of transmitting these price signals. And like equity markets, they are the platform for incentivizing efficient allocation of capital to crops. The present abundance of food at a global level is partly due to the capital reaching agriculture after the price spikes of 2011-12. Contrary to public perception, private investment is not the cause of higher food prices, as the success stories of Brazil and Indonesia show us.

When pulses touched Rs 200/kg, the government’s objective should have been to keep an eye on the long term by tiding over the present shortage through trade without distorting the price signals. Instead, it frightened even the meagre capital in the value chain through actions like stock limits and raids against stockists. When the market is left with no idea what authorities would do next, panic sets in. Traders sold off stocks and retired hurt. We are still buying arhar for Rs180/kg because the shortage is genuine.

Government action became an ‘unseen’ tax on future supply. No one sees any long-term incentive in pulses, leaving us trapped in the vicious cycle. The results of the government’s own investment in cash crops through irrigation, research, mechanization, seeds are visible from the sector’s dire straits. Wheat and rice were its only success story. There too, the policy distorted market signals and made them into a political, ecological and economic millstone.

Rising population and prosperity is expected to increase India’s food consumption from Rs 23 lakh crore in 2014 to Rs 42 lakh crore by 2020, says the Boston Consulting Group. According to McKinsey, in 2025, Maharashtra’s 128 million residents are expected to have a purchasing-power parity similar to Brazil’s today. Goa’s and Chandigarh’s 2025 purchasing-power parity will mirror that of Spain today.

That is wonderful news for farming, which is fundamentally entrepreneurial. But farmers can’t be entrepreneurs without capital, whether it is their own savings, loans or investment from others. Unfortunately, long-term bank credit for building assets such as poultry and dairy farms, machinery, tractors and pump sets is barely 7% of agri GDP. It is this poverty of capital that makes farmers feel suicidal amidst the wealth of potential.

Ironically, there is no dearth of private capital waiting in the wings. Large-scale investment in agri-inputs picked up after the 2011 spike in global and domestic food prices. Foreign direct investment in agricultural services and machinery was less than 1% of the total inflow in2000-2014 but can pick up.

Private equity has injected more than $100 billion into 3,100 Indian companies in the past 13 years. It is now turning to agriculture. Venture capitalists are funding start-ups focused on agricultural productivity, food technology, and “killer apps” that reduce waste, use of chemicals, conserve resources, and improve distribution. Everything depends on the ideological consistency between the government’s attempts to woo foreign and Indian investors and its day-to-day policy towards price management.

Modern markets are about turning scarcity into abundance. To feed itself, India urgently needs an agriculture that is efficient and resilient to climate change. The movers of money and credit do the economy a great service by the market signals they provide to entrepreneurs. Cash crops are signaling they need help. Unless the government lets capital go where the opportunity lies, we will all end up less well off.

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Here’s Why Only GM Pulses Can Give India Its Protein Fix

(Photo credit: Shankar Mourya/Hindustan Times via Getty Images)

(Photo credit: Shankar Mourya/Hindustan Times via Getty Images)

Tur dal has become a status symbol- again. And that is hardly surprising. Pulses – tur, chana, lentils, moong, urad – are highly susceptible to hot weather, pests and disease. Unless we take dramatic steps to protect them from the effects of climate change and other dangers, the primary source of proteins for vegetarians in India are going to remain off the table.

Fourteen pulses are grown across the country, from Kashmir to Kerala. While they can withstand drought, flood and frost, any abnormal temperature when the plant is ready to bear fruit affects the yield. Pests and disease are the other big nuisance in the field and for the crops in storage. Pod borer and thrips attacks wipe out a third of the chana crop annually. Diseases such as blight, rust and wilt take a further toll. Weeds can inflict 17-20% losses. Stray cattle and the blue bulls invade fields during summer. In tur, over 80% of the flowers produced on plants are shed.

Farmers do the best they can, given that most are cultivating tiny fields dependent on rain, with tired seeds and depleted soils. But conventional pesticides, weedicides and cultivation practices offer inadequate protection. The upshot is the while India has the largest acreage under pulses, output per acre trails Myanmar and parts of Africa by 30%. The high cost of chemicals and labour, coupled with the low yield, make pulses an expensive proposition.

This year, the most efficient farmer on average spent Rs 43 per kilo on tur, Rs 50 per kilo on moong and Rs 45 on urad, according to the Commission for Costs and Prices, under the Ministry of Agriculture. Despite the frequent increases, the minimum support prices offer a net return of 6-16%. As a result, farmers grow pulses only on land they can afford to ignore, in the rain-fed rice fallow period, or mixed with other crops such as soyabean and sugarcane. If rice is at 100 in terms of returns and moong at 60, the choice becomes a no-brainer. Especially since the government announces the MSP only for five out of the 14 pulses, and procurement is whimsical. Despite the obvious need for crop insurance, there are no incentives for pulses farmers.

Smarter growing techniques do help but not much. The Central government’s ambitious National Food Security Mission, launched in XI Plan to promote pulses production, could barely make a dent in 38 low-productivity districts after spending Rs 2148 crore in targeted technology demonstrations, distribution of seed kits and irrigation equipment. Area under pulses in these districts declined 17% from 2006-07 to 2010-11, when the Plan ended, while yields remained below average. The Accelerated Pulses Production Programme that followed suit with an investment of more than Rs 800 crore is nothing to write home about.

Though it appears overwhelming, the fight against heat, pests and disease is not unique to pulses. Cotton was similarly struggling to survive the odds. Indian textile mills were importing cotton to make cloth since domestic production was insufficient. Then came BT cotton and the tides turned. Production more than doubled within six years. India became largest cotton grower and second largest exporter after USA. Pulses are now begging for a similar dramatic victory.

Luckily, the solutions are ready. Farm scientists in half-a-dozen premier public sector institutions, led by the Indian Institute of Pulses Research, are using cutting-edge technologies – molecular marker-assisted breeding and transgenics – to create seeds that offer powerful and precise protection against the complex environmental and natural factors affecting pulses across the country. Once popularized, they will allow the farmer to get sufficiently higher yields for attracting larger acreage, mechanization and better cropping practices. At present, less than a fifth of the acreage is sown with new seed each season. That should change.

What is needed? Trust and political will. The government should allow genetically modified pulses to meet the current protein deficit. And the nation should believe its scientists when they promise it is safe to eat. Pulses production needs to accelerate at least 4% annually to keep pace with consumer demand. The latest seed technology can create that paradigm shift.

Former agriculture minister Sharad Pawar understood the potential of Bt. cotton and managed to convince the naysayers. But he failed to do the same for food crops. After he became Prime Minister, Narendra Modi gave the slogan of “Jai Kisan, Jai Vigyan”. The time has come to make good that promise. Pulses sorely need modern science to stand tall and bear fruit. Instead of rushing bowl in hand to other countries for its daily protein fix, India should rush to its labs. Or else, millions of malnourished people, especially the vegetarians, will remain deprived of a basic building block of health.

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Digital Farm India: How Big Data Can Sow The Seeds For Greater Food Security

Indian farmers sow a paddy  in a field in Goralhpur, Uttar Pradesh on June 27, 2012. Monsoon rains are a key factor for global commodities markets, strengthening the output of various crops in India, which could help bring relief to Asia's third-largest economy in its battle with high food prices.   AFP PHOTO / Prakash SINGH        (Photo credit should read PRAKASH SINGH/AFP/Getty Images)

Image credit: PRAKASH SINGH/AFP/Getty Images. Indian farmers sow a paddy in a field in Goralhpur, Uttar Pradesh

Every consumer in India has a stake in the food economy. And the biggest risk facing our food economy and food security is the lack of reliable big data on the availability of cereals, pulses, sugar, cooking oil, fruits and vegetables. Its absence is also the primary cause of rural distress.

There is no shortage of food in the world. So, even if the monsoon is poor, with a little bit of planning, we can easily import enough to prevent prices from spiraling up. Government agencies can prepare sale/purchase strategies. States can trigger food security measures. The RBI can correctly forecast inflation. Farmers can switch crops. Traders can book consignments in advance. And processors can better manage raw material inventories. Prices may still rise but not alarmingly. We would be prepared.

But planning requires prior knowledge. This is where we fall short year after year. Neither the private sector nor the government has reliable estimates of crop production, stocks in godowns, last season’s leftover quantity and current shipments. Or rather, though there is no dearth of data, there’s none we can bet on. As a result, the food market is continuously rocked by rumours, speculation, industry guesstimates and the government’s revised estimates.

An outdated, unreliable system

How did we come to such a pass? India has a traditional decentralised agricultural statistics system. States collect primary statistics which are consolidated nationally by the Directorate of Economics & Statistics (DES), under the Union Ministry of Agriculture. Every agricultural year (July-June), the ministry releases four advance estimates of major crops, followed by final estimates of production.

At the heart of this endeavour is the overworked, under-paid village patwari or accountant. The post is often hereditary. He has to manually gather data about each crop in each village. The patwari‘s beat ranges from more than 10 villages in Bihar to 4600 acres in Karnataka. Supervisors physically verify the patwari‘s girdawari or record book by visiting a few villages that add up to 10,000 for the entire country.

States also conduct 500,000 crop-cutting experiments in 68 crops to estimate yields for calculating crop size. Here too, their results differ widely from similar experiments on 9 lakh fields done by the Commission for Costs & Prices (CCE), under the Agriculture Ministry. Between 2001 and 2009, CACP experiments showed cotton yields 302% higher than DES estimates. So, we don’t have reliable estimates of cotton yields — from either scheme — in a country expected to topple China as the world’s largest cotton grower.

Several solutions have been offered. The National Commission on Agriculture, for example, has recommended reduction in the patwari‘s area and intensive supervision by state revenue and statistical staff. But states can’t afford more patwaris.

An IIM Bangalore study finds that in Karnataka this system of “eye-balling” the crop (prevalent in 18 states) blows a fuse when farmers do mixed cropping or shift to high-value crops. Modern remote sensing satellite technology and hand-held GPS devices are the alternative. Indeed, the IIM study found a 54% difference in estimate of area under millets in the same village done by the patwari and GPS technology.

But data from hand-held devices is susceptible to the same human problems faced by the patwari. Remote sensing technology is available for only eight out of the 27 major crops for which the Ministry of Agriculture provides estimates. There is no technology for fruits and vegetables. Use of microwave remote sensing, beyond rice and jute, is yet to be established. And it is unable to do impact assessment of damage from extreme events such as cyclones or hailstorms. Agricultural insurance companies giving farmer compensation are especially hampered by the absence of reliable crop yield data.

Not surprisingly, large trading houses and industry associations for sugar, basmati, oilseeds and pulses are conducting their own surveys that also depend on field tours and crop-cutting experiments. Therefore, industry estimates also remain non-scalable, subjective and prone to human error. Satellite imaging is usually beyond reach. Last year, there was a 3-million-tonne difference between trade and government estimates for chana. Instead of data becoming the new raw material of business, we are saddled with opinion.

Both industry and the government have no fix on stocks in the pipeline because the warehousing industry remains unorganised. Only the 400-odd warehouses registered with commodity exchanges are required to report stocks in real time. With cloudy data on size of crop and inventory, farmers, policymakers, traders and industry lurch in the dark. The cost is borne by us.

What do other countries do?

How do other agricultural giants handle the problem? China considers commodity stocks a state secret. World markets remain volatile while trying to guess supply levels in the world’s biggest commodity importer. Global crop data officials from the Agricultural Market information System, an inter-agency platform designed to increase transparency in global food markets, and members of the International Grains Council and the UN Food and Agriculture Organization are trying to convince China to release the country’s official grain stock data.

Brazil’s sugarcane estimates are considered accurate by the world market. But the Big Daddy is the National Agricultural Statistics Service of the US Department of Agriculture. Its forecasts move global markets. Crop reporting ranks as one of the soundest, most objective and most scientific of all the data gathering undertaken by the US federal government.

Because the USDA data is based on a sample of 100,000 farmers, it is far from perfect. But overall, veracity is high. The USDA even provides American exporters data from other countries, including India, collected by the Foreign Agricultural Service Bureau in every embassy.

India’s track record falls somewhere between China and the US. That is no longer enough. If information is the oil of the 21st century, and analytics the combustion engine, our food and agricultural economy has to get off the bullock cart.

So, what do we do next?
A good start would be money. A budgetary allocation of Rs 113 crore in 2014-15 to improve crop statistics can’t be expected to make a dent in a country sowing 142 million hectares annually across 29 states. States have to be incentivised while the nascent National Crop Forecasting Centre gathers strength. Big agricultural data exists to find the signal among the noise. It is interested in needles, not hay. Right now, our data is just noise. Our claim of Digital India will come true only when we have accurate and useful agricultural statistics that serve farmers and consumers.

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Why India Might Finally Begin To Get Its Commodities Game Together

India is a commodity powerhouse. It is the largest producer or consumer for commodities that range from milk, pulses and spices to gold, edible oils and industrial crops. It is second largest producer of sugar, rice and cotton. And yet, instead of dictating terms, we follow the prices set overseas for them. What stops us from taking our rightful place in the global order? The feebleness of our market.

The power of any market comes from its ability to set the benchmark price that acts as the reference for all other trades around the globe, whether it is London for physical gold or New York for cotton. India’s commodity markets have been illiquid, ill-equipped and ill-connected ever since their inception in 2003 due to a combination of outdated laws and ill-informed policymakers.

Now, 12 years later, this is set to change. SEBI has taken over as the new regulator and guardian of the commodity market, which will now be governed by the Securities Contracts (Regulation) Act, 1956, applicable to stock exchanges. India’s commodity markets have a fighting chance to emerge from the shadows.

Here are five steps SEBI can take to make it happen.

1. Create policy stability

Commodity exchanges need a conducive ground created by surrounding institutions such as the government, the banking framework and corporate law. Commodity trading has been frequently disrupted by bans and mid-air changes in trading rules. This destroys market confidence despite a strong regulator. As an independent regulator, SEBI should seek a commitment from Central and state governments to adopt transparent and predictable rules for direct interventions, such as changes in trade policies, procurement operations and trading rules. To prevent panicky reactions, it has to rapidly educate the media, politicians, bureaucrats and the public about the role and mechanics of commodity exchanges.

2.Consolidate volumes by expanding the network

Size begets power. Commodity exchanges benefit from strong “network effects”. These mean that more members are better–the more trades exchanges handle, the more liquidity they can provide and the more activity they attract. By connecting hedgers, government companies such as FCI, and farmer bodies, to generate trade volumes that are in multiples of crop production, SEBI can improve price discovery and make the market more efficient.

3. Build scale by allowing better quality of investors and speculators

A large market to which producers, dealers, manufacturers, and speculators converge makes a contract as liquid as a stock certificate or a coupon bond. Allowing banks, mutual funds and large foreign investors to enter the commodity market will improve its risk-insuring function.

4. Connect to overseas markets

Today, no market is an island. In a hyper-connected world, India will only gain if its commodity contracts are listed on overseas exchanges reciprocally so that they are quickly accepted as a reference price.

5. Create a cost advantage

Compared to overseas markets, it is expensive to trade in India. The commodities transaction tax, local state taxes, high brokerage fees and high cost of physical delivery due to poor logistics have made costs a deterrent. SEBI will have to scrutinise each one so that market participants are attracted by favourable terms and remain loyal due to the high cost of switching business away from India.

In 2014-15, 10 out of the top 20 agricultural contracts by volume were traded on exchanges based in China, according to data from the US’s Futures Industry Association. CME’s Chicago Board of Trade was the leading agricultural futures market outside China. Precious metals are dominated by the Comex gold and silver contracts traded at CME’s New York Mercantile Exchange. The Shanghai Futures Exchange is emerging as an important centre for gold and silver trading in Asia.

India has a natural competitive advantage in a wide swathe of this global commodity market. But it remains untapped because little attention has been paid on how to fight competition. SEBI has a historic opportunity to create a wide and enduring economic moat around our commodity markets through sophistication and scale. If it is successful, India–with its 52 million farmers and 1.2 billion consumers–can finally stand up to take its rightful place in the world of food and natural resources.

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SEBI-FMC merger: What is at stake?

Today commodity derivative markets in India will enter a new era under SEBI that promises integration into the mainstream finance sector. That makes it a good moment to pause, and ask ourselves what is it all for? What is the purpose of commodity exchanges? And how do we measure its success?

The answer is to see what role commodity exchanges can play in the lives of the 18 crore rural families in India, whose economic prosperity is critical. And the difference they can make to every consumer.

Farmers face three hurdles in the search for better income. First, they are forced to sell in fragmented markets. This distorts price signals, creates buyer cartels and encourages rent-seeking behavior. Second, farmers can’t offload risk. The risk of drop in prices, the risk of not finding a buyer, the risk of the buyer reneging, the risk of lacking funds to produce the crop and invest in next year’s crop, and the risk of government import/export policies affecting profitability. Third, modern agriculture needs finance. Banks are reluctant to give post-harvest credit because crops can’t be priced accurately or stored safely. Farmers are charged commercial interest rates for post-harvest loans against negotiable warehouse receipts. The one asset every farmer has – his harvest – fails to bring formal credit.

India’s 25 crore households want staple foods to be available on demand. This is possible only when crops harvested annually are safely stored for the rest of the year by someone willing to make an upfront cash investment. No brave heart wholesaler or grocery chain will venture without an inkling of the crop’s value in the coming months.

Industrial consumers, such as food and FMCG companies, and exporters/importers face the risk of fluctuating prices. With no mechanism of insurance available in physical markets, this risk is passed on to consumers in the form of higher prices.

How can commodity exchanges improve this situation? By just doing their job. Commodity exchanges contribute to society and the economy in three ways: a means of insurance against price risk, a venue for investment that makes commodities liquid and mobile, and price discovery through the breadth of the market and the close interrelationship of the exchange and physical markets dealing in the same commodity throughout the world so that every factor which can be reasonably anticipated is reflected in the current prices of the commodity.

In performing these functions, exchanges help in three wider ways: facilitate physical commodity trade, direct financing to agriculture, and promote market development. So, their utility needs to be measured by the degree to which they are advancing these six functions.
There has been little recent empirical assessment of the impact on farmers. But they are receiving price signals for wheat, pulses, coarse grains, oilseeds, sugar, cotton, rubber, guar, and spices. The influence on orderly marketing is evident. Farmers would sell up to 70% of their castorseed, chana, soyabean, and mustard harvest immediately. Now, it is 45%.

There was no formal mechanism to collect and disseminate live prices in spot markets across India. Futures trading led to an independent automated spot price polling mechanism that became the reference for over 7,000 mandis.

Transparent price discovery and risk management allowed guar production to shoot 175 times in two years to grab the top slot in India’s farm export basket without any government support.

Andhra’s chilli, turmeric and maize farmers faced the problem of caveat vendor (let the seller beware) because traders had superior market information. Availability of continuous, day-to-day futures prices removed this information asymmetry.

Chana, refined soya oil and mustard seed prices are less volatile than urad, tur, onion, and groundnut where future trading is not available. Arbitragers on the exchange platform keep prices in normal alignment between different physical markets and between months.

Business has jumped in mandis designated as exchange delivery centres. Gondal and Unjha in Gujarat, Gulab Bagh in Bihar, Akola in Maharashtra are witness to this.
Commodities traded on the exchange meet FSSAI quality parameters. This has enhanced agri-product standards, benefiting consumers, processors and farmers. Private investment is increasing in cleaning, grading and assaying of spices and oilseeds.

Anecdotal evidence and NCDEX exchange data suggests that the risk insurance function is gathering pace. In export-oriented commodities, such as castorseed, almost fifth of the crop is being hedged. A sugar miller may not be able to sell at a profit, but his sugar now need not be left unsold. He has an active, ever ready exchange market, functioning daily, which will not only absorb a large quantity but also let him hedge his sales. No wonder RBI has mandated banks to ensure their borrowers hedge agri-commodity exposure.

Transaction costs are lower because the exchange platform makes it easy to find a reliable buyer/seller, negotiate contract terms, secure finance to fund the transaction, manage credit, ensure timely cash and product transfers, and resolve any dispute.

Warehouses are springing up to meet the demand for storing 2 million tonnes of exchange-delivered commodities. Rs 1,000 crore has been invested in Rajasthan alone. Commercial banks are coming forward to lend against liquid stocks of exchange-traded commodities. Yet, this is just the start.

Success will be complete when majority farmers and consumers palpably benefit. And that, ultimately, is also SEBI’s challenge. SEBI needs to now embrace a wider responsibility. It has to be the tireless cheerleader, promoter and protector of this new segment that also performs other vital economic functions not served by stock exchanges. And while it supervises and regulates market participants, at all times its focus must be on delivering benefits to the market’s actual users – farmers and consumers. That is how history will judge both SEBI and commodity exchanges.

DISCLAIMER : Views expressed above are the author’s own.

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Sugarcane suicides: Only Farmers can solve the crisis

Any market where the final product faces perfect competition while the input costs are fixed is set up for failure. That is why the current distress in the sugar sector was a disaster waiting to happen.

Sugar prices were decontrolled two seasons ago. But sugarcane prices remain political lollipops under the control of five state governments. The perils of this half-way freedom are clearly visible.

Six hundred factories are competing to sell unbranded sugar to highly price-sensitive consumers with a no-holds-barred race to the bottom. At the same time, factories are paying record prices for sugarcane that have no connect with business reality. The average price of one kilo sugar in India is Rs 23. The average price of one kilo sugarcane is also Rs 23. In largest producer Maharashtra, one kilo sugar is selling for Rs 19 while one kilo sugarcane is selling for Rs 26.40. The situation is equally absurd in Uttar Pradesh and Karnataka. These are the states where farmers have committed suicide.

When a business haemorrhages like this at both ends, bankruptcy, losses and loan defaults are inevitable. The top 20 private sugar companies are mired in losses ranging in hundreds of crores. But closure is not an option for them till they repay banks and clear farmer dues. The outstanding bill for farmers stands at Rs 21,000 crore.

Who can solve this mess? Farmers alone hold the key. Farmers mistakenly believe that high government-fixed prices are a bonanza. In fact, they have become a noose. The illogical prices increase competition by attracting even marginal areas to cane and producing more crop than India can comfortably sustain both in terms of consumer demand and water availability. There is a difference between a free market and free-for-all market.

Had cane prices been linked to sugar prices, only the farmers with a genuine comparative advantage would have remained. To stay competitive, these farmers would have invested in yields and better varieties. And they would have made profits commensurate with their investment. Already farmers are accepting the market price by selling part of their cane to jaggery mills for Rs 15/kilo. The same logic should be extended to the entire crop.

A good example here is of guar that is native to the dry and arid areas of Rajasthan. When guar prices hit the heady heights in 2012, farmers with irrigated lands and higher opportunity cost in as far as Andhra Pradesh joined the party. Eventually the music ended and prices dropped to their natural levels. Farmers in Andhra Pradesh wisely stopped growing guar and shifted back to paddy. Rajasthan farmers continue with guar because their low opportunity costs make it a suitable option. Luckily the government stayed away from guar and market forces were allowed to play out.

Sugarcane farmers and their leaders needs a similar reality check. It is true that mills have no choice but to pay the state government’s advised prices. But this apparent lack of risk is an optical illusion. As the current scenario shows, business doesn’t run on a politician’s word. Ultimately, it is the five crore sugarcane farmers and their families who pay the human cost of cane arrears. Farmers should stop rewarding politicians who make tall promises in the name of rural welfare.

Politicians, of course, tremble at the thought of freeing the cane market because they fear instant reprisal. But this delay merely kicks the can down the road.

Since liberalization of the cane market appears unthinkable, farmer bodies such as the All India Ganna Utpadak Sangathan and All India Chini Utpadak Sangathan are clamouring for a return to controls on sugar prices. Their demand is that all factories should be forced to sell sugar only above a certain price, which will be naturally linked to the continuously rising price of cane. They argue that people in Japan are paying Rs 200/kg for sugar and so we shouldn’t baulk at paying Rs 40. They forget the vast difference in consumer incomes. In short, farmer leaders want millions of India’s poorest families to pay through their nose merely to sustain their uncompetitive agriculture.

The Modi government has wisely stayed away from meddling with the sugar market. Instead it is trying to increase cash in the hands of mills through promoting ethanol. That may be too little too late to solve the crisis.

Ultimately, the only way to stop the farmer suicides is to let the sugarcane sector run on free market principles. And that means farmers and their leaders being forced to change. Farmers may find lies about guaranteed security far more seductive than predicting the future in a free market. But as they are now discovering, when you have a market that is disturbed by government manipulations, it’s impossible to make any predictions.

DISCLAIMER : Views expressed above are the author’s own.

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The trading pits are silent. About time.

Those iconic images of frenzied commodity trading by a hundred traders in colour-coordinated jackets flashing their hand signals and yelling frenetically are finally a part of history. The last week shut its remaining commodity trading pits because they were an anachronism. Will a similar day ever dawn for India’s archaic agricultural market yards? For farmers, that is the burning question.