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Dimensions of Agrarian Distress in Andhra Pradesh

Indebtedness is not new to rural Andhra Pradesh, while suicides due to indebtedness are. What forces farmers to take their lives is not the amount of debt per se, but the changed nature of agriculture involving high costs and low or negative returns. The changed nature of politics has largely removed the farmers from the policy arena and led to their increasing immiserisation.

Dimensions of Agrarian Distress in Andhra Pradesh

Indebtedness is not new to rural Andhra Pradesh, while suicides due to indebtedness are. What forces farmers to take their lives is not the amount of debt per se, but the changed nature of agriculture involving high costs and low or negative returns. The changed nature of politics has largely removed the farmers from the policy arena and led to their increasing immiserisation.

P NARASIMHA RAO, K C SURI

F
or the first time in the known history of India, peasantsin recent years had taken recourse to suicide as a way outof agrarian distress. Although this phenomenon has beenpresent in most of the agriculturally advanced states, it has beenmost virulent in Andhra Pradesh (AP), with two-thirds of suicidedeaths in India in that state alone. During the past seven or eightyears, the peasants of AP, known for militant agrarian strugglesbefore and after independence, their hard work and enterprisingskills, have committed suicides in the thousands. Apart from thegeneral factors that are responsible for this phenomenon acrossIndia, there must be some additional factors that led to this alarming and disturbing situation in AP.Actually, the phenomenon of suicides in AP dates back to 198788, when desperate cotton growers took their lives in Guntur andPrakasam districts. There was a boom in cotton cultivation in the early 1980s, bringing good profits to the farmers. The farmerscalled cotton “white gold”. But from mid-1980s onwards, thecotton farmers suffered heavy losses due to crop failure. However,the area under cotton cultivation continued to grow in the state,as it expanded to other regions, especially Telangana. Again in1997-98, a large number of farmers who cultivated cotton, chilliesand groundnut committed suicides. Thereafter, it became a permanent phenomenon in the state with suicides taking place everyyear, with some variation in the number. There was a sudden spurtduring 2004-05, after the assumption of office by the CongressParty in the wake of the general election. Although farmers’suicides have been reported from several districts in all the threeregions of the state, the worst-affected districts are Anantapur andKurnool in the drought-prone Rayalaseema region, Mahbubnagar,Khammam, Warangal, Adilabad and Karimnagar in Telangana,and Guntur and Prakasam in the coastal Andhra region.Studies in various states identified an unbearable debt burden as the main reason for farmers’ suicides [Pramod Kumar andSharma 1998; AWARE 1998; Centre for Environmental Studies 1998; Assadi 1998; Vasavi 1999; Iyer and Manick 2000;Deshpande 2002; Chowdhary 2002; Vidya Sagar and SumanChandra 2003; Vikas Adhyayan Kendra 2003]. But the point isthat indebtedness is not something new to rural areas of Andhra,while suicides due to indebtedness are. Probably this phenomenon needs to be explained by examining the qualitative difference in the nature of indebtedness then and now. Secondly, thisindebtedness is itself the result of the combined effect of several other factors that haunt the farmers’ economy, of the largermalady that characterises the present state of affairs in agriculture. A multi-hooded serpent seems to be hissing and biting the farmers. Thirdly, the model of development pursued in the wake ofliberalisation policies all over India, and more so in the AP, added further woes to the farmers’ condition. More than anyone elsein the country the farmers of India do not have a say in theformulation of governmental policies, but are subjected to the adverse consequences of these policies. Fourthly, the changednature of politics, especially at the state level, which now centrearound the urban classes – the business people, traders, investors,professionals and salaried classes – and political representatives,who have little interest in agriculture, have also played a partin causing this phenomenon.

The extent of debt, the loss of hope of repaying it and the feelingof shame that farmers undergo in the process make the presentsituation qualitatively different. The high dependence on externalinputs, the high cost of inputs on the one hand and diminishingreturns due to crop loss and low prices on the other, have causedhavoc in the peasant economy. If the failure to get reasonableprices for the agricultural produce in the years of a good cropcauses hardships to the farmers, the failure to get a good priceeven in a bad year makes their lives miserable. The farmers havelittle control over the markets and prices or in shaping the importand export tariffs, which are directly responsible for the distressof growers of crops such as cotton and groundnut. As thishappened year after year the debt had increased to such an extentthat it was virtually impossible for most farmers to repay. Goingby the standards of an ordinary government employee or a pettytrader in urban areas, the amount may not be very big, but itis something that the farmer cannot repay even after selling his entire crop in a year or even by selling his entire assets in somecases. This forces him paradoxically to cultivate the investmentheavy cash crops, because he is anyway sunk neck-deep in debt and has no hope of getting out of it by cultivating light crops.Thus, the farmers seem to have been drawn into this whirlpooland some are swallowed up. So what causes the death of the farmers is not the debt per se, but the changed nature of agricultureinvolving high costs and low or negative returns.

This paper discusses some of the dimensions of agrarian distress in Andhra Pradesh. Section I looks at the agrarian condition inthe state that contributed to the collapse of the farmer’s economy.Section II presents the results of the analysis of a study in two villages in Guntur district with a view to closely understand thesituation at the micro level.

I Agrarian Condition in AP: A Macro View

Although features such as monetisation of the agrarian economy,a shift to commercial crops, decline of reciprocal cooperationin agricultural operations and increased money needs of thefarmers had been there for over a century of agriculture in Andhra,the changes after the 1980s are significant in several ways.

One simple feature of the rural economy of AP over the pastseveral years is the dwindling share of agriculture in the gross statedomestic product (GSDP). Although all the states had witnessedsuch a decline, it is more pronounced in AP. It declined from about 53 per cent in 1960-61 to about 13 per cent in 2002-03. Ifwe take the post-economic reform period, it almost halved. Butthe workforce in agriculture declined only marginally from 69per cent in 1960 to 62 per cent in 2001. That means the populationengaged in agriculture, which remained more or less stable, hasbeen sharing the increasingly declining income. It also meansthat the disparity in per capita income between the agriculturaland non-agricultural sections has been growing. The growth ofurban wealth and the growth of misery in rural areas seem tobe two sides of the same phenomenon. It shows that a primitiveaccumulation of wealth is taking place in the state by the transferof “agrarian surpluses” through unmitigated exploitation offarmers’ labour and wealth, as was evident in the negative returnsin cultivation. The classical theories of development of capitalismor socialism emphasised the need to transfer the agrarian surplusto feed the urban and industrial sectors. But what has taken placein India is the asymmetrical growth of different sectors of theeconomy, where the so-called “surplus” is squeezed out of thefarmers without any reciprocal benefit to the farming classes.

The decline of the share of the major crops in the GSDP isalso striking. Cotton, groundnut, rice, sugar cane and chillies,which account for 60 per cent of the gross cropped area, togethercontributed less than 7 per cent of the GSDP in 2002-03 (Table 1).In a way this provides us a clue to the changing place of agriculturein the state’s economy and the livelihood condition of the farmers.Rice, which accounted for about 31 per cent of the cropped area,contributed to only 3.8 per cent of GSDP; groundnut, whichaccounts for 17 per cent of gross cropped area, contributed ameagre 0.8 per cent; the share of cotton, chillies and sugar cane,which account for 14.4 per cent of the gross cropped area, wasonly 2.3 per cent. This decline is very steep in the case of rice,groundnut and cotton. The contribution of all five importantprincipal crops to the GSDP taken together had declined from

16.5 per cent in 1993-94 to 6.9 per cent in 2002-03. How couldthe farmers survive with these meagre incomes?

Although the area under cash crops had increased over theyears, the growth rates of yield for these crops had declined. Asmentioned earlier, the area under cotton and groundnut hadincreased a great deal after 1980. The share of groundnut increasedfrom 13 per cent in 1980-81 to 17 per cent in 2001-02 and thatof cotton from 4 per cent to 11 per cent. But the yield performanceof both groundnut and cotton was very uneven and poor. Forinstance, the growth rate of yield in cotton declined from 3.4 percent in 1980s to 1.4 per cent in 1990s. Actually, the decelerationin yields can be seen for all the important crops except sugarcaneand Bengal gram [Subrahmanyam and Satya Sekhar 2003].

In addition, the cost of cultivation for these commercial cropsis higher in AP when compared to other states. If we look atthe figures given by the Commission for Agricultural Costs andPrices (CACP), we notice that the cost of production of groundnutin AP was higher than in Gujarat and Madhya Pradesh by 15and 10 per cent in 1999-2000. The data for the previous yearsalso show a similar trend with some variations. Cotton is producedat a high cost in AP when compared with other southern stateslike Maharashtra and Karnataka. The higher cost of cultivationin the state could be mainly attributed to the high cost of paidout inputs. Among all the states in India, AP stands at the topin terms of the consumption of pesticides per unit of output andsecond highest, next to Punjab, in the consumption of fertilisers[GoAP 2005]. The prices of pesticides and chemical fertilisershad increased several fold over the past 10 years. For example,during the period 1992-2002, the prices of urea and DAP haddoubled, while the murate of potash (MoP) saw a four-foldincrease. Purchase of seeds was most common in AP and highestamong the Indian states. Eighty-one per cent of farmer householdspurchase seeds, compared to 48 per cent for India. Fifty-one per cent of the farmers in the state, again the highest for any statein the country, replace seed varieties every year [NSS 2005a:15].During the period 1992-2002, the prices of cotton and chilli seedshave gone up by 400 per cent. The farmers are led by the tradersof seeds, pesticides and fertilisers, who of late have become themain source of knowledge and information to the farmers oncultivation practices, to believe that they need to use more ofthese inputs to reap a better harvest. High use of pesticides andchemical fertilisers year after year has had a deleterious effecton the productivity of the soil and environment. It is not simplythe case of growing commercial crops, but heavy investmentson account of seeds, fertilisers and pesticides that have madefarming qualitatively different from what it was earlier.

With a high cost of cultivation, diminishing productivity andlow returns, it becomes difficult for farmers to withstand cropfailures. In earlier times, farmers could withstand crop lossesbecause the component of family labour and farm-based inputsconstituted a greater proportion in the composition of the inputs,and any loss of crop mainly amounted to a loss of labour andfamily-based inputs. With the enormous increase in the paid-outinput costs, which are mostly met by taking cash loans, any croploss or price crash would land the farmers in a distress situation.Secondly, since many farmers depend only on one crop for theirlivelihood, the situation becomes miserable when the crop failsor they do not get a remunerative price for their product as theyhave very little to fall back on. In case this situation prevailsfor two or three years continuously, the farmers are invariablydriven to debt trap. A farmer can repay the loan incurred, if onlyhe gets a reasonable crop and a reasonable price for the produce.Since both these conditions are rarely met, the loans get piledup. When a farmer cannot clear all the outstanding debt evenby giving up all that is produced, assuming that a good crop ispossible, he has to keep borrowing to meet agricultural and familyexpenses every year. Usually farmers sell their lands to pay offdebts when they lose confidence to clear the debts on subsequentcrops. For the last few years, the agrarian economy has fallenon such bad times that farmers hardly find buyers for their land,and those willing to buy would only do so at a very low price.

The present marketing structure for agricultural produce in APconsists of a number of imperfections, leading to disastrousconsequences on the price front. Lack of institutional arrangements and the presence of middlemen are the main causes forthese imperfections. The majority of farmers sell their produceeither at a lower than expected price or less than the prevailingmarket price due to the pressures to clear the debts or agreementwith the creditors. Due to a weak economic position, small andmedium farmers sell their produce immediately after the harvest,when the wholesale price is at its lowest. These farmers loseconsiderable income in this way. The income foregone is very

Table 1: Contribution (in Percentages) of Agriculture and Certain Major Crops to the SGDP in AP

At constant prices (1993-94)

Year Agriculture Rice Groundnut Cotton Chillies Sugar Cane
1993-94 24.62 8.27 3.81 1.71 0.87 1.23
1994-95 21.77 7.46 2.32 1.77 0.87 1.28
1995-96 21.97 6.77 3.41 1.82 0.85 1.22
1996-97 22.32 7.68 2.54 2.01 1.26 1.18
1997-98 17.16 6.11 1.43 1.40 0.76 1.06
1998-99 20.88 7.57 2.37 1.44 1.04 1.08
1999-2000 17.79 6.51 1.15 1.45 0.95 1.23
2000-01 19.20 6.96 2.07 1.37 0.92 1.11
2001-02 17.15 6.14 1.16 1.50 0.99 1.06
2002-03 12.94 3.79 0.82 0.81 0.67 0.83

Source: Directorate of Economics and Statistics (2004): State Domestic Product of Andhra Pradesh, government of Andhra Pradesh,Hyderabad; Director of Economics and Statistics (2003): Glimpses of Identified Growth Engines from Agriculture to Gross State DomesticProduct, government of AP, Hyderabad.

Economic and Political Weekly April 22, 2006 high for commodities like chillies, cotton, pulses and oilseedswhere there is no public procurement. The Cotton Corporationof India (CCI), which is supposed to purchase cotton at theminimum support price (MSP), purchases only a very smallpercentage of produce that comes to the mandis. Very rarely havefarmers benefited from the MSP for cotton. Usually, the minimumsupport price announced by government is less than the marketprice (Table 2). Keeping in view the constantly rising cost ofproduction, every year the government of AP has been recommending a higher MSP for most crops, but the union governmentcares very little for such recommendations. For instance, for thekharif crop of 2004, the government of AP wanted the MSP ofcotton (medium staple) to be at Rs 2,700 a quintal, while theunion government fixed it at Rs 1,760; the figures for the groundnut crop are Rs 2,260 and Rs 1,500; the same is the case forall the other crops. Low market prices at the time of harvestrevolve around MSP fixed by the government. The farmers whowithhold the product till higher market prices are obtained, tendto get higher prices than the MSP. But how many can do this?The traders and commission agents and other middlemen benefitmore out of the existing agricultural marketing system.

The story of institutional credit is a problematic one. Thecommercial, cooperative and regional rural banks have advancedRs 1,756 crore to the agricultural sector during 1992-93, Rs 5,158crore in 1999-2000 and Rs 10,925 crore in 2003-04 [GoAP 2004].While these figures may appear to be impressive, all these stillconstitute only about one-third of the credit needs of the farmers.More importantly, most of these advances reflect mere bookadjustments, as the old debts which are overdue are included inthe reissued loans, rather than actual advances during the year.More than the farmers, the traders and moneylenders benefitedfrom the present credit delivery system. But the problem is notmerely one of inadequate supply of institutional credit. In fact,the farmer seems to have become a victim of credit or loan traps.The farmer borrows to the maximum to meet his ever-growinginvestment needs. But farming, unlike business, does not yieldminimum assured returns. Farmers say that cultivation has becomea gamble, and like gamblers they borrow from wherever theycan, to invest in the land. Most of them fail. Until the prices arestabilised, markets are regularised, and prices and quality ofinputs are regulated, whatever the amount of institutional creditmade available, the problem would remain. The loan becomesa loan trap, if not a debt trap for the farmer.

The 59th round of the NSS survey on farmers’ condition revealsthe distressing picture in AP. First, the incidence of indebtednessamong farmers is the highest in the state. About 82 per cent ofthe farmer households are indebted (Table 4). The proportionof indebted households is more or less same among all socialgroups. Secondly, the debt liability-asset value ratio is the highestin AP. According to the NSSO survey it was 7.14 for AP, whileit was 1.62 for Haryana, 1.72 for Punjab, 2.71 for Gujarat, 3.55for Kerala, 3.71 for Karnataka and 4.48 for Tamil Nadu [NSSO2005c:38). The asset value of farmer households in AP (Rs 1.35lakh) was much less than the all-India average (Rs 3.73 lakh).On an average each farmer household in the state had an outstanding debt of Rs 23,965 [NSS 2005b:26]. Thirdly, most ofthe debt was incurred for agricultural expenses (about 62 per cent)and very little on education, health, social ceremonies andconsumption. Actually, in the olden days farmers incurred moredebt for non-agricultural expenses, as recorded in the surveyson agriculture and indebtedness during the 1920s, 1930s and1940s [Royal Commission on Agriculture 1928; Madras Provincial Banking Enquiry Committee 1930; Sathianathan 1935;Narayanaswami Naidu 1946]. The NSS data disproves the beliefthat the farmers are getting indebted because they take more loansto meet unproductive expenditure such as social ceremonies or to meet the growing needs of education and health. The highcost of inputs seems to be the main factor in the growing indebtedness of the farmers [NSS 2005b]. However, it is possiblethat farmers actually spend a part of the loan money taken inthe name of agricultural expenses on family needs such asconsumption, education and health.

One of the most disappointing developments in AP’s agricultural sector over the last two decades has been the declining publicsector capital formation. Adequate expenditure on rural infrastructure like roads, markets, storage, communication, health,education and research apart from irrigation is a prerequisite forsustainable agricultural growth. The expenditure on the infrastructure will sustain the growth in production, productivity andincome generation in agricultural sector. The share of agricultureand allied activity in state government expenditure under variousplans has declined from 11.8 per cent in 1980-81 to 1.8 per centin 2001-02. The expenditure on irrigation declined significantlyunder various plans. When compared to other states, AP had thelowest share of agriculture spending in total plan expendituretill 2002-03 (Table 3). While the expenditure on agriculture tototal expenditure is around 7 per cent in Karnataka and 5 percent at the all-India level, it was only around 3 per cent in AP.Clearly, the planning process in AP has neglected long-term issueof sustainable development.

As a result, the proportion of area under canals and tankirrigation over the years has declined, while the area undergroundirrigation has gone up. The actual extent of land under canal

Table 2: Minimum Support Price and Market Price for MajorAgriculture Commodities, Andhra Pradesh

Year Paddy Cotton Chillies Groundnut Minimum Market Minimum Market Market Minimum Market Support Price Support Price Price Support Price Price Price Price (Rs per (Rs per (Rs per quintal) quintal) quintal)

1993-94 310 377 900/1050 1210 1762 800 978 1994-95 340 436 1000/1200 1791 3113 860 905 1995-96 360 458 1150/1350 1477 3184 900 904 1996-97 380 492 1180/1380 1681 2802 920 1334 1997-98 415 559 1330/1530 1841 3113 980 1201 1998-99 440 598 1440/1650 2082 3986 1040 1305 1999-2000 490 875 1575/1775 1732 3534 1155 1341 2000-01 510 662 1625/1825 1852 2941 1220 1366 2001-02 530 749 1675/1875 1805 2895 1340 1367 2002-03 550 827 1695/1895 1836 3233 1355 1455 2003-04 550 – 1725/1925 1964 2441 1400 1791

Source: Directorate of Economics and Statistics: Statistical Abstract of Andhra Pradesh (compiled for various years),government of Andhra Pradesh, Hyderabad; Director of Economics and Statistics (2003): Glimpses ofIdentified Growth Engines from Agriculture to Gross State Domestic Product, government of AP, Hyderabad.

Table 3: Sector-wise State Plan Expenditure in Andhra Pradesh

Year Agriculture and Allied Activity Irrigation and Flood Control (Per Cent) (in Rs Crore)

1980-81 11.78 58.10 1990-91 4.42 23.98 1992-93 8.20 31.73 1993-94 0.03 28.77 1994-95 2.19 31.11 1995-96 2.69 22.74 1996-97 2.59 22.59 1997-98 4.80 21.30 1998-99 4.10 18.73 1999-2000 3.78 26.48 2000-01 3.91 19.42 2001-02 1.77 14.12 2002-03 2.15 17.88

Source: Directorate of Economics and Statistics: Statistical Abstract of Andhra Pradesh (compiled for various years), government of Andhra Pradesh, Hyderabad.

irrigation would be less than the area officially claimed. Officialclaims about the extent of canal irrigation are doubtful, as someof the lands, called the tail-end lands, in the authorised ayacutdo not get water. We know that the area under irrigation andthe composition of area under irrigation affect the income fromcultivation. Fifty per cent of the area under irrigation in the stateis by groundwater resources and 63 per cent of groundwater isdrawn by borewells. Excessive dependence on groundwater andthe absence of effective groundwater management had madecultivation more costly and risky. The investment in well irrigation by farmers in drought-affected areas has been going up.Incomes of farmers who use electric motors are subject to violentfluctuations due to (a) poor quality of power supply; (b) restrictedhours of supply; (c) decline in groundwater levels at an alarmingrate; and (d) frequent failure of equipment and failure of wells.

As if pest attacks and crop failures, high input costs, volatilityof prices, and deficiencies of the market and the neglect by thegovernment are not enough, the vagaries of the monsoon havedevastated farmers’ lives.1 This has resulted in fluctuations in cropped area, production and productivity of crops. Untimelyrains have become a recurring phenomenon every year and haveseriously affected the crop economy in rain-fed areas. The adverseeffects of the drought are confined not only to rain-fed areas buthave also affected areas with assured irrigation. The frequentdrought not only affects agricultural growth, it has severelyaffected rural employment. The loss of agricultural income hasresulted in depletion of the purchasing power of the farmers. Thishas a multiplier effect on the income of those who derive theirlivelihood from non-farm employment.

Finally, we have to mention that after the initiation of economicreforms in the state, an atmosphere has been created that theagriculture as was practiced was no more a “growth engine”. The emphasis was on urban infrastructure, information technologyand transforming AP into a knowledge society. The government,led by Chandrababu Naidu, claiming to be an active reformer,virtually stopped talking about agriculture. Instead of taking longterm measures to increase irrigation potential in the state, emphasiswas laid upon watersheds and rainwater harvesting pits and theycame a cropper, as there was anyway little rain in those years. Themiddlemen, commission agents, those in agribusiness and contractors got more benefits out of these schemes and their politicalclout had enormously increased. As an occupation, cultivationcame to be looked down upon. In their own eyes, agriculturehad little esteem for the farmers and the experience of lowincomes, crop failures and indebtedness vindicated this for them.

II An Enveloping Crisis: Report from Two Villages

With a view to understand the different dimensions of this agrarian distress in AP more closely we conducted, duringFebruary 2005, a micro study at the village level. A sample of75 farmer households was selected using systematic randomsampling method from two villages in Guntur district, wherefarmers’ suicides were reported. A household schedule was usedto collect information about the size of the landholding, cropsgrown, cost of cultivation, source of credit and the debt burden.The villages selected, represented two types of crop situations.One was Nadendla, where mainly cotton, chillies and pulses aregrown under rain-fed and semi-irrigation conditions. The otherwas Karalapadu, where paddy was the main crop grown undercanal irrigation; cotton, chillies and pulses were grown under bothsemi-irrigation and rain-fed conditions. The cropping pattern andirrigation conditions in these villages represented some similarity

Table 4: Nature of Indebtedness of Farmer Households in Andhra Pradesh

Social Category Percentage Outstanding Capital Current Non-farm Consumption Marriages Education Medical Other
of Indebted Debt Expenditure Expenditure Expenditure Expenditure and Treatment Expenditure
Farmer in in Ceremonies
Households Agriculture Agriculture

A: Outstanding loans by purpose of loans (for different social categories) STs 78.0 12760 11.9 40.3 3.8 18.5 6.6 1.9 0.1 19.5 SCs 79.4 12720 17.1 33.3 1.5 15.4 11.5 0.2 4.2 16.7 OBCs 83.2 23697 23.3 35.9 3.9 12.1 11.2 1.2 3.2 9.3 Others 83.6 37802 26.8 41.6 2.7 8.7 7.6 1.9 1.4 9.3 All social groups-AP 82.0 23965 23.4 38.1 3.2 11.5 9.6 1.4 2.4 10.5 All social groups-India 48.6 12585 30.6 27.8 6.7 8.8 11.1 0.8 3.3 10.8

Size Class of Land Possessed Outstanding Capital Current Debt Expenditure Expenditure Non-farm Consumption Marriages Expenditure Expenditure and Education Medical Other Treatment Expenditure
in Agriculture in Agriculture Ceremonies

B: Outstanding loans by purpose of loans (for different classes as per the extent of land possessed in ha)

< 0.01 12362 26.1 3.4 2.2 24.6 13.8 0.0 7.5 22.4

0.01 – 0.40 12192 13.6 19.8 5.1 16.6 19.1 1.2 5.6 19.0
  • 0.40 – 1.00 18163 15.8 31.5 6.0 14.4 12.4 1.8 3.5 14.5
  • 1.00 – 2.00 33043 29.0 37.5 1.2 10.8 9.0 0.4 1.5 10.6
  • 2.00 – 4.00 29981 25.9 48.2 0.9 10.0 5.0 2.8 1.6 5.5
  • 4.00 – 10.00 44865 31.2 49.6 3.9 5.4 4.6 1.5 0.6 3.1 10.00+ 103817 26.9 64.2 0.0 4.5 2.3 0.0 1.6 0.5 All sizes 23965 23.4 38.1 3.2 11.5 9.6 1.4 2.4 10.5

    Size Class of Land Possessed Government Cooperative Bank Agricultural/ Trader Relatives Doctor, Lawyer Others Society Professional and and Other Moneylender Friends Professionals

    C: Distribution of outstanding loans (in Rs) by source of loan for each size class of land possessed by farmer households

    < 0.01 0.7 4.8 11.4 75.2 2.0 3.6 0.0 2.4

    0.01 – 0.40 1.6 6.7 11.0 63.8 2.6 9.8 1.4 3.3

  • 0.40 – 1.00 1.8 7.4 15.9 59.9 3.7 6.7 0.2 4.5
  • 1.00 – 2.00 0.3 11.1 15.2 54.6 4.8 6.9 0.6 6.5
  • 2.00 – 4.00 1.3 15.2 25.0 50.2 5.4 1.0 0.2 1.6
  • 4.00 – 10.00 0.4 13.4 34.8 39.4 2.6 2.1 3.6 3.7 10.00+ 0.0 3.0 46.5 19.8 29.8 0.9 0.0 0.0 All sizes 1.0 10.4 20.0 53.4 4.8 5.3 0.9 4.1

    Source: NSSO (2005a), Situation Assessment Survey of Farmers: Indebtedness of Farmer Households, 59th Round, Ministry of Statistics and Programme Implementation, government of India.

    Economic and Political Weekly April 22, 2006 to the other parts of state where suicide cases were reported.Qualitative and quantitative data were collected from the selectedsample farm households. Interviews with informed persons andofficials were also conducted to elicit the problems relating tocultivation. The profiles of the selected villages are given in Table 5.

    In Nadendla, the farmer who committed suicide owned four and half acres of land and had leased in another 10 acres. He cultivated both cotton and chilly crops. He ended his life dueto crop failure and the fear of inability to pay the accumulated debt.In Karalapadu, the farmer who committed suicide owned one andhalf acres of land. He had leased in another four acres of land. He cultivated both cotton and paddy. He too ended his life dueto recurrent crop failures and the fear of inability to repay the debt.

    The data on landholding distribution in these villages showthat 46 per cent of the farmers in the two villages have operationallandholdings of less than 5 acres; 43 per cent were operatingland between 5 and 10 acres; and only 13 per cent had holdingsabove 10 acres. Thus, most of the farmers belong to marginal,small and medium groups and were vulnerable to risk anduncertainty that prevail in agricultural production. The averageland operated by marginal farmers was 1.9 acres, whereas smallfarmers operated 4.15 acres per household. Nearly 43 per centof the farmers were medium size and on an average operated8 acres of land. Thirty per cent of the land cultivated by the samplehouseholds is leased land. The puzzle, however, is that whileagriculture has become unremunerative why are tenants willingto take land on lease and cultivate? Probably, the marginal andsmall farm households, in the absence of alternative employment,choose to cultivate crops on leased lands instead of working asagricultural labourers in other farms or they hope to gain in theevent of a good crop and high output prices. In a situation wherethe farmers are obtaining negative returns on crops, it would alsomean a cut in their possible earnings, which otherwise they wouldhave got had they engaged themselves as wage labourers. Mediumand large farmers cultivate additional land by taking on lease eitherto meet family’s additional expenditure or to ensure work for theirmechanical and other inputs. It appears that small farmers and tenantcultivators are only agricultural labourers in the guise of farmers.

    Farmers of Nadendla village, irrespective of their land size andsocio-economic status, cultivate cotton and chillies knowing wellthe risks involved. Nearly 98 per cent of the area is under capitalintensive commercial crops such as cotton and chillies. Whenasked why they cultivate such crops instead of low-cost cereals,which could provide them at least with food requirements, farmersreplied that they either float or sink with the cash crops becausethey are already neck-deep in debt and it is not possible to thinkof repaying the debts with the meagre returns on the low-valuecrops. They also say that the low-value crops do not give backthe cost of their labour and the cash or credit-based input costs.In Karalapadu village, which has irrigation facility, 66 per centof the area is under paddy.

    Farmers of all categories had taken loans from both formal andinformal agencies. Out of the total 75 farmers, 72 have borrowedfrom two or more than two sources. Table 6 shows the breakup of borrowings by different sources and size groups. Ninetysix per cent of the farmers borrowed from institutional agencies,namely the commercial banks or cooperative banks. In recentyears, like in most other parts of the country, fertiliser andpesticide dealers in Guntur have emerged as the major sourceof lending agency for farm production activity. About 70 percent of the farmers have borrowed from fertiliser and pesticidestraders. These traders supply fertiliser and pesticides on creditwith a rate of interest of 24 per cent per annum. Seventy-threeper cent of the farmers borrowed from other sources like bigfarmers, moneylenders and businessmen with high rates of interest,ranging from 24 to 36 per cent per annum. Out of the 75 farmers, 27 borrowed from three or more than three sources, while 34 farmers borrowed from two sources. This is clear evidence that there is a big gap between the credit supplied by banks and thecredit needs of the farmers. Therefore, farmers depend oninformal credit sources at high cost.

    We have also noticed that although the stated purpose ofborrowing is to meet agricultural expenses, majority of the farmersuse it for both farm and family expenditures. The way farmersmeet their family expenditure is different from wage earners,salaried people or traders, who have daily, weekly or monthly

    Table 5: Profiles of Sample Villages

    (Figures in parentheses are percentages)

    Name of the Village Nadendla Karalapadu
    Total cultivated area (in acres) a Irrigated b Non-irrigatedTotal 2741 4194 6935 2616 1667 4283
    Area (in acres) underPaddy Cotton Chillies Pulses Outstanding debt in PACS (in Rs) No of defaulters 13 (1) 4429 (71) 755 (27) 13 (1) 755 768 (66) 134 (9)106 (7) 209 (18) 78
    Total amount 11072024 624802
    Average debt per farmerOutstanding debt commercial banks (in Rs) No of defaulters 14664 50 8010 –
    Defaulters amount 800000
    Average debt per farmer 16000

    Note: – Not Available Source: Sample Survey

    Table 6: Source-wise, Purpose-wise and Size-wiseDistribution of Borrowings

    (Figures in the parentheses are percentages)

    (in acres)

    Below 2.50-5.00-Above Total

    2.50 5.00 10.00 10

    1 Source of Borrowing:

    Big farmers, local business

    men and moneylenders 5 18 25 7 55 (73.3)Traders 7 15 23 9 54 (72.0) Commission agents – 1 1 – 2 (2.6) Cooperative Societies 3 13 19 7 37 (49.3) Commercial Banks 1 10 17 7 35 (46.7)

    2 Purpose of Borrowing: Education 1 3 1 1 6 (8.00)House construction – 1 – – 1 (1.33) Marriage and health 1 – 1 – 2 (2.67) Consumption 1 1 1 – 3 (4.00) Cultivation 10 23 32 10 75 (100.00)

    Source: Sample Survey.

    Table 7: Economics of Cultivation

    Per Acre Net Profit/Loss (in Rs) Below 2.5 2.5 to 5.0 5 to 10 Above 10

    Nadendla Cotton 175 -1219 -1424 637 Chillies 1500 551 2099 937

    KaralapaduRice 166 -1892 -2038 -450 Cotton -1333 -1983 -1814 -1071 Chillies – 1000 1451 2500 Pulses – 300 266 613

    Nadendla Per acre debt 6225 16015 12542 9695 Per farm debt 15000 69615 104800 137750 Average farm size (operated) 2.25 4.15 8.15 14.30

    Karalapadu Per acre debt 17541 13654 12814 11250 Per farm debt 27916 53100 98235 250000 Average farm size (operated) 1.66 4.04 7.88 25.00

    Source: Sample Survey.

    incomes. Farmers get lumpsum income only once or twice in ayear. So they have to meet family expenses out of the loan amount.It is not possible to distinguish between what the family expensesare and what the agricultural expenses are, as the farmers wouldpay back the debt when they sell the crop that includes the valueof family labour. Out of 72 households covered, 12 farmers haveborrowed exclusively for purposes other than cultivation.

    Farmers were not able to recover their cost of cultivation. Farmers in both villages used both BT cotton and non-BT cottonseeds. They spent nearly Rs 1,500 to Rs 2,500 on BT seed per acre.For HYV chilly seed farmers spent nearly Rs 2,000 to Rs 3,000per acre. From the previous year’s experience, farmers feel thatBT cotton yielded good income when compared to non-BT cotton.However, in 2004 farmers who sowed BT cotton seed incurred huge losses. The plants came up well, but the yield was extremelypoor. Use of HYV seeds meant more investment on fertiliser andpesticides. The net loss or profit from cultivation is shown inTable 7. If we include land rent in cultivation costs, both paddyand cotton show negative returns; chillies and pulses gave marginalreturns (Table 8). In 2004 farmers suffered heavy losses evenin paddy cultivation in Karalapadu due to the late release of waterand pest attack. Farmers in these two villages felt that they rarelyget crop productivity up to their expectation. Only in exceptionally good climatic conditions the productivity matches their levelof expectation, which is a rare phenomenon, according to them.

    Table 9 shows the returns to farmers across size classes in the sample farms. The data show that the losses appear to be thelargest in the middle size category.

    When asked about public extension services, the farmersexpressed dissatisfaction about this service. In the absence of theright information on cropping patterns, seeds, other inputs, andcultivation practices, they suffer every year from one or the otherproblem. The private input dealers have emerged as the main sourceof technical knowledge about pesticides and fertiliser doses. Croploss has become a permanent phenomenon. Every year, they lose oneor other crop either due to a bad monsoon, lack of water or pests.

    As debt got accumulated the loss of income from cultivationled to debt crisis for all the farmers. Out of the 75 sample farmhouseholds, 73 households are indebted to various agencies. Onlytwo farm households are free of debt and they are in the mediumfarm size. Be it large or small farmers, they are not able to escapecrop losses. Per acre debt is highest in Karalapadu village whereirrigation facilities are available. Per acre debt in Nadendla wasRs 12,345, whereas it was Rs 13,375 in Karalapadu. In large farmholdings the debt burden ranges betweenRs1,37,000 to Rs 2,50,000.For marginal farmers it ranges from Rs 15,000 to Rs 28,000. A highcorrelation (r=0.76) significant at 5 per cent level of significanceis found between farm size and total debt of the farm households.

    This is basically due to the difference between the cost ofcultivation and the returns the farmers finally get on the produce.The loss is calculated after including the rent of the land in thecost of cultivation. There was a substantial loss in cotton in both the villages. Variation in price also reduced farming to gambling.Price received for a quintal of cotton in 2003-04 was Rs 2,000 toRs 2,500, whereas in 2004-05, cotton was sold at a rate less than Rs 1,800. The net loss in cotton cultivation for different farmer households ranges between Rs 1,000 and Rs 1,900 per acre exceptin the smallest and largest size classes in Nadendla village. The netprofit from the cultivation of chillies ranges from Rs 500 to Rs 2,500.Paddy cultivators in Karalapadu have suffered heavy losses. Thenet loss from paddy cultivation per acre was between Rs 450and Rs 2,000. Farmers stated that they rarely incur a loss in paddycultivation, but in 2004-05, they incurred heavy losses due toextensive damage caused by pests and late sowing due to thedelay in the release of water from the Nagarjuna Sagar dam. Inthe previous two years, they could not cultivate paddy as the canal water was not released to their fields because of scanty water,and whatever was available in the dam was either used for electricity production or the drinking water needs of the towns.Thus, crop losses are not confined to commercial crops.Farmers cultivating food crops are also incurring losses dueto weather fluctuations, pest and market condition.

    During informal conversations, farmers felt that the conditionof wage labourers was better than the farmers, because a wagelabourer takes away his wage in cash, whether high or low. Heor she is not vulnerable to the consequences of crop losses orthe volatility of market prices of the agricultural produce. True,she does not claim a greater share in case the farmers get a profit,but nor does she need to share the loss. As crop losses and lowprices had hit the farmers repeatedly, their households are subjected to severe hardships. It is not that the condition of agricultural wage labourers is any better, but degradation andpauperisation are the special characteristics of farmers. Thedilemma of the farmer is that he cannot transform himself into a wage labourer, nor is he happy with cultivation. No wonderthat 40 per cent of farmers of India reported a dislike for farmingand most of them expressed their dislike because farming is noteither profitable or risky. Probably, the proportion of farmers whowant to give up agriculture, given a chance, could be higher in APthan the proportion reported by the NSS survey, which puts thefigure at 24 per cent [NSS 2005a]. In an economy where alternativeopportunities for work and employment are low, the farmers findnowhere else to go, except to continue to work in agriculture.

    Concluding Remarks

    The findings from the two villages bring out with clarity thedimensions of the agrarian distress perceivable at the state level.The low economic status of those engaged in agriculture, asreflected in the large work force continuing in agriculture, thewidening gap in the per capita income between people employedin agriculture and those in non-agriculture seem to be the major

    Table 8: Cost of Cultivation of the Sample Villages

    (Per acre in Rs)

    Particulars Paddy Chillies Cotton

    Ploughing 1000 1000 1300 Seeds 600 2000 1500 Sowing/transplanting 800 800 100 Weeding 600 1000 1200 Pesticides 2000 4500 3000 Fertilisers 1000 5000 4000 Applying pesticides and fertilisers 400 900 600 Harvesting 900 4000 2000 Irrigation charges 200 900 200 Land revenue 200 200 200 Interest on fixed capital 400 1300 900 Transport to house 200 200 500 Transport to markets – 400 300 Total paid out cost 8500 22200 15800 Land rent 5000 5000 4000 Total cost 13500 27200 19800 Price per quintal 650 2100 1750 Yield in quintals 18 14 10 Gross income (main and byproduct) 11700 29400 17500 Net income -1800 2200 -2300

    Source: Sample Survey.

    Table 9: Returns to Cultivation in Sample Villages

    (In Rs)

    Village Profit/Loss Below 2.5-5.0 5-10 Acres Above

    2.5 Acres Acres 10 Acres

    Nadendla Per holding 1,806 –2,726.64 –2,560.46 9,275.44 Per acre 802.77 –644.59 –300.17 645.47 Karalapadu Per holding (–)1,084.00 –13,474.64 –1,036.35 –2,062.18 Per acre (–)653.01 –3,335.30 –137.88 –82.48

    Source: Sample Survey.

    Economic and Political Weekly April 22, 2006 factors behind the present agrarian crisis in AP. There appearsto be a vicious association between the two, constantly feedingoff each other. This condition is evident from the decline in production and productivity in all the crops for the last one decadeor more. The changes that occurred in the cropping pattern andproductivity of crops significantly affected the livelihoods of thepeople employed in agriculture in an adverse manner. There hasbeen a shift in the cropping pattern from low value crops to highvalue crops. Cotton and chillies emerged as important commercialcrops whose the cost of cultivation is high and are rated as highrisk crops. The cost of cultivation of these crops in AP is foundto be higher when compared to that in the competing andneighbouring states. Thus, a complete dependence on externalinputs, increased expenditure on inputs and diminishing returnson inputs over time, have weakened the ability of the farmersto recover the cost of cultivation.

    An increase in cash expenditure on modern inputs and adecline in productivity have been steadily taking place overthe years and have resulted in a continuous decline in the netsurplus from agricultural activity. The more depressing point is thatthese conditions are found to be common for all size groups offarmers. It has become impossible for farmers to carry outcultivation without taking loans from informal agencies.

    Recurring drought conditions during the previous decade havecreated havoc in the crop economy of AP. It is not the crop lossin one year but recurrent losses that ruin the economic conditionsof the farmers. It is not crop loss alone but multiple factors likespurious seeds and pesticides, non-remunerative prices for theirproduce, increasing expenditure on health and education, etc, thatcontribute to the acceleration of the agrarian crisis and indebtedness. Apart from economic factors, social factors like a lowliteracy rate, breakdown of the joint family system and thecollapse of other social institutions have created depressedconditions in the agrarian economy.

    It is a paradox that most of the political representatives comefrom agricultural background but little is done for farmers’welfare. The space for farmers in the policy process is shrinking,as they are least organised and can hardly lobby with lawmakers.For the last 10-15 years we have not seen any vibrant agrarianmovements in AP. Political parties seem to be little interestedin organising and mobilising farmers. The disunity among farmers and their inability to pool resources to conduct any sustainedagitations make the political parties take them for granted. Overthe years the role and importance of traders in agriculturalproduce, contractors and commission agents have been growingin politics at the district and state level.

    It does not mean that farmers’ condition is a hopeless one. Thedevelopments in the last few years have shown that if there isa political will there are ways out of the present distressingcondition. The defeat of the Telugu Desam Party in the May 2004elections was partly attributed to the negative vote by the farmersagainst the government. The Congress Party carried out its electioncampaign focusing on the farmers’ problems. After the party cameto power, it adopted programmes and policies to the benefit ofthe farmers and the agrarian sector. Electricity dues from thefarmers to the tune of Rs 1,300 crore were waived; electricity foragricultural purposes was made free; a moratorium was declaredon the recovery of farm debts; and massive outlays were made onirrigation projects. These measures were taken up less out of anyaltruistic attitude, but out of electoral and political considerations,as it was felt that farmers, who constitute about one-third of voters, would punish parties and leaders who do not care for theirproblems. When the avenues of mass agitations are not availableto the farmers as the political leadership is not sensitive tofarmers’ concerns, the only option for the farmers to asserttheir interests is through their voting behaviour. It augurs well for the farmers and the country as a whole that the agrarian distresshas become a political and electoral issue in recent years.

    m

    Email: pemmasaninrao@yahoo.comsurikc@gmail.com

    Note

    [We wish to thank P Srinivas, research scholar, Department of Economics,Nagarjuna University, for helping in carrying out the filed study in the twovillages and collecting relevant information.]

    1 For every three years during the last decade AP experienced deficit rainfall intwo years. A 20 per cent deficiency in rainfall affects the 80 per cent of thecropped area under dry land cultivation. In 2002-03, the rainfall deficiencywas estimated at 32 per cent of normal rainfall. Union ministry of agriculture,in its report on drought in the states, estimated that the crop loss was morethan 50 per cent of normal yield in an extent of 21.4 lakh hectares in AP. Inthe last seven years, inflows into the irrigation sources have come down dueto deficit rainfall. As a result of recurring drought, the recharge to groundwaterwas drastically reduced. The excessive drawing of water, in order to meetthe water requirements of the cash crops and the shortage of surface watersupply, resulted in a further decline in water levels. According to the datagiven by director of economics and statistics (government of AP), in 2002alone the decline in groundwater levels was more than four metres in 25per cent of the borewells, between two and four metres in 26 per centof the borewells and less than two metres in 44 per cent of the borewells.

    References

    Assadi, Muzaffar (1998): ‘Farmers’ Suicides: Signs of Distress in RuralEconomy’, Economic and Political Weekly, 33(14), pp 747-49.

    AWARE (1998):Report on Farmers’ Suicides in Andhra Pradesh, DevelopmentResearch Advisory Group, Hyderabad.

    Centre for Environmental Studies (1998):Gathering Agrarian Crisis: Farmers’Suicides in Warangal District, Citizens’ Report, Warangal.

    Chowdhary, P A et al (2002): Report of the Farmers’ Commission of Expertson Agriculture in Andhra Pradesh, Hyderabad.

    Deshpande, R S (2002): ‘Suicides by Farmers in Karnataka: Agrarian Distressand Possible Alleviatory Steps’, Economic and Political Weekly, 37(26),June 29, pp 2601-10.

    Gopal Iyer, K and Mehar Singh Manick (2000): Indebtedness, Impoverishmentand Suicides in Rural Punjab, Indian Publishers and Distributors, Delhi.

    Government of Andhra Pradesh (2003): Compendium of Area and Land UseStatistics of Andhra Pradesh, Directorate of Economics and Statistics.

  • (2004): State Domestic Product Series of Andhra Pradesh, Directorate of Economics and Statistics, government of Andhra Pradesh, Hyderabad.
  • (2004): Economic Survey of Andhra Pradesh, Hyderabad.
  • (2005): Report of the Commission on Farmers’ Welfare, Hyderabad.Government of India (2002): Report on States’ Drought, Parts I and II, Ministry of Agriculture, New Delhi.
  • Government of Madras (1927): Royal Commission on Agriculture in India,Vol III, Evidence taken in the Madras Presidency, Calcutta.

  • (1930): Report of the Madras Provincial Banking Enquiry Committee, Vol 1, Government Press, Madras. Kumar Pramod and S L Sharma (1998): Suicides in Rural Punjab, Institute for Development and Communication, Chandigarh.Narayanaswami Naidu, B V (1946): Report of the Economist for Enquiryinto Rural Indebtedness, government of Madras, Madras.
  • National Sample Survey Organisation (2005a): Some Aspects of Farming, Situation Assessment Survey of Farmers, 59th Round, Report No 496,Ministry of Statistics and Programme Implementation, government ofIndia, New Delhi.
  • (2005b): Indebtedness of Farmer Households, Situation Assessment Surveyof Farmers, 59th Round, Report No 498, Ministry of Statistics andProgramme Implementation, government of India, New Delhi.
  • (2005c): Household Assets and Liabilities in India, 59th Round, ReportNo 500, Ministry of Statistics and Programme Implementation, governmentof India, New Delhi.
  • Sathianathan, W R S (1935): Report of Agricultural Indebtedness, Madras.

    Subrahmanyam, S and P Satya Sekhar (2003): ‘Agricultural Growth in AP’in Ch Hanumantha Rao and S Mahendra Dev (eds), Andhra Pradesh Development: Economic Reforms and Challenges Ahead, Centre for Economic and Social Studies, Hyderabad.

    Vasavi, A R (1999): ‘Agrarian Distress: Market, State and Suicides’, Economic and Political Weekly, 34(32), April 7, 2263-68.

    Vidya Sagar, R and K Suman Chandra (2003): Farmers’ Suicides in Andhra Pradesh and Karnataka, Centre for Social Development, National Instituteof Rural Development, Hyderabad.

    Vikas Adhyayan Kendra (2003): Cotton Cultivation in Maharashtra, Vol 1, Report of a Study for OXFAM, Mumbai.

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