Farm challenges

Why Haryana’s plan to shield vegetable farmers from low prices might just work

Vegetables being a perishable commodity might protect the Bhavantar Bharpai Yojana from trader manipulation.

In March, Jaiveer Antil, a 33-year-old farmer in Haryana’s Sonepat district, was waiting for the tomato plants on his one-hectare plot to bear fruit. Antil’s family has been growing tomatoes for 15 years now and this year, like previous years, he was anxious about what the markets would be like in the two months it would take his crop to ripen.

Tomato farming, or indeed any horticultural production, is a risky proposition, as Antil knows very well. Prices fluctuate over time. And since fruits and vegetables are perishable, they cannot be stored for long periods. They have to be sold and consumed within a few days of being plucked, which also means that unless Antil has already contracted their sale to a trader before planting them, he will have to accept the price he gets in the market.

But in January, Antil had heard of a new state government scheme that promised to make him “risk free”. If he did not manage to recover at least his production cost at the market, the state would pay him the difference.

Antil is now one of 4,435 farmers who have registered for Haryana’s Bhavantar Bharpai Yojana since January 1. After Madhya Pradesh, this is the second state-level implementation of a price deficit payment scheme suggested by Central government’ s policy think tank Niti Aayog.

After Madhya Pradesh, Haryana

The two states, both ruled by the Bharatiya Janata Party, announced separate price deficit payment schemes in 2017. Under these, the government promises to pay registered farmers the difference between the market price and their cost of production to buffer them in the event of market failures.

Madhya Pradesh’s Bhavantar Bhugtan Yojana initially covered seven oilseeds and pulses, all of which have minimum support prices declared by the Centre. A minimum support price nominally covers a farmer’s cost of production. If market prices go below this level, the government is supposed to intervene and procure from the market.

Though the government declares minimum support prices for 23 crops, in practice, it procures only wheat and rice regularly, and pulses intermittently. Madhya Pradesh’s scheme was meant to cover that. It was launched in September and its first sales window closed in December. It has been criticised for its vulnerability to trader manipulation – there are suggestions that urad and soyabean traders suppressed prices artificially to buy these crops at a lower rate in the market, leaving the government to compensate farmers.

Haryana’s Bhavantar Bharpai Yojana is slightly different. Instead of crops for which there is a declared minimum support price, it has selected four vegetables – tomato, onion, potato and cauliflower – and declared their production cost, between Rs 4 and Rs 5 per kg, on its own. Unlike Madhya Pradesh, which sought to support farmers already growing certain crops, Haryana sees the scheme as a way to encourage farmers primarily engaged in growing cereals such as wheat and rice to switch to horticulture.

“We have been working for the last two to three years to promote horticulture among farmers,” said Arjun Singh Saini, director general of horticulture in Haryana. According to him, the state is saturated with wheat and rice and any increase in their minimum support price will not greatly improve the incomes of farmers who grow these staples. The state believes that diversification into horticulture is the solution.

Saini added that since farmers making the switch were not comfortable, “they have asked for fixed prices for horticulture”.

That is where the Bhavantar Bharpai Yojana comes in. Registration for two of the four vegetables covered by the scheme – tomato and onion – began in January. Between February and mid-March, horticulture officers surveyed the lands of those who had registered to verify that they had indeed sown as much of the crops as they claimed. The sales window will open in April, when tomatoes are typically ready to be plucked.

According to state government data, 4,290 of the 4,435 individuals who have registered for the scheme are male. The registered acreage covers 10% of the state’s estimated horticulture area.

A banner at the Panipat market shows farmers where to sign up for the Bhavantar Bharpai Yojana. (Credit: Mridula Chari)
A banner at the Panipat market shows farmers where to sign up for the Bhavantar Bharpai Yojana. (Credit: Mridula Chari)

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The schemes in Madhya Pradesh and Haryana are essentially pilots for a Central rollout of a similar programme to be implemented by the state governments. More details about Niti Aayog’s plan for a price deficit payment scheme emerged in the Ministry of Agriculture’s Demand for Grants, which was passed by the Lok Sabha this month. Through this scheme, the Centre will directly pay farmers the difference between the minimum support price and the price at which they sell their crops in the market, but with several riders.

The Centre will pay the price difference for only 75% of the average production of the land holding for the scheme. Also, only those states that have enacted or have promised to enact the new Model Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act of 2017 at the state level will be eligible for the scheme. These states will be allowed to select a maximum of four crops each season.

Farmers will have to register online with their expected sowing area every season and sell the crops within a specified 90-day window at a registered agricultural market. They will be compensated only for produce that is “fair average quality”.

An assessment of the price deficit payment scheme in the Demand for Grants report notes that states are often not in a financial position to undertake these schemes. The Centre should thus strengthen these agencies and consider allotting more funds to the states for implementing the schemes.

Haryana, however, has decided to embrace the risk.

“We have studied the market of the last 10 years for crops,” said Saini. “In terms of sensitivity [to price fluctuations], potato is the most sensitive, then tomato, onion and cauliflower. We have decided that farmers will get money and Haryana will take the risk.”

Arjun Singh Saini, director general of horticulture, at his office in Panchkula. (Credit: Mridula Chari)
Arjun Singh Saini, director general of horticulture, at his office in Panchkula. (Credit: Mridula Chari)

Market stability

The Centre’s price deficit payment scheme and the Bhavantar Bhugtan Yojana in Madhya Pradesh both call for an average price based on sales in neighbouring states to be declared to ensure traders do not artificially suppress prices. The government will then pay farmers the difference between the average sales price and the minimum support price, even if the market price drops below the average price.

In Madhya Pradesh, trader manipulation seems to have pushed prices of urad and soyabean during the sales window lower than usual. But though several farmers suffered lower prices, only a small percentage of those who had registered for the scheme got its benefits, noted The Indian Express.

The Haryana government has not yet announced a similar safeguard, and plans to keep its options open. But a powerful control for the state is that the primary market for its vegetables is Delhi, not Haryana, and that the number of buyers is also diffused across this area. Most tomato and onion farmers in Haryana either sell directly to Delhi or to traders at the farm gate soon after sowing. These traders then take their produce to the Capital.

In Delhi’s Azadpur mandi, Asia’s largest vegetable market, traders were unimpressed by the Haryana scheme’s potential to disrupt their prices.

“Tomatoes and onions from Haryana are only 1% of our arrivals,” said Pankaj Chauhan, a tomato trader at Azadpur, which sees tomato arrivals mostly from Jaipur, Agra, Maharashtra, Andhra Pradesh and Himachal Pradesh. “This cannot affect our prices,” he declared.

That said, there is considerable fluctuation in the vegetable market, even in Azadpur. The average price for tomatoes in Azadpur during April and May last year was Rs 666 a quintal, a sharp drop from an average of Rs 1,353 a quintal in 2015. Yet, even within the 2017 sales period, prices shifted from Rs 1,179 a quintal in mid-April to Rs 332 a quintal a month later. Much of this is based on constantly shifting arrivals from various parts of the country. Prices in Haryana were a few hundred rupees lower, but more stable.

According to farmers, the government has largely set a fair cost of production for the four vegetables – though for tomatoes, it only covers the cost of local tomato seeds and not the doubly expensive and productive hybrid ones. At a promise of Rs 4 or Rs 5 a kg, with a maximum average productivity of 100 quintals to 120 quintals per acre, farmers will receive between Rs 48,000 to Rs 56,000 per acre should market prices fall unusually low, as they have for a few days each in the last five years.

But to avail of the scheme, Haryana farmers will have to sell their produce at a registered Haryana mandi. This means they will have to be aware of daily price movements in Delhi and Haryana markets and be far more nimble in making their decisions than before.

“Sonepat is too small a market for us,” explained Jaiveer Antil. “We take our vegetables only to Delhi. It will be a problem if we have to sell only in Haryana.”

Traders in Haryana, too, might be unwilling to buy tomatoes because of the quick turnover phase – tomatoes have to be picked and consumed within three or four days or they will spoil without storage facilities. Each day of delay in reaching the customer then becomes a costly one, explained Rajendra Sharma, president of the Potato and Onion Merchant Association at Azadpur.

“Vegetables cannot be hoarded,” Sharma said. “If it is ready, we have to sell it. This is why there is absolutely no hoarding for tomatoes and less for potatoes and onions.”

Tomato farmer Jaiveer Antil in Haryana's Sonepat district. (Credit: Mridula Chari)
Tomato farmer Jaiveer Antil in Haryana's Sonepat district. (Credit: Mridula Chari)
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