Farmer dies by suicide in Kerala over debt: What ails the state’s paddy cultivation sector?

MSP for paddy in Kerala

In Kerala, the Minimum Support Price (MSP) has two components; the amount fixed by the Union government, as a minimum payment for procuring crops from farmers, and an additional incentive given by the state government.

Last year, the MSP was Rs 28.20 per kg of paddy. Of this, Rs 20.40 was the share of the Union government and Rs 7.80 of the Kerala government. This season, the Union government raised its share to Rs 21.83. The state government, on the other side, did not bring in a corresponding increase, and instead reduced its share from Rs 7.80 to Rs 6.37, bringing the total procurement price to Rs 28.20. Even at this rate, the procurement price is reckoned as one of the best prevailing in the country.

Kerala govt’s incentives for paddy cultivation

The shrinking size of land under paddy cultivation in the state has prompted the state government to introduce incentives to encourage cultivation and dissuade farmers from leaving the paddy fields fallow. Input assistance of Rs 5,500 per hectare is given from the state schemes to support paddy cultivation.

Also, the local self-government bodies (mainly panchayats) support paddy cultivation at the rate of Rs 25,000 per hectare, towards seeds, fertilisers, pesticides and land preparation. However, this support varies from region to region, depending upon the funds and number of paddy farmers.

In 2020, Kerala introduced a royalty scheme for farmers who undertake paddy cultivation for three consecutive years. Accordingly, a farmer would get Rs 2,000 per hectare (aid limited to a hectare) as royalty in a year. Last year, the royalty was increased to Rs 3,000 per hectare. As per official data, this year, as many as 1,30,891 applications came from the Palakkad district, of which, 88,258 applications for royalty have been approved. However, farmers in different parts of the state complain that these incentives have been inconsistent.

How cost of cultivation impacts paddy cultivation

Despite the incentives, the paddy sector is seen as unprofitable in Kerala mainly due to the spiralling cost of cultivation. As per the state’s Economic and Statistics Department, the cost of cultivation per hectare in 2021-22 was Rs 75,430, rising from the previous year’s figure of Rs 69,344.

Of the total cost, hired human labour comprised 41.78 per cent, mechanised labour 14.25 per cent and manure and chemicals 11.19 per cent. This did not include the value of household labour (which is deployed by small and medium farmers who till on their land), and interest on land value.

The cost of producing one quintal (100 kg) of paddy in 2021-22 was Rs 2,081 and has been increasing every season. In the current year, paddy is procured at the rate of Rs 28.20 per kg. At that rate, income from one quintal of paddy would be only Rs 2,820. A comparison between cost and income shows farmers are on a hand-to-mouth existence.

The role of acute scarcity of labourers, wildlife and erratic monsoon

The biggest problem in Kerala is a shortage of labourers, required mainly for planting the saplings. Women had formed a large chunk of the workforce in the paddy sector. With the MGNREGS in place, most aged women have vanished from the paddy sector.

Farmers are now mainly depending upon migrant workers from West Bengal. However, their availability in Kerala is mainly during the autumn paddy season. The migrant workers are missing during winter crop, forcing farmers to scout for local hands which are limited in numbers.

Scattered paddy tracts and conflicting interests among farmers of a particular locality (some want to continue paddy, while others are not keen) often make mechanisation impractical and unviable in many parts of the state. Although tractors and tillers are available in Kerala, harvesters have to be brought from Tamil Nadu. This, again, has hiked the cost of production. In many seasons, paddy had perished in the fields for want of enough harvesters.

In recent years, erratic monsoons during sowing days and unexpected downpours during the harvest have also upset the paddy calendar in the state. Almost all paddy tracts in Kerala face the menace of wild animals, especially wild boars that raid the paddy fields. These attacks leave a wide swathe through the paddy tracts, reducing yield considerably and making harvesting more time-consuming.

Pitfalls of Kerala’s PRS system

In Kerala, state-run Supplyco procures the paddy from farmers and hands over the produce to private mills, which convert the paddy into rice for its distribution through the Public Distribution System (PDS). This rice would be included in the share of Kerala’s rice lift from the government’s Food Corporation of India (FCI).

The central government starts the process of distributing its share of MSP only after the rice reaches the PDS network for distribution. This process, starting from fields to ration shops, takes at least four to six months. The Kerala government introduced a loan scheme in 2015 to overcome this delay.

Under this, when Supplyco takes the paddy from farmers, they are to be given Paddy Receipt Sheets (PRS) for the procured quantity. Earlier, Supplyco used to directly pay the farmers. However, due to the financial crunch of the state government, a consortium of banks was formed to help the farmers.

Accordingly, farmers would get their amount of paddy sale on production of these PRS from the concerned banks. But banks would credit the amount to farmers’ accounts only as a loan, which the Supplyco or the government would repay, with the interest fixed by the banks.

The government often defaults on the payment of the PRS loan, blaming the delay in the release of MSP from the Union government. When the government fails in timely repayment of the PRS loan, it affects the farmers’ credit score. This affects their other loan transactions apart from fresh agriculture loans. Farmers are now demanding the scrapping of the PRS loan system.

Why rice mills are now reluctant to procure paddy

The harvesting season of the first crop of this year is mid-way. However, private rice mills are reluctant to procure the paddy from farmers, many of them having few storage facilities. Of the 50-odd mills, only a dozen mills have so far registered with the Supplyco for procurement this season.

There is a dispute between Supplyco and mills over fixing the paddy-to-rice conversion ratio. At the national level, the ratio is 68, which means a quintal of paddy should give 68 kg of rice after processing. But, the outrun of rice in Kerala has been fixed at 64.50 kg per quintal of paddy due to the pressure from rice mills in the past.

To help the farmers, the state government used to bear the difference (between 68 and 64.50), by contributing the amount required to fill the gap between the two figures. But in the present season, due to the financial crisis, the government was not ready to bear that difference and asked the mills to go by the ratio of 68. Hence, most mills are keeping away from procurement.

This would force the distressed farmers to sell their paddy to the same mill owners who would offer only an amount much less than the support price. While in Palakkad, farmers have storage facilities at homes, the situation is different in the Kuttanad belt spread over Alappuzha, Kottayam and Pathanamthitta districts, where farmers have only the option to keep the harvest at the field or wayside. On many occasions, farmers in central Kerala suffered huge losses due to unexpected rain.