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Post-demonetisation: Punjab farmers weather storm – with help from arhtiyas

Credit, payment in old notes from grain commission agents ensures normal rabi planting operations.

Written by Anju Agnihotri Chaba | Jalandhar |
December 9, 2016 2:31:09 am
punjab, punjab agriculture, punjab sowing, punjab farmers, punjab farming, punjab wheat sown, indian express, india news, latest news Labourers at a grain market in Sector 39 in Chandigarh. (Express Photo: Kamleshwar Singh)

Punjab farmers have so far got only about Rs 19,350 crore, out of the Rs 24,915 crore that was due for the 16.50 million tonnes paddy they had supplied to government agencies in the recent kharif procurement season at the minimum support price (MSP) of Rs 1,510 per quintal.

But even with pending payments of over Rs 5,500 crore for the already sold kharif paddy — and the cash crunch from the overnight demonetisation of Rs 500 and Rs 1,000 currency notes on November 8 — farmers have planted wheat in almost the entire 35 lakh hectare (lh) area targeted for the state in the current rabi season. Moreover, 28 lh of this total sowing has happened post-demonetisation.

How the Punjab farmer has managed to complete wheat sowing, amidst an unprecedented demonetisation-imposed cash shortage and not receiving full payments for the previous crop, is a matter of mystery to many.

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Seeds for sowing apart, farmers seem to have had not too many problems even procuring fertilisers. The state has an estimated rabi season requirement of 5.5 lakh tonnes (lt) for di-ammonium phosphate (DAP) and 8 lt for urea. “90 per cent of DAP, which is applied at the time of sowing itself, has already been lifted. Farmers have also bought over 2.5 lt of urea, for use 20-25 days after sowing along with the first irrigation. We will ensure that they have enough urea also for the second dose after December 15,” claims Jasbir Singh Bains, director of agriculture, Punjab.

The answer to the mystery — how this is turning out to be a business-as-usual rabi season for the Punjab farmer, notwithstanding the most extraordinary circumstances – may lie in the institution of the ‘arhtiya’ or grain commission agent. It is the arhtiyas who seem to have helped farmers sail through in this hour of crisis. The flip side, of course, is that it makes the farmer all the more indebted to this omnipresent intermediary, moneylender and input supplier, all rolled into one.

“We have very strong arhtiya system that you’ll not find in any other state. The arhtiya is always there to provide seed, fertiliser and other inputs on credit to the farmer. The fact that wheat sowing has taken place, that too well within time (80 per cent area got covered by November 21) and despite demonetisation, is proof of their delivering this time as well,” notes Ravinder Singh Cheema, vice chairman, Punjab State Agricultural Marketing Board.

“The government owes me Rs 4 lakh for the paddy I had supplied more than a month back. But that hasn’t prevented me from sowing wheat on my 15 acres. My arhtiya provided the seeds, DAP, and urea on credit, which I took because sowing can’t be delayed beyond the third week of November,” says Gurdeep Singh, a farmer from Najowal village in Pathankot tehsil of Gurdaspur district.

Ajit Singh, who farms 12 acres near Nakodar in Jalandhar district, tells a similar story: “I have Rs 2 lakh of paddy payments to get, on top of no cash for making purchases. It is my old arhtiya who saved me from this double-trouble: He provided fertilisers on credit, because of which I could sow wheat in time”.

Bikar Singh’s arhtiya went beyond making inputs available for planting wheat on his five acres. He also extended Rs 2.50 lakh for depositing that amount in his cash credit limit account at the district central cooperative bank (DCCB). “I couldn’t have afforded to default, as it would have made me ineligible for any concessional interest. But now, I need to repay the arhtiya from the sale of my wheat harvest,” remarks this farmer from Jalandhar’s Akhara village.

Punjab has roughly 26,000 registered commission agents, with each arhtiya having a farmer client base numbering anywhere from 20 to 50. “It is a relation of mutual benefit and trust extending to decades. They (farmers) supply us the grain, without which we cannot do business. Now, when they need us, how can we ignore them?” points out Vijay Kalra, president, Federation of Arhtiya Association, Punjab.

According to Rajnish Sharma, a leading Pathankot-based agricultural inputs dealer, farmers stopped coming to make direct purchases of inputs following demonetisation, as they suddenly had no cash. But they still managed to procure their inputs through arhtiyas. The latter took these on credit from the dealers, who did not mind obliging them, and made the same available to farmers – again on credit.

The arhtiyas always keep enough cash, especially during sowing time when most farmers take advances for cropping operations. This money they return with interest, after receiving payment for their crop sold to government agencies. The sale itself is mediated through the arhtiyas, who earn a commission – amounting to 2.5 per cent of the MSP payable to the farmer – for ‘facilitating’ procurement.

This time round, however, much of the cash held by the arhtiyas was useless, being in the form of demonetised notes. There is a lot of anecdotal evidence – though no conclusive proof – of many arhtiyas actually palming off these notes to farmers, who have then deposited them in banks. “Since farmers’ incomes are anyway tax-exempt and no questions were to be asked on deposits of up to Rs 2.5 lakh, this was seen as a convenient avenue for arhtiyas to dispose old currency. Farmers did not mind, so long as they were getting the inputs for planting wheat, especially at a time when the government was not making paddy payments”, admit bank officials on condition of anonymity.

It is interesting to note here that government agencies paid Punjab farmers Rs 12,000 crore between October 1 (when paddy procurement started) and October 16. Thereafter, no payments happened till November 21, as the Punjab government could not secure adequate cash credit limits to undertake procurement of a bigger-than-expected crop. Yet, farmers sowed 7 lh area from November 1 to November 8. By November 21, the acreage had reached 27.5 lh – despite no cash and no payments for paddy!

Farmers apparently used the old notes taken from arhtiyas to first deposit them in DCCBs. The DCCB branches in Jalandhar alone received around Rs 65 crore in demonetised notes in just four days, from November 10 to 13. The very next day, the Reserve Bank of India put a ban on DCCBs accepting and exchanging the scrapped notes. But that did not stop the demonetised currency from getting deposited in regular commercial banks.

The good news, if any, from such ‘gaming the system’ could be that Punjab farmers seem set to harvest a decent wheat crop even in these trying times. Whether this will be the case in other states, where arhtiyas aren’t so formidable a force, remains to be seen.

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