An ear to the field

An ear to the field

Finance ministry should reconsider its rejection of the proposal to relax cash norms for farmers to buy seeds

demonetisation, agriculture minister, black money, union finance ministry, farmer concern, agriculture ministry proposal, indian express, india news
The currency crunch in the country has severely curtailed the purchasing capacity of farmers. (File)

The Union finance ministry must rethink its decision to reject the agriculture ministry’s proposal to let farmers buy seeds using Rs 500 and Rs 1,000 notes, demonetised by the Centre a few days ago. The finance ministry reportedly felt that making this exception could potentially lead to the misuse of Jan Dhan accounts and turn them into a conduit to legalise black money. The claim is alarmist.

It also betrays a lack of sensitivity to the plight of farmers, who are either trying to sell the kharif produce or preparing to sow the rabi crop. The currency crunch in the country has severely curtailed the purchasing capacity of farmers, as they prepare to buy seeds, fertilisers and so on ahead of the sowing season.

In the absence of state intervention, many may be forced to leave the land fallow or opt for inferior seeds and other inputs, as the agriculture minister had warned in his missive to his counterpart in the finance ministry, which could lead to a fall in farm output.

On Thursday, the government relaxed the cap on cash withdrawals for farmers, raising it to Rs 50,000 per week. This is a welcome measure. But the shortage of currency notes, restrictions on converting the old ones, uneven spread of ATMs and bank branches, and the rationing of cash itself has turned banking into a time-consuming activity.


A less complicated way to ease the pressure is to extend to farmers the exemptions the government has already made for the airlines, railways, petrol pumps and hospitals, which are all permitted to accept the demonetised notes as payment for services. The concerns flagged by the agriculture ministry are genuine and reflect the distress building at the grassroot level. Following the demonetisation announcement, farmers who have harvested the kharif crop are staring at volatile prices while the rabi acreage could shrink in the absence of cash infusion by the government. The impact of such a churn in the farm sector would have a cascading effect on other areas of economic activity. Agriculture hasn’t fully recovered from two drought years and the present crisis threatens to derail a recovery despite improved groundwater levels from a bountiful monsoon.

The crisis calls for innovative solutions and maximum outreach by banking services, especially in rural India. The government has indeed been responding to the events as they unfold and has been tweaking its restrictions and exemptions. The cash-for-seeds proposal is specific and narrowly targeted — the currency notes are to be traded at the public sector National Seeds Corporation for certified quality seeds — and unlikely to derail the government’s wider battle against black money. The finance ministry should let the proposal through and, in fact, extend it to the purchase of fertilisers as well.