News from the regions

Demonetisation in India: Farmers' Groups write an open letter to the Prime Minister

b_350_0_16777215_00_http___media.indiatimes.in_media_content_2016_Dec_cf267b4a-826e-45f9-bfcc-d2d371e28bef_1480574426.jpgSeveral farmers' groups in India have written a joint letter to the Prime Minister of India, highlighting the severe distress that exists in the countryside after the Indian Government withdrew nearly 86% of the currency in circulation overnight, in a supposed crackdown on corruption and 'black economy'.

Three months since the decision to partially demonetise all bills worth 1000 INR and replace all bills worth 500 INR, the move  has been widely criticised by economists of all leanings as chaotic and unwarranted. India is a predominantly cash-based economy. The government's drive to turn India into a cashless society,one where digital banking and plastic transactions would become the norm, has taken much of the rural society by surprise where digital infrastructure necessary to facilitate such a transition is barely existent.

While mobile phone usage in India is impressively common, number of smartphone users are only a fraction of that number. More so, much of the rural population are out of the formal banking system due to lack of adequate infrastructure in the forms of bank branches and ATMS. The crackdown, announced abruptly on 8 November 2016, was intended to catch currency hoarders by surprise and thereby obliterate the black economy. The government had estimated that nearly 20% of the total cash in circulation were hoarded as 'black money' and this surprise step would effectively force the hoarders to either destroy those cash or come clean. At the time of publishing this article, reports indicate that nearly 97% of the cash currency have returned to the banks, effectively raising doubts about the claims that '20% of currency were being hoarded as cash'. Critics say that most of those who involve in money laundering and tax evasion have parked their assets in tax havens or in real estate properties and that this crackdown would do nothing to retrieve that back. 

Effectively, the rural agricultural economy which is heavily dependent on cash is in tatters. The English version of the open letter, reproduced below, gives a sneak peak into the distress that has dawned upon Indian farmers and farm workers, who were already reeling under back-to-back droughts and price crash on their produce due to cheap imports and agricultural dumping brought about by free trade agreements.

Bharatiya Kisan Union, a member of La Via Campesina is also a signatory to the letter. 


Date: 5 Jan 2017

Dear Prime Minister,

Namaste! The signatories to this open letter to you represent lakhs of farmers of this country across various states and regions. We have been deeply distressed at the hardships that rural India in general, and farmers including agricultural workers have been going through from the time that you brought in demonetization of 86% of India’s currency on November 8th 2016, in the name of curbing black money in our economy. Right from the beginning, it was clear that our rural and agrarian contexts/economies were not kept in mind and measures not taken specifically for these vulnerable and critical groups in this entire demonetization episode.

We also listened to your address to the nation attentively and carefully on 31st December 2016 evening, hoping to hear some good news that will signal an end to the hardships. We had hoped that you will share some evidence on the gains from this “surgical strike” on the economy. We have however been disappointed. On the agriculture front, you talked about the government taking care of the interest on agri loans from DCCBs and Primary Societies for 60 days, by paying directly into the bank accounts of farmers. NABARD will be re-capitalising cooperative banks and societies to a tune of Rs. 41000 crores, you said. You also said that 3 crore Kisan Credit Cards will be made into RuPay Debit cards within three months so that they can be used by farmers anywhere. We find all of these inadequate when the entire season has been affected badly for the farmers. We also find that this is a rehash of what already exists.

A reality check against these three major measures that you announced to ameliorate the sufferings of farmers shows the following:

  • When the entire agricultural season suffers due to an adverse effect on timely operations because of the demonetization move, postponing the loan repayment period by 60 days or the government bearing the interest for those 60 days to a tune of Rs. 333 for Rs.50000/- crop loan (usual short term loan amount for the average farmer covered by institutional credit) is a pittance against the hardship inflicted, that too in a good year. It is bad enough that farmers suffer natural disasters of all kinds, without having to face such surgical strikes in years when they could have recovered some losses.
  • The provision for RuPay and other debit cards against KCC existed since 2012 and 5.66 million such cards have already been issued in 2013-14 itself. A natural extension of this move by the UPA government should have actually covered 3 crore farmers by now and it would be surprising if that did not happen in the natural course of scaling up of this measure.
  • About the infusion of 41000 crore rupees of low interest credit to cooperative banks and societies by NABARD: this is not new, and in 2015-16, NABARD sanctioned credit limits aggregating 71497 crores under short term refinance portfolio and Rs. 48,064 crores in long term refinancing. This is the unutilized last quarter funding that was in any case available.
  • Given all the above, given that no clear benefits have been created from the demonetization move and our collective sacrifice, and given that there are no clear timelines indicated on when full cash availability will be restored, we are forced to conclude that farmers’  hardships do not seem to matter to the government at all.

In fact, your timing of the demonetization move had shown a dismaying disregard to farmers’ livelihood cycles / agricultural seasonal calendars. Selling of kharif produce was affected as were the rabi season agricultural operations. Showing higher rabi sowing in 2016-17 against a bad season last year (2015-16) is not the measure to indicate that demonetization has had no impact on this Rabi. Estimating the contraction in rabi operations vis-à-vis a good year, without the demonetization impacts, would be the right thing to do.

In villages all over India, we have come across numerous tales of hardship and woes, ranging from agricultural workers not being paid in time by farmers owing to shortage of cash, to farmers cutting back on investments on the crop management in this season, to farmers not being able to sell their produce with traders citing their own difficulties and importantly, loanee farmers from cooperative banks not even being able to repay their loans! Even timely repairs of machinery are becoming difficult. The thrift and credit activity in self help groups and their federations has also been affected. The difficulties of producers of perishable produce are particularly acute. There are also the hardships of returning migrant workers, who are unable to find work outside villages in other sectors.

The biggest negative impact of this entire demonetization process so far is the destruction that is taking place of the rural cooperative banking sector,, whereas there is  a dire need to actually strengthen rural banking and agricultural credit in numerous ways, including removal of political interference. 

The DCBs were not allowed to exchange or deposit invalidated 500 and 1000 rupee notes. This affected 12 crore customers of 33 State Cooperative Banks and 367 District Cooperatives Banks, even though all these SCBs and 349 DCBs are on the core banking platform. About 5 crore farmers, despite having fulfilled due KYC norms and having received kisan credit card loans, are unable to repay loans and reports suggest that loan offtake has come down drastically. If the current trends continue, cooperative banks are headed towards decimation.

For those farmers/agricultural workers operating Jan Dhan Yojana accounts, the norms have been inequitable in terms of withdrawal limits. 

Coming to the policy dream of moving India to a cashless/less-cash digital economy, we can only say that farmers and other rural Indians would like basic infrastructure and services like uninterrupted power supply to be ensured, in the first instance, before such dreams can become a reality. Such services will directly contribute to our livelihoods and add to the economic growth of the country.

It appears that “war on black money” and demonetization are being used to forcibly integrate the rural masses into certain techno-financial regimes. While these assure profits for the corporate sectors that run these techno-financial systems, they imply tremendous hardships on the average rural person, whose access to such systems is limited and for whom such systems will serve little purpose. The implementation of such a system does not take into account the gap between metropolitan financial systems and that of the rural and agrarian economies, and reflects a lack of intimate knowledge about rural economies. In the final reckoning, the current demonetisation will have introduced new forms of corruption (as already evident in the commission system for old notes, the transfer of large amounts of new currency to hoarders and income-tax evaders), punitive financial systems that will ensure huge profits to the corporate financiers, and will intensify the pauperisation of the rural masses, especially small and marginal farmers who form the bulk of the farming population.

Like other sections of society, we had remained silent since you had sought sacrifices for 50 days from all citizens, till December 30th, in anticipation of some major benefits to be gained by the economy. However, it is unclear what the objective was for this entire exercise and how it has been achieved. History will remember this scheme as the most hurtful one since independence, in the name of resolving the problems of corruption, black money, and terrorism.

During the Pre-Budget consultation on agriculture held by the Finance Minister on 19th November 2016, one of the important demands of various farmer unions to the government was to find ways of exempting farming transactions from demonetization rules. However, no positive intervention was taken up in this regard, other than to allow farmers to purchase some inputs like seeds from public sector bodies using demonetized notes. That was an extremely inadequate response from the government. There has also been an additional 60 days provided for repayment of farm loans, in addition to extension of timelines for crop insurance premium. All of these would have been helpful only if cash flows were actualizing and were getting enhanced, which is not the case right now.

Meanwhile, the latest NCRB figures on farm suicides in 2015 highlight yet again, the deep distress in Indian agriculture, affecting both farmers and agricultural workers, with a vast majority of the farmers’ suicides being related to indebtedness/bankruptcy. This nation cannot afford to put any more burden on its *anna daatas* who are keeping the country fed.

At this juncture, we seek from you the following actions to ameliorate the hardships being faced by farmers:

From the black money netted (non-return of demonetized notes back to the banking system, or from the taxes and revenues collected by the current crackdown and new tax amnesty measures),  each farm household (we are using an expansive definition of a farmer here to include agricultural workers too) should be paid through Direct Benefit Transfer Rs. 10,000/- at least. This would amount to around Rs.1.2 lakh crores of rupees, which is less than the projections made initially about the outcome of this war against black money.

Cooperative Banks be immediately brought on par with other banks, first and foremost. All restrictions on deposits and withdrawals from the cooperative banks should be withdrawn.

All withdrawal and deposit curbs on farmers should be withdrawn fully even in the context of Jan Dhan Yojana accounts.

Announce a loan waiver immediately to all farmers, owing to the massive disruptions caused in the agricultural activities in this season.

With increased NABARD funding, enhance soft loans to Joint Liability Groups and Self Help Groups. Provide for village level funds to finance and support women farmers.

Further, in the kisan credit scheme, the scale of finance should be increased, interest rates should be lowered and agriculture credit expanded for more coverage.

Given that the cash crunch is expected to continue, set up an MGNREGS-like mechanism to fund agricultural operations so that all agricultural operations continue smoothly even as workers get paid by government into their accounts, from where withdrawals should be allowed unconditionally. Double the allocation of MNREGA.

Adequate arrangements be made from now itself for Rabi season sales and marketing to take place unhindered. Adequate cash flows be ensured with traders and other agencies so that farmers do not suffer in any way. Government should step in to procure as much as it can, including dals like arhar which are at present seeing a crash in the markets, and pay these amounts into farmers accounts immediately.


 Sincerely,

  • Yudhvir Singh, General Secretary, All India Coordination Committee of Farmers Movement (AICCFM)
  • Virendra Kumar Shrivastava, President, Laghu Simant Krishak Morach, Uttar Pradesh
  • Virendra Dagar, State President, Bhartiya Kissan Union (BKU), Delhi Rural
  • Vijay Jawandhia, Shetkari Sanghathana, Maharashtra
  • Vidyadhar Olkha, State President, Bhartiya Kissan Union (BKU), Rajasthan
  • Sukhdev Singh Gill, State President, Bhartiya Kissan Union (BKU), Himachal Pradesh
  • Satnam Singh Cheema, State President, Bhartiya Kissan Union (BKU), Uttarakhand
  • Rusikulya Rayat Sangha
  • Ratan Singh Mann, State President, Bhartiya Kissan Union (BKU), Haryana
  • Rajveer Singh Gadaun, State President, Bhartiya Kissan Union (BKU), Uttar Pradesh
  • Poguri Chennaiah, Rashtriya Vyavasaya Vruthidarula Union (A Federation of Unions of agri.workers,marginal farmers & Fisher people in India)
  • Paschima Odisha Krushak Sangathan Samanvaya Samiti
  • Nallagounder, Uzhavar Ulaippalar Katchi (Tamil Nadu Farmers Association)
  • Mahila Kisan Adhikaar Manch (MAKAAM)
  • Krushak Bikash Mancha
  • Kiran Vissa, Raithu Swarajya Vedika
  • Kavitha Kuruganti, ASHA-Kisan Swaraj
  • K. Sella Mutthu, President, Tamil Nadu Farmers Association
  • Jayant Verma, Vice President, All India Agragami Kissan Sabha
  • Jagdish Singh, State President, Bhartiya Kissan Union (BKU), Madhya Pradesh
  • Gurnam Singh, President, Bhartiya Kissan Union, Haryana
  • Dr Sunilam, Kisan Sangharsh Samiti
  • Dhan Singh Sherawat, Bhartiya Kissan Union (BKU), Maharashtra
  • Deshi Bihan Surakshya Mancha, Odisha
  • Com Hannan Mollah, General Secretary, All India Kisan Sabha
  • Ch. Rakesh Tikait, National Spokesman, Bhartiya Kissan Union (BKU)
  • Ajmer Singh Lakhowal, State President, Bhartiya Kissan Union (BKU), Punjab
  • Adi Krushak Sangathan

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