Kerala paddy farmers caught in a vicious circle

Farmers demand that the government should provide budget allocation for paddy procurement to streamline the procurement process.
Image of farmers used for representational purposes.
Image of farmers used for representational purposes.

KOCHI : At a time when farmers in Punjab are agitating for a legal guarantee to the minimum support price (MSP) system, their counterparts in Kerala are struggling for survival. For, the delay in distribution of payment for the paddy procured by a government agency is pushing them into a debt trap.

The biggest pain point is the mode of payment. The cost of paddy procured from the farmer is given as a loan, thus fixing the liability on the farmer. Since banks deny agriculture loans to them citing their low CIBIL (Credit Information Bureau (India) Ltd) score, farmers are left to the mercy of usurious loan sharks.

Two farmers — K G Prasad of Thakazhi and K R Rajappan of Vandanam in Alappuzha — died by suicide in 2023 as the delay in payment landed them in insurmountable debt.

“Most of the agriculturists in Kerala are marginal farmers. Every season, farmers get down to sowing after availing loan from banks. The loan is settled after selling the crop. But after the Paddy Receipt Sheet (PRS) loan scheme was started, the distribution of procurement price got delayed and the banks denied loans to farmers claiming they had low CIBIL score. As the procurement price is distributed as loan, it becomes a personal liability for the farmers. When the banks deny loans, they are forced to depend on loan sharks. Once they accept loan from a private money lender, they are forever trapped,” said Dinesh R, a farmer at Choolanoor in Palakkad district.

The Kerala State Civil Supplies Corporation (Supplyco), the nodal agency, issues paddy receipt sheets (PRS) to farmers after procuring their crop, recording the quantity of paddy and the procurement price. The Supplyco has entered into an agreement with nationalised banks for the distribution of the procurement price. The government settles the amount annually, but the farmer has to sign a loan agreement with the bank which says that the liability will be transferred to him if the government fails to settle the amount within a year.

“There are many farmers in Palakkad district who are yet to receive payment for the paddy procured for the first crop in 2023. The harvest season has begun and the Supplyco has started procurement. But there is no assurance on payment,” said Dinesh.

“The Supplyco procured paddy from me during monsoon last year, but I have not received payment. The harvest of the second crop has started but we are yet to receive the payment for the first crop. I cultivate around 5 acres of land and we have no other resource for our livelihood. As a result, many farmers in Palakkad are selling paddy to private mills at low rates as the mill owners gives spot payment. Though they will incur a loss, it will help them to settle the loan,” said Perelikulam Krishnakumar, a farmer in Vadakkancherry.

However, the government rubbished the charges. “The PRS scheme was introduced to avoid delay in payment to farmers. The allegation that the loan will affect the CIBIL score of the farmers is absurd as the government settles the dues promptly. We have procured 1,36,344 tonnes of paddy from 41,936 farmers and Rs 309.26 crore has been disbursed through SBI and Canara Bank till February 13,” said an official at the office of agriculture minister P Prasad.

Why trouble began in 2021

The PRS scheme was introduced by the UDF government led by Oommen Chandy in 2013. In the initial phase, the procurement price was immediately distributed through primary and district cooperative banks. In 2019, the government formed the Kerala Bank, amalgamating district cooperative banks with the state cooperative bank. And in 2021, the government started distributing the procurement price through nationalised banks following the guidelines of the Reserve Bank of India. That was when the problem started. Payment to farmers was delayed as the government delayed payment to the banks. Farmers demand that the government should provide budget allocation for paddy procurement to streamline the procurement process.

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