Deepening farm crisis in India could hurt Modi's re-election bid

  • Farmers are grappling with falling domestic product prices due to rising yields.
  • Indian farmers voted overwhelmingly for Modi in 2014.
Vegetable prices, especially onions, cabbage and tomatoes, have also fallen 25 percent from last year, largely because of overproduction.

The financial squeeze on India's farmers is set to worsen because of record high fuel prices and surging costs of fertilisers, posing a challenge to Prime Minister Narendra Modi in the election that must be held by May.

The rise in input prices could not have come at a worse time for farmers who are already grappling with falling domestic product prices due to rising yields and abundant harvests.

Indian farmers voted overwhelmingly for Modi in 2014. But a fall in rural incomes risks damaging that support next year.

Thousands of farmers marched in New Delhi on Tuesday to demand better prices for their produce. Police responded with teargas and water cannon. Farmers suspended their protests after talks with officials that ran into early Wednesday morning.


"Although we have decided to end our protest, we still believe that the government is not serious about addressing the concerns of the farmers," Anil Talan, national secretary of farmers body Bhartiya Kisan Union, said after the march.

Diesel prices have surged 26 per cent this year, making tilling fields, harvesting and transporting crops expensive for India's 263 million farmers who mostly use diesel tractors.

Alongside rising diesel costs, prices of key fertilisers such as potash and phosphate have jumped nearly 15 and 17 per cent respectively in a year, as companies pass on the rise in global prices and the impact of the weak rupee to farmers.

"It's a double whammy for farmers who have to bear the brunt of lower crop prices and higher input costs," said Devinder Sharma, an independent food and trade policy analyst, saying this explained "why farmers' anger has come to the fore."

Diesel demand is rising as farmers have started harvesting summer crops. After tilling, they will plant wheat and rapeseed, the main winter crops.

Union official Talan said the government needed to prop up commodity prices and keep a lid on farmers' costs to support the agricultural industry, which accounts for about 16 per cent of India's $2.6 trillion economy.

Counting the cost

"Because of higher diesel prices I need to spend nearly 20 per cent more on harvesting soybean but soybean prices have crashed this year," said Uttam Jagdale, a farmer from Pune.

Nilesh Sable, a cane farmer from Sangli in Maharashtra, said fertiliser prices were rising each month.

Fertiliser firms say they have little choice but to pass on at least some extra costs due to a sharp fall in the rupee and a 20 per cent rise in international potash and phosphate prices.

"Still, we are not passing the entire burden to farmers," said an official with a state-run fertiliser company, asking not to be named in line with government policy.

Greater farm efficiency is partly to blame. Mechanised farming, high-yielding seed varieties, and increased use of pesticides have pushed up harvests. Output of most crops has soared to record levels each year.

In bid to help the sector, the government unveiled measures last week such as transport subsidies and incentives to export at least 5 million tonnes of sugar. Brazil, Thailand, Australia and other rival producers were quick to complain.

Vegetable prices, especially onions, cabbage and tomatoes, have also fallen 25 percent from last year, largely because of overproduction.

Domestic milk prices dived more than 25 percent in the past year, but a global glut has made Indian exports uncompetitive.

Harish Galipelli, head of commodities and currencies at Inditrade Derivatives & Commodities in Mumbai, said India needed to find markets abroad to reduce its inventories.

"But exports will not be easy, as global prices are depressed, and there is no export parity for most commodities," he said.

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