A Practical Risk Management Plan for Small Farmers

Every other day we read of some farmer in some part of India committing suicide due to debt burden. This is as painful and poignant as it is a mockery of our planning and agricultural extension work. As a farmer I know some facts of farming. Most farmers are in debt due to some or all of the following reasons:

1. They gamble in pure crops in large areas.

2. They get tempted by hybrid/GM seeds and the propaganda of HUGE profits

3. They borrow money at high interest rates to plant all available area (this is the reason large farmers are more prone to debt than small farmers)

4. A vast majority of farmers have no idea of what schemes and credit facilities are available to them; they generally shy away from paperwork and prefer to borrow at 60% or more thinking "it's only 4-6 months before we can repay it".

5. Most farmers do not service loans promptly - even when they get a good harvest. They think the government may anytime write off loans. So they most unwittingly ruin their credit worthiness themselves. This is what our vote bank politics has achieved by its "farmer friendly loan and interest waivers".

6. Rural bank managers have targets for priority sector advances (agri and small scale industries) - but they prefer to play it safe and account jewel loans as agricultural loans. Getting soft bank loans for farming is hard in reality.

7. Farmers are steadily becoming lazier by the day and they prefer to scatter urea than collect cow's urine & dung and spray or compost it. Locally available resources are sufficient for all crops.

8. Farmers have no concept of working capital management - they divert funds into things like children's education or a daughter's marraige.

IF we are serious about preventing further farmer suicides, farmers should be educated hands-on in risk management, working capital management, marketing and social bravery.

Major factors contributing to risk include:

1. High input costs (immediately raising the bar on the break-even yield)

2. Mono cropping (exponentially increasing the consequence of failure)

3. Market fluctuation/instability

4. Pests & diseases

5. Bad weather

6. Seed failure

7. Insufficient ground water (half-way through the crop cycle)

How does a simple farmer with limted resources manage and mitigate these risks? Crop diversity, organic farming, native seeds, farm pond, milch cattle and planting trees are pretty useful and significant components of a practical risk management plan.

Organic farming substantially reduces input costs. For example, a micro-organism culture based on fermenting pumpkin, papaya & banana fruits with jaggery, cow's urine and eggs will cost only 1 Re / acre for production.

A farm pond guarantees irrigation water for atleast one crop in a year; in addition growing fish can provide valuable income.

Mixed cropping reduces pests by as much as 80% and also increases yields by 25-30% (because of natural selection).

Native seeds are cheap, are resistant to pests and diseases and withstand both drought and flood much better.

Trees contribute to wealth appreciation, reduce labour costs, reduce irrigation requirement, reduce working capital requirement, provide fodder and greatly aid in water harvesting.

Milch cattle assure steady cash flow and also retain/replenish soil nutrition by recycling the bio-mass.

As for working capital requirement, the farmer should only plant as much acreage as his resources will permit.Instead of spending 12000 per acre to cultivate BtCotton and earn a gross revenue of 20000 in 6 months (if at all!), a farmer can spend 1500 per acre and grow multiple vegetables and earn at least 25000 nett per acre.

Borrowing at 60% and 120% and investing it on high risk farming is a sure road to a debt trap. If he has 10 acres and only 25000 rupees, he should invest it on multiple crops in 3-4 acres and either let the rest of the land fallow or grow trees there. Even leaving it for cattle to graze is a very wise investment. (A cow can graze all year round in 1 acre of occasionally irrigated land and produce 1500-2000 litres of milk in a year - it needs no other fodder). Instead if he borrows another 50000 and invests 75000 in a single crop like cotton he is paving the way for his own peril.

There is a tremendous peer pressure in villages to "utilise" all available land. It needs courage to go against the grain and let it fallow or plant trees. Similarly it needs courage to withstand the peer ridicule of activities like collecting cow's urine/dung or picking neem seeds for preparing pesticides. This is what I mean by social bravery.

The so called Green Revolution has only made gamblers out of our farmers. And the casinos are all owned by the seed and pesticide companies. Our governments are no better than the bouncers that protect the house. If establishment really cares, it will wake up to these ground realities, educate the farmer that he is hopelessly addicted to the roulette tables we call farms and do something to wean him out of commercial, high-intensity mono cropping. Till then farmer debts and suicides will be the regular fallouts of our dusty casinos.

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