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Punjab growers stuck with surplus crops due to liquidity problems of Indian traders

India’s withdrawal of high value banknotes in November 2016 has hit Punjab potato growers quite hard. With the potato traders facing a liquidity crunch post-demonetisation, the growers have failed to find buyers for their surplus crops.

As a result, they are forced to sell produce at prices much less than the input cost. The first harvest of potato yielded just Rs 150- Rs 200 per 50 kg (€1.87-2.50) to the growers in the Doaba region of the state. The cost of production per kg works out to be Rs 4.5.

A potato grower in Jalandhar, told The Tribune that traders had stopped buying the potatoes and potato seed after demonetisation. “The traders face a cash crunch. The farmers, however, planted more potato this year as they did not want to waste the bumper potato seed from last year’s harvest.

Traditionally in potato trade, the trader would not just buy the crop, but also ploughs money in the farming operations. Since the trader did not give loans to the growers, the latter borrowed money from elsewhere (family and friends) to pay for pesticides, fertilisers and labourers, and increased the area under potato. This led to a bumper crop for the second year in a row, but traders have not bought the produce, leading to a glut and farmers throwing away their produce on the roads.”

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