Business Today

Slowdown adds to Sangli's drought woes

The turmeric capital of the country is in the grip of a drought and a price crash. But real estate is buoyant.

twitter-logo Anand Adhikari        Print Edition: July 8, 2012

The drought is hurting in Western Maharashtra. In Walasang village, 100 km away from Sangli town, Mahadev Bhimrao Shinde, 79, survives thanks to the two cows and a goat he owns. His lands bring him nothing. It is the same all over the village which is full of dead orchards, barren land and dry bore wells. Tankers provide the residents with water for their daily needs. Even the animals survive only because a state run scheme which provides them free fodder. From last year, Shinde has turned from farmer to labourer, ready to work on other people's fields should they want to employ him. His son, unable to find employment, has moved to Kolhapur district and sends money home only intermittently.

Residents of this large village of 28,000 people rush to the tankers every day when they arrive. "I have to fight my way to get a bucket of water," says Shinde. Poor rainfall and drought-like conditions have prevailed in this region for the past five to six years, but it was officially declared 'drought affected' only in May this year. The Centre has yet to provide any relief package, and has only advised the state government to focus on fiscal discipline.

The situation in this region is no different from that in other rain deficient states like Bihar, Jharkhand, Uttar Pradesh and West Bengal.

Much could have been done to prepare for the drought: the villages could have been declared 'drought hit' early, water could be lifted from nearby rivers, farmers could have been taught to grow the least water guzzling crops and practice soil conservation. But nothing was.

Only two years ago, Shinde used to cultivate corn and bajra. Shinde is illiterate, and understands little of agricultural economics, or the current slowdown, but there is one English word he does know well, and that is 'government'. It is not a word he likes. "I have no expectations from the government," he says.

The severe drought and farmers' shift from foodgrain to high priced crops like turmeric, grapes, pomegranate and so on has already affected the state's foodgrain production, which fell from15.4 million metric tones in 2010/11 to 11.8 million MT in 2011/12. Maharashtra showed negative agricultural growth of 9.1 per cent in 2011/12.

Agriculture contributes only 15 per cent to state's gross domestic product.  But that too showed a significant decline from 11.3 per cent in 2010/11 to 8.5 per cent in 2011/12.

Anil Kumar Navale, Additional CEO at Sangli Zilla Parishad is quick to defend the government. "The area is vast and the money is limited," says Navale.

Elsewhere in the state water is more freely available, but the beginning of a slowdown can be seen from the falling prices of agricultural commodities. Falling prices impact the disposable income of the people who depend only on the farm income for their livelihood.

Take for instance; the prices of turmeric, which have fallen from a high of Rs 20,000 per quintal in 2010 to Rs 4,500 per quintal.

Not very far away from Shinde's village, in Pimpalwadi village of Kavathe Mahankal taluka , a young farmer called Parshu Khot is a victim of depressed agricultural prices. Sitting in one corner of his 10 acre land, Khot fiddles with his mobile while also keeping an eye on labourers working on his land.

"I'm the only one in Pimpalwadi village who decided to grow turmeric," says Khot proudly. Sangli district is known as a top producer of water guzzling cash crops like turmeric, sugarcane, grapes and pomegranate. Three years ago, Khot took the risk of growing turmeric despite his father advising him not to shift from their traditional crops of corn, brinjal and foodgrain.  Sangli is the turmeric capital of the country. Today, the prices of turmeric have crashed and many others like Khot  are left with huge quantities of turmeric they cannot sell. "I'm going to make a loss if I sell today," he says but quickly adding that he wants to hold on to turmeric for next two to three years.  "I don't think other framers are as strong as me," reasons Khot. He feels half the farmers who grew turmeric will now stop doing so. Supply will then fall and prices may recover. "I 'm hopeful," he says.  But Khot agrees that the good old days of rising prices of agricultural commodities are over now.

Khot says his life has not improved much despite rising prices in the period 2007 to 2010. "Expenses are also going up," he says, making special mention of labour cost, which was Rs 100 per day per labourer two years ago but is now Rs 200-250 per day.

Many farmers like Shinde are stuck  because of falling prices and unsold stock. "This will have an impact on disposable income and the demand factor in the rural economy," says Kiran Kulkarni, who runs a NGO supporting self help groups.

The plight of farmers in Maharashtra represents the state of affairs of a state that contributes the maximum to centre's GDP at 14.5 per cent followed by Uttar Pradesh and Andhra Pradesh at 8.3 per cent each.

The condition of the agriculture sector is also impacting the demand in semi-urban and urban areas in the vicinity.

Sangli District, which is some 350 km away from the Mumbai city with a population of 28 lakh people, epitomizes everything that India represents. Unlike China and some other export led emerging markets, India is predominantly a consumption driven economy. In Sangli, consumption is mainly driven by farm income as 55 per cent of the people live in rural areas.

In the post 2008 period, consumption from the semi urban and rural areas came to India's rescue, keeping its growth at reasonable levels.

Small town folk had high farm income (thanks to high food inflation) and had much lower debts than their big city counterparts, who are all paying out EMIs for houses, cars, etc, as well as large credit card bills. They kept the GDP growing.

Today, these once recession proof centres are also feeling the pinch.

The streets are not exactly deserted, but demand has indeed been impacted.

"The demand has moderated a bit in the last one and a half years. My business in terms of value is increasing, but the volumes are not much," says Vijay Ladda , owner of a Sony showroom in Sangli.

At the main Shivaji Mande market one can see big apparel brands, auto showrooms of Hero, Maruti, Dominos, Sony and even showrooms of home furniture and bath fittings.

But of late, financial services companies are also observing higher bad debts in smaller towns, which together with higher interest rates are restricting consumption in the smaller towns and cities. "I'm doing purely cash business. There is no finance support from banks and NBFCs," says another consumer durable shopkeeper.

Randeep More, owner of a swanky bath fittings showroom, says growth is high because of the sluggish Pune real estate market and the shift from Pune builders and customers to Sangli. "Our business is directly linked to the fortunes of real estate market," says More. But there are many who say the real estate market is now up for correction.

"We are as much impacted as any person in a metro. The rising prices of crude oil, steel, plastics, cement affects us as well," says Deepak Mane, a salesman.

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