Dairy business hit: Farmers have money in banks, no cash in hand

The demonetisation of higher value currency notes has resulted in a twofold blow to the dairy industry with the plunge in retail sales and financial distress at the farmers’ end disturbing the trade. Ironically, while dairy farmers have been paid directly into their accounts they are unable to withdraw cash as majority of them have accounts either in the District Central Cooperative Banks (DCCBs) or Urban Cooperative Banks. The Reserve Bank of India (RBI)’s refusal to withdraw the ban on DCCBs from exchanging and accepting the demonetised Rs 500 and Rs 1,000 banknotes has added to the farmers’ financial crisis.

Like most agri-based industries, dairy farming is also cash intensive with farmers requiring liquid cash for fodder and other inputs for animals. In Maharashtra, both private and cooperative dairies deal with primary milk collection societies at the village level while farmers are paid directly through bank transfers.

Chairman of Indapur-based Sonai Dairy, DS Mane, said sales for his private company has gone down by 25 per cent. “The end retailer is not willing to spend and so there is no uptake of the goods from our end,” he said.

Sonai dairy procures around 2.5 lakh litres of milk per day and works with 16 lakh farmers in eight districts of the state.

Pointing out that his company pays the farmers on the 5th, 15th and 25th of every month, Mane said, “Around 50 per cent of our farmers deal with DCCBs and although we have paid the farmers on time they are unable to access the cash (due to RBI’s restrictions),” Mane said.

“Farmers need to get fodder and other things for their animals and all transactions are made with cash. We had deposited Rs 80 crore in the dairy farmers’ accounts but they are unable to access the same due to RBI guidelines,” he said.

Similarly, Pune-based Katraj Dairy — a cooperative dairy unit — has also reported 25-30 drop in their retail business. Managing director of the dairy, Dr Vivek Kshirsagar, said the cash crunch has hit the end consumers. Katraj pays farmers twice a month and Rs 8 crore have been transferred to the account of 50,000 farmers. “Farmers and the primary societies have accounts in the Pune DCCBs and due to RBI’s restrictions the farmers are unable to access the money,” he said.

In many cases, Kshirsagar said, farmers do not have bank accounts and are paid in cash. “We have asked the societies to pay those in need in advance,” he said. The restrictions on DCCBs has debarred 5.5 lakh farmers from Kolhapur and Karnataka who supply 12 lakh litres of milk per day to the Kolhapur District Cooperative Milk Producers Association, or Gokul.

Mohan Yadav, spokesperson for Gokul, said farmers who have accounts in the Kolhpur DCCB are facing the same issue. “Rs 49 crores have been deposited in farmers’ accounts but they can’t access the same,” he said. Demonetisation crisis comes at what is known as the excess part of the milk cycle so production has not yet been affected.

Besides, the possibility of state farmers joining Gujarat farmers’ protest also can’t be ruled out. “If this continues, state farmers too will go the Gujarat way,” said a senior official from the dairy commissionerate.

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