New Delhi: Ajay S. Shriram, chairman and senior managing director of DCM Shriram Ltd, a company with business interests in seeds, fertilizers and sugar, thinks crop production cannot be the sole matrix to measure farmers’ welfare—prices too play a critical role. Edited excerpts from an interview.
Agriculture was impacted positively by a normal monsoon and perhaps negatively by demonetisation. What is your view?
With a good monsoon, production is higher and farmers have got good yields, but there were pockets of stress. But the issue of (lower) prices for farmers is more generic than what can be explained by note ban. For 5-7 weeks it did impact farmers as there was no cash available in the markets. The challenge for a country like India is, how do we increase productivity while ensuring better prices for farmers. Success in agriculture cannot be measured only by production levels but must correlate to farmers’ realization.
Did demonetisation impact your business?
The sugar segment did not see any impact. For other crops there was an impact for two months when liquidity was tight. Sale of various inputs to farmers went down due to lower demand.
This was again in pockets; the impact in southern India was limited while some states in north India were more affected. In the third quarter (ending December) our seed business grew 12% (year-on-year), while sales for crop care products remained the same, but sales of bulk fertilizers like urea were down by about 17%. We can discuss the pros and cons of note ban but our belief is, something dramatic had to be done to curb black money.
You cannot go on with a situation where, in a country of India’s size, only 42,000 declare an income of over a crore (rupees). Chandi Chowk (in Delhi) will have more crorepatis. My feeling is the government wanted to create a shock. India had to be shaken up to follow the rules of the game.
Firming up of sugar prices has been good for companies like yours. Do you think the availability situation is precarious or that import duty needs to be slashed?
Based on production, consumption and stock positions at the end of the season (in October this year), we will have enough sugar in the country. There is no shortage despite a fall in production in Maharashtra and Karnataka. It will be a knee-jerk reaction to cut import duties and create a shock after which prices fall and dues to farmers go up.
Also, sugar prices cannot be looked at in isolation. Nearly five crore (50 mn) cane farmers’ livelihood depends on it. In the past years when sugar prices fell to Rs20-21 per kg (ex-mill) dues to farmers rose. Sugar is the only produce for which farmers get the highest share of the retail price, without any middleman—the way it should be for other crops.
Is the fertilizer sector out of the government’s policy radar?
The fertilizer industry, unfortunately, was never looked at from the point as to how to make it more vibrant and alive.
Every year the carry forward of (subsidy) dues to the industry is Rs30,000 to Rs40,000 crore; it has become a standard. The indicator of the health or attractiveness of the industry is when we see groups like the Tatas wanting to exit. That tells a story. We are not getting the re-evaluated fixed costs despite a cabinet approval.
There has been no increase in retail urea prices, though a small raise may be beneficial as prices of complex fertilizers are not controlled. Some balancing out needs to be done for the sake of balanced use and soil health.
We would like a direct benefit transfer of subsidies to farmers, but the new policy (pilot experiments) is that, at the point of sale the retailer punches in bags of urea sold to farmers, based on which manufacturers receive the subsidy. This is going to create more chaos for the industry... imagine three lakh retailers punching in every sale.
How do you see the government control over seed prices?
Our view is that intellectual property and research have to be respected. Looking at short-term gains of price reduction which will have long-term impact for farmers, policies like (licensing guidelines) for genetically modified seeds or control over royalties will discourage research. Unfortunately, some people in the seed industry convinced the government wrongly.