People's Democracy

JAMMU & KASHMIR

NABARD Exposes How Apple Growers Are Fleeced

Zeba Siddiqi

ONE may be cursing the growers when one pays a high price for Kashmiri apples, wondering what share of the money the orchard owners would be receiving. But the reality is that the apple growers don’t even know the price at which the fruit is sold in the mainland, leave alone reaping profits.

Then, where does the money go? Into the pockets of commission agents, who, sitting in Delhi or any of the major cities, exploit and cheat the apple growers in Kashmir of crores of rupees every year. The apple growers live only in debt and distress, thanks to these agents.

Since the last 50 years the commission agents (CAs) of Delhi and from other parts of the country have been exploiting more than five lakh small apple growers of Kashmir in the process of apple procurement.

UNDUE ADVANTAGE OF

CASH STARVED GROWERS

A study report by the National Bank for Agriculture and Rural Development (NABARD) on the apple of Kashmir, which is to be submitted to the Jammu & Kashmir government, says:

“In the absence of proper financing mechanism, informal credit and output (apple) markets are interlocked in such a way that CA’s [Delhi based and others] take undue advantage of the cash starved growers with the help of their pre-harvest contractors (PHCs) to make them captive supplier of apple.”

Here PHC means a local agent of the Delhi based CA, one who directly deals with the orchard owner.

The modus operandi of a CA is that he gives advance money to a grower through a PHC in the month of March or April and then makes him sell his produce to the former. The season of harvest of Kashmiri apple starts from July, picks up by the end of August, its supply increases in October and reaches at peak in November. The NABARD report said that the feudal type of captivity of a grower’s produce in the hands of a CA through a PHC spells doom for their economic fortunes in the market. “He is bound to sell his produce through the same CA in the market and to the buyer which is decided and dictated by manipulation of circumstances by CA’s only,” the report added.

During the four decades period between 1950 to 1990, almost the entire production of apple from Kashmir valley had its destination in Azadpur market of Delhi, but the market then began to slowly diversify. The dependence on Delhi’s CAs is very slowly decreasing and other CAs from Kashmir and other parts of India are entering the field.

Although a CA promises to a captive grower a “lucrative and best possible” price, it is not so in actuality. This was the condition existing 50 years ago and it exists even today. A captive grower is informed over telephone from Delhi, Chennai or Bangalore by his CA that his produce has been sold at a “very good price” to the “right buyer” but with “great difficulty” as there were too much “quality, size, grading, physical defects” in apple. A captive grower then has no choice but remain content with that statement, and this happens year after year. “Thus his net price and price realisation is low and artificially depressed,” the report added.   

After selling the growers’ produce, the advance money given, the transportation cost etc and a commission of 12 per cent is deducted from the sale of apples by the CA and the rest is given to the orchard owners. A visit to and interactions with the apple growers of North and South Kashmir revealed that the growers receive lesser money than the market price and are living in debt. “We don’t know at what amount per peti the CA of Delhi sold my product in market. We are completely dependent on them and have to agree to them,” said Abdul Qayoom Bhatt of Biner village in Baramullah district who is in a debt of Rs 50,000 due to the low prices paid.

Worse, in complete contravention of the Agricultural Product Marketing Committee (APMC) Act, the CA charges a commission from the seller. “.....CA is allowed to charge commission from buyer (not seller) as per the act. However, in practice it was generally observed that CA charged commission from sellers (growers) @ 6-12 per cent. This practice has been continuing since 1950s.....”

FINANCE, STORAGE,

COOPERATIVE MARKETING  

The failure of banks in providing institutional finance to small growers of Jammu and Kashmir, the lack of cold storage facilities and the dying down of cooperative marketing societies mean that the growers are not able to come out of the clutches of these commission agents.

The NABARD report pointed out that during 2010-11, a finance of Rs 1200 crore was provided to the apple growers of J&K, of which merely Rs 200 crore was the share of all banks taken together excluding the J&K Bank with its ‘Apple Project.’ The total amount provided by traders, dealers and CAs as advance to the apple growers of Kashmir during 2010-11 was Rs 1024 crore, of which the CAs based in Delhi, Kashmir and rest of India financed Rs 645 crore (63 per cent), Rs 207 crore (20 per cent) and Rs 172 crore (17 per cent) respectively.

A more or less equal amount was financed in the next year, 2011-12, said the NABARD report. Paradoxically, banks have been providing credit to Kashmir CAs who indulge in onward lending to the cash starved growers, causing continuation of the medieval practice of their ruthless, continued over-dependence on CAs, the report added.

As per the NABARD’s draft report, the “CA(s) of Delhi and Andhra Pradesh (South India) are reportedly being replaced with commission agents of Kashmir..... Growers need access to bank credit as kisan credit card mechanism is not sufficient to their requirement of production and marketing costs. While traders/wholesalers/commission agents in Kashmir enjoy cash credit limit facility up to Rs one or even two crore, growers do not have such easy access. They in turn borrow (take advance) from these very same CAs who have full access to commercial banks (mainly J&K Bank). ”

The rate of interest charged by Kashmir based CAs is the same as Delhi CAs, which is 12 per cent of the value of apples. But this amounts to hiding the real interest rate under the term commission charged from sellers. The report added, “Banks somehow find it more convenient to have business dealing with traders and CAs than with small growers.”  

While, banks are sceptical of giving loans to growers, the apple cooperative marketing societies in J&K, which were once benefiting the growers, have failed for the want of intervention by the state government. The NABARD report said, “…..the collective might of CAs in Delhi Azadpur market and unfair trading practices had led to the economic failure of over 250 cooperative marketing societies. They met with delayed payments and forfeited payments under the conditions in which CAs got themselves declared insolvent and bankrupt from the courts.” Out of a total of 256 growers’ societies, which were set up by the state government from 1971 and afterwards, only two have survived.   

Another reason why growers are completely dependent on the CAs is because apple is a perishable product and lack of cold storage faculties makes their produce vulnerable.  Except Narwal market in Jammu division, none of the APMC markets in J&K has cold stores for fruits.

HOARDING &

SELF-BUYING

The CAs of Delhi and other parts of the country not only cheat the apple growers of J&K, but also indulge in market manipulation and hoarding in order to sell the produce later at higher rates, thus picking the consumers’ pockets across the country.   

The CAs bring the apples from the orchard owners, indulge in ‘self-buying’ of these apples and store them in cold storages in order to create an artificial scarcity so as to finally sell the produce exorbitant rates. It is the consumers who finally suffer due to such high prices.

The NABARD report said, “Supply is manipulated in artificial manner generally at CAs level through hoarding of apple in cold stores for short duration and controlled atmosphere stores (CAS) for long duration up to 6-9 months.”

Big CAs are increasingly engaging in self-buying either in their own names of their own men. The process starts in July or August and goes up to October, the NABARD report said. Around 20 per cent of these CAs are big sharks, 20 per cent are small ones and 60 per cent are in between in terms of the turnover and financial power. “Price manipulation takes place by artificially quoting price so high so as to attempt exclusion of other smaller buyers from auction and then bringing it down next day/next time to self-buy at whatever price, mostly reduced price because bigger “lots” of boxes cannot be purchased by smaller buyers even if price is low,” the report said.

Even large open auctions are manipulated. “Largely, open auction takes the shape of self-buying or buying by market functionaries of CAs, like (a) ‘fixed match,’ the report said.

Once the auction is manipulated and apples are bought at cheap rates, the CAs store them in the CAS units for some time in order to artificially manipulate supply. As per the NABARD report, CAs are now setting up cold stores and CAS with the motive of storing the self-purchased apples from market.

This trend started with Delhi and spread to other parts of the country. Though the CAs adopted this particular modus operandi in the latter half of the 2000s, the trend grew after 2010 when big CAs expanded their CAS capacities in Delhi and Kundli (Industrial Growth Centre, Sonipat). “Now CAS unit is sort of becoming economic craze among CAs,” said an area marketing manager of the horticulture marketing and planning department of the J&K government. The official’s name cannot be revealed as he is not authorised to speak. 

“The existence of seven cold storages within Azadpur market yard of Delhi and about 100 CAS at Kundli in Haryana (25 km from Azadpur market) is leading to sort of “hoarding” of Kashmir apple before it enters Delhi market for auction,” the report added.  Incidentally, the governments of Delhi and Haryana are providing subsidies for setting up these cold storages and this too is working in the favour of the CAs.