Grape growers grapple with losses as lockdown shuts door on profit  

Already hit by fall in exports, growers sell produce at distressed prices due to transportation hiccups  

The Finance Minister’s announcement of investment in agricultural infrastructure like cold storages was welcome but farmers needed a pause in loan and interest repayments, so they did not default and banks continued to lend.

The grape growers of Maharashtra were taken aback when the government announced a 21-day lockdown on March 24. March and April are peak months for harvesting of grapes and export was in full swing when the lockdown was announced.

In a matter of days, farmers witnessed losses that now threatens to push the farming industry’s progress at least by a couple of years. While exports fell due to the COVID-19 crisis, surplus produce caused the farm gate rate to crash to at least a third of the usual price. Growers faced difficulties in ferrying their produce to the market and those who made to the market sold grapes at distressed prices.

India has 139,000 hectares under grapes. The country’s average annual production over the past three years has been 2.80 million tonnes. Maharashtra produces 80 per cent, and Nashik 45 per cent of the country’s production. Exports are about 7.5 per cent of the total output but they account for a quarter of the value.

How roaring exports lost steam

The export of fresh grapes was in full swing when the lockdown came into effect. In the week beginning March 24, 715 containers of 12 to 16 tonnes each left Indian shores, 434 of them for the European Union, the Maharashtra Grape Growers’ Association said.

The momentum of the export had built up steadily from January 6 when 25 containers were despatched abroad.

In each of the four weeks before the lockdown 832, 872, 893 and 870 containers had been despatched – more than half of them to the port of Rotterdam, the distribution hub of the European Union.

But exports seized up, once western European countries hunkered down to fight the COVID-19 epidemic.

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“Export prices crashed and in the first three weeks of April, only 689 containers were sent. Grapes, which were retailing for €12 per five kg box, sold for €7,” Vilas Vishnu Shinde, founder chairman and managing director of Nashik-based Sahyadri Farmers’ Producer Company (FPC) said.

Sahyadri is the largest exporter of fresh grapes with a market share of 17 per cent.

Before the lockdown, the price of grapes meant for the European market was ₹70 a kg at the farm gate, and ₹50 a kg for those exported to Russia and the Gulf. The former fetch a premium price because of stricter pesticide-residue compliances. Farmers were getting ₹35-40 a kg for grapes meant for domestic consumption, Shinde said.

According to Shinde, Sahyadri FPC was exporting 220 tonnes of grapes before the lockdown and despatching 30 tonnes to markets across the country.

Domestic supply takes a hit

Domestic supply was also hit after the lockdown came into force.

The central government as part of revised lockdown orders on March 28, exempted farming operations from the lockdown and allowed regulated trade in mandis.

Despite the relaxations, stricter implementation of rules by the police and local administrations constrained the movement of produce to the market, even though farmers continued the harvest.

“In the absence of public transport, workers could not move from home to fields. Trucks were not available and when they were, drivers were reluctant. At Sahyadri FPC’s processing complex at Nashik, the number of workers fell from 4,100 to 110,” Shinde said.

Since 70 per cent of Indian grape holdings are of less than five acres, the grapes were harvested with family labour and farm hands residing in the fields.

“But the oversupply of grapes resulted in prices at the farm gate crashing to ₹12-15 a kg,” Arun More, director of Maharashtra State Grape Growers Association said.

Following the advisory of the National Research Centre for Grapes after the lockdown, a few growers diverted the output to raisins. Grapes were dried either on vines or in the open sun.

But, the solution didn’t solve their major problems.

Burden of loss and loans

With grape production being capital intensive, the problem of surplus is now a worry for many farmers who have taken huge loans for the plantation.

“The plantation cost is around ₹25 lakh an acre and the per acre production cost is ₹2 lakh. The average production cost is about ₹25 per kg. The late rains last year caused considerable damage to crops and farmers were expecting higher prices owing to lower output. They had not reckoned with the virus and the lockdown,” says Nivrutti Khandrao Medhane, 47, a grape grower.

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Medhane has been growing grapes since 1991, after 11 years in school and college. He had about 500 tonnes of unsold grapes when the lockdown commenced. He managed to sell about 100 tonnes at distress rates of ₹8-10 a kg at the farm gate against ₹30-50 he was getting before the freeze on economic and social activity. Medhane has a loan of ₹2 crore and worries about servicing it. He has faced weather-induced setbacks before, but higher prices usually compensated for loss of production.

Growers demand relief on loan

It is hard to say whether the government could have calibrated the lockdown to minimise the distress that farmers are facing now. Shinde does not expect a loan waiver from the state government as it is already hard up.

“Grape growers cannot shift out because of sunk costs. They have to recoup their losses from future grape revenue streams,” Shinde says. He wants the government to provide liquidity support in the form of moratorium on loan repayment or subvention of interest.

“Grape-growing provide more jobs per acre than the cultivation of cereals. Although less than a tenth of the produce is sold overseas, fresh grapes earn as much in export dollars per acre as basmati rice, much of which is exported. An incentive to grape growers from the government would act as a “morale booster” and help in the government’s programme of doubling farmers’ income as well as the country’s agricultural export earnings,” says AK Singh, Deputy Director General (Horticulture), Indian Council of Agricultural Research.

Perhaps, this crisis will induce more small growers to join FPCs like Sahyadri. It was formed in 2011, as a reaction to losses induced by government-accredited laboratories failing to test grapes exported to Europe for residues of CCC, a plant growth regulator. They didn’t have the protocols. As a result most consignments were found to have CCC above the prescribed maximum limit and were rejected. Exporters suffered heavy losses. Shinde’s group of 110 farmers lost ₹ 6 cr. They decided to form an FPC, build up scale and quality and become as less reliant on the government as possible. Currently Sahyadri has 793 grape growers as members but has floated 11 FPCs for other horticultural crops.

Farmers have not paid for the equity shares; they have been issued bonus shares from retained profits.

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More than the government, it is groups with capability and led by leaders with the intention to work for the common good that can help weather COVID-19 kind of out-of-the-blue storms.

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