MUMBAI/NEW DELHI, (Reuters) — The financial squeeze on India’s farmers is set to worsen because of record high fuel prices and surging costs of fertilizers, posing a challenge to Indian Prime Minister Narendra Modi in an election that must be held by May.
The rise in input prices could not have come at worse time for farmers, already grappling with falling domestic product prices due to rising yields and abundant harvests.
Yet, the government has few easy options to respond. Rival global producers have complained about Indian state support, and falling global farm product prices undermine export prospects.
Indian farmers voted overwhelmingly for Modi in 2014. But a fall in rural incomes risks damaging that support next year.
Thousands of farmers marched on New Delhi on Oct. 2 to demand better prices for their produce. Police responded with tear gas and water cannons. Farmers suspended their protests after talks with officials that ran into the next day.
But their demands and those of other agriculture workers, who together make up about half of India’s 1.3 billion people, have not gone away.
“Although we have decided to end our protest, we still believe that the government is not serious about addressing the concerns of the farmers,” Anil Talan, national secretary of farmers body Bhartiya Kisan Union, said after the march.
Diesel prices have surged 26 percent this year, making tilling fields, harvesting and transporting crops expensive for India’s 263 million farmers, who mostly use diesel tractors.
Alongside rising diesel costs, prices of key fertilizers such as potash and phosphate have jumped nearly 15 and 17 percent, respectively, in a year, as companies pass on the rise in global prices and the impact of the weak rupee to farmers.
India, the world’s second-biggest producer of staples such as rice and wheat, imports all its potash needs and relies on foreign supplies for nearly 90 percent of the phosphate it uses.
“It’s a double whammy for farmers who have to bear the brunt of lower crop prices and higher input costs,” said Devinder Sharma, an independent food and trade policy analyst.
Diesel demand is rising as farmers start harvesting summer crops. After tilling, they will plant wheat and rapeseed, the main winter crops.
Union official Talan said the government needed to prop up commodity prices and keep a lid on farmers’ costs to support the agricultural industry, which accounts for about 16 percent of India’s $2.6 trillion economy.