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Agrarian Crisis in India
PERSPECTIVES January 2009
homicide, not suicide
Ramdas has an old and gnarled babul tree in the courtyard of his home. A dilapidated mud hut with a roof of black plastic sheets. A small courtyard surrounded by a boundary wall made of thorns and wood. Three acres of land in Bharumri village in Yavatmal district, Vidarbha. At the end of our hour-long conversation, Ramdas pointed towards the babul tree and said, “Madam ji, when there is no other option left for me, this will still be an option…” When Ramdas and thousands of farmers like him across the country decide to exercise their last option – end their own lives – it does not make much news. People in the cities do not come out on the streets asking why so many farmers have committed suicides in the last fifteen years. Ministers of the state and central government do not acknowledge their mistakes or policy failures and resign from office. When an economic activity which provides livelihood to more than five out of ten people suffers from stagnation and crisis, the government does not announce crores of rupees of stimulus packages, interest rate cuts, and daily assurances. Newspapers and television channels do not scream for help and demand immediate bailouts. There is so much brouhaha over the global financial crisis in India, but hardly anyone seems bothered about the agrarian crisis which has killed, on an average, one farmer every half hour in 2007 alone. After all, it is not the Sensex, banks or companies whose survival is threatened. It is a question of survival for merely half the population of our country. The population which remains invisible in the villages, mandis and fields. The population which feeds the country but is uncertain of its own future. We, at Perspectives, started thinking about agriculture when we were struggling with our earlier work – development and displacement. The forced acquisition of agricultural land along with lack of alternative employment opportunities for those displaced made us think about the plight of those dependent on this sector. In our opinion, no meaningful development of the economy is possible without the growth and development of the agricultural sector.
In June 2007, a Perspectives team went to Mansa and Patiala districts of Punjab. The myth of the unending prosperity of Green Revolution was busted. The misery of farmers in one of the richest states of our country convinced us that this was a matter worth investigating and understanding. In May 2008, a team of seventeen people from Perspectives visited the Pandharkawada tehsil of Yavatmal district, one of the suicide-hit districts of Maharashtra. We interviewed farmers in fifteen villages, some families where members had committed suicides, and the peasant leaders of the region. The desolation and hopelessness of Vidarbha farmers continues to haunt us. The grim situation in Vidarbha galvanized us to understand the complex causes of the larger crisis in Indian agriculture. Suicides are only the proverbial tip of the iceberg. The agrarian crisis in India has been deliberately engineered by the state, to serve profit-seeking interests and to pursue the urban-centric, growth-obsessed model of development. Credit to agriculture, public investment, irrigation, subsidies, costs of inputs, minimum support, public procurement, technology, trade-related international agreements – the list of areas where governments could have acted in the interest of our farmers, but chose to do the contrary, goes on and on. During the course of our work, we have realised how much the rulers of this country have neglected the agricultural sector, especially in the period of liberalisation, privatisation and globalisation, and made it possible for transnational corporations of the developed countries to earn profits from this sector. They have ensured that the occupation of agriculture loses all dignity and respect, becomes unviable and unsustainable, and leaves the farmer with no option but to seek ways – including suicide – to get out of his profession. We have divided the book into ten chapters. The first chapter describes our experience of Vidarbha, our study and the analysis and conclusions that follow from it. The second chapter introduces the larger agrarian crisis and gives a historical overview of policies and approach of the state towards agriculture. Chapters three, four and five discuss policies at the domestic and international level related to agriculture and their impact, especially during the period of liberalisation, privatisation and globalisation. Credit policy reforms, agricultural subsidies, public investment in agriculture, costs of cultivation, market and procurement policies, and the
Agreement on Agriculture are discussed in these chapters. The sixth chapter discusses the content and impact of the technological changes that have been brought about in agriculture. Chapter seven traces the impact of these policies on the viability of agriculture, on cultivators and on agricultural labourers. Chapter eight deals with the issues of food security and sovereignty. The penultimate chapter talks of the farmers’ movements around the issues underlying the present crisis. Agriculture plays a crucial role in our economy and society. The last chapter tries to suggest the kinds of support that this sector requires, and an alternative model of development for the country, in which agriculture would get its due recognition and priority. In our work, we have received help, support and encouragement from many individuals and organisations. First and foremost, our gratitude goes to the people of Punjab and Vidarbha. We would also like to thank the peasant leaders and activists of the two regions, in particular Bharatiya Kisan Union (Ekta), Vidarbha Jan Andolan Samiti (VJAS) and Vijay Jawandiya. Professor Amit Bhaduri, Professor Sucha Singh Gill of Patiala University, Dr. Sukhpal Singh of Punjab Agricultural University, Professor D.M. Diwakar of DRISTI, Dr. T. Haque and Bhaskar Goswami helped with valuable insights. Thanks are also due to those friends who suffered stoically the demands made by us: cover designers, page setters, translators, proof readers, those who were forced to read chapters endlessly and give their feedback, and the tea makers. Needless to say, the errors remain ours. We hope our work communicates the gravity of the situation. The Perspectives Team Delhi December 2008
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This harvest of hopes, my friend Cut down All these wilted plants Don’t leave them thirsty and sobbing Tear down These restless blossoms Don’t leave them weeping on the bough This harvest of hopes my friend Will go waste once again All toil, of mornings and evenings Will still again go in vain In every nook and corner of the field Feed again the manure of your blood Yet again water the soil with your tears Yet again agonize over the season to come Agonize, yet again over the season to come When we are to be uprooted once again Once this yield is harvested we will be done Till then we do what thus remain
Faiz Ahmed 'Faiz' Translated by Perspectives
ERSPECTIVES was conceived while some students and teachers of Delhi University got together to work on the question of development and displacement. The first edition of our first work ‘Abandoned: Development and Displacement’ was brought out in February 2007 and the second revised edition was brought out in January 2008. Our effort has been to investigate and understand issues of social, economic and political relevance, and propagate our understanding as widely as possible. Of late, students from Jawaharlal Nehru University, Delhi, have also joined us in our endeavour. We try to engage with undergraduate and postgraduate university students through seminars, conventions, public meetings and newsletters. We also hope to reach out to those who are working in different parts of the country on issues of social concern. Our publication on displacement was translated in Hindi as dgka x, os yksx% fodkl vkSj foLFkkiu. We try to understand the issues first hand on the ground. For this we have organised field trips in and outside Delhi, for example, in Asansol and Durgapur in West Bengal, Saraikela Kharsawan and East Singbhum districts of Jharkhand, Mansa and Patiala districts of Punjab, Yavatmal in Maharashtra and Gurgaon in Haryana. Our experience at Perspectives has taught us not to accept what is usually taken for granted. We do not believe that economic growth is synonymous with the well being of the people, that people have equal opportunities in this society, and that human rights can be located in an ahistorical social vacuum. Instead we look at social, political and economic development also from the point of view of those who are ignored, or are adversely affected by such development. Whether it is land acquisition for industry, special economic zones or corporate agriculture, our understanding is built on the maxim – development has to be for the people, not at the cost of the people. In our work, we have given importance to social movements and their role in challenging and changing the status quo. Perspectives is open to all individuals who are concerned about these issues. Information and arguments presented in our work can be used by any individual, institution or organisation. Ours is a non-funded organisation, which depends on voluntary contributions by all democratic and concerned individuals. If you wish to write to us, email to the Perspectives team at: email@example.com
I. II. III. IV. V. VI. VII. VIII. IX. X.
Debt, Despair and Death
BACKDROP TO THE CRISIS ECONOMIC POLICY REFORMS AND THEIR IMPACT TIGHTENING THE NOOSE
1 33 43 73 100 127 161 170 187 196
Credit Policy and Reforms
FREEDOM TO TRADE AND FREEDOM TO PLUNDER
WTO and Indian Agriculture
SCIENCE OF PROFIT
Technological Changes in Agriculture
Agriculture is becoming Unviable
OF HUNGER AND GREED
Issues in Food Security and Sovereignty
Movements against Agrarian Crisis
TOWARDS AN ALTERNATIVE
List of Appendices on reverse
Chapter I Vidarbha Survey Findings 21 Questionaire 29 Chapter II Public investment in agriculture 70 Government expenditure on irrigation 70 Plan expenditure on agriculture 71 Agricultural subsidies in India 72 Chapter IV Growth of rural banking 97 Relocation of RRB business 97 Priority sector advances of commercial banks 98 Bank advances outstanding to agriculture 98 Outstanding loans by size of farmer 99 Chapter V Aggregate measure of support to agriculture 121 Total support to agriculture in select countries 121 What is market access? 122 What is market support? 124 Chapter VI Doctors for food and bio-safety letter to Home minister 156 Chapter IX Demands by some peasant organisations 192
Chapter I Debt, Despair and Death Vidarbha:
Debt, Despair and Death
The first thought that comes to mind when we hear the name of Vidarbha is suicides. Something as morbid as people taking their own lives due to despair and helplessness has translated into a mere statistic now. When nightmares become a pleasant and preferable preoccupation for an entire community, and death an opportunity for a better life its time to jam the brakes and take a check. Eleven districts strong, Vidarbha region of eastern Maharashtra is known for the cultivation of cotton, soybean and of late for its alarming rate of farmer suicides. In fact six of these districts have been declared as ‘suicide districts’ viz. Yavatmal, Amravati, Wardha, Akola, Buldhana and Washim. Vidarbha lies just 700 km from the thriving state capital Mumbai, also one of the centers of global finance, yet the two are worlds apart. According to the National Crime Records Bureau (NCRB), suicides by farmers in Maharashtra crossed the 4000-mark in 2007 for the third time in four years. The exact number was 4,238, onefourth of the total number of farmer suicides in the country in that year.1 This is after one-and-a-half years of farm relief packages of around Rs. 5000 crores and a visit by the Prime Minister in mid2006. According to a study, the suicide mortality rate (the number of suicide deaths per one lakh people) for male farmers in Maharashtra trebled from 17 in 1995 to 53 in 2004 which is nearly four times the national average. 2 In affected districts like Amravati, the figure at times is ten times the national average. Since September 2005, post-mortem centers in Maharashtra are open 24 hours by government order. In Vidarbha alone, there has been a suicide every eight hours in just three months (June-July to August- September) of 2008. According to some reports, more than two hundred farmers of this region committed suicide after the announcement of waiver of farm loans by the central government. At the beginning of September 2008, nine farmers ended their lives in the midst of one of the biggest festivals of this region, ‘Pola’. An increasing number of suicide notes today directly address the Prime Minister or the Chief Minister,
Harvesting Despair: Agrarian Crisis in India
taking the form of a public statement accusing the state of betrayal. Kuchankar (age 27), literally spoke from his grave; “The cotton price has fallen to Rs.1, 990 a quintal. We cannot manage with that. Which is why I am giving up my life,” said the suicide note of this farmer who left behind among many dependents, a widow of just 17, whom he had married only 6 months ago. The hypocrisy of the government became evident when the family of a suicide victim in Kolezari village of Yavatmal district received a cheque for Rs. 30,000 in 2006 only when it became public knowledge that this village was on the itinerary of the Prime Minister’s visit. The farmer had committed suicide as he did not have the money for his niece’s dowry. The enormity of the issue, overwhelming as it is, is also undermined to a large extent due to lack of specific information and criteria which invisiblise or simply deny the existence of large sections of the victim population. Over 450 women farmers committed suicide in the same districts, yet their numbers did not add up to any government liability since they did not own any land and hence were disqualified as victims of the crisis. Their names only surfaced due to the meticulous records maintained by a local doctor. While addressing the Parliament in September 2006, noted journalist P. Sainath said that in Yavatmal district in the preceding month, every single claim of suicide was rejected by a six-member ‘independent’ committee consisting of top government officers of the district plus two non-government officials chosen by the government! At the time of our survey, we were told by the local tehsildar that only those suicide victims were ‘eligible’ for compensation who had land records in their name, and a default notice for any bank loan that they had taken. Vidarbha is only one of the many regions of the country reporting suicides by the farmers. And suicides are merely symptomatic of a much larger malaise, a much larger crisis facing the country. In order to try and understand this, a Perspectives team went to Pandharkawada tehsil of Yavatmal district in May 2008.
The districts of Vidarbha region were part of the Maratha kingdom uptil 1803 and came under direct British rule in 1853. The Ryotwari system of land tenure adopted in the area vested property rights in the hands of cultivators. Consequently, the better
Vidarbha: Debt, Despair and Death
off castes like Brahmins and Rajputs began acquiring ownership rights to land, though it was Kunbis who gained control over the largest amount of agricultural holdings, while the lower castes became tenants. Mahar, Chamar, Mang etc., who were at the bottom of the rural hierarchy largely worked as agricultural labourers and were considered untouchables. Under the British, area under cultivation increased and pressure was exerted for farming of commercial crops especially cotton. The area under cotton cultivation increased during the American Civil War on account of rise in British demand for Indian raw cotton (American exports of the crop had stopped). The growing demand in both foreign and Indian markets resulted in continued increase in the sown area even after the war. The building of a railway line through Nagpur facilitated the transportation of cotton and further stimulated cotton cultivation. In Yavatmal district, the area under cotton rose from 29 per cent in 1891-92 to 45 per cent in 1925-26. 3 However, since the output was dependent on monsoons, low rainfall led to a near crop failure in Yavatmal district in 189697 and 1899-1900. This forced many lower caste farmers and landless labourers to borrow from large landholders and traders in cotton or grain at exorbitant rates of interest. This period also saw migration to nearby cities. At a socio-political level, many lower caste cultivators and labourers either converted to Christianity and/ or joined the Satyasodhak movement led by Jyotiba Phule, who worked for the abolition of the caste system and against the socioeconomic power exercised by the higher castes. With Independence came land reforms. Land reforms were mere lip service in most regions of the country as will be shown in a later chapter. However, Vidarbha did witness some positive outcomes. This process, combined with the pressure generated by the dalit movement led to a small increase in the area and number of holdings operated by the Scheduled Castes. Today, peasant cultivators can be seen amongst the Scheduled Castes as well. This however, does not mean that the caste-class hierarchy does not exist today—only that there have been some changes in the extent and intensity of discrimination and exploitation. In 1970s with the promotion of High Yielding Varieties (HYV) by the government, there was a rise in the use of both chemical fertilisers and pesticides. Consequently, costs of cultivation increased. This further increased with the adoption of Bt cotton.4 Agricultural co-operative societies did not suffice to meet the
Harvesting Despair: Agrarian Crisis in India
growing credit requirements of the farmers. The area still depends on monsoons for irrigation. Almost the entire region is unirrigated. Even the government admits that almost two-thirds (66 per cent) of the area under cotton was cultivated under rain fed conditions (i.e. without irrigation) during 2000-01. Only those farmers who have a source of income or remittances outside of agriculture have managed to arrange for private irrigation. Today, India is the third largest producer of cotton in the world behind China and U.S. It accounts for one fourth (25 per cent) of the world acreage and 14 per cent of the world production. Maharashtra, Gujarat and Andhra Pradesh together occupied 65 per cent of India’s total area under cotton cultivation in 2001-02. Maharashtra alone accounted for more than one-third (34 per cent) of the acreage in the same period. Within Maharashtra, Vidarbha accounted for more than half (52 per cent) of the total area under cotton cultivation during 2001-02. However of late, there has been a discernible shift away from cotton and towards soybean.
SUICIDES: MANY CAUSES, MANY EXPLANATIONS
An act of extreme desperation committed by such large numbers of people over a prolonged period of time can only be explained by a combination of economic, social, psychological and political factors. A number of explanations are being put forward by various agencies, institutions and individuals for the spate of suicides. The state has attributed these deaths largely to crop failures. Often statements have been made suggesting that the victims needed psychological counseling. The state has responded to the crisis either through random and meaningless relief packages or through psychological ‘healing’ sessions of the farmers and even bhajanskirtans as part of the atma vishwas jagruti abhiyan campaign. There are others who forward arguments such as drunkenness, disputes within the family, ‘herd mentality’ etc. as the reasons for suicides. Unfortunately, all these explanations ignore the systemic nature of the problem. According to Vijay Jawandiya, a leading peasant activist of the region and the country, the economic squeeze accentuated by escalating costs, fluctuating crop prices on account of opening our markets internationally, and a growing disparity between rural and urban incomes, are the factors responsible for the crisis leading to farmers’ suicides. He says that agriculture is becoming unviable even for a farmer with 50 acres of land. Kishore Tiwari, leader of
Vidarbha: Debt, Despair and Death
VJAS (Vidarbha Jan Andolan Samiti), is of the opinion that the spate of suicides has increased after the scrapping of Monopoly Procurement Scheme (MPS) for cotton in Maharashtra. According to him, banks consciously under-finance the farmers pushing them into the clutches of the moneylenders. According to a study5 in 2004, 87 per cent of the suicides out of all surveyed were on account of indebtedness. Fall in economic position (due to indebtedness or sale of land and other assets) was the next most important reason reported and accounted for 74 per cent of the suicides. Another study6 based on field surveys conducted in Amravati and Yavatmal districts in 1999, concluded that it was a combination of economic and social factors which compelled farmers to take their own lives. According to this study, the largest numbers of suicides were committed by small cultivators (belonging to medium or lower castes) who grew mostly cotton. For them, crop failure and the resulting economic distress, adverse impact of the policies of economic reforms along with a trend towards ‘individualisation’ were responsible for the suicides. Suicides amongst the larger farmers were due to business failures, family disputes and diminished social esteem.
Perspectives team visited fifteen villages and met approximately one hundred and fifty families in these villages. We met farmers owning different sizes of landholdings and also some families where suicide deaths had taken place. Our observations are based on these interviews but the survey did not follow any particular method. Thus it is quite possible that these results may not be applicable for the entire region. The survey was conducted in a period where the transition to Bt cotton was already in place. This is also a period after the scrapping of monopoly procurement of the crop by the government. What was found in the course of the survey was that farmers owning different sizes of land were indebted; the specific details did vary but what held true across all sections of farmers was the universality of debt, an increasing pressure of economic squeeze, and a palpable feeling of despair and hopelessness. Only the source, purpose and amount of borrowings differed. Those with landholdings of up to three acres had to work as agricultural labourers on others’ farms simply to ensure survival. These farmers had loans ranging between Rs. 15,000 to 17,000. They had to depend on the moneylenders or the local krishi kendras
Harvesting Despair: Agrarian Crisis in India
for loans. Krishi kendras are the private suppliers of seeds, fertilisers and other inputs, which are increasingly evolving as moneylenders. This class of farmers (up to three acres), sometimes had to pay rates of interest as high as 25 per cent. Farmers with land between five and ten acres were not much better off. They also needed to hire out labour at times i.e. work on other people’s farms. Often they were forced to sell land or other assets in order to finance the education of their sons or marriages of their daughters. Incidentally, those with more than five acres of land will only get 25 per cent of their loan waived as part of the revised loan waiver scheme announced by the central government. The next category of farmers with land holdings between ten and twenty five acres also needed to supplement agricultural incomes routinely by activities such as running a grocery shop unless they had relatives employed outside agriculture who could send them money. For these farmers, the average amount of loans taken every year was between Rs. 50,000 to 60,000. In this case, loans were taken largely from the cooperative banks. Only those above twenty five acres of land could manage with just returns from agriculture but the pressure of growing economic squeeze and disenchantment with agriculture was evident amongst them as well. Their average debt amounted to about Rs. two lakh per year and was usually taken from scheduled commercial banks. The loans are usually taken for production purposes. The team met a large farmer (80 acres) who had to sell off nearly half his land in order to buy a car and make a pucca building, thus demonstrating the impossibility of incurring the same expenditures from agricultural income. The impact of agrarian crisis is felt by all classes of farmers, only the specificities vary. Most of the farmers interviewed, talked of a steep increase in the cost of cultivation and the uncertainty regarding the price their crop would fetch. Almost everyone was dismissive of the loan waiver as being a political gimmick and did not consider it a solution. The details of different aspects of cultivation have been presented towards the end of the chapter. The raw findings of our survey are given in the appendix to the chapter.
FROM CRISIS TO SUICIDE
Agrarian crisis is not a recent phenomenon. Why is it that more and more farmers are being driven to the point where they simply end their lives? As explained by various people, there is a very complex combination of economic and social factors underlying this
Vidarbha: Debt, Despair and Death
situation. There is evident economic distress, unfulfilled aspirations of a better future, a strong sense of public humiliation especially at times when loans cannot be returned (there are instances of coercive and humiliating methods being used by the lending agencies) and a psychological feeling of complete isolation. Alcoholism and family tensions also exist but these are often the result of above factors. But what exactly leads the farmer to the point of ‘no return’? It is true that costs have increased, price that the crop fetches in the market has become extremely uncertain, debts keep on mounting but when and how is the threshold actually crossed? Most of the factors seem to converge and the following explanation can be offered. At an economic level, the threshold is crossed when the sole source of livelihood is seriously threatened or cultivation becomes impossible for the farmer. When can this happen? This can happen when either the farmer loses his/ her land (or the right to use the land) or when he can no longer access the inputs to be used on the land. In other words, either his fixed capital (land) or working capital (needed to buy seeds, fertilisers, pesticides) is no longer there. In our survey, we found the latter to be the primary cause for suicides. A point in time is reached when the farmer does not have the means to undertake cultivation in a new season. This breeds a sense of complete hopelessness. Along with this, at a socio-politicalpsychological level, it is the feeling of extreme isolation and helplessness accentuated by lack of political organisations and movements of the peasants. In such a situation, economic hopelessness can easily translate into a feeling of social shame, lowering of self-esteem and seeing suicide as the only option especially when others in the village are seen to do the same. At the root of the economic crisis in Vidarbha lies the fact that the cultivation of cotton and soybean has become completely dependent on purchased inputs. This means, most importantly, that one cannot begin sowing in a new season without access to adequate cash or credit. If adequate credit, from any or all possible sources (public or private sector banks, cooperative societies, moneylenders, input dealers, friends or relatives), is not available, the farmer is not left with any hope of continuing in agriculture. In Vidarbha, as in most other agriculturally advanced regions of the country, costs of cultivation have been steadily increasing. And with the introduction of Bt cotton, they have increased at an
Harvesting Despair: Agrarian Crisis in India
even greater pace. Given this, availability of adequate credit becomes a crucial factor for the purchase of these inputs. The fresh sowing of crop critically depends on the availability of credit. As we stated earlier, sources of credit depends on the landholding size of the farmer. Larger farmers with land as the collateral can access bank loans within the credit limits prescribed by the scheduled and the cooperative banks. However smaller farmers have to depend on krishi kendras for providing inputs on credit or on moneylenders for loans. During our visit we found that private krishi kendras (input sellers) are now beginning to give credit to the farmers. Here, we would like to point out what we saw in Punjab (during our visit in June 2007), where the arhatiyas (commission agents) completely control the sale of inputs, the procurement of the output in the mandi and give credit to the farmer for agricultural operations at the same time. The extent of dependence on (and indebtedness to) arhatiyas has increased to such an extent that they even finance the farmers’ marriage expenses and his sons’ education in the city. Thus, lack of credit can easily translate into complete inability to cultivate in the new season. This according to us is the predominant explanation for farmers’ resorting to such drastic measures as suicides. One can hypothetically think of a farmer whose credit options dry up completely over time threatening his very livelihood. Suppose a farmer takes loan from the bank in one sowing season. In all likelihood, this loan would be inadequate to meet his requirements so he would also need to borrow from the moneylenders. In Maharashtra, the credit limits of the banks i.e. the maximum loan that can be given per acre of land is quite low, much lower than the costs of cultivation so this situation is very common. Even if the bank loans were sufficient, in case of a default (possibly due to crop failure or due to price of the crop crashing in the market), the banks would not extend loans in the next season. Thus, a new season may begin with the purchase of inputs on credit from the local krishi kendra. Another round of default would probably force him to ask his relatives to use their credibility in order to buy another round of inputs, again on credit. Or it would force the farmer to borrow from the moneylenders. Both ways, this situation cannot be stretched continuously. In case of either a crop failure or a crash in the price of the crop for two or more successive years, continuous defaults are quite possible. It is possible to visualise a time when there are no more options for credit left. In a situation where cultivation is completely dependent on purchased
Vidarbha: Debt, Despair and Death
inputs, this essentially means that there is no possibility of sowing in the fresh season. The farmer would be moving down the credit ladder till a time comes when he does not have any more options. This moving down the ladder is likely to be associated with a feeling of fall in social esteem and prestige. It needs to be understood that defaults are quite likely. Underfinancing by the formal credit agencies and lack of control on the output market has made the farmers more vulnerable. It should be noted here that the farmer has virtually no control over the quality or price of his crop. Crop failures have been a common occurrence. Apart from a minimal amount of crops grown for self-consumption, most of the output is grown for sale in the market. It is well known that the market for agricultural produce especially that for cash crops is a buyers’ market. This means that individual farmers have no influence over the prices that they receive for their output. This price, in the case of cotton in Maharashtra, was determined by the state government till 2003. With the scrapping of the Monopoly Procurement Scheme, this price is now being determined by the international cotton market. Now there is absolutely no guarantee that the price that a cotton farmer will receive in a season will cover his costs of cultivation. This certainly increases the risk of default on loans and of credit line being cut completely for the next season. As long as sowing can take place, at least there is some hope. But if sowing itself is not possible then this would be a situation of complete hopelessness. The only way to tide over the situation could be if there are some avenues of earning other than cultivation. We came across a farmer with three acres of land who told us quite clearly that since he did not have the money for sowing this year, he would work on someone else’s land for wages. Others have to depend on family members earning an income outside cultivation, whether in the form of self-employment in the village (small grocery shops etc.) or employment in cities like Nagpur from where remittances are sent. However when this option is also unavailable (often due to social, psychological factors which would deter an upper caste farmer from working as agricultural labourer) there seems to be no way out of this dark abyss. There are some reports which have documented cases of confiscation of land of the farmer by the sahukar or the moneylender in the Amravati-Akola belt of the Vidarbha region.7 However we did not come across attachment of land in the course of the survey.
Harvesting Despair: Agrarian Crisis in India
In this situation of complete helplessness and despair, presence of strong farmers’ movement could have provided some source of hope. The lack of such a movement has undoubtedly contributed to the large numbers of suicide victims. Political movements are a source of hope everywhere which enables people to locate their individual problems within a larger social, political context; which enables people to draw strength from each other and bank upon their collective might. Unfortunately, these do not seem to exist in Vidarbha today. The team did not come across any strong farmers’ movement against the policies which are driving them into the present state of despair. Absence of organised struggles has definitely accentuated the psychological feeling of ‘no way out’.
DIFFERENT ASPECTS OF CULTIVATION
Costs of cultivation
Till the 1970s, there were virtually no costs of cultivation. Indigenous varieties of seeds were used which did not need to be bought from the market. Fertiliser requirement was also negligible. It was after 1970 that is after the advent of Green Revolution, that hybrid varieties of jowar and cotton were introduced. Before 1980, agricultural universities of the state released cotton seeds. It was post 1980 that private companies were allowed to release their seeds in the market pushing up the seed cost. As a result, the cost of a 450 gram packet of cotton seed rose from Rs. 100 to Rs. 250 and further to Rs. 300. After the 1970s, agricultural practices became more capital intensive and thus costlier with the introduction of chemical fertilisers and pesticides. After the oil shock of 1973, the price of urea doubled overnight from Rs. 50 per kg to Rs. 101 per kg. In 2002, the government gave a formal approval for the cultivation of Bt cotton. Bt (Bacillus thuringiensis) is a genetically modified variety of cotton which is supposed to resist the attack of the American bollworm. Although this has been found to be true and there has been no crop failure since 2001, the crop is not free from attacks of other pests such as millibug. We were told that during the time of harvesting in 2007 this pest was found on the plants. There were reports that the cotton crop was attacked by a pest called laliya in 2008. With the introduction of Bt seeds, costs of cultivation have risen dramatically. The cost of cultivation for one acre of land comes to
Vidarbha: Debt, Despair and Death
approximately Rs. 7,000 to 8,000 for non-irrigated land. Approximate Costs in the In case of cultivation on Cultivation of Bt Cotton irrigated land, pesticide and (per acre of unirrigated land) labour costs double whereas the cost of fertilisers more Heads Cost (in Rupees) than doubles. The costs of cultivation on an average Land Preparation 1000 comes to Rs. 15,000 to 16,000 Seeds 1000 (breakup of costs for unirrigated land is given in Fertiliser 1000 Table 1). A field survey 8 (DAP and urea) comparing the costs of Bt and non Bt in Yavatmal district Pesticides 1500-2000 (depends showed that Bt cultivation on the season) requires more manual as well Weeding 2000-3000 as bullock labour, greater use of tractors, greater use of Inter cropping 700-1000 fertilisers, more use of FYM (farm yard manure) thus Plucking 1000 pushing up the costs Marketing 500 significantly. It was claimed by the seed companies that Total 8,700-10,500 there would be a decrease in the requirement of pesticides Source: Interviews with farmers and Vijay but this has not been proved Jawandiya by the Perspectives team. conclusively on the ground. According to the above study, number of pesticide sprays had fallen but the quantity per spray had increased (in millilitres) raising the costs of pesticides as well (See Table 2).
Due to exceedingly high seed cost for Bt cotton, relatively smaller farmers especially those with no sources of irrigation, are reluctant to use it. During our survey, we came across a few farmers who would have preferred to use hybrid seeds but were unable to do so, as they are not available any more.
Yield of the Crop
With the introduction of Bt cotton, the yield per acre of the crop has definitely risen. We were told that one acre of non-irrigated land yields approximately two to three quintals (under favourable
Harvesting Despair: Agrarian Crisis in India conditions) and the same is five to six quintals for irrigated land. The study referred to earlier also found that the productivity difference between non Bt and Bt was estimated as 65 per cent for Yavatmal district, i.e., cultivation of Bt cotton gave 65 per cent more crop as compared to non Bt cotton. Whether the increased yield is due to the inherent quality of the seed itself or due to increased usage of fertilisers and other inputs cannot be answered conclusively. There is greater uncertainty about the produce in rain fed areas. As both the cost of cultivation as well as the yield is higher, the price at which the crop can sell becomes all the more crucial.
Comparison of Costs for Bt and non Bt Cotton in Yavatmal District
Heads % change in cost of Bt over non-Bt -5.06 -7.20 190.93 -4.69 82.12 56.97 16.77 5.11
Ploughing and preparation Harrowing Seed Sowing Fertilisers FYM (farm yard manure) Pesticides Weeding and interculture
Marketing and Selling Price
Maharashtra had a Monopoly Procurement Scheme for cotton Irrigation 107.67 from 1973 to 2003 wherein the Maharashtra State Cooperative Harvesting 61.51 Cotton Growers’ Marketing Transport and 57.11 Federation (MSCCGMF), a state government appointed body, marketing bought cotton from the farmers at Others 486.57 an assured price. It then sold it in Total 49.29 the open market to mills and traders. The body never had a Source: A. Narayanmoorthy, S.S. farmers’ representative. The Kalamkar, Economic and Political Federation used to charge 3 per Weekly, 30 June 2006 cent of the crop price as commission from the farmers though this was returned by the government at the time of the suicides. The payment was usually made within a month (although it was claimed that it would be made within 15 days) and Rs. 500 per quintal was given as advance before sowing. This advance bonus
Vidarbha: Debt, Despair and Death
used to be added on to the Table 3 minimum support price Price of Pesticides and Cotton for cotton declared by the Seeds over time Centre. According to noted journalist of the Period Pesticide Seed region, Jaideep Hardikar, (Rs. per litre) (Rs. / 450 gm) the scheme ran well till the nineties but after that 1970 16 100 the huge influx of cotton 200-250 250-300 imports (import duty on 1980 (Hybrid seeds) cotton fell to a mere ten per cent in 1997) led to Post 1980 — 300-450 losses for the Federation which could not resell its GM (2001-02) — 1,600-1,700 procurement at higher 500 750 prices. According to some Today people, even in the earlier Note: Prices are not adjusted for inflation period the Federation acted more as a tool of the Source: Interviews with farmers and Vijay textile lobby. This was the Jawandiya by the Perspectives team. time when market prices were above the prices offered by the Federation, yet the farmers were prohibited from selling their produce in the open market. In fact during the plucking season, the police was posted all along the border to neighbouring Andhra Pradesh in order to confiscate bullock carts trying to cross the border for sale in the open market. Around the mid nineties, the Federation started defaulting on payments due to the farmers. The manipulation in gradation of cotton varieties began around the same time and good quality cotton was graded as low yield variety and priced accordingly. The Federation had also become a coterie of parliamentary leaders and was immersed in corruption and incurred huge debts. In March 2005, a decision was taken to scrap advance bonus and in June of the same year, Rashi Bt (which had failed in Andhra Pradesh) was introduced. The state admits it costs around Rs. 2200 to produce a quintal of cotton. Yet the scrapping of the advance bonus meant farmers received Rs. 1700 a quintal, a price last seen in 1994. Usually, Vidarbha cotton used to be procured at Rs 2100 per quintal. The Monopoly Procurement Scheme (MPS) was scrapped in the fiscal year 2003-04 and subsequently the situation worsened for the farmers. Presently, the Agricultural Produce Marketing
Harvesting Despair: Agrarian Crisis in India
Committee (APMC) takes the initiative to conduct auctions for the purchase of cotton. Private traders have entered the auction market. Some of these traders have ginning and pressing units while some have oil plants to make oilcake from the cotton seeds. The Cotton Corporation of India also has a procurement centre in the market. The Federation too remains a player in the auction market. Now the prices are determined by the international market. The international market affects the cotton prices in two ways, through the price of cotton seeds and the price of cotton. 60-65 per cent of lint (the crop of cotton plants) is actually cotton seeds which are used to extract oil. With the reduction of import tariffs on palm oil resulting in imports of the same, price of lint has fallen. The remaining part of the lint is used to process cotton. Domestic cotton prices have also suffered a decline during the years of high cotton imports. With the scrapping of the MPS, farmers have become completely vulnerable to the volatility of the international market for cotton. There was considerable fall in prices from Rs. 2500 per quintal in 1995 to Rs. 1600-1700 perquintal in 1997. The international price between 1997 and 2003 was extremely low, although this had almost no impact on the farmers in Maharashtra, as MPS was still in place here. This was the period when suicides by cotton farmers were reported in Andhra Pradesh. However the year of scrapping of MPS was incidentally also a year of good prices internationally. The benefit of the high prices largely goes to the private traders and not to the farmers. In 2003-2004, traders in Vidarbha procured cotton from the farmers at Rs. 2800 to Rs. 3200 per quintal and sold at higher prices in the international markets. The traders have been exploiting the situation to full by passing on the fall in international prices to the farmers but not doing the same when the prices rise. For example, as a result of the global recession of 2008, no trader is willing to pay more than Rs. 2500-2600 per quintal. In fact, many traders have become moneylenders and some of them have their own seed and fertiliser shops or krishi kendras. Kishore Tiwari of VJAS says that the trader earns a minimum of Rs 400 for every quintal of cotton sold and some would have made crores of rupees just by the way of commissions! The transportation, weighing and brokerage costs have to be borne by the farmers. Brokers charge a commission of 1.25 per cent. The rule is that the farmers are to receive payments within twenty four hours but often farmers end up paying a commission of two
Vidarbha: Debt, Despair and Death
per cent in order to get immediate payment. Of late, krishi kendras have begun buying the produce from the farmers in the villages itself. With the scrapping of Monopoly Procurement Scheme, the procurement by the state-run Federation fell dramatically as it offered a lower price than the traders. The number of government procurement centers also fell but the fall in procurement has been more drastic than the fall in the number of government centers. According to Jaideep Hardikar, the Federation managed to procure only 3200 quintals in 2003-04 as against a previous annual average of 200,000 quintals. In 2006, there were 411 official centers to procure cotton, which fell to a mere 141 in 2007. “But that’s because open market prices are better,” insists N.P. Hirani, chairman of the MSCCGMF. But on the ground, his claim is challenged by farmers in Vidarbha. Most of them say that Federation’s prices are even lower than the Minimum Support Price recommended by the CACP. According to Vijay Jawandiya, “It is a policy move to reduce procurement…The government is pushing farmers towards private traders.” This can be seen clearly in the case of procurement in 2008. Although the government announced a price of Rs. 3000, it did not open any procurement centres to actually buy the crop till end October. Consequently, the farmers were being forced to sell to the traders at a lower price. Due to this insecurity and loss faced by the farmer one of the major demands of farmers’ organisations in Vidarbha (as also in Punjab) is assured procurement by the government at remunerative prices to protect the farming community.
It has already been noted earlier that the requirement of credit has become a crucial factor in cultivation for the farmers in Vidarbha. Institutional credit is provided both by the commercial banks and the cooperative banks. In Yavatmal district, the latter provided one-third of agricultural credit in 2007-08. The banks have provisions for crop loans; loans for agricultural equipments like motor pumps, pipelines, sprinklers etc; as well as loans for motorcycles. In fact the team found that private banks like ICICI did not provide loans for production purposes though plenty of loans were given out for purchasing consumer durables like motorcycles. For all bank loans, land records are required which are locally known as saat-barah forms. The banks give loans based on a normal
Harvesting Despair: Agrarian Crisis in India
credit limit (NCL) determined by the District Technical Committee, which comprises of bankers, professors of agricultural universities, government officials etc. with no representation of farmers. The NCL varies for different crops and also differs for irrigated and unirrigated land. According to the Branch Manager of the District Central Cooperative Bank in Pandharkawada, the NCL in the case of cotton crop (lint) for irrigated land is Rs. 19,000 per hectare or Rs. 7,600 per acre. The same limit for cotton crop on unirrigated land is Rs. 14,500 per hectare or Rs. 5,800 per acre. However Vijay Jawandiya claims that the maximum permissible limit is Rs. 4,200 per acre for unirrigated land. This is much lower than the value of land mortgaged and also lower than the cost of cultivation. In addition the manager of the local branch of State Bank of India in Pandharkawada informed us that a 25 per cent extra on the loan amount can be given at the discretion of the branch manager. The credit available from banks is directly related to the size of landholding. This means that there are no special measures taken to help out the smaller farmers, who are in any case more vulnerable. The rates of interest charged by the banks in 2007-08 were 7 per cent on the crop loans and 10.5-11.5 per cent on loans for agricultural equipments (tractors, borewells etc.). Till 2002, a premium was deducted for crop insurance but now that has been made optional. The bank officials the team met admitted that both the NCL and the rates of interest have no relationship with the costs of cultivation. In other words it means that the NCL is not adequately raised or the rate of interest lowered when the cost of cultivation increases. The banks are also increasingly giving loans to Self Help Groups (SHGs). The agricultural advances made by SBI Pandharkawada in 2007-08 included almost one-third as advances to SHGs (out of a total advance for agriculture of Rs. 9 crores, Rs. 2.5 crores were given to SHGs as advances). 9 The farmers and their representative organisations claim that the banks deliberately under-finance farmers so that they have no choice but to depend on the moneylenders. Secondly, since the entire land is mortgaged to the bank, in the case of a default, there is no possibility of taking fresh loans from the banks in the next season. This again accentuates the dependence on moneylenders and krishi kendras.
Vidarbha: Debt, Despair and Death
Everyone we spoke to, whether farmers or bank officials, dismissed the loan waiver as being completely useless.10 A majority of the farmers do not stand to gain from the loan waiver, since farmers having less than 5 acres of land (for whom it is largely applicable) mainly depend on informal credit. Also a mere waiver of 25 per cent of the outstanding loan for farmers with more than 5 acres of land is meaningless. According to the officials of the District Cooperative Bank in Pandharkawada, despite their having sent detailed information to the central government, they had not
We came across a tribal hamlet in Pandharkawada where no one had land in their own names. Here annas (big brothers) from the Balaji Tirupati Trust would come from adjacent state of Andhra Pradesh and give loans. For every 100 rupees given as loans, 150 would be taken back after six months. We were later told that this money comes from the offerings to Lord Balaji!
received any payments even as late as 29 May 2008 (the loan waiver was announced in March) and therefore they were in no position to extend fresh loans to the farmers. This time is very critical as sowing takes place towards the beginning of June. All the above factors compound to ensure that majority of farmers are dependent on informal sources of credit. The team came across only one farmer who said that he did not need to take loans from informal sources, but he was a large farmer owning more than 25 acres of land. Informal sources of credit also charge exorbitant rates of interest sometimes as high as 25-100 per cent. Although moneylending is illegal but it is still widely prevalent, with the village postmaster, teachers, large farmers and input dealers all dabbling in moneylending. In fact at present, input dealers are increasingly taking on the role of moneylenders and supplying inputs on credit. These loans often put a lot of social pressure on the farmers and defaulting is associated with a strong sense of shame.
Suicides by the farmers of Vidarbha are not individual acts of desperation but part of a systemic problem located in a much larger socio-economic-political context. It cannot be and should not be reduced to a phenomenon confined to the individual self. In fact
Harvesting Despair: Agrarian Crisis in India
Soybean: The New Killer
Vidarbha is witnessing a shift from cotton to soybean. According to one estimate, area under soybean in the eleven districts of Vidarbha went up by nearly two lakh hectares in 2007 to 17 lakh hectares in one year. At the same time cotton saw a reduction of nearly three lakh hectares, falling to about 14 lakh hectares.11 Vijay Jawandiya says that today 60-65 per cent of the land in Yavatmal is under soybean cultivation. This percentage is higher in other districts such as Wardha. In a discussion with an agricultural development officer of Pandharkawada, the Perspectives team was told that the government is encouraging soybean cultivation as it takes lesser time (four months) compared to cotton, which would mean that if irrigation is available, gram and wheat can be grown as additional crops. Also soybean is not as dependent on irrigation as cotton. Soybean cultivation requires much less labour and no pesticide which lowers the costs relative to cotton. Additionally in recent times soybean has been fetching fairly high prices, roughly Rs. 2,200-2,400 per quintal, which happens to be double the minimum support price for soybean (Rs. 1,050). Jawandiya points out that soybean is no less risky than cotton. Very specific climatic conditions are required for this crop. Rains are indispensable at the time of the flowering of the plant and there should be absolutely no rain at the time of harvesting of the crop, or else the crop fails. He also refutes the government’s claim that it does not require irrigation. Further, soybean draws heavily on nutrients from the soil so it is possible that soil may be degraded soon and the yields would fall. According to him the high prices of soybean (till before 2008) need not remain the same. The reason for these high prices was the high global prices of soybean’s de-oiled cake. These in turn were high as the major producers of soybean like Argentina and Brazil were facing problems and there was reduction in the acreage under soybean in the USA. The situation has not remained the same as can be seen this year. Thus it is quite possible that soybean farmers may find themselves in the same or worse position in a few years’ time.
the policies of the government are directly culpable for forcing more and more people to this extreme step. They have driven an entire community to a point of no return, a point where their livelihood itself stands threatened.
Vidarbha: Debt, Despair and Death
As this book goes to print, we have received disturbing news. Nine farmers have committed suicide over just three days of December 2008 in Yavatmal, Buldhana, Bhandara and Amravati districts. There is a famine-like situation in Vidarbha this year. The rainfall was not even half of the usual. As a result, the yields of both cotton and soybean have reduced drastically. The yield of soybean has dropped to 1-2 quintals per acre compared to the normal yield of 4-5 (and sometimes even 10) quintals per acre. Cotton yield in the rain fed areas in Vidarbha (majority of the area is rain fed or unirrigated) has also suffered. Some of the farmers had sown late because they were waiting for the rains, and they are the worst affected. Their crop is affected by the ‘laliya’ pest and they are unlikely to get even one quintal per acre. Additionally, the global recession has depressed the prices of both the crops. The price of soybean this year has dropped to Rs. 1400 per quintal from Rs. 2700 last year. The recession in the textile industry has also meant that private traders are not willing to purchase cotton, and the maximum price they have been offering is Rs. 2500-2600 per quintal. Although the government has announced a good procurement price (of Rs. 3000), this is ineffective because of the absence of government procurement centres. Other crops like wheat and chana have not grown because the wells have dried up this year. The peasant leaders in Vidarbha are demanding that the government should declare the region to be drought-hit and take the requisite emergency measures, including waiving of all loans. Notes
1. 2. 3. P. Sainath, The Hindu, 12 December 2008 Study by K. Nagaraj of Madras Institute of Development Studies B.B. Mohanty ‘We are like the living dead: Farmer Suicides in Maharashtra, Western India’ Journal of Peasant Studies Volume 32, No. 2, April 2005 Refer to the chapter ‘Science of Profits’ for discussion on genetically modified seeds Srijit Mishra ‘Risks, Farmers’ Suicides and Agrarian Crisis in India : Is there a way out?’ An IGIDR Study B.B. Mohanty 2005 op. cit. P. Sainath, The Hindu, 27 August 2006
4. 5. 6. 7.
Harvesting Despair: Agrarian Crisis in India
A Narayanmoorthy, SS Kalamkar ‘Is Bt Cotton Cultivation Economically Viable for Indian Farmers? An empirical Analysis’, Economic and Political Weekly, 30 June 2006 Refer to the box on microfinance in the chapter on credit policy reforms
10. For the details on loan waiver, refer to the chapter on credit policy reforms 11. P. Sainath ‘Soybean trumps King Cotton in Vidarbha’s regime change’ The Hindu, 24 June 2008
Vidarbha: Debt, Despair and Death
SURVEY FINDINGS Farmers, Agricultural Labourers and Suicide Victims
1. Farmers who own 3-5 acres of land Farmers who own 3-5 acres of land struggle to make their ends meet. Often, they are not much better off than the landless labourers. Most of the farmers in this category belonged to the lower castes. Some of them had received up to 3 acres of land during the land ceiling and land redistribution drive in 1975 but their economic condition remains precarious in absence of any other support from the state. Most of them have to work as agricultural labourers to ensure survival. Some also collect tendu leaves to supplement their incomes. Some families lease in land (generally of inferior quality) at the rate of Rs. 400 for 3 acres. Many farmers said that they would not be sowing in the coming season as they were not able to get credit from any sources. They were planning to rely on their work as agricultural labourers. A strong desire was expressed to move out of agriculture by the farmers of this category. Farmers with small and marginal landholdings mainly use firewood from the forest as cooking fuel. They have to pay a bribe of Rs. 500 to the forest guard for collecting the firewood. If they are caught by the forest ranger, the bribe increases to Rs. 2000. Farmers of this category have been using Bt cotton for the last 2-3 years. The cost of cultivation of Bt cotton is Rs. 3000-7000 per acre. Farmers reported that yield has increased by 2-3 quintals but their expenditures have also increased. The problem of credit is severe for all classes of farmers, but especially so for the people in this small farmer category. It was clear that they depend on moneylenders for most part of their credit needs. If they do not repay the loan to the moneylender, their land is mortgaged, animals and non-land assets taken away and sold. In some cases, loans were taken from the moneylenders in order to pay back the bank loans. Sometimes they would take loans from krishi kendras at Pandharkawada town, but in this situation, they are forced to sell their crops to them. Some farmers were of the opinion that, in the absence of institutional credit, making moneylending illegal was in fact, going to leave them worse off. According to the farmers, their cotton crop was sold at Rs. 1900-2000 per quintal to the government and Rs. 2300 per quintal to the private traders. In the absence of any storage facility for the produce, crop has to be sold immediately, even at lower prices. Taking the produce to the market in Pandharkawada, requires a further expenditure of Rs 1800. Most farmers rued over the low prices that they received for cotton. For many of them, the price did not even cover the costs. The
Harvesting Despair: Agrarian Crisis in India
farmers prefer not selling their produce to the Cotton Corporation of India, as CCI offers them about Rs. 100 per quintal less than the private traders. Moreover, there are middlemen who charge a commission of 5 per cent to sell the crop, while the private agents charge a commission of 1.5 to 3 per cent for the same. However, some farmers did reveal their preference to sell to CCI, as a bonus had been given on some occasions in the past. Some of the farmers were visited every 20 days or so by some agricultural officers of the government who advised them to grow papayas and oranges. Sometimes the small farmers were refused fertilisers by krishi kendras, because of the fact that in case of shortages, they preferred selling larger volumes to the larger farmers. This left the smaller farmers with no choice but to take assistance of the big farmers for availing fertilisers, who demanded for unpaid labour in return. Consumption expenditure: The consumption expenditure of farmers in this category ranged from about Rs. 50,000 to 60,000 per year. On many occasions land was sold to pay off previous loans or to finance marriages of their daughters. A farmer from Kosara village said, “Hum toh pehle se bhi kum khate hain (we consume even lesser than what we used to earlier)”. In addition to this, state support policies remain poorly implemented. For instance, job cards under NREGA were provided almost a year back, but no work has been provided as yet. The ‘500 rupee’ relief package given by the Prime Minister for the ruined crop at the time of laliya attack reached only a few farmers and that too after considerable delay.
2. Farmers who own 5-10 acres of land
It is an indication of the growing unviability of agriculture in vidarbha that farmers who own 5-10 acres of land are also forced to hire out their labour at times. Some of them have to go to villages as far as 20 kilometers to search for work. Women have to supplement their families’ income by collecting tendu leaves. Despite this economic condition, farmers owning land above 5 acres were liable to receive only partial loan waiver under the scheme of the central government in 2008-09. We saw in the villages that families have found myriad ways of selfemployment to sustain themselves such as tailoring, small grocery shops etc. Farmers reported that their output has increased with the use of Bt cotton. Some farmers said they would prefer to use hybrid seeds, but those were no longer easily available in the market. The cultivation of Bt cotton has increased the input costs of the farmers as they have to buy seeds every year. The cost of cultivation of cotton is now Rs. 10,000 per acre. It is also perceived that the
Vidarbha: Debt, Despair and Death
shortage of labour has pushed up the wages of agricultural labour. The Madhyavarti Cooperative Bank in Pandharkawada gave loans generally to the larger farmers at an interest rate of 10 per cent per annum and a bribe has to be paid to avail of these loans. A farmer also revealed that in practice, rates of interest were different for rich and poor peasants as the latter had to pay a higher rate of interest. Some farmers had taken loans from Self Help Groups (SHGs) at 24 per cent per annum. However, they remained divided on its actual impact, with some farmers arguing that the loans covered a very small proportion of the total input costs. Farmers also felt that financial institutions favoured irrigated land over un-irrigated land as collateral for giving agricultural loans. Private moneylenders gave loans at the rate of 50 per cent per annum. In case of delay in the repayment of loans, assets are taken away along with the crop yields. During the sale of their produce, farmers get 97 per cent of the price at which their cotton is sold. The remaining 3 per cent is kept by the private traders to whom the cotton is sold. Government procurement is at a lower price than private procurement. The payment made to the farmers is not immediate, it usually takes one month. There are no storage facilities and therefore farmers have to sell the cotton immediately after harvest (at the prevailing low prices). Consumption expenditure: Consumption levels have worsened for this category as well. “Earlier we used to eat wheat twice a day. We can no longer afford that, so we have switched to jowar”, said one farmer of Bandhiwadhwa village. Some farmers had sold their land or other assets to repay old loans, or to finance higher education (computer and other vocational courses) for their sons, or to finance their daughter’s marriage.
3. Farmers who own 10 to 25 acres of land
These farmers expressed a very strong desire to leave agriculture. They wanted their sons to be employed outside agriculture and get jobs with regular incomes in the town. Although irrigation is underdeveloped in general for the entire area, some farmers in this category have private wells and tube wells. The team came across the case of a farmer, who was in debt of Rs. 30,000 for boring a well in his field. Unfortunately, he was unable to find water. Most farmers of this category preferred to use Bt cotton over the hybrid variety. Some of them gave the reason (amongst others), that higher yield added to their social status in the village. Many of them had been using Bt for 5-6 years. Initially, the larger farmers started using it and subsequently, the smaller farmers followed. Farmers said that input costs had increased due to the use of Bt cotton and buying seeds each year was a big problem. The prices of fertilisers and
Harvesting Despair: Agrarian Crisis in India
pesticides increased each year by Rs. 50-100. Credit to farmers in this category comes from the Madhyavarti Cooperative Bank or the moneylenders. A few farmers complained that credit becomes most difficult to obtain, precisely when it is needed the most (at the time of sowing and harvesting). Many SHGs exist in these villages (between 10 to15 in most of them). Some farmers seemed to have a positive view about its role and said that it is helpful in getting loans when they need it. Farmers sell their produce to private traders, as the Federation (Maharashtra State Cooperative Cotton Growers Marketing Federation) does not offer them a reasonable price. In recent times, krishi kendras have also become buyers of the produce. Since no storage facilities are available, farmers have to sell their produce to avoid risking its spoilage, even if the prevailing price is very low. Two farmers reported the case of crop failures some years back when they did not receive any insurance money despite having paid the premium for crop insurance to the banks. In the case of one farmer, the bank officials denied him insurance benefits on the grounds that the crop insured was different from the crop cultivated. Consumption expenditure: There were farmers in this category who had to supplement their income by running a grocery shop or working as a carpenter in the village. The income of farmers owning 20 to 25 acres of land was approximately Rs. 1 lakh a year. Farmers said that they had witnessed considerable worsening of their consumption pattern in the past 3-4 years. Medical expenses have increased with heart diseases and cancer becoming more common place. Since villages lack the required health infrastructure, significant expenses have to be undertaken in taking the patient to Nagpur or to Mumbai and even Delhi for treatment. The expenditure on marriages is quite high and is on a constant increase. On an average, Rs.1-2 lakhs are spent on dowry for a girl’s wedding. In the opinion of farmers of this category, the government should do the following: 1. Provide irrigation facilities (that will increase the produce 3 to 4 times) 2. Increase the amount of credit given to farmers (by raising the credit limit of institutional sources) so that they do not have to approach the moneylenders. Credit should be made available at the appropriate time. 3. Schemes like NREGA and Loan Waiver should be properly implemented 4. CCI should procure the crop at a remunerative price and make payments immediately.
4. Farmers who own above 25 acres of land
Vidarbha: Debt, Despair and Death
Farmers who owned more than 25 acres of land had private means of irrigation. Water levels have fallen in the area as many of them have been using bore wells for a long time. However, there is an absence of mechanisation (either owned or hired) of cultivation, with only a few exceptions. Bt cotton is used because it gives better yields than the hybrid varieties. Some farmers of this category have completely shifted to cultivating soybean, because they were incurring losses with Bt cotton. Some farmers have leased in land at Rs. 4000-5000 per acre. The unavailability and high wages of agricultural labour was a problem cited by many farmers who owned above 25 acres of land. The team met a large farmer from Sonbatti village who expressed his helplessness and said that even he would have to hang himself if the crop failed this year. The team also met a farmer from village Deshmukh Khairgaon who owned two storage godowns. This farmer reported that he had lost 150 quintals of his cotton crop to milli bug last year. The main demand of farmers of this category was that the government should fix the price of their output before the sowing season. Cooperative banks, State Bank of Maharashtra and State Bank of India give credit to farmers up to Rs. 10,000 – 15,000 per acre. Farmers of this category, in general, denied that there was any requirement for loan from private moneylenders. Some of them even denied the existence of moneylenders. It was found out from other villagers that most of these big farmers act as moneylenders for the rest of the village. The minimum debt on farmers of this category was Rs. 2 lakhs. SHGs could not meet the credit requirement of these farmers and hence they were not very happy with them. The selling price of cotton is around Rs. 2500 per quintal. Some farmers had started the business of distributing cotton and soybean seeds to different villagers in order to augment their profits. Farmers also had crop insurance. The premium for crop insurance was paid from a part of the loan that they received from the institutional sources. Consumption expenditure: The total income from agriculture is around Rs. 5 lakh per annum. This income is usually enough to cover consumption expenditures of the families but not enough to meet the production expenditures. Many families have members working in the towns who send remittances back home and the family depends on that money to meet the consumption and production expenditures.
5. Agricultural Labourers
It was observed that most of the people who worked as agricultural labourers were either the landless, or those with marginal landholdings or the loan defaulters. Most of them belonged to the Gond, Kolam (Scheduled Tribes) and dalit
Harvesting Despair: Agrarian Crisis in India
Crops, Credit and Cotton Yield by Landholding Size
Land Crops grown holding size (acres) 3-5 5-10 Cotton, Jowar, Soybean and Tur Cotton, Jowar, Soybean and Tur Cotton, Jowar, Tur, Chana, Soybean and Moong, Chili Cotton (double Bt variety), Arhar, Groundnuts, Chana, and Wheat Source of credit and interest rates charged for production loans (in percent per annum) Moneylenders (50), Krishi Kendras (25) Cooperative banks (10), Moneylenders (50), SHGs (24) Cooperative banks (1112), Public sector banks (8) Moneylenders (50) Cooperative banks, State Bank of Maharashtra, State Bank of India (6) Amount of Credit Required per year Yield of cotton quintals per acre
Rs. 15000 3 – 4 to 17,000 NA 3.5 – 5*
Rs.50,000 4 – 6** to 60,000 Rs. 10 20,000 to 50,000
*One farmer said his yield was 8 quintals per acre. **Only in seasons with adequate and timely rainfall
communities. Even farmers who had land up to 3 acres worked as agricultural labourers in order to supplement their income. All members of the family, including women, worked on the field to meet their ends. The daily wages of agricultural labour in the area the team visited was Rs. 80-100 for men and Rs. 50-60 for women. Women were paid almost half the wages paid to men for the same amount of work. The standard of living of agricultural labourers was one of subsistence and bare survival. Labourers do not find agricultural work in all months of the year, as cultivation is mostly rain-fed. Employment is meager during off season when cultivation does not take place. Agricultural labourers possessed NREGA job cards but they had not received work or unemployment allowance under this scheme. Most of them had Below Poverty Line ration cards which enabled them to buy wheat at Rs. 2 per kg and rice at Rs. 3 per kg. This was a major bone of contention with the landowning peasants in the village as the latter perceived subsidised food as a major benefit for the agricultural labourers. Apart from working on the fields,
Vidarbha: Debt, Despair and Death
collecting tendu leaves was another activity for subsistence. Some of them went to Pandharkawada or nearby towns in search for work in the lean season. When asked if they wished to migrate to a town, the agricultural labourers said that they would not want to, for they had been staying in the same village for many years now. The search for a better life was an impossible dream for them. Their hopelessness had reached to such an extent that when they were asked what alternative do they have in such a situation they said, “we have no other alternative but to survive without complaining”.
6. Suicide victims
Out of the fifteen villages surveyed in the Pandharkawada tehsil of Yavatmal district, farmer suicides had taken place in six of the villages. The option of suicide and the inevitability of this option were omnipresent in the teams’ conversation with the farmers. In Kosara village, Eknath Kanauji Danande, a 56 year old farmer, committed suicide on 3 May 2008. He had a debt of Rs. 13,000. He had been saving Rs. 3000 per year for 7 yrs in a SHG called Sanchayani. However, the NGO backing the SHG closed suddenly and did not give his money back. Finding his hard earned money embezzled and little hope of repaying his debt compelled this farmer to end his life. Moreover, during the time of his death, his wife and daughter were both ill, causing added expenditures which he was not in a position to incur. In another case in the same village, Tukaram Paikaj Tonge had massive debts in his name. He stopped eating, fell ill and died on 20 May 2008. However, his death was not considered as a ‘suicide’ as per the definition of the term and therefore his family did not receive any compensation. Suicide in this village did not remain confined to the farmers, but their children as well. Madhukar committed suicide as his desire to study further remained unfulfilled. This was an example of how the agrarian crisis has impacted those dependent on agriculture in different ways, attacking their livelihood as well as their psychology. Indebtedness, impossibility of loan repayment and hopelessness were the main reasons for suicides. In Yavra village, a farmer committed suicide as he was finding it difficult to repay a loan of Rs. 50,000. His family received a compensation of Rs. 1 lakh. They received only Rs. 30,000 as cash. The remaining Rs. 70,000 was put in a bank as a 6 year bond. Arjun Dhanraj Rathore’s father committed suicide due to the same reason of indebtedness. He had become a defaulter and the banks had stopped giving loans to him. His family members had not received any compensation till the time of the team’s visit, despite sending repeated requests to the government. Some villagers argued that drunkenness, problems in the family and the lack of desire to work, were the real reasons why men committed suicide, not
Harvesting Despair: Agrarian Crisis in India
indebtedness. One farmer argued that the compensation amount received by the suicide victims’ family could be the reason for a spurt in the number of suicides. An observation cited by many of those interviewed was that reasons like drunkenness were not the ‘cause’ of suicides but the ‘effect’ of the chief predicament i.e., the debt that was haunting the lives of these farmers. It is the impact of tremendous frustration and an extreme sense of helplessness that led them to this miserable end. Others farmers blamed the low price of cotton and indebtedness as the main reasons for suicides. A Brahmin farmer owning 30 acres of land said he would not hesitate to hang himself if the crop failed another year. Suresh Karla said that increasing consumption expenditures because of social pressure worsened the situation. He said, “If his (another farmer’s) daughter uses Fair and Lovely (cream) then why not mine?” Marriage of daughters, a cause for worry and expenditures in a majority of families in our society, has become a more difficult exercise for the farmers of this region. Lack of funds for marriage, coupled with a bad crop yield, has led many farmers to seek suicide as the last resort. Marriage costs in this region range from Rs. 40,000 to Rs. 50,000. The dowry or hundi demanded is worth Rs. 1-2 lakh.
Vidarbha: Debt, Despair and Death
I. (a) Name/ Age/ Caste/ Number of members in the household (M/F) (b) (i) Amount of land (owned/operated) in hectares (ii) Other assets and equipments owned (c) (i) Land leased in- yes/no/hectares. (ii) Land leased out-to whom/at what price (d) Any member of the household employed in non-agricultural activity? (e) Agricultural activity carried on with family labour or hired labour or both (f) Do women in the family go out and work? (g) Educational status of self and family (a) What crops are grown (changes from jowar to cotton) (b) How many crops a year (c) Have there been any changes in the cropping pattern over the years? If yes, why (d) How many quintals of cotton do you produce in a year? (e) What is the yield per hectare, has it increased or decreased over time (details) (f) Reasons for changes in the yield
III (a) Degree of mechanisation of the agriculture (b) Use of tractors-owned/hired/hire charges (c) Type of seeds/changes in kinds of seeds-traditional/hybrid/BT – are BT seeds better? (d) Where and from whom, the seeds are bought? In cash or credit? (e) Fertiliser - the use has increased or decreased? (f) Risk of pests/pesticides (g) Irrigation any facility—government or private? (h) Is the agency selling inputs same as that which gives credit or buys produce? (i) Total costs in a year, Costs per hectare/per quintal (j) Changes in costs (k) Any subsidy by the government on inputs? IV Market (a) Sale to CCI/state government or to private parties Who do you prefer to sell to? (b) Is scrapping of monopoly procurement good or bad?
Harvesting Despair: Agrarian Crisis in India
(c) (d) (e) (f) (g) (h) V
Are green cards still applicable? Is opening to international economy good or bad Is remuneration immediate? Any storage facilities Total income from agricultural produce in a year Any relief at time of crop failure
Consumption patterns (a) Any food grains grown for self-consumption? (b) Any changes in consumption? Why? (c) Monthly Expenditure on food/health/education (d) Does agricultural income cover consumption expenditure? (e) Does agricultural income cover production expenditure?
VI Credit (a) Need for credit (b) How often? (c) To meet consumption deficit or production expenditure? (d) From whom? (e) Any changes in institutional credit policy? (f) Collateral/interest rate of institutions (i) Moneylender/rate of interest (j) Self Help Groups (k) Are the agencies giving loans same as those selling seeds and inputs? (l) Any switch from one agency to the other? (m) Ability to pay back loans (n) Loans as a per centage of agricultural incomes (o) Pattern of recovery adopted by the agencies (p) Agricultural credit societies or cooperatives? (q) Will loan waiver help? (r) Any distress sale of land? (s) Amount of debt of a suicide victim’s family VII Perceptions (a) Corporate farming (b) PM-relief package (c) Crop insurance (d) Why suicides? (e) Would you want to continue with agriculture?
Vidarbha: Debt, Despair and Death
(f) Local support systems—panchayat/political parties/peasant organisations (g) Compensation in case of suicides (h) Solution to the problem VIII Questions for agricultural labour families (a) Number of months of employment/changes over years (b) Wages—M/F (c) Availability of work—M/F (d) Structure of employment——M/F (e) Employment opportunities other than agriculture (f) NREGA (g) Any decline in access to common property resources—impact (h) Consumption deficit if any (i) Loans (j) PDS—TPDS
Harvesting Despair: Agrarian Crisis in India
We owe respect to the living To the dead, we owe nothing but the truth – Voltaire
Backdrop to the Crisis
Backdrop to the Crisis
The situation in Vidarbha described in the previous chapter is not an isolated instance. In state after state, district after district, village after village, hope is dying slowly. The living dead in India’s once prosperous Green Revolution areas are now joining the already dead and swelling the numbers of ‘suicides by the farmers’. The feeling of helplessness and despair is almost tangible. Ironically, the only ‘hope’ is seen in ending the hopeless existence. Maharashtra, Andhra Pradesh, Karnataka, Kerala, Punjab… the story is the same everywhere. According to National Crime Records Bureau (NCRB) the number of farmer suicides in the country from 1997 to 2007 has been 1,82,936. 1 This means that on an average, one farmer was taking his life every half an hour in the last ten years. Even this number, shocking as it is, is in fact an underestimation of the actual number of farm suicides in the country during this period. Suicides are symptomatic of a much more serious malaise, an acute crisis in Indian agriculture virtually doctored by the state. In India, bulk of the population depends on agriculture for its livelihood (66 per cent). Considering that there are very few employment opportunities outside agriculture in our economy, stagnation and crisis in this sector has serious implications for the entire people and the country. All sections of people dependent on agriculture viz. different classes of cultivators – rich, medium, small and marginal peasants as well as agricultural labour, have been affected by this crisis to varying degrees. At a time when India is one of the fastest growing economies in the world with growth rates ranging from 8 to 9 per cent, agricultural growth has stagnated. The growth rate of agriculture and allied activities has been merely 2.6 per cent in 2007-08. 2 It has declined sharply compared to 1980s when it was over 3 per cent. Agriculture contributed less than one-fifths (18.5 per cent) to the country’s Gross Domestic Product in 2006-07. Despite its poor performance, agriculture continues to support more than two-thirds of the population. The share of agriculture in the output is in sharp contrast to its share in the country’s employment.
Harvesting Despair: Agrarian Crisis in India
The crisis in agriculture is evident in a variety of other ways. According to the Ministry of Agriculture, the net sown area3 has fallen from 143 million hectares in 1990-91 to 140.9 million hectares in 2003-04. 4 Even the net irrigated area5 decreased from 57.1 million hectares in 1999-2000 to 55.1 million hectares in 2003-04. The cropping intensity has stagnated at around 1.35 i.e., only 35 per cent of the area is cropped more than once. The per capita output of food grains has stagnated in the 1990s. It was 178 kilograms in the three year period ending in 1991-92, it did not increase even after a decade and remained at 177 kilograms in the three year period ending 2000-01. The yield of food grain crops as well as non-food grain crops declined in the 1990s. The terms of trade for agriculture worsened in the period after India entered the World Trade Organisation. That is, agricultural prices relative to nonagricultural prices fell by 1.7 per cent annually between 1996-97 and 2003-04. 6 The only visible and over-hyped step that the central government has taken to address this crisis is the announcement of the loan waiver for indebted farmers in the annual Budget of 2008-09. The low importance attached to agriculture is apparent from the fact that the Rs. 71,000-crore waiver is not even one-third of the tax concessions given to the private corporate sector in 200708 under just three heads – customs duty, excise duty and corporation tax. The loan waiver does not address the root causes of the agrarian crisis. Not surprisingly, farmer suicides have continued unabated even after the loan waiver. Meanwhile, the attention of the government has shifted to another crisis: the global financial crisis. It is now leaving no stones unturned to spend crores of rupees in bailout packages for industry and financial sector. The agrarian crisis that is the concern of this book encompasses regions of the country where agriculture has become largely commercialised. These are mostly those regions where Green Revolution technology has been adopted and agriculture has moved from subsistence to commercial cultivation. In these areas, only a small proportion of the crop is grown for self-consumption, most of the crop is meant for sale in the market. Cultivation is highly inputintensive: it requires large quantities of water, hybrid or even genetically modified seeds, chemical fertilisers and pesticides. In many of these regions, considerable mechanisation of agriculture (increasing use of tractors and combined harvesters) has taken
Backdrop to the Crisis
place. The increasing dependence on inputs which have to be purchased from the market has also increased the need for credit. It is not that agriculture in areas following traditional agricultural methods, is not facing any problems. But the discussion of agrarian crisis in this book is limited to the crisis in regions like Vidarbha, parts of Punjab, Haryana, Karnataka, Kerala, Andhra Pradesh and Maharashtra, from where farmer suicides have been reported. Our understanding is based on visits to Vidarbha in May 2008 and Punjab in June 2007. The causes for the distress in Vidarbha and Punjab would be applicable to other regions facing large-scale farmer suicides as well. Forty per cent of farmers in the country want to leave agriculture, given an alternative, reports the Situation Assessment Survey of Farmers (Report No. 496, NSS 59th Round). This is not surprising. According to the same report, on the average, “farmer households” in the country could meet only 35 per cent of their consumption expenditures out of net receipts from cultivation. The Indian state never carried out thoroughgoing changes in the pattern of landownership in the country, despite the widely recognised need for the same. Economic policies that it formulated and followed since Independence have been consistently detrimental to agriculture. Technological changes have been introduced without a holistic idea of their consequences. The combined effect of all of these has been widespread agrarian distress in the countryside, with suicides in some areas and stagnation in others.
At the time of Independence, India inherited a semi-feudal structure with complicated tenancy arrangements (between landowners and actual cultivators) over large parts of the country. The ownership and control of land was concentrated in the hands of relatively few landlords and intermediaries. The zamindars and intermediaries’ principal interest was to extract maximum rent from the land; they had no interest in increasing the productivity of land. The actual tillers of the land also did not have any incentive to invest or improve production techniques because they did not own the land or its output. There was a rationale for urgent and immediate land reforms at the time of Independence – meaningful economic and social equality could only be achieved with a more egalitarian distribution of land and vesting ownership rights with the actual tillers of the
Harvesting Despair: Agrarian Crisis in India
soil. Despite tall claims in various policies and plans, genuine land reforms remained an unfulfilled dream for the Indian peasantry. Land reforms involve three components – abolition of the zamindari system, tenancy reforms and ceiling and redistribution of surplus land. In all these respects, land reforms were seriously lacking. Though the Parliament enacted legislations like zamindari abolition and land ceiling acts, the enactment of these legislations was merely an eyewash. Not only were the zamindars paid sizeable compensation for their lands, they were also allowed to retain khas land and more under the pretext of cultivating it themselves. The land ceiling legislations, even after making liberal concessions, left loopholes which allowed owners of large property to retain most of their possessions. Before the enactment of the legislations, these landowners were permitted sufficient time to divide their landed property and hold it in their own, their relatives’ as well as under fictitious names. The land reform legislations were not intended by the reigning political leaders to bring about any significant changes in the ownership patterns. This was evident in the way land reform was implemented. In a study, P.S. Appu has critically analysed the implementation of land reforms in India since independence. By 1992 ownership rights had been conferred on some 11 million tenants on 14.4 million acres of land which was not more than 4 per cent of the total operated area. As far as redistribution of land is concerned, by 1992 only 2 million hectares of surplus land was distributed to less than 5 million beneficiaries. In other words less than 2 per cent of the operated area was redistributed. 7 The enormous inequality in land ownership in India has not reduced in the last six decades. According to the National Sample Survey (NSS), the top 5.2 per cent of the rural households today own almost half (42.8 per cent) of the land, the top 9.5 per cent own more than half (56.6 per cent) of the area, and the remaining 90.5 per cent of the households owned less than half i.e. 43.4 per cent of the area. 8 Among the bottom 90.5 per cent, 41.6 per cent of the rural households own no land except homestead land (the land on which their houses are built). Another aspect of inequality arises from the steady decrease in the common land and water resources to which the rural poor do not have any legal rights but on which they depend for fuel, grazing of animals and water for irrigation. As a result of takeover of land for non-agricultural purposes by the
Backdrop to the Crisis
state and private interests (aided and abetted by the state, of course), these resources have reduced considerably in the past decades.
AGRICULTURE AND THE FIVE YEAR PLANS
As far as economic policies are concerned, economic planning in India began with setting up of the Planning Commission in March 1950. Till date a total of eleven five year plans and three annual plans have been formulated. The country has entered the Eleventh Five Year Plan (2007-2012). Economic planning is not merely an economic exercise; it is a political exercise as well. Society is not a homogeneous entity and therefore it is meaningless to talk of universal goals which benefit all classes, strata, sections and sectors equally. In India, like in other developing countries, there was a continuous rhetoric about changing the social structure. The following Directive Principles of State Policy embodied in the Indian Constitution were supposed to act as the basic terms of reference for the Commission: “(a) that the citizens, men and women equally, have the right to an adequate means of livelihood; (b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good; and (c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.” From the very beginning, Indian plans have been heavily dependent on loans, investment, technology and ‘experts’ from the foreign countries. US ambassador to India in the fifties and sixties, Chester Bowles, notes, “…Ford staff in India became closely associated with the Planning Commission…”9 At the initiative of the USA, the Aid India Consortium (renamed Indian Development Forum in 1994)—a consortium of developed countries with the World Bank—was set up in 1958 to provide the loans for Indian plans. The policies regarding agriculture were shaped by the interests of the developed world and in that sense were a continuation of the colonial legacy. Even for food, India depended on the US. As early as 1958, Prime Minister Jawaharlal Nehru and the Planning Commission accepted the suggestion of the Ford Foundation chief in India, Douglas Ensminger, that a group of
Harvesting Despair: Agrarian Crisis in India
foreign experts might be set up to work with an Indian group to make recommendations about Indian agriculture. Incidentally, it was the Ford Foundation’s ‘Report on India’s Food Crisis and Steps to Meet It’ which criticised the approach of institutional change (land reforms), recommended a technocratic approach and paved the way for Green Revolution. At the time of independence, agriculture and ancillary activities accounted for nearly half (49.1 per cent) of the total output of the country. Despite this, there was not sufficient food to feed our people. Although the First Five Year Plan (1950-1955) focused on public investment in the areas of infrastructure and agriculture, there was a major change at the time of the Second Five Year Plan (19551960). This plan focused on capital goods production to the extent of neglect of agriculture. It was ignored that a developing country requires not only more machines but also more food. An effective policy framework for agriculture was absent from this plan. It is not surprising that agriculture could neither create much surplus for investment in industry, nor could it create a sufficiently large market for industrial goods. The urban bias of Indian planners also started becoming evident from the Second Plan. It was assumed that industrialization would absorb the surplus labour of the agricultural sector and agriculture started being de-emphasised fairly early in the course of planning. Although the Third Five Year Plan (1960-1965) did have some lofty claims about agriculture, the underlying assumption was that agriculture was supposed to provide cheap labour as well as cheap food for the needs of the developing economy. The Community Development Programme, which formed an integral part of India’s early plans, was undertaken with US assistance. The programme was aimed towards an intensive agricultural development amongst other things such as land reclamation, irrigation, farm management, application of scientific methods of cultivation like the use of improved seeds etc. It also aimed at forming cooperative societies, credit cooperatives initially and later cooperative farming and panchayats. Before the inauguration of community projects in October 1952, an operational agreement was signed by the governments of India and USA. US Aid for International Development (USAID) and Ford Foundation worked together on the programme. Since these programmes did not intend to change the basic social and economic structure of the villages, the main benefits of the projects were cornered by the
Backdrop to the Crisis
“dominant families”, as reported by the Planning Commission’s Programme Evaluation Organisation. The Intensive Agricultural Development Programme (IADP) was initiated in 1960-61 in three districts with the inspiration and financial assistance from the Ford Foundation. It was later extended to another thirteen districts. IADP signified a shift to intensive techniques in selected districts, which was to be carried forward later under the Green Revolution. This programme concentrated on rich farmers in irrigated areas and supplied them with subsidised inputs, generous credit, price incentives, technical advice and marketing facilities. This technocratic approach was supposed to raise agricultural production. IADP was followed by the Green Revolution.
Forty years have passed since Green Revolution was first introduced in this country. Looking back at the phenomenon, we tend to forget the domestic and world political circumstances in which this new technology was introduced, not only in India, but in many other similarly situated countries of Latin America, Africa and Asia. Consider this. After the end of the Second World War, the world found itself divided into two camps of opposite ideologies, of opposite notions of progress and development. The socialist camp led by USSR had not only offered the most courageous resistance against fascism, but was presenting a strong challenge to the capitalist model of development itself. National liberation struggles had broken out all over the Third World during and after the Second World War. In the decade of fifties and sixties, countries of Latin America and Africa were reverberating with the demand for freedom. In 1949, there was a revolution in China, a country very similar to India in its size, history of colonial exploitation, and backwardness of agriculture and industry. The new government in China, led by the Communist Party, was undertaking land redistribution and agrarian reform in the countryside on a scale never seen before. In 1959, began the Vietnam War. Ordinary peasants and communist guerillas fought an extraordinary battle against the world’s strongest superpower, and proved that it was possible to survive and win in the face of most brutal and inhuman military offensive. The ‘spectre of communism’ was certainly haunting capitalism.
Harvesting Despair: Agrarian Crisis in India
In our own country, even as the process of getting Independence from formal British Rule was going on, sharecroppers and peasants rose up in struggle, whether it was the Tebhaga uprising in West Bengal or the Telangana struggle in the Nizam’s Hyderabad. Further, in the late sixties, there were peasant uprisings in Naxalbari in West Bengal and Srikakulam in Andhra Pradesh. The demand for changes in the institutional structure and property relations in the countryside were growing strong. There was a food crisis to deal with as well. This then was the backdrop to the Green Revolution. On one hand was the urgent need to meet the peasant unrest and increase crop yields to address the food crisis. On the other hand, were the chemical industries of USA who were saddled with large unused production capacities after the World War. The search for new markets by transnational corporations of USA, the need of the capitalist camp to beat back the challenge of communism, and the interests of our rulers, all coalesced to introduce the new technology of Green Revolution. In this sense modern science and technology was used to postpone and to deny the pressing need of changes in property ownership and consequently in the social relations of production. The implementation of Green Revolution in different parts of the country over the past forty years has shown what mindless application of technology can do to agriculture, an important lesson for those advocating new technologies of genetic modification. Soil and water resources of the country stand depleted to an extent where their replenishment seems almost impossible. It is an accepted axiom that more and more of chemical fertilisers would be required every season to beat back the declining fertility of the soil and maintain the same crop yields. The loss of biodiversity in the environment is an irreplaceable loss. Farmers in Punjab have high levels of pesticide in their blood. There are new varieties of pests and weeds that have to be combated with higher potencies and quantities of insecticides and weedicides every year. As environmental activists have pointed out, the High Yielding Varieties (HYVs) of seeds introduced as part of Green Revolution, were actually High Responsive Varieties (HRVs) i.e. they responded with higher yields when fed with adequate (read, large) doses of water and chemical fertilisers. Whether the seeds had any inherent quality to produce more, remains a point to debate about.
Backdrop to the Crisis
Seeds, fertilisers, pesticides, agricultural equipment, all have to be bought from the market at ever increasing prices. All this has meant galloping costs of cultivation for the farmers, one arm of the scissors which is pushing them towards death and despair. In accordance with the policy of ‘betting on the strong’ and ‘building on the best’ put forward by the Ford Foundation (in its report to the Indian government in 1959), the Green Revolution was introduced only in selected districts of the country – those districts which had fertile land and adequate sources of irrigation. Uneven development was a built-in feature of the Green Revolution model. Large parts of the country stagnated with state neglect and backward techniques of cultivation, while states like Punjab and Haryana moved rapidly ahead in improving yields with monocultures of rice and wheat. It is not surprising then that the Green Revolution has exacerbated inequalities across regions and class sizes of farmers. Only the large farmers were able to reap the maximum benefits of a technology that required incurring of heavy costs and investment.
The dependence on developed capitalist countries and their corporations showed itself not only in the use of technology in agriculture, but also in the broader economic policies followed by the Indian state. The decade of eighties saw the beginning of liberalisation, privatisation and globalisation of the Indian economy. The economic reforms were extended to all sectors, including agriculture. Domestic reforms manifested themselves in a variety of policy changes such as liberalisation of the financial markets, liberalisation of trade, withdrawal of the state from social sectors like education and health, and sectors like power, telecommunications and banking. Public sector units started being dismantled and privatised. In agriculture, public investment and expenditures by the government declined steadily. Subsidies were targeted, especially the food subsidies, which led to a shrinking of the public distribution system. Public procurement of crops became more and more dysfunctional. Laws were made and rules and regulations bypassed or amended to facilitate the entry of the private corporate sector (large agri-business companies) in different spheres of agriculture, including selling of seeds, other inputs, cultivation and marketing.
Harvesting Despair: Agrarian Crisis in India
The domestic agricultural market was opened to international trade with the signing of the Agreement on Agriculture, as part of the WTO negotiations in 1994. The Mid-Term Appraisal of the Ninth Five Year Plan10 states clearly that “Restrictions on movement, stocking, trading, credit by financial institutions, monopoly buying, processing and exports have to be removed…” so that the farmer can take … “advantage of the free market”. It talks of encouragement of application of biotechnology in agriculture and opening of lease market in land. The technology adopted in agriculture necessitated the purchase of all the inputs required for cultivation from the market. This, in turn, meant larger requirements of credit from the banks. However, the credit policy reforms starved agriculture of this much needed credit. Profitability was made the basis for extending institutional credit to different activities, which excluded a sector as crucial as agriculture. The crisis in agriculture which we are witnessing today has definitely been aggravated by the economic reforms. We now turn our attention towards post-reform policy measures and their impact on agriculture and Indian farmers, in the next three chapters. Notes
1. P.Sainath, The Hindu, 12 December 2008 2. Economic Survey 2007-08, Government of India 3. Total area sown with crops and orchards, counting area sown more than once in the same year only once. 4. This could also be partly due to acquisition of agricultural land for non agricultural purposes such as special economic zones. 5. Area irrigated through any source once in a year. 6. Report of the Steering Committee as quoted in Aspects of India’s Economy No. 46, Research Unit for Political Economy 7. as quoted in S.K. Ray “Land System and Its Reforms in India”, Indian Journal of Agricultural Economics, Volume 61, Number 192, January-June 1996. 8. NSS Report no. 491 9. Bowles, Ambassador’s Report, p 340 as quoted by Suniti Kumar Ghosh ‘Development Planning in India: Lumpendevelopment and Imperialism’, 2002 10. Mid Term Appraisal Highlights (1997-2002), Planning Commission, www.planningcommission.nic.in
Chapter III Economic Policy Reforms and their Impact
Economic Policy Reforms and their Impact
The agrarian crisis of today has been precipitated by a steady withdrawal of the state from most of the important spheres relating to agriculture. The process of economic reforms has meant that government expenditure on agriculture has declined steadily, subsidies are being withdrawn impacting the costs of cultivation, private companies are being allowed to sell inputs and buy the crop, government procurement is getting dismantled and farmers have been left to the mercy of the ‘free market’. As will be seen in the next chapter, farmers’ access to credit is getting reduced and the cost of credit has also increased. Agricultural extension services have collapsed as has been admitted by the Finance Minister himself in his budget speech of 2007-08. We shall look at various policy changes in different sections of this chapter. The first section deals with the neglect of agriculture in government policies, the next section shows the impact of this on costs of cultivation and prices received by the farmers, and the last section critiques various ‘patchwork’ measures being offered as solution to the crisis.
NEGLECT AND DISCRIMINATION
Public investment and expenditures
The state of rural infrastructure was pitiable at the time of independence. The onus of developing the rural economy fell on the newly formed government. Public investment in agriculture was increased till about the end of 1970s. The beginning of reforms coincided with a consistent decline in the proportion of public investment in agriculture as a percentage of GDP although the same period has been marked by a high savings and investment rate for the economy as a whole. It should be remembered that agriculture is a sector where public investment is needed to encourage private investment. The majority of farmers in our country are resource-poor i.e., they cannot afford to undertake investments individually. They are dependent on government irrigation system and infrastructure to carry out cultivation. Individual farmers cannot be expected to carry out leveling of soil and build irrigation systems. Rather, only when such infrastructure is ensured by the state are farmers able to invest in their own fields.
Harvesting Despair: Agrarian Crisis in India
In other words, public investment in agriculture cannot be substituted by private investment. It can be seen from Table 1 of the appendix that public investment in agriculture as a proportion of GDP has consistently declined since the 1980s. If we look at public and private investment together, we will see that investment in agriculture as a proportion of GDP has fallen from 1.92 per cent in 1990 to1.31 per cent in 2003. This is the time when the economy as a whole was witnessing very high levels of investment. Investment levels for the entire economy were 33.8 per cent in 2005-06 i.e., investment was almost equal to one-third of the national output. These are high levels of investment by any standards. However, agriculture did not get its due share of investment during the same period. If the investment levels in agriculture as a proportion of the output were the same as that for the entire economy, then total investment (public and private) in this sector would have been at least 6 per cent.1 It is obvious that share of agriculture in investment is nowhere near the share of other sectors of the economy. Apart from a sharp decline in investment, the allocation by the government to agriculture and allied sectors in successive Five Year Plans has declined (See Table 3 in appendix). Moreover, the expenditure on agriculture and rural development in the annual budgets of the central and state governments have also shown a downward trend. Even if rural development expenditures are considered broadly and were to include expenditures on agriculture, rural development, irrigation and flood control, village and small scale industry, and special areas programme, this has shown a decline since the 1990s. In fact, plan expenses incurred on total rural development by all the state governments was 42.9 per cent of the budget in 1990-91, but declined to a little over 30 per cent of the budget in 2002-03; this means a drop of almost 25 percentage points. Likewise, the non-plan expenses incurred by all the state governments on total rural development as a percentage of budgets, went down from 13.3 per cent during 1990-91 to 9.9 per cent during 2001-02 and further to 8.4 per cent during 2002-03. 2 The central government’s expenditure on agriculture as a percentage of total expenditure also deteriorated in the period of economic reforms. It became less than half between 1990-91 and 2004-05 (from 2.6 per cent to 1.1 per cent). 3
Economic Policy Reforms and their Impact
Even after sixty years of independence, three-fifths of the agricultural land in our country remains dependent on the monsoons and cultivation takes place under rain-fed conditions. This dependence on the monsoons makes the Indian farmer even more vulnerable. Commercialisation of agriculture has meant that crops which require lots of water are being grown in the unirrigated regions of the country, like Bt cotton cultivation in Vidarbha. Only two-fifths of the agricultural land is irrigated, and there are severe regional imbalances and disparities in access to irrigation across large and small farmers. It is not surprising that the technology of Green Revolution was introduced only in those areas of the country where a well-developed system of irrigation already existed. The existing system of irrigation can be broadly classified into different types – surface water irrigation, groundwater irrigation (tubewells, and wells, with or without pumpsets) and harvesting of rainwater (through tanks and other traditional forms). In 1999-2000, less than one-third of the total irrigated area (31.44 per cent) was irrigated through canal irrigation and almost sixty per cent (58.76 per cent) was through private wells. The state has to take the primary responsibility for building the irrigation systems and reducing the dependence of farmers on the monsoon. There has been an utter neglect of this sphere by the state. The expenditure by all state governments on major and medium irrigation (works) and flood control as a percentage of total budgets of all states fell from 7.8 per cent in 1990-91 to 5.5 per cent in 2001-02 (see Table 2 in appendix). The central government’s expenditure on irrigation as a percentage of total expenditures has also fallen sharply during the period of economic reforms. It fell from 0.3 per cent in 1990-91 to 0.1 per cent in 2004-05. After adjusting for inflation, the centre’s spending on irrigation and flood control fell by 15 per cent.4 The investment that takes place in irrigation is also influenced by political clout rather than actual requirements. The Marathwada region in Maharashtra – the sugarcane belt as well as the constituency of the present agricultural minister Sharad Pawar – has cornered most of the irrigation benefits in the state whereas the Vidarbha region in contrast, stands neglected. Canal irrigation has suffered the most. The area irrigated by canal irrigation decreased from 40 per cent of the total irrigated
Harvesting Despair: Agrarian Crisis in India
area in the first half of the 1970s (1970-71 to 1974-75) to only 31 per cent in the second half of the 1990s (1995-96 to 1999-2000). Even in cases where the government has invested in irrigation projects, it has chosen to do this by building big dams, which have their own adverse consequences. The neglect of irrigation by the government has meant that farmers have had to resort to methods of private irrigation, which is mostly groundwater extraction. The area irrigated by wells increased from 40 per cent to 57 per cent in the period mentioned above. This dependence on private irrigation has only exacerbated inequalities amongst the classes of farmers, since only those with adequate means can invest in tubewells, borewells and motor pumps. Unfettered groundwater extraction has led to severe depletion of groundwater levels across the country, especially in states like Punjab and Haryana. In central Punjab, the prime area of rice and wheat production, the cumulative fall in the water table for Octoberover-October 5 was 3.26 metres in 1998 (since 1973). The water table went down at an alarming rate after this. Its depth increased by 7.67 metres by 2003 and further by 9.28 metres by 2005 (since 1973). 6 The water table has fallen in 264 of the country’s 596 districts. The fall in the water table has resulted in an ecological crisis, for which policies of the state and central governments, and not the farmers, are to be blamed. A study by three pumpset farmers in 2005 in Andhra Pradesh calculated that the fixed cost of sinking a borewell was Rs. 1,00,000 and the recurring expenditure per annum was Rs. 38,000. 7 It is obvious that only a rich farmer can undertake such expenditures. It is interesting to read what the three authors of the aforementioned study had to say about farmers and borewells (see Box). As mentioned earlier, the favoured choice of public investment in irrigation has been the creation of big dams. Today, India ranks among the top three big dam countries, next only to China and the US. There have been a number of studies which indicate that big dams have serious environment costs, they are not cost effective compared to minor and medium irrigation projects (the cost of minor irrigation projects from the beginning of the planning period till recently has increased only three times whereas the cost for major and medium projects increased by eleven times), and most importantly, the benefits of large dams are heavily skewed in favour
Economic Policy Reforms and their Impact
Borewell Technology: The Modern ‘Bhasmasura’?
Like the demon ‘Bhasmasura’ in Hindu mythology who won a boon from Lord Shiva that whosoever is blessed with his hand will turn to ashes, the Indian farmer is today armed with borewell technology. Wherever he sinks a borewell, sooner or later, the water disappears, ultimately ruining the water table and the farmer himself (just as Bhasmasura himself finally turned to ash). There are laws of course to prevent indiscriminate sinking of borewells which, like the Dowry Act, no one bothered about .Very soon, within 10 years, by the early 1980s, utter chaos prevailed. Increasingly, open wells were becoming unviable as a neighbour sinking a borewell automatically implied one’s own well went dry, forcing one to sink deeper at great expense. As the farmers went deeper and deeper, the cost of groundwater mining kept growing, with old pumpsets discarded for new and more powerful submersible ones demanding/consuming more power but drawing out less water and the life of the borewell growing shorter (from an average of 10 years in the last decade to 5 years now). Two or three years of consequent drought and all hell will break loose, as wells dry up rapidly and new wells are sunk in desperation, which in most cases, either fail to strike water or dry up as summer advances.
Source: G. Narendranath et al, EPW, 31 December 2005 of large landowners and organised industry. Even the major share of electricity generated through big dams goes to urban areas and the organised industrial sector. Recently, people in Orissa have been protesting against diversion of water from the Hirakud dam for industrial projects. The Hirakud dam adversely affected the livelihood of more than one lakh people during the course of its construction in 1948. Farmers who do not have the means or access to any source of irrigation, are dependent on common property water resources – lakes, ponds and village rivulets. It is important to note that twothirds of the farmer households which use irrigation draw water from such resources. The impending privatisation of water resources will mean that these sections of the farmers will be denied access to irrigation completely or they will be asked to pay for the usage of these hitherto common property resources. There is also talk of increasing the water use charges in the case of canal irrigation, which will further increase the costs of cultivation for the farmers.
Harvesting Despair: Agrarian Crisis in India
Subsidies to any sector are a form of support given to it by the government. For example, if farmers are provided fertilisers at a price lower than the cost of production of fertilisers, and the gap between the two is met by the government, this would be the fertiliser subsidy by the government. Agriculture is just one of the sectors receiving subsidies from the government. Agricultural subsidies take different forms, including food, fertilisers, petroleum and power subsidies. The fertiliser, petroleum and power subsidies reduce the cost of cultivation for the farmers, while the food subsidy benefits both the farmers and the buyers of food. Subsidies for food, fertilisers and petroleum account for about 38 per cent of total government subsidies.8 In the period of economic reforms, there has been a continuous attack on agricultural subsidies on the ground that these are an unnecessary burden on the government’s budget. Food subsidy: Food subsidies comprise of subsidies to farmers through support prices and purchase operations of the Food Corporation of India (FCI), consumer subsidies through the public distribution system (PDS) and subsidies to FCI to cover all its costs. Since June 1997, the Universal Public Distribution System has been replaced by a Targeted PDS (or TPDS). The details regarding the FCI are given in the section on marketing and price policies. PDS is discussed in the chapter on food security. Fertiliser subsidy: In the case of fertilisers, the Retention Price Scheme (RPS) was introduced in 1979. According to this, the retention price of fertilisers is determined by the government for each fertiliser manufacturer on the basis of the input costs of the plant producing the fertiliser. Each manufacturer is required to sell the fertiliser to the farmer at a price fixed by the government. The difference between the retention price and the retail price of fertiliser is paid back to the manufacturer as a subsidy by the government. The subsidy accruing to the farmer is on account of the retail price being lower than the cost of production of the fertiliser. Large part of the benefits of fertiliser subsidies is cornered by the fertiliser manufacturers. Between 1981-82 and 2002-03, more than one third of the subsidy (38 per cent) accrued to the fertiliser industry and only the residual went to the farmers. The fertiliser subsidy began to decline as a proportion of the GDP after 1989-90. It fell from 0.93 per cent in 1989-90 to as low as 0.43 per cent in 2003-04. From 1994, the government decontrolled all fertilisers
Economic Policy Reforms and their Impact
except urea. Now, the fertiliser subsidy is due to the continuation of retention price scheme in the case of urea and ad hoc concessions in other fertilisers like di-ammonium phosphate (DAP) and muriate of potash (MOP). Internationally, fertiliser prices have risen more than oil or any other commodity in 2007 and 2008. Of the three main types, DAP sold for $250 a tonne in January 2007 but rose to $1,230 by middle of 2008. Potash-based fertilisers rose from $172 per tonne to more than $500 and nitrogen based fertilisers rose from $277 to more than $450 a tonne during the same period. 9 In the context of rising fertiliser prices in the world, withdrawal of the fertiliser subsidy would have disastrous consequences for our farmers. Petroleum subsidy: Petroleum prices impact the costs of private irrigation, transportation and urea. Subsidies on kerosene started declining after 1999-2000 and those on Liquefied Petroleum Gas began to decline after 2000-01. As part of the energy sector reforms, prices of many petroleum products, for example, naptha, furnace oil, low-sulfur heavy stock (LSHS), light diesel oil (LDO) and bitumen have been liberalised since April 1998. High speed diesel prices were linked to international prices resulting in rise in diesel prices. This would impact those farmers who use tractors and diesel pump sets to irrigate their fields. Power subsidy: The agricultural sector accounted for one-third of the total electricity consumption in the country in 2001. States like Tamil Nadu and Punjab provided free electricity to farmers (for using pumpsets for irrigation) and other states usually have low electricity tariffs for farmers. The power subsidy to farmers is seen as an unjustifiable burden on the government, and one that leads to excess consumption of power by the farmers. The power subsidy has been repeatedly targeted by governments in the process of economic reforms. The World Bank has forced many state governments to undertake power sector reforms as part of its loan conditionalities. One essential feature of power sector reforms is that it increases user charges for all users – including farmers. This allegedly reduces wastage and excess consumption by the farmers. However, the truth about claims of “power wastage” by the farmers is revealed by a study of the World Bank itself. The study (India: Power Supply to Agriculture, 2001) shows that in Haryana, the actual electricity consumption by the agricultural sector is only 36 per cent as against the 46 per cent claimed by the Haryana Vidyut Prasaran Nigam Limited (HVPNL). The trans-
Harvesting Despair: Agrarian Crisis in India
mission and distribution (T&D) losses of the state were underestimated and part of the actual T&D losses were passed off as consumption by the agricultural sector!10 This might be the case in many other states as well. It is, indeed, difficult to believe how the farm sector in Madhya Pradesh, Rajasthan, Gujarat, Maharashtra and Karnataka can account for 46 per cent, 38 per cent, 41 per cent, 31 per cent and 44 per cent of power consumption, when the share of irrigated area to the gross cropped area in these states are only 25 per cent, 30 per cent, 34 per cent, 14.5 per cent and 25 per cent, respectively.11 Studies like the one mentioned above have not stopped the World Bank for aggressively advocating and coercing state governments to hike electricity tariffs for farmers in the process of power sector reforms. Such increases in electricity tariffs increase the costs of cultivation for the farmers and worsen their vulnerability and distress. Table 4 in the appendix shows that in the present decade, there have been some years where subsidies on fertiliser, electricity and irrigation have actually declined in real terms. Even when they have not declined, they have remained stagnant or shown a marginal increase. The slashing (rationalisation) of all these subsidies have had a major impact on agricultural costs. Those who argue for lowering the burden on state exchequer by reducing the subsidies to agriculture, remain silent about the huge subsidies given to private corporate sector. By way of comparison, it would be useful to note the transfers and subsidies given to the corporate sector – disinvestment, land acquisition, building of infrastructure for industries and tax concessions. Between 2000 and 2002, the government sold nine public sector firms to the private sector at undervalued prices and with gifts of surplus land. Acquisition of land from farmers and giving it to industry and real estate is yet another way of transferring scarce resources away from agriculture. The introduction of Public Private Partnerships (PPPs) in infrastructure development (airports, power sector and ports) where the government keeps a provision for financing in the name of ‘Viability Gap Funding’ is nothing but a camouflage for subsidy to the private companies. Many of these sectors were making profits even without the partnership of the public sector. The expenditure on flyovers, bridges, elevated corridors, express ways and golden quadrangle are much higher compared to facilities like public irrigation, which benefit a much
Economic Policy Reforms and their Impact
larger proportion of the population. Last but not the least – the large transfers and varieties of tax concessions given to the private corporate sector. In 2007-08, concessions were given in the corporation tax, excise duty and customs duty to the tune of Rs. 236,483 crores. Even as the Indian government cuts its subsidies to agriculture at the behest of international organisations like the World Bank, IMF and WTO, the developed countries of the world continue to give huge subsidies and direct cash transfers to their farmers and agriculture. The total support given to agriculture in the OECD countries12 increased by 9 per cent from 1986-88 to 1999-2001. In the US alone, the increase in the same period was 39 per cent. For Korea and Japan, the increase was 51 per cent and 11.36 per cent respectively.13
RISING COSTS AND FLUCTUATING PRICES
Costs of cultivation
The cumulative impact of the input-intensive technology employed and the domestic reforms in agriculture has been an increase in the costs of cultivation for farmers. The technology adopted after the Green Revolution requires seeds purchased from the market and increasing quantities of chemical fertilisers and pesticides. The withdrawal of subsidies from important spheres and allowing multinationals to manufacture and distribute inputs has further increased the costs incurred by cultivators. In addition to this, the decline in public investment and expenditures on irrigation and rural development has meant that farmers have had to fend for themselves in this respect. The credit policy reforms have brought back the moneylender to the countryside increasing the interest costs of loans for the farmers. A study14 of costs of cultivation of wheat from 1970-71 to 200405 was conducted for Haryana, Madhya Pradesh, Punjab, Rajasthan and Uttar Pradesh. These states together account for 80 per cent of the area and 85 per cent of the output of wheat produced in the country. The study shows that for these states, the average cost of cultivation of wheat (measured in current prices) increased moderately in the 1970s, picked up further in the 1980s and “started galloping” in the 1990s and the first half of the current decade. Agricultural costs can be decomposed into fixed costs and variable or operational costs. The former reflects the value of land and fixed
Harvesting Despair: Agrarian Crisis in India
assets owned by the cultivators. Operational costs are costs of variable inputs and include wage costs, costs of chemical fertilisers and pesticides, seeds, irrigation charges, machine labour cost and interest costs on loans. Based on the above study, we can see how the different components of costs have escalated due to economic reforms. The fixed costs have tended to stagnate after the reforms whereas the operational costs have risen sharply. According to the study quoted above, the reason for the former lies in the decline in value of land on account of decreasing agricultural prices and due to decrease in private investment on fixed assets. However almost all components of variable cost rose on account of removal of input subsidies and the dependence of farmers on the open market for most inputs. The average expenses (on hired human labour, hired machine labour, chemical fertilisers, insecticides, irrigation charges and interest on short term loans) in wheat cultivation were slightly above Rs. 1,500 per hectare in the 1980s, rose to Rs. 4,500 per hectare in the 1990s and jumped to Rs. 7,700 per hectare in 200405. In other words, the costs have risen more than five times above the level in the 1980s.15 The two technological changes that have had the maximum impact on costs of cultivation are the adoption of high yielding varieties (HYVs) of seeds, associated with access to irrigation and increased use of chemicals; and mechanisation, associated with reduced use of bullock and human labour. Although the above study is limited to the costs of cultivating wheat, the situation will not be very different for other crops which use HYV seeds and/or a similar degree of mechanisation.
Changes in different components of costs
Wages and employment: The employment of manual workers in the cultivation of wheat has been declining since the mid-1970s. In the mid-1970s, the wheat crop required 72 person-days of manual labour on an average. In 2004-05, this came down to 63 persondays in Rajasthan, 56 in Uttar Pradesh, 37 in Haryana and 20 in Punjab. Although wages comprise the largest segment of the variable costs, share of wages (in total operational costs) has been declining since the mid-1990s. This shows that average wages have increased at a lower rate than all other costs taken together. Chemical fertilisers and pesticides: After wages, fertiliser costs are the second largest component of operational costs. HYV seeds require large doses of chemical fertilisers in order to yield higher output. But the application of chemical fertilisers has many other
Economic Policy Reforms and their Impact
consequences. They increase the incidence of weeds, pests and nematodes which require the application of pesticides and weedicides. Water also needs to be controlled carefully which in turn requires sophisticated technology. Short duration HYV seeds require inter-cultures in quick succession which makes mechanization indispensable. All these factors increase the costs of cultivation. The average fertiliser costs in the five states considered in the study, were estimated at Rs. 228 per hectare in the 1970s, rose to Rs. 534 in the 1980s, to Rs 1,339 in the 1990s and to Rs. 1,755 per hectare in the first half of the present decade.
In June 2008, police stations in Vidarbha were assigned an additional duty, the distribution of fertilisers. “It’s not an easy job,” says inspector Devidas Chaudhary, officer-in-charge of the Washim police station. Well known journalist P. Sainath observes, “Rarely has fertiliser been distributed under such tight security, by men in uniform.” Fertiliser shortages sparked unrest across rural Maharashtra. Apart from fertilisers, seeds also seemed to be in short supply.
With the emergence of private operators, costs on account of insecticides, weedicides and herbicides have increased many times. The all-state average expenses per hectare on insecticides was less than a rupee in the 1970s, Rs. 25 in the 1980s, Rs. 90 in the 1990s and has become Rs. 303 in 2004-05. Machine Labour: With widespread mechanization of agricultural operations, hiring of machines has become quite common and this has led to an increase in the demand for machine labour. Apart from this, frequent increases in the prices of petrol, diesel and electricity have led to an increase in the operational costs of agricultural equipments. Both these factors have contributed to a sharp increase in machine labour charges. In the 1980s, on an average, these charges were Rs. 435 per hectare; they rose to Rs. 1,280 in the 1990s and to Rs. 2,520 in 2004-05. Seed Costs: With the onset of economic reforms, the seed corporations of the states and the central government have become redundant; and this has made the peasants largely dependent on private seed companies for the commercial purchase of seeds. These seeds are costlier and require repeated sowings; the cultivation cost
Harvesting Despair: Agrarian Crisis in India
on this account has been rising. The rise may be higher than what is shown by government statistics as these statistics do not factor in bad quality or spurious seeds. US multinational companies like Monsanto, through their Indian subsidiaries, have been trying that the seed regulations laws in India are changed in their favour. In 2007, cotton seeds were surprisingly removed from the Essential Commodities Act, which is the only weapon in the hands of the state governments to regulate private seed trade and seed prices. As a result, the state governments found it difficult to regulate the price of Bt cotton. When some of the state governments reduced the price of Bt cotton by promulgating ordinances, the US Department of Agriculture referred to this and said “unwarranted interference by state governments in seed pricing could act as a disincentive to introduce new biotech traits/ events into India”.16 Irrigation Charges: The cost of irrigation depends on the source of irrigation like surface water, wells, tube-wells, tanks or canal irrigation. In Punjab, Haryana and Uttar Pradesh, the major source of irrigation is water drawn from wells and tube-wells with electricity and diesel pump sets. This kind of irrigation is much more costly than flow irrigation i.e., canals, rivers and springs (whose costs are practically insignificant). The average irrigation charge in the five states for the cultivation of wheat was Rs. 298 per hectare in the 1980s, Rs. 832 in the 1990s and Rs. 1,725 in 2004-05. It may be noted that while states like Punjab have been subsidising water and electricity charges for irrigation, many other states are being forced to raise the irrigation charges as they avail credit under the Accelerated Irrigation Benefit Programme or Rural Infrastructure Development Fund scheme, both initiated in the mid1990s. Interest costs: The financial sector reforms of the 1990s have allowed the banks to dilute the mandate of priority sector credit to agriculture. Although banks are required to provide 18 per cent of the net bank credit to agriculture even now, the definition of agricultural credit has been modified to include loans extended to business houses dealing in farm inputs, machinery, drip/sprinkler irrigation systems, loans to the power sector to extend transmission lines to rural areas, and credit to private companies and MNCs engaged in construction and maintenance of cold storages, dairying,
Economic Policy Reforms and their Impact
food processing, and other agri-businesses. As far as cultivators are concerned, only those with sufficient collateral are able to avail of institutional credit, and that is also far short of the actual credit requirements. The interest rates charged have shot up from 4.5 per cent in the 1970s and the 1980s to 15-18 per cent. In case of default, banks could impose a penal interest of up to 24 per cent. Due to the difficulties of procuring bank credit, in many cases, peasants are forced to rely on moneylenders who charge exorbitant interest rates. All this has escalated the cost of credit required for cultivation.
From the farm to the market:
price policy, marketing and procurement The life of an Indian farmer is full of uncertainty and hardship. After incurring high costs and protecting the plant from various kinds of pests, the crop represents hope. It is symbolic of successful fruition of a season of back-breaking labour. Increasingly now, even this does not guarantee survival, leave alone prosperity. With growing commercialisation of agriculture, farmers are selling a major share of their output in the market and keeping a very small proportion of it for self-consumption. The passage from the farm to the market is full of vagaries. The farmer can (or has to) sell his crop to any one of the following – the government, private traders at the local markets ( mandis), or the input dealers and private moneylenders. In all cases, he has virtually no control over the prices that he gets. Government procurement of crops is on the basis of prices fixed by the Commission of Agricultural Costs and Prices (CACP). Prior to the formation of the CACP in 1985, this work of fixing crop prices was done by the Agriculture Prices Commission (APC). In the 1980s questions started being raised about the methods adopted in arriving at the Minimum Support Price (MSP) fixed by the APC. The inclusion or exclusion of imputed costs of various items of farm operations such as value of family labour, the imputed rental value of owned land and the risk premium began to be debated. Farmers’ organisations across the country began emphasizing the ‘remunerative’ role that price policy ought to play implying that MSP should be calculated after including some remuneration for the farmers above the costs. Following the recommendations of the S.R. Sen Committee, the CACP came into existence and a policy document was issued in
Harvesting Despair: Agrarian Crisis in India
1986 titled Agricultural Price Policy: A Long Term Perspective, outlining the new objectives. Today, the MSP fixed by the CACP takes into account the cost of production, changes in the costs of inputs, domestic and international demand and supply conditions, market prices for the crop, price parity between various crops and inter-sectoral terms of trade. Presently, CACP recommends the MSPs for twenty-four commodities. The stated objectives of the CACP are to protect the interests of the producers as well as the consumers and also to provide incentive for the use of appropriate technology. Once the MSP is recommended by the CACP, the government is supposed to procure the crops at that price. In the case of food grain crops like rice and wheat, it is the Food Corporation of India (or bodies of the state governments) which does the procurement, itself or through commission agents. For crops other than food grains, there are different bodies like the Cotton Corporation of India. In reality, this system has several flaws which act in tandem against the interest of farmers. Firstly, there are many lacunae in the methods followed by CACP to calculate the cost of cultivation for different crops which underestimate the actual costs and hence also suggest lower prices. The second problem is associated with implementation of the CACP recommendations. The cost of cultivation considered by the CACP is the all India weighted average of costs which often results in MSPs being actually lower than the cost of cultivation in some states. In case of crops like jowar, ragi and cotton, even the costs paid out of farmers’ pockets were not covered in certain years. Another serious problem is that labour employed in agriculture is considered unskilled and the valuation of labour is done accordingly.17 The average market wages paid to hired labour or the stipulated minimum wages for unskilled labour, whichever is higher, is used for valuation of labour. It should be noted that stipulated wages for unskilled labour are lower than those for skilled labour. It is not possible to undertake the entire exercise from preparation of fields to sowing of seeds, protecting the seeds and the plant from pests and insects without possessing requisite skills. Had this labour been considered skilled, then valuation of costs would have to go up and prices would have to be higher as well. The costs tend to be underestimated due to variety of other factors as well. For example, the rental value of land considered is
Economic Policy Reforms and their Impact
often depressed. Even today the recommendations of 1960s are in force according to which the rent is considered to be merely onefourth or one-sixth of the gross value of the crop. Secondly, the interest costs are based on interest rates charged by the banks even though it is well known that a large number of farmers are dependent on moneylenders who charge much higher rates of interest. Similarly, the estimate of depreciation cost is also inappropriate. To give an example of another kind of problem in estimation, the cost of cultivation is underestimated for those farmers in Punjab who use diesel pumps to irrigate their fields, since the CACP assumes cost of irrigation to be zero because electricity to the farmers is free in the state. At the level of implementation, CACP’s decisions are often influenced by bureaucrats and political exigencies. Very often there is pressure to recommend low MSPs so that the government does not have to dole out a large subsidy. Prices recommended by the CACP are often modified by the government and therefore price fixation is rendered a cosmetic exercise. Such changes by the government are a rule rather than an exception. Even the time of declaration of MSPs is rarely before the sowing season, so the farmers do not know what prices to expect for their crop. Once the MSPs are declared, there are serious problems in procurement of crops by the governments of different states. For example, the MSP of Rs. 3000 announced for cotton in 2008-09 reflects a correction of past mistakes in the methodology adopted by the CACP but this is of no practical use. There were no government procurement centres in the Vidarbha region to actually buy the crop at this price till as late as end of October 2008. Naturally, the farmers were being forced to sell to the private traders at much lower prices of Rs. 2500-2600 per quintal. The implementation of MSP has been a difficult task in most of the states in the country (except some states like Punjab and Haryana). There are instances of no government procurement even when market prices rule below the MSP. During the harvest season, often there are huge quantities of crops arriving in the local markets, many times on a single day because the regulated markets function on pre-decided days of the week. This results in a collapse of prices, putting farmers at a disadvantage. In Punjab and Haryana, the relative success of public procurement can largely be explained by the pressure of the strong farmers’ lobbies. MSPs have become
Harvesting Despair: Agrarian Crisis in India
irrelevant to the growers of oilseeds, pulses, onion, potato, cotton, jute and copra, whatever be the levels at which they are fixed. This is because there is no procurement by the central or state governments at these prices. With the beginning of the liberalisation process in the country, objectives and the emphasis of price policy also witnessed a change. Now there is a debate on the continuation of MSP itself. A committee was set up under Abhijit Sen to look into the long term grain policy of the country. The Report of the High Level Committee on Long Term Grain Policy was brought out by the government in 2002. Now it is being suggested that the role of CACP be expanded from management of domestic prices to entering the trade related aspects of policy for agricultural commodities. This report openly talks about withdrawal of procurement agencies like the FCI from states like Punjab and Haryana. It is being suggested that price policy should encourage cropping of export oriented crops. The procurement of crops has been steadily decreasing and the reason is not hard to find. The above committee was informed by the representatives of agri-business companies that they would only invest in grain trading in India if “the potential threat posed by high stock levels [of the FCI] is removed”. The removal of FCI from procurement and storage of food grains will enable these companies to make additional profits. And these multinationals have not been unsuccessful. More and more states have made pro-corporate sector changes in the Agricultural Produce Marketing Committee (APMC) Acts, increasing the participation of the corporate sector in marketing and reducing that of the government. The government has been adopting a policy of keeping the MSPs low so that procurement can be reduced. The Economic Survey of 2005-06 openly states that large government procurement hurt private traders and discouraged them from expanding in the field of agricultural marketing. Hence the government is keeping the MSPs low so that private (read corporate) investment in agricultural marketing can be encouraged! The procurement of wheat as a percentage of total output of wheat crop became less than half (from 29.6 per cent to 13.3 per cent) from 2000-01 to 2004-05. 18 This steady decrease in procurement, initially of other crops and now of food grains exposes both the cultivators and consumers to the uncertainties of the market. Absence of assured procurement means that the farmers are left with no option but to sell to private
Economic Policy Reforms and their Impact
The fiasco in wheat procurement in April-May 2006 is illustrative of the government’s failure in this regard. The total public procurement of wheat was 9.2 million tonnes, only 13.3 per cent of the wheat output, a historic low. 19 This was despite the fact that wheat production was higher than the previous year. This failure of procurement was entirely predictable. Private traders and the corporate sector had already started making direct purchases from the farmers the previous year, affecting public procurement. The pro-corporate changes introduced in the APMC Acts of different states further displaced public procurement. The official minimum support price of wheat in 2006 was set just 1.6 per cent higher than the previous year, despite wholesale prices rising 4.3 per cent in the previous year (and fuel prices rising at more than twice that rate).20 Thus, the corporate sector was able to bid just slightly higher than the MSP and buy up the grain. Speculators in grain were able to drive market prices much above the MSP because of the previous year’s shortfall in procurement and the low stocks with FCI (1.9 million tonnes on 1 April 2006). It did not come as a surprise that farmers preferred to sell in the market rather than to the government. Even though the government announced an incentive bonus of Rs. 50 per quintal on 21 April 2006 to attract more wheat, it was too late as many farmers with less holding power had already sold their output to the private traders. Much of the grain was bought by private traders even before it reached the market. Only 13.7 million tonnes of wheat reached the market in 2006, 2.3 million tonnes less than the previous year and 4.4 million tonnes less than the year before that. 21 Sharad Pawar, Minister for Food and Agriculture, admitted that “large purchases by private traders, including multinational corporations have been a contributory factor for the low level of wheat procurement this year”.2 2 Perhaps for the first time since the creation of the FCI, private traders held far more wheat than the government. The government was now much less able to control open market prices and it urgently required food grains for PDS and its welfare schemes. Thus, a situation was deliberately created to import wheat from outside. The government could have procured enough wheat in April-May 2006 by giving remunerative MSPs to farmers, and preventing agri-businesses and private traders from purchasing on such a large scale (as production was higher than last year). But it did not do so, since then there would be no excuse for importing wheat. Under-procurement was necessary to create the case for wheat imports. Wheat was imported that year at prices higher than those offered to the farmers.
Harvesting Despair: Agrarian Crisis in India
traders (and agri-business houses). Except for that tiny minority of consumers who can access grains through TPDS, consumers have no option but to buy in the open market at high prices (often from the retail outlets of the very same agri-business houses). As part of the preparations to shut down the FCI, various schemes are on the anvil: provision of food stamps, making direct cash payments to the targeted families, booking purchases on the ‘futures markets’ instead of physically procuring the grain and outsourcing all the major operations of the FCI. The Food Ministry has hired McKinsey, a US based consultancy, to make a plan for ‘re-structuring’ of the FCI. This consultancy firm wants eight to ten thousand of the employees of FCI to be retired ‘voluntarily’. Already private parties are being engaged by the FCI in certain areas. For example, National Collateral Management Services Limited was hired by the FCI to procure rice from Balaghat in Madhya Pradesh and five districts in Orissa in 2005. The operations were to be extended to wheat procurement. In reality, the government never had a consistent pro-farmer policy of announcing remunerative procurement prices and purchasing the crops of all farmers at those prices. Under the impact of World Bank policies, even the skeletal mechanism of procurement which existed is being scrapped step by step. The FCI is being dismantled, the system of minimum support prices is being slowly withdrawn, warehousing is being privatised, and multinational agribusiness corporations are being allowed to purchase directly from the peasants. The World Bank has been continuously arguing against high domestic buffer stocks and pressurising India to enter the world market in order to meet any shortfalls. And as restrictions on imports of agricultural commodities are removed, imports have virtually displaced domestic production in some crops. For example, India was self-sufficient in the production of edible oils but now imports 40 per cent of its requirements after trade liberalisation. In other crops, threat of importing at lower prices is used to depress the prices domestically. The government is consciously moving to a regime where imports are being given precedence over domestic procurement. This would become evident if we look at wheat imports of 2007. On 4 September 2007, it was announced that the Indian government is importing wheat at Rs. 16 per kg. Only a few months prior to that, the procurement price of Rs. 8.50 was declared. Incidentally this was a year when there was sufficient production
Economic Policy Reforms and their Impact
of wheat in the country. Often the imports are also of low quality grain. On top of this, international grain traders are being given repeated relaxations of the quality norms for wheat imports with regard to pesticide levels, and the presence of pests, weeds and diseases. An example of this is the very high levels of pesticide found in the first shipment of Australian wheat in 2005. 23 With a steady scrapping of assured procurement by the government, the farmer is now exposed to the fluctuations in international prices where the rise in prices benefits the traders and speculators and the fall in prices is passed on to the farmer. Between 1997 and 2003, prices of many agricultural commodities crashed in the international market which meant that the farmers received very low prices for their crops. The private traders who buy the crop from the farmer and then sell in the international market naturally pass on the fall in prices to the farmers. The absence of public storage facilities puts pressure on the farmers to sell their produce immediately in the market. The market is a buyer’s market or in other words, the sellers of the produce i.e., the individual farmers do not have any say in the determination of the prices. Not only is warehousing being privatised, multinational grain firms are being allowed a free hand to purchase directly from the farmers. Needless to say, this would only encourage speculation and increase in profits of these firms. In many areas of the country, the farmer is often not in a position to take the produce to the market. Where loans have been taken from the arhatiyas (commission agents) as in the case of Punjab or seeds have been bought on credit from private traders, the crop has to be taken to these agencies for repayment of loans. The farmer may actually have no cash to take home at the end of the long, arduous year!
FALSE SOLUTIONS, REAL PROFITS
Although policymakers have been forced to acknowledge the agrarian crisis, the solutions they have offered are farcical, do not address the root causes of the crisis, and serve the interests of large business houses. Futures trading in agricultural commodities, contract farming and corporate agriculture are solutions which will, at best, benefit only the tiny minority of very large farmers in the country. The Seed Bill in 2004 and the Patent Bill in 2005 favour the seed companies against the farmers. In this section we will discuss some of the proposed solutions.
Harvesting Despair: Agrarian Crisis in India
Bleak future: “futures” market
Futures’ trading or trading in forward markets essentially refers to an agreement to buy the commodity at some future date at predetermined prices. This form of agreement has started in agricultural commodities as well. In fact it is being projected as a solution to the marketing and storage risks which have to be borne by the farmers. In India, forward markets developed spontaneously in the later part of the 19th century. This basically served the traders and the financial interests with no role for the actual cultivator. By 1953, regulated futures markets were established for some fifteen commodities. Khusro Committee on Forward Markets had shown quite clearly that it was not possible for the majority of farmers to benefit from this (with the exception of large growers in the Saurashtra region of Gujarat). Since then, there have been a number of policy changes permitting or banning trading in some particular commodity. In 1993, Kabra Committee on futures trade liberalisation, recommended by a majority view to permit futures only in 17 commodities. It unanimously recommended that permission should not be granted for futures trading in wheat, pulses, non basmati rice, tea, coffee, dry chillies, maize, vanaspati and sugar.24 However in 2003, the ruling NDA government issued a notification permitting futures trade in 103 commodities. Thus the present revival of futures trade began in 2003. Forward Contract (Amendment) Bill of 2006 has been changed to Forward Contract (Regulation) Amendment Bill and was introduced on 13 March 2008. The notification in 2006 was followed by twenty four commodity exchanges—three national and the remaining regional. It is the former which dominate the futures trade. These exchanges began offering contracts in various commodities including essential foodgrains, edible oil seeds, sugar and some spices. The National Commodities and Derivatives Exchange (NCDEX), the second largest national commodity exchange in 2006, largely deals with agricultural commodities. According to UNCTAD, it is the third largest exchange trading in agricultural futures in the world. The organisation, structure and modus operandi of the futures exchanges ensure that actual farmers have no role in the same. For one, they are located in metropolitan cities and the trade is conducted in English using computers. The large size of the contract rules out the participation of small, medium and marginal farmers
Economic Policy Reforms and their Impact
who do not have the resources to produce in large quantities. They are often net buyers of food and it is a travesty to expect them to possess warehouse receipts. This kind of trade is largely speculative in nature and enables large agri-business firms to hoard agricultural produce and hike its prices for their own profits. The hyper growth of futures trade can be seen from the following illustrations. In October 2006, the daily average trade in chana in just one exchange outdid the daily turnover of a Reliance share. The annual estimate of volume of futures trade in 2006-07 was estimated to be 90 per cent of the estimated GDP for 2006-07 at current prices.25
Foreign Direct Investment
Foreign Direct Investment is now being permitted in a number of spheres related to agriculture. FDI up to 100% is permitted under the automatic route only in the following mentioned activities viz. Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture, Aqua-culture and Cultivation of Vegetables & Mushrooms, under controlled conditions and services related to agro and allied sectors. With prior government approval it is also permitted in tea plantation, coffee and rubber processing and warehousing. When Pepsi and Syngenta rule the roost: corporate agriculture and contract farming
The advent of corporate agriculture and contract farming is a step forward in the invasion of the private corporate sector in agriculture. As the agricultural crisis stares the country in the face, the government is endorsing these as solutions in the New Agricultural Policy. The practicing of agriculture by the private companies, both domestic and foreign, is referred to as corporate agriculture. Traditionally, agri-business companies involved in this have largely been restricted to horticulture (which includes floriculture). Recently, steps have been taken to expand their control beyond horticulture. Contract farming on the other hand is when a private firm signs a contract with a farmer. The farmer is told to produce a crop with the company agreeing to buy the produce. The companies may or may not supply the agricultural inputs as per the contract.
Harvesting Despair: Agrarian Crisis in India
Many firms have entered contract farming and corporate agriculture in recent years. Pepsi foods set up tomato processing plants in 1989 in Punjab. Hindustan Lever Limited, Rallis and ICICI together entered contact farming for wheat in Madhya Pradesh. Other companies either already present or to enter in the future are Mahindra and Mahindra, Wal-Mart, Reliance Industries, Monsanto, Cargill, Dow Agro besides others. Some of the states actively promoting contract farming are Andhra Pradesh, Gujarat, Tamil Nadu, Punjab and Karnataka. Profitability is the driving force of the private corporate sector. This would inevitably lead to corporates entering the production of those commodities, where speculation and hoarding, and consequentially large profits, exist. Driven by the profit motive, companies do not have any concern for the local economy, livelihoods of the people or the ecology of the region. In contract farming, a single farmer or even a group of farmers have no bargaining power against the might of the multinational companies. There is an unequal relationship which will always lead to unfair terms of business for the farmers. There is no legal obligation on the firms to buy the produce. The produce may be rejected by the company if it does not meet the required standards or even if the company claims it does not. In the event that the company does not buy the farmer’s produce, he has to sell it in the open market at the prevailing low prices, thus incurring losses. This has been experienced in Punjab for crops like maize, sunflower and durum wheat. On the other hand, if the market price is higher than the price offered by the corporates, the farmer does not have the freedom to sell it in the market due to contractual obligations. In those cases where inputs are not provided by the corporates, the high input costs have to be borne by the farmers. Needless to say, this kind of risk can only be borne by very large farmers. There are cases of interlinking amongst companies selling inputs, providing credit and buying the produce in a region. Madhya Pradesh presents us with an example of such a tie up. Here, Rallis provides inputs to the farmers, ICICI provides them credit and HLL buys their produce. Such an alliance would be devastating for the farmers, as she/he has no control over input costs, access to credit or output price. As the firms look to expand production and to fulfill their profit motives, they will follow intensive farm practices that are likely to
Economic Policy Reforms and their Impact
be disastrous for the land and the soil. One of the gravest concerns regarding corporate agriculture is growing corporate control over agricultural land. This is one more way in which scarce and nonrenewable resources of the country are being transferred to multinational corporations. The Indo-US Knowledge Initiative on Agriculture, started in 2005, seeks to adapt the US system of contracts in Indian agriculture. In the US, it is well known that as part of technology and contract agreements with farmers, companies also enter into marketing agreements which leave very little choice for the farmers in terms of the inputs that they use, or prices for their output.26 Contract farming and corporate agriculture are not solutions for the agrarian distress. If anything, they will worsen the crisis and the farmers will be at the receiving end. The example of Mexico comes to mind where the corporate sector monopolises corn, the staple item of the Mexican diet. The consumers have to pay higher prices than before and the farmers receive less than before. Mass consumption has fallen and the corporations cater only to the elite in the country.
The Indo-US Knowledge Initiative on Agriculture
(India’s) first Green Revolution benefited in substantial measure from assistance provided by the U.S. We are hopeful that the Knowledge Initiative on Agriculture will become the harbinger of a second green revolution in our country. – Manmohan Singh speech to the US Congress, July 2005 The ‘assistance’ provided by the US for our first Green Revolution has been written about in the chapter on technology (Science of Profit). There is now another agreement between India and the US in the sphere of agriculture that merits our attention. Prime Minister Manmohan Singh announced this bilateral deal, known as the Indo-US Knowledge Initiative on Agriculture, during his visit to the US in July 2005. A Joint Working Group was established and a MoU was signed between the two governments in the same month. The first Board meeting of the KIA was held in December 2005 in Washington DC. Since then, six board meetings have taken place till April 2008.
Harvesting Despair: Agrarian Crisis in India
The Knowledge Initiative on Agriculture (KIA) during its first three-year-phase worked in four areas, education, learning resources, curriculum development and training; food processing, use of byproducts and bio-fuels; water management; and biotechnology. The Indian government had a budget outlay of Rs. 350 crores for this first phase. Out of this, 61 per cent was reserved for biotechnology. The US did not commit any budget for this initiative. 27 What is the KIA really about? It is the newest and the most blatant attempt by the US to interfere in our domestic agricultural policies in the interests of its own transnational corporations. Not surprisingly, the three big US multinational companies – Monsanto, Wal-Mart and Archer Daniels Midlands (ADM) – are on the board of the KIA. The KIA is working out plans for facilitating the entry of agri-business corporations in India. The entry of TNCs this time round is being planned in those spheres of agriculture which are most sensitive and which are likely to have long-term dangerous consequences for the farmers of this country. For this purpose, the KIA is seeking to change existing legal regulations in India in the fields listed below. 1. REGULATION
GENETICALLY MODIFIED O RGANISMS
Biotechnology is the largest area of intervention planned in the KIA. According to a WTO document, the US has referred to Indian GM regulation laws (of 1989) and environmental protection acts as “vague” and “broader than any existing regulation in the world”. US is the world’s largest cultivator of GM crops and is on the lookout for markets for the same. Indian laws require food importers to take permission from the GEAC (Genetic Engineering Approval Committee) for any GM food imports. The effect of KIA on this protective regulation was seen in September 2007, when the GEAC suddenly issued a notification saying that no regulatory approvals were needed any longer. This notification was subsequently put on hold till February 2008. Earlier in 2006 as well, US representatives on the board of KIA had expressed concern over ‘regulatory and policy developments in India’ which according to them would make it more difficult for public and private sectors “to deliver beneficial biotechnology products to farmers and markets”. It is clear that US is trying to target the GM regulations in India through the KIA.
Economic Policy Reforms and their Impact 2. CONTRACT F ARMING
The second board meeting of KIA explicitly talked about “drawing on the US experience with contract farming”. The third board meeting said, “training on growing crops under contractual agreements will be conducted in both the US and India and will include legal mechanisms of contracts and adapting the US system to India’s conditions”. This would require farmers to switch to plant varieties which are more suitable for processing and food retail industry. The potential dangers of contract farming for Indian agriculture have been discussed in this section. US-style contract farming US-style will certainly mean doom for our farmers and huge profits for the multinational corporations. 3. INTELLECTUAL PROPERTY RIGHTS
The impact of KIA on intellectual property rights (IPR) in food and agriculture is expected to be in two areas. Firstly, there is the agenda of ‘harmonisation of regulatory regimes’. What this essentially means is that the US IPR model is sought to be adopted in India. In the US, even the publicly funded research in US universities and institutes is patented and licensed out for commercial development to companies such as Monsanto (BayhDole Act of 1980). Further, individual scientists from public sector bodies can hold IPRs along with their private sector collaborators. The Indian version of the Bayh-Dole Act has already entered the Parliament as a bill. The sixth board meeting of KIA talks about trainings in state agricultural universities in India about intellectual property (IP) management and technology transfer issues, and for the preparation to set up IP cells. Second impact of KIA would be the ‘biopiracy’ of valuable resource and knowledge in the name of collaborative research. The Biological Diversity Act 2002 is meant for conserving biological diversity, sustainable use of its components and fair and equitable share of the benefits arising out of the use of biological resources and knowledge. Under this Act, there are specific guidelines drawn up for collaborative research projects like KIA. However, KIA has been violating many of the notified guidelines of this Act. That Indian law will be bypassed or violated in the efforts to import US regulatory regimes is not surprising.
Harvesting Despair: Agrarian Crisis in India SEEDS REGULATION
The US agri-business corporations are trying to ensure that legislative changes brought about in the Seed Bill 2004 are in favour of private industry. The Indian face of Monsanto, Mahyco, has been part of discussions relating to finalising the proposed seeds regulation law. Although there is no explicit evidence that KIA is being used to influence seeds regulation, the same can be expected in future. In two board meetings of the KIA, there were express points made on how the private sector (read multinational corporations) could provide more inputs for the regulatory process. The irony of the private sector giving inputs for regulations, which are intended to regulate the private sector in the first place, would have been lost on our policymakers and government! The unfortunate truth is that the KIA is trying to make knowledge in agriculture, like knowledge is so many other spheres, a commodity produced by, controlled by and used for the profits of the transnational corporations. The Indian government’s complicity in such ‘initiatives’ reveals its own intentions and interests.
Whether it is declining public investment in agriculture, cut in subsidies resulting in increased costs of cultivation, ineffective policy of procurement of crops and finally the dismantling of institutions like the FCI, all have worked towards starving the agricultural sector. This sector is the lifeline of any society but is especially important in our country as majority of our populace is dependent on it for their livelihood. This kind of neglect and bias against the agricultural sector reflects callousness towards the vast majority of our people. Notes
1. Agriculture’s contribution to Gross Domestic Product has been falling and was 18.5 per cent in 2006-07. For an investment of 33 per cent or one-third of its contribution to GDP, investment in agriculture would need to be one-third of 18.5 i.e., at least 6 per cent. Praveen Jha, ‘Some Aspects of well-being of India’s agricultural labour in context of contemporary agrarian crisis’, 22 February 2007, www.macroscan.org Aspects of India’s Economy No. 43, R.U.P.E.
Economic Policy Reforms and their Impact
4. 5. 6. 7. 8. 9.
RBI, Handbook of Statistics on State Government Finances, 2004 as quoted in Aspects of India’s Economy No. 43 The data recorded in October each year shows the post-monsoon to post-monsoon changes in the water table. Fall in Water Table in Central Punjab: How serious?, The Punjab State Farmers Commission, Government of Punjab, 22 November 2006. G. Narendranath, Uma Shankari and K. Rajendra Reddy, ‘To free or not to free Power: Understanding the context of free power to agriculture’, Economic Political Weekly 31 December 2005. “Central Government Subsidies in India: A Report”, Ministry of Finance, Department of Economic Affairs, December 2004. The Hindu, 15 August 2008
10. “The myth of the ‘powerful’ farmer” Business Line, 12 November 2001 11. Ibid. 12. Organisation for Economic Cooperation and Development, a group of the 30 richest nations in the world. 13. Parthapratim Pal “Implementation issues of the Agreement on Agriculture and its implications for Developing Countries”, 9 September 2002, www.networkideas.org 14. M. Raghavan ‘Changing Pattern of Input Use and Cost of Cultivation’, Economic and Political Weekly 28 June 2008 15. Ibid. 16. Kavitha Kuruganti, Targeting Regulations in Indian Agriculture, Economic and Political Weekly, 29 November 2008 17. Skilled labourers are defined as those who acquire certain years of training and for whose ‘skill’ there is a demand in the market 18. The wheat procurement is done in the marketing year following the crop year, which means that procurement for the year 2000-01 would have been carried out in 2001-02. And similarly, for 2004-05. 19. Aspects of India’s Economy No. 42 , R.U.P.E. 20. Ibid. 21. Ibid. 22. Business Standard, 23 June 2006 23. Aspects of India’s Economy No. 42. op. cit. 24. Kamal Nayan Kabra ‘Commodity Futures in India’ Economic and Political Weekly 31 March 2007 25. Ibid. 26. Kavitha Kuruganti 2008 op. cit. 27. Kavitha Kuruganti, The Indo-US Knowledge Initiative on Agriculture – an overview”, Centre for Sustainable Agriculture, www.csa-india.org
Harvesting Despair: Agrarian Crisis in India
Public Investment in agriculture as percentage of GDP (at 1993-94 prices)
Period 1980-84 1985-89 1990-94 1995-99 2000-02 Percentage 4.08 2.90 2.07 1.75 1.54
Expenditures by all state government on major & medium irrigation and flood control
(as a percentage of total budget expenditures)
Year 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 Percentage 7.80 7.40 7.60 7.70 7.60 7.73 7.33 7.42 6.90 6.45 5.89 5.51
Source: Ramesh Chand, ‘Domestic Policy Measures and Challenges in Indian Agriculture’ in Reforming Indian Agriculture edited by Sankar Kumar Bhaumik, Sage Publications 2008
Source: Handbook of Statistics on state government finances, RBI 2006 as quoted in Praveen Jha 2007.
Economic Policy Reforms and their Impact
Expenditure on Agriculture in various Five Year Plans
Plans % of agriculture and allied sectors to total plan outlay 14.9 11.3 12.7 16.7 14.7 12.3 16.4 5.8 5.9 5.8 6.0 5.2 4.9 5.2 Share of agriculture, irrigation and flood control as % of actual plan expenditure 37.0 20.9 20.5 23.8 23.3 22.1 26.9 23.9 22.0 — — 20.7 19.8 16.5
First Plan (1951-56)* Second Plan (1956-61)* Third Plan (1961-66) Annual Plans (1966-69)** Fourth Plan (1969-74)** Fifth Plan (1974-79) Annual Plan (1979-80) Sixth Plan (1980-85) Seventh Plan (1985-90) Annual Plan (1990-91) Annual Plan (1991-92) Eighth Plan (1992-97) Ninth Plan (1997-2002) Tenth Plan (2002-07)
* Includes Animal Husbandry, Special Area Program, Rural Development and Forestry and Wildlife; ** Includes buffer stocks Sources: for second column from the Tenth Five Year Plan Document, Government of India; for third column from Praveen Jha, ‘Some Aspects of well-being of India’s agricultural labour in context of contemporary agrarian crisis’, 22nd February 2007, www.macroscan.org
Harvesting Despair: Agrarian Crisis in India
Tightening the Noose
Tightening the Noose
Credit Policy and Reforms 1
What do farmers need… Do we need to create new institutional structures such as SHGs, micro finance institutions etc., to provide improved and reliable access to credit? Or do we need to bring in moneylenders under some form of regulation? It is necessary that we find answers to these questions in the near future. – Manmohan Singh Prime Minister of India Address at the 2nd Agricultural Summit, 18.10.2006 Over the years credit, which in usual parlance had been seen as an important requirement of industrial and business enterprise, has become equally if not more critical in agriculture as well. With increasing dependence on inputs which have to be purchased from the market, credit requirements of the farmers have increased simultaneously. The requirement of credit is met from two kinds of sources – formal or institutional, and informal. Institutional sources in our country have primarily been the Scheduled Commercial Banks (including the Regional Rural Banks) and the cooperative societies/banks. Informal sources on the other hand, comprise of traditional moneylenders; and the new kind of moneylenders like the input dealers or commission agents as in Punjab. In recent years, microfinance institutions and self help groups have emerged as other sources of credit, propagated by many as the “magic pill” to alleviate rural poverty. At an all-India level, source-wise distribution suggests that more than half of the credit requirement (58 per cent) is met from the formal sources [Government – 2.5 per cent, cooperatives – 19.6 per cent and banks – 35.6 per cent]. More than one-fourth of the outstanding debt is from the moneylenders and the rest from other informal sources. Small and marginal farmers, who comprise 84 per cent of all farmer households, get three-fourths of their credit requirements from moneylenders and informal sources.2 This of course implies that the large farmers, landlords and the agri-
Harvesting Despair: Agrarian Crisis in India
business corporations corner a major share of the formal credit available to agriculture. With reforms in the credit policy, the underlying basis of allocation of credit moved away from the needs of the priority sectors to profitability (‘priority sector’ has been explained subsequently). Hence the share of agriculture in total bank credit declined from 19 per cent during 1990 to only 11 per cent by March 2005. Let us look at the history of credit to agriculture in our country after independence.
COOPERATIVE CREDIT INSTITUTIONS (CCIs)
With the passage of the Cooperative Credit Societies Act, 1904, cooperative finance gained recognition in India as the first ever substitute initiated to counter the exploitation of usurious moneylenders. Rural credit cooperatives in India were envisaged as a mechanism for providing financial services to farmers, especially small and marginal farmers. Increasing food security and generating employment in the rural areas were some of the other associated objectives of the cooperatives. After independence, cooperatives were guided and supported heavily by the Reserve Bank of India (RBI) which constituted specialised funds to ensure long term loans to state governments. Primary Agricultural Credit Societies (PACS) form the most basic units of the cooperative structure. They often serve as outlets for inputs and for the public distribution system for food and other essential items. There were more than one lakh PACS in the country in 2005, with thirteen crore members (including six crore borrowers). However, cooperative societies are functional only in some states like Maharashtra, and they are beset with problems like poor loan recovery and shortage of funds. Despite recommendations of many committees, no convincing steps have been taken to get rid of the primary problems of the cooperative sector, reflecting the callous attitude of the government. Most importantly, the benefits of cooperatives are usually cornered by a minority (that is, the rural elite) given the continuing inequalities in rural society.
THE NEED FOR NATIONALISATION
In 1951, the All India Rural Credit Survey found that the share of banks in rural credit was less than one per cent. Throughout the 1950s and 1960s, the role of private commercial banks in rural credit
Tightening the Noose
remained minimal and indirect. Rural branches of commercial banks were few and far between despite a 1954 RBI directive for them to open at least one branch in unbanked rural and semi-rural areas for every branch opened in previously banked areas. The Imperial Bank of India was nationalised in 1955 and the new State Bank of India (SBI) was asked to open 400 branches in semi-urban areas and start agricultural lending, even if at a loss. Even so, right up to 1971, the share of banks in rural credit was no more than 2.4 per cent and most of these loans were given to plantations. Their main activity was to finance agro-processing firms and purchase bonds floated by land development banks. Until the end of the 1960s, 98 per cent of commercial bank credit went to industry, trade and commerce. Thus there was an urgent need to create public sector credit institutions, which would reach out to the rural areas, and more specifically, to the agricultural sector. Perhaps, the government had also realised that access to bank credit was an important prerequisite for its model of Green Revolution to be successful.
NATIONALISATION OF BANKS & OTHER POLICY MEASURES
The 1961 Census showed that only about 50 per cent of India’s towns and almost none of its villages had bank branches. Recognising the dissonance between the objectives of private banks and the priorities of a developing country, the government nationalised fourteen commercial banks in July 1969. In 1970, the RBI formulated its first “socially coercive” licensing criterion – for every new branch in an already banked area (with one or more branches), each bank would have to open at least three branches in unbanked rural or semi-urban areas. Seven more banks were nationalised in 1980. The RBI also identified certain sectors – agriculture and allied activities and small-scale and cottage industries – as ‘priority sectors’ in 1972 and introduced the concept of Priority Sector Lending. In 1979, it directed all banks to lend 40 per cent of their loans to these sectors. Differential rates of interest were introduced in early 1972. For example, for the most deprived sections in the rural areas, an interest rate of 4 per cent per annum was fixed. Banks had to provide 1 per cent of their total loans within the priority sector at this rate. Along with this, it was felt that commercial banks including both private and public sector banks as well as cooperatives were
Harvesting Despair: Agrarian Crisis in India
not institutionally equipped to provide credit to certain sections of the society. Thus the Regional Rural Banks (RRBs) Ordinance was passed in 1975 and the first five RRBs were established. They were to be funded in a pre-determined ratio by the Sponsor Banks, the central government, and the state governments. Their target groups were the weaker sections of the rural society comprising of small and marginal farmers, agricultural labourers, and artisans besides others. As many as 196 RRBs had been set up in the country by December 1987 and most of them were sponsored by public sector banks like the State Bank of India and Punjab National Bank. In 1978, the RBI directed commercial banks and RRBs to charge a flat rate of 9 per cent on all priority sector loans, irrespective of size. Down payments were not required to be mandatory for small rural borrowers. Another major impetus to rural credit was provided by the establishment of the National Bank for Agriculture and Rural Development (NABARD) in 1982. NABARD was set up as an apex development bank with a mandate for facilitating credit flow for agriculture, rural industries and all other allied economic activities in rural areas. NABARD finances commercial banks, state cooperative banks, state cooperative agriculture and rural development banks, RRBs and other eligible financial institutions. All the aforementioned measures had a definite positive impact on the reach of credit to the rural areas. Even though the rural rich still cornered a large share of formal credit, the entire agricultural sector definitely benefited from bank nationalisation and the “social coercion” mechanism of RBI. There is much evidence to show this. The number of rural branches of banks (including RRBs) increased from a mere 1443 in 1969 to around 35,000 in the early 1990s. Most of this increase was in unbanked areas. The number of banked locations in this period rose from around 1,000 to over 25,000. The share of rural branches went up from 18 to 58 per cent during the same period. Between 1961 and 2000, the average population served by one bank branch fell from around 1,40,000 to just under 15,000, thus indicating an increase in the number of bank branches serving the population. The share of priority sector loans in total credit of scheduled commercial banks went up from 14 per cent in 1969 to around 40 per cent by the end of the 1980s. The share of agriculture had reached 19 per cent by 1985 and remained around that figure until
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1990. The number of agricultural loan accounts increased from around 1 million in the early 1970s to nearly 30 million by the early 1990s. Within agricultural credit, 42 per cent of the credit went to small and marginal farmers. The share of professional moneylenders, landlords and agriculturist moneylenders in rural credit fell from an average of over 75 per cent in 1951-1961 to less
Loan Waiver ?
The annual budget 2008-2009 announced by Finance Minister, P. Chidambaram, is most famous for the Rs. 60,000 crore loan waiver. According to the original proposal for the loan waiver scheme, it was the small and marginal farmers (those owning less than 5 acres of land) who were eligible. However there were many protests regarding the limited number of farmers that would benefit from this scheme. A few changes were made and the Agricultural Debt Waiver and Debt Relief Scheme 2008, was approved by the Union Cabinet. It covers all direct agricultural loans by banks to farmers disbursed between 31 March 1997 and 31 March 2007, which were overdue as on 31 December 2007 and remained unpaid until 29 February 2008. The scheme was meant to be taken up by the banks by 30 June 2008. The banks include Scheduled Commercial Banks, Regional Rural Banks, Cooperative Credit Institutions and local area banks, while the loans cover crop loans and investment credit for both agricultural and allied activities (dairy, poultry farming, bee-keeping etc). The scheme was expected to cost the exchequer a total of Rs. 71,680 crores against Rs. 60,000 crores projected initially in the Budget. The beneficiary farmers have, in turn, been clubbed under two broad categories of ‘marginal and small’ and ‘other’ farmers. The former have been identified as cultivating up to 2.5 acres (marginal) or 5 acres (small) of land, whether as owners or tenants or sharecroppers (and not solely as owners, going by the original Budget proposal). The marginal and small farmers would be granted a complete waiver of the eligible loan amounts due (together with the applicable interest). The other farmers, however (cultivating as owner or tenant or share cropper above 5 acres) will be entitled to a 25 per cent waiver. While the changes made to the originally proposed scheme are an improvement, there are glaring problems in the formulation of the scheme itself, not to mention the inadequacies in its implementation. While the scheme does cover farmers with land over 5 acres, waiving off only 25 per cent of the loan is insufficient. In many regions with dry and un-irrigated lands,
Harvesting Despair: Agrarian Crisis in India
productivity is low and hence the size of land holdings tends to be larger. In such cases it is often farmers who hold up to 10 acres of land that are in deep distress. Debt relief amounting to a mere 25 per cent is of no real significance then. This is surprising since it was mainly the crisis in Vidarbha that led to an outcry which resulted in the loan waiver. For instance, a farmer owning 10 acres of land in Vidarbha will not qualify for the complete waiving of his loans, which may be only Rs. 50,000, whereas a grape-growing farmer with 5 acres of irrigated land in Nasik can get his loan of even Rs. 2.5 lakhs waived completely. In Vidarbha, a majority of the farmers who are facing the crisis, own more than 5 acres of land. The benefits of the loan waiver are highly skewed. More than 50 per cent of the loans to be waived in Maharashtra will be of farmers of the prosperous Marathwada region, a constituency of Sharad Pawar, the Union Minister for Agriculture. The scheme also does not cover landless agricultural labourers who are in distress as well. Since the scheme has no way of waiving the loans taken from non-institutional sources, the loans taken from moneylenders will not be affected by it. Farmers will have to repay the loans of moneylenders at high rates of interest. As argued earlier in the chapter, the dependence on moneylenders and input dealers is often higher than loans taken from banks and cooperative societies.
than 25 per cent in 1991. The share of formal sector lending more than doubled between 1971 and 1991.
CREDIT POLICY REFORMS – REVERSAL OF GAINS
The Committee on the Financial System (CFS) chaired by M. Narsimhan was set up by the RBI in 1991. The report of the Narsimhan Committee argued against the mandatory requirements for lending and recommended the freeing up of private and public sector banks from regulations (such as Priority Sector Lending) in order to ensure their profitability. According to the committee, the credit system could not be used for redistributive objectives and it argued that “directed credit programmes” should be phased out. The Narsimhan Committee recommendations were in line with the broader processes of liberalisation going on in the economy. The basis of credit policy underwent a fundamental change – credit ought to go to those economic activities, sectors of the economy
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and sections of the consumers, where it has the lowest risk of default and highest profit earnings. This meant consciously starving the agricultural sector, the lifeline of our economy and society. Credit to agriculture would fetch lower returns than credit to sectors like information technology, but this cannot be used as an argument to deny credit to the agricultural sector because it is crucial for the sustenance of the majority of our people. Profitability cannot be the sole basis for allocating credit in an economy. Social priorities must take precedence over the insatiable drive for profits. The effect of credit policy reforms on rural credit and the credit flow to agriculture were disastrous, to say the least. The impact of reforms has been negative on the farm sector on various fronts. There has been a major decline in terms of accessibility of small and marginal farmers to credit. The banking sector has ignored the increasing credit needs of farmers as a result of increased commercialisation of agriculture and dependence on purchased inputs. NABARD has been witnessing a decrease in funds supplied to it by the government and the RBI. The shift of emphasis away from rural credit institutions and the lack of sincere corrective arrangements for problems affecting the financial health of cooperatives and RRBs, has led to a failure in meeting the credit demands of rural India. It is unambiguously clear that the state consciously and deliberately made agriculture unviable through its credit reform policies and precipitated the present agrarian crisis.
THE ATTACK ON RURAL CREDIT INSTITUTIONS
The recommendations of the Basel Committee of 1988 (known as the Basel norms) were extended to all sectors (including agriculture) by a RBI circular to commercial banks in 1992-93 without any consultation with NABARD. The strict implementation of these instructions (which measure the risk value of assets and loans given by banks) would have meant that agriculture would not receive any credit from commercial banks at all. The RBI soon realised its faux pas and partially mitigated the damages in a clarificatory circular.3 But the policy of not lending to agriculture (as it was perceived to be a high risk sector and banks had to reduce lending to such sectors under the Basel norms) was continued by commercial banks in practice. The RBI supported this practice by hinting to the commercial banks that they could price agricultural and other priority sector loans at higher levels. A 2004 circular of the RBI said, “If a bank believes that loans to a certain sector are
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unattractive from a portfolio perspective, it can raise the prices of these loans to a level that will act as a disincentive to borrowers.”4 NABARD gradually stopped receiving funds from the government and RBI during the period of economic reforms, and now has to depend on borrowings from the market. Market borrowings, which formed just 11.71 per cent of its loan portfolio at its inception, have now risen to 63.66 per cent which is not sustainable.5 The contribution of RBI to General Line of Credit (GLC) limit of NABARD, which provides refinance to RRBs and cooperatives was gradually curtailed from Rs. 66,000 crores in 200001 and was stopped completely from 31 January 2007. The number of RRBs stagnated at 196 from 1987 to 2002 and thereafter declined to 133 in 2006. The government has now taken a decision, without the ratification of the Parliament, to amalgamate the 196 RRBs. The process of amalgamation commenced in September 2005 and was expected to be completed by March 2008. As a result of the amalgamation, 145 out of 196 RRBs were amalgamated to form 45 new RRBs by 31 March 2007. 6 The recommendations of different committees (such as the Capoor Committee, the Vikhe-Patil Committee and the Vaidynathan Committee) to strengthen the functioning of the cooperative system were never implemented and the promised flow of funds to the Cooperative Credit Institutions was never ensured. The outcome of this systematic atrophy was that the cooperatives which had a share of 49.1 per cent of total credit to agriculture in 1990-91, witnessed a decline to 30.9 per cent in 2004-05. 7 The National Rural Credit (Long Term Operations) Fund was established in 1982 in NABARD and RBI was a major contributor to this fund. From1992-93, RBI stopped its contribution to the Long term Operations Fund and the only source for the Fund has been the surpluses of NABARD itself. This severely constrained the growth of re-finance resources available for long-term lending to agriculture. However, RBI realised that by stopping its contribution altogether, it was violating certain sections of the NABARD Act and therefore it has been contributing a token amount of Rs.1 crore every year.
TRENDS IN BANKING
Serious attempts have been made in recent years by the RBI to dilute the norms of priority sector lending, in order to avoid lending
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to the agricultural sector. While the targets for Priority Sector Lending have remained unchanged, the definition of what constitutes the priority sector has been widened. It now includes financing of distribution of inputs for agriculture and allied sectors such as dairy, poultry and piggery and short-term advances to traditional plantations including tea, coffee, rubber, and spices, irrespective of the size of the holdings. These are totally new areas under the umbrella of priority sector for the purpose of bank lending. Public sector banks have been asked by the RBI to meet their priority sector lending targets by contributing to the Rural Infrastructural Development Fund (RIDF, formed in 1995-96 within NABARD) and by contributing to the consortium fund of Khadi and Village Industries Commission (KVIC). 8 These policy guidelines ensured that banks which were defaulting in meeting the priority sector sub-target of lending 18 per cent of net credit to agriculture, could meet their shortfall by contributing to the RIDF and KVIC. Another method to avoid channeling of credit to priority sectors has been to ask banks to make investments in special bonds issued by certain specialised institutions and treat such investments as priority sector advances. In 1996, for example, the RBI asked the banks to invest in State Financial Corporations (SFCs), State Industrial Development Corporations (SIDCs), NABARD and the National Housing Bank (NHB).9 These changes were obviously meant to enable the banks to move away from the responsibility of lending to the genuine priority sectors of the economy. The deregulation of interest rates in the period of economic reforms has meant that the cost of institutional credit has gone up for farmers in the country. The interest rates on farm loans are linked to the size of the loan, according to RBI policy. The interest rates on loans up to Rs. 2 lakhs should not exceed the Prime Lending Rate10 (PLR) of the commercial banks, but they are free to determine their lending rates on loans above Rs. 2 lakhs. Till 2002-03, the PLR of commercial banks ranged between 9 and 12.25 per cent.11 However, by the Union Finance Minister’s own admission, “the interest rates on farm loans worked out to be as high as 16-18 per cent”. 12 This is higher than the interest rates charged by the commercial banks to consumers for home loans or automobile loans. It was only in July 2003 that the government belatedly took cognizance of the agrarian distress of small farmers and reduced the interest rates on crop loans to 9 per cent for loans up to Rs. 50,000. However, such token gestures do little to repair the
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irreversible damage done to the rural institutional credit system over the period of reforms. Along with an increase in costs of credit, there has been a decrease in the access to institutional credit as well. There has been a steady decline in the rural branches of commercial banks from 58.2 per cent in 1990 to 44.5 per cent in 2006. There has been a decline in the percentage of outstanding credit and deposits in rural areas in the period of economic reforms. All growth in rural banking that had been achieved since 1969 has now been undone. Perhaps, the most shocking indicator of this is the fact that from 1991 to 2006, the number of rural bank branches has fallen by almost 22 bank branches every month! (See Table 1 in the appendix) The number of farm loan accounts with Scheduled Commercial Banks has declined in absolute terms from 27.74 million in March 1992 to 20.84 million in March 2003. 13 The sponsor banks of RRBs were allowed to relocate RRB branches that were unprofitable to profitable areas instead of directly addressing the underlying causes for their long term losses. Thus one can find growing number of “urban branches” of regional rural banks. There has been relocation of 458 bank branches and almost 6 per cent of outstanding credit from rural to semi-urban and urban areas between 1996 and 2003 (see Table 2 in the appendix). This implies a direct impact on the ability of farmers to obtain credit since RRBs for many years had been an important source in this respect.
TRENDS IN CREDIT FLOW TO AGRICULTURE
The proportion of credit to agriculture in the net bank credit declined in the period after economic reforms, while the proportion of credit to the non-agricultural sectors continuously increased during the same period. The deliberate failure of successive governments to implement the Priority Sector Lending obligation of banks has meant that the target of 40 per cent has not been met since 1990. Rather, share of priority sector advances in total credit of commercial banks has been decreasing since 1987 (from 42.9 per cent) and reached 36.7 per cent in 2005 (See Table 3 in the appendix). The share of agriculture as a proportion of total bank credit (18 per cent is the set target under PSL) has fallen since the start of the last decade. In 1991, this figure was 15 per cent and it declined to 10.8 per cent in early 2005. A glance at the performance of private
Tightening the Noose
Harvesting Despair: Agrarian Crisis in India
banks displays their lax attitude towards priority sector lending norms. Direct agricultural advances were only 6.3 per cent of net private sector bank credit (against the 13.5 per cent target). Similarly, their priority sector lending achievements have been worse than public sector banks and most of their PSL has been to export services, transport, small scale industry etc. Cooperatives had traditionally played the role of the primary institutional lenders and their outreach had been unparalleled for many decades. However, the period of economic reforms has witnessed a decline of their share in flow of credit to agriculture. From 1992 onwards, RRBs expanded their business beyond the conventional target groups of farmers and agriculture. They diversified to non-priority sectors such as consumer loans and home loans. Even within the priority sectors, there was a shift towards areas with lower default rates. The Priority Sector Lending of RRBs dipped from about 70 per cent in 1990 to 57 per cent in 2001. In 2002-03, the Parliamentary Estimates Committee expressed its concern over this declining figure and advised the RBI to keep a check so that it did not fall further. The average annual growth rate of outstanding credit to agriculture declined from 7.82 per cent in 1981-1991 to just 1.40 per cent during 1992-2000. The ratio of agricultural credit (longterm and short-term agricultural credit from all financial institutions) to agricultural GDP increased from 0.16 in 1983 to 0.22 in 1990, and then actually declined to 0.14 in 2000. 14 The Currency and Finance Report published by the RBI shows that agriculture and small and medium enterprises (SMEs) are not getting their due share of bank credit. As on 31 March 2007, agriculture received only 12 per cent of total bank credit. In comparison, industry received 38 per cent of the total credit while 22 per cent went in financing consumer durables and urban home loans. Although both agriculture and industry have received lesser credit over the years, the former has shown a steeper decline compared to the latter (see the figure provided). While much is made of the bad debts (loans which cannot be recovered) and low recovery rates of the loans given to farmers, no one talks of the huge loans given to large individual borrowers (and companies) and their frequent defaults. This is yet another aspect of the discrimination faced by our farmers. In the case of farmers, banks often attach (confiscate) the entire property of the borrower
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and may even have him arrested; the treatment meted out to the corporate defaulters, on the other hand, is entirely different. In their case, the banks not only lengthen the schedule of repayments but also make provision for the bad debts out of banks’ profits earned elsewhere. In 2001-02, Rs. 40,000 crores of the total bad debts of commercial banks was on account of large individual borrowers. For the public sector banks as well, Rs. 22,866 crores of the defaults was accounted for by almost 1800 accounts of very large borrowers (deposits of over Rs.5 crores each). 15 Hence the argument of lending to sectors and individuals with lower risks is not adhered to when extending loans to large borrowers and for speculative activity.
WHO GETS AGRICULTURAL LOANS?
There has been a decline in the share of borrowing by credit size less than Rs. 25,000 (i.e. the class of borrowers whose total bank loan is Rs. 25,000 or less), from almost 50 per cent in 1985 to merely 13.3 per cent in 2006, whereas the large borrowings have seen a greater share over the years (see Table 4 in the appendix). The borrowings of smaller credit size are usually by small and marginal farmers. The constant decline in their share indicates a bias towards larger farmers and agri-business corporations who have been the major beneficiaries of whatever credit has been extended to agriculture. Over the years, an increasingly large share of agricultural credit is going to farm sizes of more than five acres. Also, the average amount of loans outstanding per account has grown much more rapidly in the case of farm sizes of more than five acres and above as compared with the credit accounts of small and marginal landholdings. Needless to say, those without land or other assets as collateral, remain excluded from institutional credit. Apart from the bias in favour of cultivators with larger land holdings, in recent times, there has been a remarkable increase in agricultural credit which has gone to the corporate sector engaged in agricultural activity. This has been accomplished by changing the very definitions of finance to agriculture. Since 2000, agricultural credit has grown by 20.5 per cent per annum but it would be a mistake to view this as a favourable development in agriculture. The recipients of agricultural credit have undergone a definite change. About one-third of the increase in total credit supply to agriculture between 2000 and 2006 was in indirect finance. The share of indirect finance in total agriculture
Harvesting Despair: Agrarian Crisis in India
finance increased from 15.5 per cent in 1990 to 25.9 per cent in 2002 and 27.9 per cent in 2006. 16 One of the main reasons for this phenomenal growth is that the definition of indirect finance has been broadened. Indirect finance traditionally included finance to the institutions that support agricultural production in rural areas e.g. loans to agriculture input dealers, loans to electricity boards. The new additions include finance for distribution of inputs for allied activities in agriculture such as loans upto Rs. 40 lakhs for cattle feed and poultry feed, loans upto Rs. 30 lakhs to rural dealers in drip irrigation, sprinkler irrigation systems and agriculture machinery, loans for agriculture clinics and agri-business centres, loans to NBFCs (Non-Bank Financial Corporations), loans for construction and running of storage facilities, loans to food processing and agro-based processing units and loans to power distribution companies. There has been a sharp increase in the number of loans with a credit limit of Rs.10 crores and more. Furthermore the share of advances with a credit limit of Rs.25000 in total advances fell from 35.2 per cent in 2000 to 13.3 per cent in 2006. Hence it can be safely concluded that most of the recent increase in credit flow to agriculture, after the decline of the 1990s, is because of increase in indirect finance. Rise in large credit limits is consistent with the changes in official policy of favouring growth of capital intensive and export oriented production pattern in agriculture. The changes in the definition of indirect finance are also a reflection of this trend. There have also been changes made in the definition of direct finance. Presently direct finance also includes loans to plantations such as tea, coffee, rubber, spices and horticulture as well as loans given to corporates for activities such as bee keeping, piggery, poultry fishery and dairy. Between 2000 and 2006 there has been a major increase in the share of direct advances with a credit limit of more than Rs. 1 crore. The share of direct advances with credit limits between Rs.10 crores and Rs. 25 crores as well as above Rs. 25 crores doubled between 2000 and 2006. Most of the increase in the credit has gone towards financing large agri-business enterprises and large cultivators as is evident from the fact that the share of the number of loans outstanding to big cultivators under direct finance increased phenomenally since late 1990s.
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Microfinance – the new pill?
Ever since Mohammed Yunus and Grameen Bank won the Nobel Peace Prize in 2006, microfinance has become the new messiah for the rural poor, especially poor women. Microfinance is defined by RBI and NABARD as the “provision of thrift, credit and other financial services and products of very small amounts to the poor enabling them to raise their income levels and improve living standards”. There are two broad approaches in the microfinance sector in India – the Self Help Group-Bank Linkage Program (SBLP) and the microfinance institutions (MFIs). Under the SBLP, a non-governmental organisation (NGO) helps women to form groups to save money (from their insufficient incomes), which is placed in a local bank account. The SHG itself functions like a small bank, with compulsory savings by its members, fixed lending procedures (for its own members) and penalties for default. After functioning for six months to a year, the SHG becomes entitled to loans from the local bank. The SBLP model was started by NABARD in 1992 and lending by banks to Self Help Groups was given the status of “Priority Sector Lending” by the RBI in 1996. The other approach is that of microfinance institutions (MFIs), which is presently small (compared to the SBLP model), but is growing at a rapid pace, owing to its propagation by international financial institutions. Microfinance institutions provide short-term loans (which regular commercial banks are unwilling to provide) at very high rates of interest. The interest rates of MFIs are so high and its loan recovery practices so abusive, coercive and derogatory that in some cases, borrowers have been forced to commit suicides (as in Andhra Pradesh in 2007). The World Bank has actively funded and supported MFIs in states like Andhra Pradesh. Andhra Pradesh had half the number of SHGs in the country under the SBL program and headquarters of India’s four largest MFIs in 2006. Self help groups and microfinance institutions have grown rapidly in the recent years, with state support. The proportion of rural bank credit disbursed through SHGs was less than 1 per cent in 2001, but increased to 6 per cent in the next four years. Microcredit is increasingly displacing direct credit to agricultural activities, and is being posed as a solution to the present agrarian crisis. The concept of microfinance rests on several implicit and explicit assumptions. The first and the foremost is that poverty is not the result of existing socio-political and economic structures and state policies. Rather, it is an
Harvesting Despair: Agrarian Crisis in India
inevitable feature of the growth process which can be corrected by simplistic measures such as providing credit. This is an absolutely fallacious assumption, especially in the context of the agrarian crisis. Cultivators require credit to purchase inputs and most of the micro credit loans are given for self-employment purposes. Thus micro credit does little to meet the credit requirements of the farmers. In any case, as we shall see in the course of this book, the agrarian crisis has deep roots in the present and past policies of the Indian state and cannot be solved by “band-aid” solutions like microfinance. Secondly, the reliance on self-employment as a way out of poverty ignores the nature and causes of unemployment in our country. Self-employment can never be an answer for a developing economy like India with a vast labour force, especially when labour-displacing and growth-oriented policies of the State and private capital continue to generate more unemployment. There is no infrastructure or marketing support measures accompanying these selfemployment schemes which considerably reduce their chances of success. Thirdly, the “cheap credit” being promised by microfinance schemes is not really cheap. At 24 per cent per annum, the interest rates are lesser compared only to the usurious moneylenders of the countryside. What is conveniently forgotten is that it was the banking sector and credit policy reforms of the 1990s which withdrew ‘Priority Sector Lending’ from the rural areas, and allowed the moneylenders to return in the first place. The interest rates charged in Self Help Groups are higher than the Priority Sector Lending Rates of the banks, RRBs and Cooperative Societies, and even higher than the interest rates charged for loans for personal consumption (of cars and homes) in the urban areas. The much hyped high loan recovery rates of the SHGs often have a dark underbelly. They are based on informal coercive mechanisms and peer group pressure. There have been many cases where women have been forced to take loans from other sources in order to repay loans taken from SHGs and save their izzat in the village. It is alarming that commercial and cooperative banks have started categorising loans to SHGs as part of their credit to the agricultural sector. In Vidarbha, the Perspectives team found that one third of the total credit of SBI Pandharkawada branch, Yavatmal district, to agriculture in 2007-08 was in the form of loans to SHGs. It is doubtful what proportion of these loans would actually go to agriculture and what proportion would be diverted for generating selfemployment.
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vocal recommendations for this came from Bill Gates? What is the reason that global financial institutions like Citigroup, ING and VISA were the official sponsors of the International Year of Microcredit in 2005? Is it mere philanthropy and honest intentions of removing poverty that are driving commercial banks and institutions like the World Bank to advocate micro credit? Or is micro credit a way for these global financial interests to tap the large number of small savings of the poorest and the most vulnerable in the most backward regions of the world?
FARMERS IN DEBT
The Indian farmer is born in debt, lives in debt and dies in debt.
– Malcolm Darling (1925) Prominent administrator-scholar in colonial Punjab
The quote often used to describe the condition of the Indian peasant has for long been a classic in Indian economic history. Accumulated data from various sources only strengthens this assertion. According to the Situation Assessment Survey of Farmers (SASF) carried out by the National Sample Survey Organisation during 2003, 48.6 per cent of all farmer households were in debt. The outstanding debt per indebted farmer household stood at Rs. 25,902. The rate of indebtedness was highest in certain states which follow an input intensive agriculture, such as Andhra Pradesh (82 per cent), Tamil Nadu (74.5 per cent), Punjab (65.4 per cent), Kerala (64.4 per cent) and Karnataka (61.6 per cent). These are some of the states that have witnessed a wave of debt related farmer suicides. NSS data further shows that altogether 65 per cent of the amount of loan taken is directly used for production purposes, as opposed to the general assumption that farmers are committing suicide due to excessive expenditure on consumption and socialreligious ceremonies. Consumption expenditure would also include education and medical expenses. However, more than 50 per cent of the indebted farmers’ households had taken loans for the purpose of capital or current expenditure in farm business. Such loans accounted for 584 rupees out of every 1000 rupees of the outstanding loan.
Harvesting Despair: Agrarian Crisis in India
Altogether 57.7 per cent of credit taken by farmers was provided by the formal/ institutional sources i.e. commercial banks, cooperatives and the government. The remaining 42.3 per cent of the credit market was run by informal players who are by and large moneylenders. It has been shown in the earlier sections that economic reforms resulted in a decline in the share of formal credit in total agricultural credit. However after 2000, there was an increase in the amount (not share ) of formal credit given to agriculture. But why is the dependence on informal credit still so high? It can only lead to one conclusion – a vast section of the peasantry is unable to avail of the benefits coming from the disbursal of institutional loans. The SASF states that out of the indebted farmers’ households, 31.3 per cent were from the category of landless and below marginal farmers, 29.8 per cent were marginal farmers and another 18.8 per cent were from the small farmers’ category. In total, a staggering 80 per cent of the indebted households were from the poorest lot in terms of land in possession. Households with 2.5 acres (1 hectare) or less land holdings accounted for 66 per cent of all farmer households and of them, 45 per cent were indebted. The prevalent rate of indebtedness amongst landless labourers’ households in rural areas was as high as 45 per cent. This section has virtually no access to formal bank credit since they have no land records to show as collateral to banks, thus forcing them to approach moneylenders for their credit needs. The same problem is faced by the tenants as well. Without a clear land record it becomes difficult to avail of institutional loans. This means that the institutional loans have largely gone to the large farmers and agribusiness corporations. Such evidence makes it obvious that it is largely the landless labourer, marginal and small farmer that is bearing the brunt of indebtedness. A look at the caste composition of farmers in each land-size category proves again that it is the socially depressed sections that are likely to suffer to a greater extent from the burden of indebtedness. STs, SCs, OBCs and other castes account for approximately 11 per cent, 22 per cent, 42 per cent and 26 per cent of the total rural households respectively.17 However the shares of each social group in terms of land owned is not proportionate to their percentage share in total rural households. For instance the Scheduled Castes comprised almost 25 per cent of the landless and only 8.97 per cent of rural SC households owned land. In contrast
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about 45 per cent of the Other Castes belong to the category of large farmers or those owning more than 10 acres (4 hectares) of land. This caste analysis goes to prove that traditionally disadvantaged social groups are liable to experience the burden of indebtedness with greater intensity, for it is the amount of land owned by a rural household, amongst other factors, that determines access to formal sources of credit. Data from the SASF clarifies that credit extended by cooperatives and commercial banks is positively directed towards increasing size of holdings whereas credit extended by moneylenders generally goes towards smaller land holdings. Those with very small landholdings took almost 50 per cent of their credit requirements from moneylenders (see table 5 in appendix). There have been increasing incidents of coercion used by recovery agents of private banks. The tactics used by banks to recover loans from defaulters are pushing some to commit suicide. The use of threats and force has been reported from both urban and rural areas. People’s Union for Civil Liberties brought out a report on two separate cases of farmer suicides in Karnataka during December 2007. Both farmers had availed of loans from ICICI Bank for the purchase of tractors.
RETURN OF THE MONEYLENDER
What helps informal credit flourish in the rural economy? A few of the answers could be its easy accessibility, lesser formalities such as the requirement of collateral, the moneylender being able to disburse loans quickly etc. However, the main reason why noninstitutional sources of credit have received a fresh lease of life in the past one-and-a-half decades is the systematic retreat of institutional credit. This coming back to eminence of informal credit should not be studied in a simplistic manner, for it has taken on new forms and is closely tied with every stage of agricultural production. As mentioned before, up to 42.3 per cent of farmers get their credit from informal sources, who are by and large moneylenders. The proportion of farmers taking loans from informal sources varies from state to state. These moneylenders are not only the traditional sahukars, but comprise of professional moneylenders, rich farmers, input dealers, commission agents, government revenue officials, persons of prominence in the region etc. There are other informal
Harvesting Despair: Agrarian Crisis in India
sources as well. In Akola district of Maharashtra, for instance, a chit-fund-like trend called ‘Bhisi’ was being promoted. The NSSO survey conducted in 2003 brings out some interesting facts. The survey found that at an all-India level, on an average, 29 out of 100 indebted households borrowed from professional agricultural moneylenders. The highest incidence was in Andhra Pradesh (57 out of 100 indebted households), followed by Tamil Nadu (52 out of 100 indebted households). The characteristic feature of lending from these sources is the usurious rates of interest charged by the lender. These figures can range from 30 per cent to 100 per cent per annum. The kind of moneylenders that have arisen now are very different, in fact many call them a class of neo-moneylenders. In Yavatmal district in Vidarbha, the Perspectives team found that input dealers, government’s revenue officials and even school teachers had emerged as moneylenders. Inadequacy of bank loans also increases the dependence of the farmers on moneylenders and other sources of informal credit. The case in Punjab while along similar lines, is a little different where the commission agent is even more deeply entrenched in the process of agricultural production. Commission agents form one of the most unique features of the financial market in the agricultural sector in Punjab. Their role is distinguished from being mere moneylenders to being central to the entire process of agricultural production. arhatiyas, as commission agents are locally known, apart from lending are also a legal institutional mechanism within agriculture. Their legal mandate is to act as the procurement agency for the government. But they also act as input dealers and provide credit to the farmers. Commission agents therefore provide such vital services, which makes this institution seem indispensable to agriculture. The role of the arhatiya begins with the season when the farmer prepares the land for sowing of the crop. Money is lent to the farmer which is then utilized for various purposes, from hiring labour, to leveling and watering of land. Later the capital for seeds, fertilisers, pesticides etc. is provided by the same person. Loans are provided and inputs are supplied on credit. Hence the farmers’ borrowings are partially in cash and to a large extent in kind. In short, the commission agent supplies inputs and finance for agriculture, and the farmer borrows money in order to purchase these inputs from the same person.
Tightening the Noose
The function of the commission agent does not end here. Once the produce is harvested, the farmer has to sell the produce either in the mandi (market) to private traders or have it procured by the government. The arhatiya in the mandi acts as the agent for the buyer (government or private) and accumulates this produce to be sold in bulk. The produce also needs to be weighed, cleaned and packed in gunny bags, which involves extra costs and labour; for which the arhatiyas earn a commission from the farmer and the government. In Punjab an extra 4 per cent is earned over and above the Minimum Support Price of the produce from the government, for the procurement and processing of the produce. This is despite the fact that a part of the cost is borne by the farmer, and the arhatiya only acts as an agent between the farmer and the buyer. The farmers get paid after the agent has sold the produce in the market, from which the initial loan amount and the costs of cleaning and packaging are deducted, leaving at best a marginal profit for the farmer. Therefore the farmer is compelled to again take a loan for the next crop. This also ensures that farmer returns to the same commission agent each year for credit and other inputs, since there is always some outstanding debt that remains. Traditional moneylenders, traders and large farmers who had surplus capital from other enterprises (Rs.60 lakhs and above) entered this field. People have invested upto 20 crores individually as the returns are attractive. There are potential investors as well, who loan their money through commission agents since they charge high rates of interest. Who’s championing the cause of moneylending? The Reserve Bank of India! An Expert Technical Group formed by RBI has suggested in a report dated July 2007 that rural usury should be legitimized by suitable legislations. The moneylenders will now become ‘accredited loan providers’. According to this proposal, banks will provide funds to the moneylenders rather than the cultivators. It won’t be surprising if these advances become part of the Priority Sector Lending targets. The arguments given in the report glorify an institution which has exploited the Indian peasantry since time immemorial. Now, suddenly the moneylender is the hero of “market reforms” who’s ‘friendly to the borrower’, ‘has an informal approach’, can provide the loans ‘any time, any where, any amount’. The report forgets to mention the recovery procedures and the usurious rates charged.
Harvesting Despair: Agrarian Crisis in India
The demand for credit in the rural areas is undoubtedly a lucrative market. The aforementioned proposal was hailed by chairman and managing director of Vijaya Bank, who has welcomed the proposed tie-up with the moneylenders. It is now the commercial banks and global financial institutions who will squeeze the farmers out of their last drop of blood, with the help of the ‘friendly’ village moneylender.
Indebtedness of the farmers has to be seen as a symptom of a much deeper malaise that has permeated the agricultural sector. The nature of current rural indebtedness is a reflection of the kind of policies being adopted by the state in general. The drive towards a more capital intensive and export oriented agriculture shapes credit policies, which determine who gets credit and at what rate. Those who do not fit into the scheme of things have to fend for themselves. It is not that institutional credit is absent, but it has been made unavailable for agriculture. The Narsimhan Committee recommendations, the implementation of Basel norms, banking sector reforms after 1991 and the overall financial policy environment of the last two decades have starved agriculture of the credit it needs so desperately. This was done in different ways – reducing the flow of funds to finance institutions like NABARD and RRBs, non-implementation of Priority Sector Lending targets by commercial banks, dismantling of rural credit institutions like cooperative societies and RRBs, making it more difficult for the smaller farmers to access institutional credit, and changing the definitions of agricultural credit to favour export-oriented agriculture and agri-business corporations. The result of all these changes has been that farmers’ indebtedness has increased steadily and their dependence on informal credit sources has increased as well. The situation of lower castes and small, marginal and landless cultivators has worsened in this period. Credit policy reforms are an important reason why agriculture is becoming more and more unviable today for the farmer. The period of credit policy reforms have taught us an important lesson – there is a distinct trade-off between profitability being the sole guiding policy of commercial banks and banks playing a positive role in the economic development of the country (which necessarily includes development of agriculture). We reiterate here that if
Tightening the Noose
agriculture and the livelihoods of millions of farmers have to be rescued from the present crisis, the credit policy for agriculture needs to be completely reversed. Credit to a sector as crucial as agriculture cannot be based on high profitability. Social priorities need to be the guiding principle in this case.
1. This chapter “borrows heavily from / is indebted to (!)” the article by Mihir Shah, Rangu Rao, P.S. Vijay Shankar “Rural Credit in the 20th Century: Overview of History and Perspectives”, Economic and Political Weekly, 14 April 2007 Srijit Mishra ‘Agrarian Crisis in Post-Reform India’ Alternative Economic Survey, 2006-07 P. Satish ‘Agricultural Credit in the post-reform Era’ Economic and Political Weekly, 30 June 2007 Ibid. “NABARD union seeks PM’s intervention to regain lost glory”, Financial Express, 13 November 2007 Vasam Anand Kumar ‘Case for De-Amalgamation of Regional Rural Banks’ Economic and Political Weekly, 18 October 2008 P. Satish 2007 op. cit. C.P. Chandrashekhar and Parthapratim Pal ‘Financial Liberalisation in India: an assessment of its nature and outcomes’ Economic and Political Weekly, 18 March 2006 Ibid.
2. 3. 4. 5. 6. 7. 8.
10. Prime Lending Rate refers to the rate of interest at which banks lend to their credit-worthy or favoured customers. 11. Report of the Advisory Committee on Flow of Credit to Agriculture, Reserve Bank of India, 18 May 2004 12. Indian Express, 17 July 2003 13. Chandrashekhar and Pal 2006 op. cit. 14. Table 4 and Table 5, Gagan Bihari Sahu and D. Rajashekhar “Banking Sector Reform and Credit Flow to Indian Agriculture” Economic and Political Weekly, 31 December 2005
Harvesting Despair: Agrarian Crisis in India
15. Independent Commission on Banking and Financial Policy, Interim Report, April 2005 as quoted in Aspects of India’s Economy No. 45 16. Pallavi Chavan and R. Ramakumar “Revival of agricultural credit in the 2000s: An Explanation” Economic and Political Weekly 29 December 2007 17. Report on Household Ownership Holdings in India, 2003, 59th round, NSS Report No 491 18. “Private Corporate Sector-Led Growth and Exclusion” in Aspects of India’s Economy No. 45 (R.U.P.E.)
Tightening the Noose
Growth of Rural Banking India, 1969-2006
Year Number of Bank Offices Rural 1969 1972 1978 1984 1990 1996 2002 2006 1443 5274 12534 25541 34867 32981 32243 30572 % of total 17.6 36.0 42.5 52.9 58.2 51.2 47.8 44.5 Outstanding Credit Rural Rural % of total Rs. crores 115 257 1530 6589 17352 29012 66682 175816 3.3 4.6 8.4 13.5 14.2 11.4 10.2 8.4 Deposits Rural % of total Rs. crores 306 540 2664 9603 28609 61313 159423 226049 6.3 6.5 10.1 13.4 15.5 14.4 14.2 10.8
Source: RBI, Banking Services, Basic Statistical Returns, various issues, March 2006
Relocation of RRBs’ Business from Rural to Semi-Urban & Urban Areas
Location Number of Offices 1996 Rural Semi-Urban Urban All-India 12448 1844 380 14672 2003 11989 2183 499 14671 Distribution of Credit Outstanding (in %) 1996 77.45 17.72 4.84 100.00 2003 71.51 21.76 6.74 100.00
Source: RBI, Basic Statistical Returns, March 1996 and March 2003.
Harvesting Despair: Agrarian Crisis in India
Tightening the Noose
Chapter V 100 Harvesting Despair: Agrarian Crisis in India
Freedom to Trade and Freedom to Plunder
WTO and Indian Agriculture
India became a member of the World Trade Organisation (WTO) in April 1994 and signed the Agreement on Agriculture (AoA). The rulers of the country had already embarked upon the policies of privatisation, liberalisation and globalisation, and the liberalisation of agricultural trade was just another step in this ladder. There were two assumptions underlying the process of trade liberalisation. Firstly, that India must aggressively adopt the export-oriented model of development if it was to travel on the high-growth trajectory. Exports (and therefore, trade with other economies) must be encouraged and India must look to increase its share in world trade. It was assumed that economic growth inevitably reduced poverty, and therefore export-oriented agriculture would reduce rural poverty in our country. This assumption ignores the present and past historical realities of world trade. India does not benefit much from international trade due to its small share in it (less than two per cent). Rather, the volatility and price fluctuations of the international market are imported into India through its engagement in world trade (for examples of this, see sections below). The emphasis on trying to capture a share of the external market is at the cost of neglecting our domestic market, and ignoring the needs of the large majority of our people. For example, the shift from cereal crops to commercial crops, conforming to the norms of export-oriented agriculture, has adversely affected our food availability and food security. Secondly, the export surpluses of some countries must mean import surpluses for other countries. Since most developing countries tend to produce a similar range of exports, the competition among them is more acute and there are likely to be many losers. This competition forces all countries to adopt severe cost-cutting measures (such as reducing wages, adopting capital-intensive technologies in labour-surplus economies) and leads to a ‘race to the bottom’. Even if we are winners now (at a high cost of course), we are certain to be losers at other times.
Freedom to Trade and Freedom to Plunder 101 The second assumption is closely related to the first one. This is the theory of free trade. It is argued that international trade, if freed from the encumbrances of tariffs, regulations and other quantitative restrictions and barriers, is most beneficial to all participating economies and leads to the most efficient and optimum outcomes. However, reality seldom confirms to theory, especially economic theory. The truth is that the ‘free trade’ argument has always been mere rhetoric for the presently developed countries. It has rarely been followed in practice, even by its staunchest advocates. Countries like the USA, Britain, Japan and countries of European Union (EU) had severely protectionist trade regimes during the commencement phase of their own economic development. Not only did they impose tariffs and quantitative restrictions to protect their domestic products and markets, they also modified the trade patterns, manufactures and agricultural products of their colonies (like India) to suit their own needs. The forced change in cropping patterns, restrictions imposed on the nature and quantum of agricultural exports, and the expropriation of land and other natural resources, greatly impeded the colonies’ own development, reduced them to being exporters of raw materials and importers of finished goods, and adversely impacted their food security. Today, economists and governments of these same countries argue in the name of ‘free trade’ and arm-twist developing countries like ours to accept unfair trade agreements. Like in the colonial period, these agreements are heavily biased towards the interests of the developed countries, and at best, promise benefits to the developing economies which are seldom realised. Our own economists and policymakers are vociferous proponents of such agreements (like the Agreement on Agriculture) ignoring their deleterious impact on agriculture and our economy.
WTO AND THE URUGUAY ROUND
There were two important reasons why during the last decade of the twentieth century, it became imperative for the developed countries to introduce agricultural-trade related rules that would be followed by nearly every country in the world economy. Firstly, USA, Australia and countries of the European Union lost huge export markets for food grains (which were used both for direct consumption and for indirect consumption as animal feed)
102 Harvesting Despair: Agrarian Crisis in India after the economic collapse of Russia, Ukraine and other East European countries in 1991. This loss had to be compensated and hence the need to open new markets of the developing countries. Secondly, the emergence of large transnational agri-business corporations (like agro-chemical and seed companies, processing companies, food manufacturers and food retailers) and their thirst for profits also necessitated the opening up of potentially large markets, like that of India. There was a need for an international organisation which would open up world agricultural trade and govern the conditions and rules of trade amongst countries. The WTO and its constituent treaty, the Agreement on Agriculture (AoA) fulfilled this purpose. Before the emergence of the World Trade Organisation, the rules of international trade were governed by the General Agreement on Trade and Tariffs (GATT). This was a de facto international organisation, based on an agreement reached initially by twenty three countries in Geneva in October 1947. GATT was yet another instrument similar to the International Monetary Fund and the World Bank, whose objective was to widen economic cooperation between the capitalist countries which were recovering after the Second World War and to influence economic policies of the newly independent third world countries. There were seven rounds of negotiations under GATT, but they mostly dealt with trade in manufactured goods. Important and sensitive areas like trade in services, intellectual property rights and trade in agricultural goods were left untouched. The charter of the International Trade Organisation, a failed predecessor of the WTO, was repeatedly rejected by the US Congress from 1948 to 1950 because they worried that the new organisation would interfere in the internal economic matters of their country! The eighth round of negotiations started in Uruguay in September 1986 and continued till April 1994. This was known as the Uruguay Round, and it dealt with all the aforementioned areas, most importantly agriculture. The Dunkel Draft Text, for the first time, brought agriculture within the ambit of the GATT discipline. The conclusion of negotiations by most of the 123 participating governments led to the creation of the WTO and its rules came into
Freedom to Trade and Freedom to Plunder 103 force from 1 January 1995. The Agreement on Agriculture (AoA) is a part of the WTO.
THE AGREEMENT ON AGRICULTURE
The commitments which members have to undertake under the Agreement on Agriculture (AoA) fall under four main areas related to the opening up of agricultural markets – domestic support, market access, export subsidies; and other provisions which include the Special and Differential Treatment for the developing countries and Agreement on Sanitary and Phytosanitary measures. The detailed provisions of the first two areas (domestic support and market access) are listed in the appendix to the chapter.
The GATT only concerned itself with trade measures, and kept away from purely domestic production policies, except where these had a trade impact. AoA overruled the provisions of GATT 1994 as it also brought domestic support given by governments to agricultural products under its purview. Domestic support refers to those policies of the government which support agriculture and farmers of a country. This support can be in a variety of ways, for example, investing in agricultural extension services, research, and irrigation, providing price support to farmers for different crops, providing inputs or credit at subsidised rates. Domestic support has been one of the most controversial and contested aspects of the AoA. These measures provide farmers incentive to grow certain crops (which may be in the larger interest of the country), provides them assured incomes and livelihoods, and allow for the possibility of the planned development of the agricultural sector. According to WTO understanding, support measures which distort markets and international trade in agricultural commodities must be reduced and eventually eliminated. AoA divides domestic support measures into three categories. Support measures classified as green box and blue box are exempted from any reduction commitments because their trade-distorting effects are believed to be minimum. However, support measures classified as amber box – which include critical support measures like market price support and subsidies on inputs – have to be reduced under the Agreement on Agriculture. The various subsidies under three boxes are given below.
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Green Box (exempt from reductions)
Blue Box (exempt from reductions) Production limiting programs, Livestock payments made on a fixed number of head of livestock.
Amber Box (subject to reduction commitments) Market price support, Subsidies on Inputs, Direct payments to farmers linked to production
Agricultural research programs, Training programs, Research in pest and disease control, Extension services, Marketing and promotion services, Infrastructure, Food security stocks & domestic food aid, Investment aids, Environmental programs, Regional assistance programs.
Amber Box subsidies are measured in terms of “Total Aggregate Measure of Support” (Total AMS). AMS is further divided into product-specific support and non-product specific support i.e. those support measures which are targeted at individual crops (for e.g. minimum support price for wheat) and those support measures which are for the agricultural sector as a whole (for e.g. the fertiliser subsidy). The total AMS of a country is expressed as a percentage of the total value of output of agriculture. This total AMS does not have to be reduced if it is less than 5 per cent in case of developed countries and 10 per cent in case of developing countries. Otherwise, as per the AoA rules, developed countries have to reduce their AMS by 20 per cent in equal annual installments over the implementation period of six years and the developing countries have to reduce it by 13.3 per cent over a period of ten years. India’s product specific support is highly negative but its nonproduct specific support was 8.6 per cent of value of agricultural output in 1999-2000. This means that India at present does not have any reduction commitments under domestic support, although its non-product specific support is reaching close to the maximum allowed level of 10 per cent. THE HYPOCRISY
The developed countries have consistently tried to protect their own rich farmers and agri-business corporations, while preaching to the developing countries the benefits of ‘free trade’ and the need
Freedom to Trade and Freedom to Plunder 105 to reduce their domestic support. While developing countries like India, which have large populations dependent on agriculture, provide very little support to their agriculture under pressure from WTO, the developed countries (where only a small minority is employed in agriculture) continue to give huge levels of support to their own agricultural sectors – sometimes amounting to 90-100 per cent of their agricultural GDP. This can be seen from Table 1 in the appendix. Further, over a period of time, in order to avoid reducing their subsidies and support measures, the developed countries have shifted their subsidies from the amber box to the blue box and the green box, since the latter two are exempt from reduction. For example, in 2003, 60 per cent of cereals, oilseeds and pulses produced by the US and EU was fed to animals and should have been treated as input subsidy for the dairy and meat sectors. However, the same year, the EU transferred 90 per cent of its direct payments for these three commodities from the Blue Box to the Green Box.1 Almost 80 per cent of the subsidies in developed countries are now in the Green and Blue boxes. Developed countries like the EU and USA are paying huge subsidies to their agricultural sector by way of green box and blue box categories as well as de-coupled income support (income support de-linked from agricultural production). The Organisation of Economic Cooperation and Development (OECD), the group of 30 richest nations of the world, provided agricultural subsidies worth $318 billion in 2002. The prices received by OECD farmers were on an average 31 per cent above world prices (measured at border), due to the subsidies and support provided to them. Total support levels in the US and EU have actually risen compared to the preUruguay round support levels, as can be seen from Table 2 in the appendix. Who benefits from these subsidies given by the developed countries? The recipients of the US agricultural subsidies in 2001 included millionaires Ted Turner (of CNN) and David Rockefeller (of the Rockefeller Foundation, which has been instrumental in shaping much of India’s agricultural policies after 1947). The richest man in the United Kingdom, the Duke of Westminster, who owns about 55,000 hectares of farm estates, receives an average subsidy of 300,000 pound sterling as direct payments, and in addition gets 350,000 pounds a year for the 1,200 dairy cows he owns.2
106 Harvesting Despair: Agrarian Crisis in India
The ‘White’ Truth
Milk and dairy products are one of the most heavily subsidised agricultural products in almost all the developed countries. In the beginning of the new millennium, support to agriculture in Japan added about 400 per cent to the domestic price of milk, whereas in US and EU market price was inflated by 71 per cent and 76 per cent, respectively. 3 The dairy farmers of US, EU or Japan, who receive such large subsidies, are not exactly poor or vulnerable. An average dairy farmer in the US in 2002 had more than 100 cows, assets over a million dollars and a net income of $80,000! In 1999-2000, India imported over 130,000 tonnes of EU’s highly subsidised skimmed milk powder. This was the result of Euro 5 million export subsidies that were provided by EU to its dairy industry. Ironically, India is the biggest producer of milk in the world, and does not provide any subsidy for the dairy sector. It has been estimated that EU provided a daily subsidy of US $ 2.7 for every cow, and Japan provided three times more at US $ 8 in 2003. 77 per cent of India’s people survive on less than half a dollar a day. It would have been funny if it were not criminal and tragic – cattle in the rich countries are pampered at the cost of several hundred millions of farmers in the developing world. This is the ‘white’ truth of free trade under global capitalism.
What do these huge subsidies mean for the developing countries? They mean that developing countries cannot ever hope to significantly increase their export of agricultural products to the developed world, despite the fact that they can produce many commodities at relatively cheaper costs. The huge subsidies given to the rich farmers and agri-businesses in the developed countries reduce the costs and risks associated with cultivation, processing and distribution of agricultural products. This allows developed country farmers and agri-businesses to control their domestic markets as farmers of developing countries can only sell at higher prices. In fact, subsidies also allow developed countries to dump their surpluses in the markets of the developing countries. The actual operation of ‘free market’ and ‘free trade’ principles would have meant that many developed countries which are major exporters of agricultural commodities would turn into importers of
Freedom to Trade and Freedom to Plunder 107 these commodities. For example, it has been shown that Europe would become a net importer of wheat and the Japanese imports of rice would have increased dramatically, if there were no trade policy distortions by these countries. This would have created major export opportunities for India and Latin America. Similarly, although USA is the largest exporter of wheat, it gives lavish support to its wheat producers. It is permitted under AoA to provide $363 million in export subsidies for wheat and wheat flour. Agricultural policies actually add 91 per cent to wheat farmers’ income in USA! 4 These countries are subsidising their large farmers and agri-business corporations at a heavy cost to farmers of the developing countries. In negotiation after negotiation, OECD and countries like the US and EU have refused to reduce their agricultural subsidies. Instead, they have asked for more and more of market access from the developing countries. They have tried their best to manipulate proceedings at the WTO so as to get away with high levels of subsidies and support. At best, they have promised cosmetic reductions and at the same time, have played around with the Green Box-Blue Box-Amber Box categories so that they did not have to reduce their support levels in reality. Market access has now become the central theme of negotiations where huge concessions are being demanded from developing countries.
Market access refers to the extent to which the domestic markets of other countries are accessible to countries which are exporters of agricultural products. Before the WTO rules came into force, most countries protected their own markets and producers (farmers) with high tariffs5 and quantitative restrictions6 (QRs, also known as non-tariff barriers, i.e., NTBs) on imports. These tariffs and QRs were decided on their own by all the countries according to their own needs and interests, and were regulated only by Free Trade Agreements (FTAs) that existed between individual (or a group of) countries. Under the AoA, barriers to ‘free trade’ have to be gradually removed i.e. access to the domestic markets of countries have to be opened up to countries exporting agricultural products. This process begins with converting all non-tariff barriers to tariffs. This is called tariffication. It means that by using a formula, all countries had to change the form of protection (given to different agricultural commodities) from NTBs to tariffs, although the extent of protection
108 Harvesting Despair: Agrarian Crisis in India provided could remain the same in the initial phase. After this, the second step for all countries was to decide their own bound tariff rates for different commodities. Bound tariff rates refer to the maximum possible rates that can be applied on a commodity at any time. The actual tariff rates (known as the applied tariff rates) have to be lower than or at most, equal to the bound tariff rates. The third step was tariff reduction – to reduce all the tariffs (including bound tariff rates as well as tariffs resulting from the tariffication process) that had now been decided. Developed countries had to reduce their tariffs by an average of 36 per cent over six years (from 1995) and developing countries had to reduce their tariffs by an average of 24 per cent over ten years. A minimum reduction of 15 per cent had to be made on all tariff rates.
PROBLEMS WITH TARIFFICATION AND TARIFF REDUCTIONS
There were several reasons why the bound tariff rates continued to be high, especially in the case of developed countries, even after the AoA rules on market access were implemented. There were several ways in which developed countries continued to deny to the developing countries access to their own markets, even while adhering to the AoA. Firstly, the choice of 1986-89 as the base year period for tariffication was flawed. Since market prices of agricultural commodities were very low during this period, the bound tariff rates were calculated to be very high. This was because the formula for calculating bound tariff rates (see appendix) is based on the difference between domestic and world prices, which turned out to be very high for the base year period. When the developed countries reduced 36 per cent from these high bound tariff rates, the final bound rates by 2000 still remained quite high. Developed countries also undertook dirty tariffication i.e., they intentionally overestimated the tariff rates by inflating the gap between domestic and international prices. This happened because every country was allowed to decide its domestic price levels for itself. Dirty tariffication was done particularly for high-value agricultural commodities and for commodities produced in the temperate zones (like cereals, dairy, meat and sugar) in which developed countries would have faced stiff competition from developing countries. Tariffs were kept low for tropical products which were not produced by the developed countries, and whose imports they required from the developing world.
Freedom to Trade and Freedom to Plunder 109 Thirdly, the simple average formula for reduction of tariffs decided in the Uruguay Round allowed countries to make smaller cuts on sensitive items and larger cuts on others (e.g. tropical products) in order to arrive at the simple average of 36 per cent. For example, whereas the base year rates on tropical zone products were cut by an average of 43 per cent, the reduction rate on temperate zone products was much lower – for example 26 per cent on dairy products. It has been noted that the policy of substantial reduction in tariffs of less protected products with negligible cuts in tariffs for the highly protected commodities has resulted in the continuation of high protection for several high value agricultural commodities by many developed countries. 7 Highly protected commodities like sugar, meat, cereal flour and dairy products were not liberalised at all, or to a negligible extent. On the other hand, oil seeds, fruits and vegetables, which were less protected, were further liberalised. It has also been observed that tariff rates imposed by the developed countries are higher for processed products than the agricultural raw materials at the beginning of the processing chain. This means that market access for more processed products (embodying greater value added8) is more restricted. This is another indication that the developed countries want the developing countries to remain exporters of basic raw materials, so that most of the processing and value added takes place in their own economies. In Canada, tariffs on fully processed food products are 12 times higher than first stage processed products. The US tariff on fresh tomatoes is 2.2 per cent, on dried tomatoes in a package 8.7 per cent, and 11.6 per cent if the tomatoes are in sauce. The provisions of AoA related to market access essentially allowed the developed countries to dump their agricultural products (which are highly subsidised, as we have seen in the previous section) in the markets of the developing world. The farmers of countries like India now had to compete, without any state protection, with farmers and farming corporations of the developed world, who received extensive support from their own governments.
Export subsidies are prohibited in WTO in all sectors except agriculture. Export subsidies refer to subsidies given to producers and traders to encourage exports of agricultural commodities. The cost of export subsidies have to be usually borne by tax-payers in
110 Harvesting Despair: Agrarian Crisis in India the subsidising country. Countries which do not subsidise their exports get affected in several direct and indirect ways, as their share of the international market decreases. AoA required that both the expenditure on export subsidies and the quantities receiving subsidies needed to be reduced over the period of implementation (1995-2004). The developing countries had to reduce export subsidies by 24 per cent over a period of ten years and the quantity of exports that are subsidised had to decrease by 14 per cent. The developed country members committed to reduce their export subsidies by 36 per cent and the quantity of exports that are subsidised had to decrease by 21 per cent. Since very few developing countries give export subsidies, this provision for differential treatment has little relevance for them. Even in the case of export subsidies, it is the European Union which is the major user of export subsidies. The export subsidy in EU was USD 6,386 million in 1995 and decreased only to USD 5,968 million in 1998. 9
Special and Differential Treatment (SDT)
‘Special and differential treatment’ (SDT) refers to GATT rights and privileges given to developing countries but not extended to developed countries. Under AoA, developing countries enjoy SDT in three main areas: market access, domestic support and export subsidies. In all three areas, developing countries are allowed a ten-year (1995-2004) implementation period as compared to five years (1995-2000) for developed countries. The reduction commitments of developing countries in these areas have been about two-thirds that of developed countries. In the area of domestic support, AoA provides some additional latitude for developing countries. Their de minimus (maximum) level of subsidies is fixed at 10 per cent of the value of agricultural production, as compared to a de minimus level of 5 per cent for developed countries. Besides, AoA provides exemption for input subsidies to low-income or resource poor farmers in developing countries. However, the term ‘low-income or resource-poor farmers’ is not defined in the AaA. Public stock of food grains and food security measures that are targeted at the poor are also exempt from reduction commitments. Another SDT for the developing countries is the exemption from reduction commitments of two types of support measures that are
Freedom to Trade and Freedom to Plunder 111 sometimes referred to as “rural development measures”: investment subsidies which are generally given to agriculture and agricultural input subsidies generally given to low-income or resource-poor producers. However, in most developing countries, due to fiscal compulsions, the subsidy provided to the agricultural sector is much lower than the de minimus level and only a few relatively prosperous countries among them are likely to make effective use of this exemption.
IMPACT ON INDIAN AGRICULTURE
The provisions of AoA must be looked at in conjunction with other policies of the Indian state, which it has been following since the 1980s in the name of “economic reforms”. These include policies which reduce public investment in agriculture (in critical areas like irrigation and extension services), withdrawal of institutional credit and priority sector lending from agriculture, reduction of price support to farmers, reduction in agricultural subsidies and in rural development expenditures (RDEs). The contents and effects of these policies have been described elsewhere in this book. All these policies, along with trade liberalisation under the WTO regime, acted together to precipitate the present crisis in agriculture. Therefore, it is difficult to isolate individual causes for the present crisis. On the contrary, all these policies combined together and acted upon each other to aggravate the crisis in the countryside and push the rural economy into a spiral of death and despair.
Impact on food security
The first effect of trade liberalisation was a diversion of agricultural land from food crops to commercial crops. There was a substantial shift in the cropping pattern, while total sown area remained unchanged. From an initial area of 127.8 million hectares under food grains in 1991, 6 million hectares were diverted to the cultivation of exportable crops by the mid-1990s, during which period exports from agriculture grew fast.10 The main crops that saw rapid area expansion or export thrust were cotton, soybean and sugarcane, as well as horticulture, floriculture and prawn fisheries, which displaced paddy production in some coastal areas. Some land was reverted back to food crops in the mid-1990s due to the global decline in prices (which will be discussed below). But in
112 Harvesting Despair: Agrarian Crisis in India 2001, the net diversion of food grains area was over 8 million hectares compared to 1991. The diversion of land away from food crops along with the decline in growth rates of food grain production lowered the domestic food availability. The primary export thrust was at the expense of declining nutritional levels for the mass of the population. The per capita production of food grains for human consumption declined by 4 kilograms from 1990 to 1999, while the per capita availability of food declined by 14 kilograms in the same period (the difference between foodgrain production and availability is on account of imports, exports and stocks).
Impact on farmers
The period when most countries of the world began liberalising their agricultural trade under WTO, coincided with a drastic decline in world prices of agricultural products. There was a fall in the prices of commercial crops grown in tropical regions (like tea, coffee, rubber and cotton) as well as a fall in the prices of cereal food crops grown both in tropical and temperate regions. Thus, the dollar prices of wheat (Argentine and US RSW variety) fell by 46 per cent between 1995 and 2001. The price of maize in the same period fell by 50 per cent. The price of palm oil fell by 88 per cent between 1995 and 1999, and the price of jute fell by 25 per cent in the same period. For sugar and cotton, the decline in prices between 1995 and 2001, was 30 per cent and 50 per cent respectively.11 Since agricultural trade was now liberalised and the farmers of developing countries were no longer protected by tariff and nontariff barriers, the disastrous effects of the price decline was entirely borne by them. As Utsa Patnaik put it, “By liberalising trade and by opening up at this juncture, the depression in the global markets is being imported into the Indian economy and into other liberalising countries.”12 As a consequence of this price decline, the livelihood of food grain producers in countries like India was affected due to the imports of exceptionally low-priced foreign grain. In the case of commercial crops, again, it was the developing country farmers who mainly suffered because of the global depression in prices. The situation was worse for the commercial crop farmers because they had to take large loans for cultivation and engage in input-intensive farming, at a time when the government was removing all forms of support and institutional credit sources. Mostly dependent on
Freedom to Trade and Freedom to Plunder 113 private moneylenders who charged usurious rates of interest, these farmers had little option but to end their lives when they received less than remunerative prices for their commercial crops. The removal of quantitative restrictions and lowering of import tariffs on agricultural commodities has also been disastrous for our farmers (apart from the price fluctuations in the global market). The case of Kerala is tragically illustrative in this regard. Cultivation in the state mainly takes the form of commercial cultivation of crops for exports, like spices, cashew, rubber, coffee and tea. Food crops (cereals, pulses and tapioca) account for only around 14 per cent of the gross cropped area while export-oriented or exportable cash crops account for nearly 30 per cent. More than 80 per cent of the agricultural products produced in Kerala are dependent on the domestic and/or international market situation.13 The cropping pattern in the state is tailored to the demands of the domestic and world market. The cultivation undertaken requires large quantities of inputs purchased from the market and thus large amounts of credit. Trade liberalisation under the WTO regime meant that the farmers of Kerala were fully exposed to the stiff competition and price fluctuations of the international market. Although export of agricultural commodities recorded good growth rates till the end of the 1990s, they began to decline in the present decade. The export of spices (mainly pepper, cardamom, ginger) and coffee and tea from the state declined in the period 2000-01 to 2005-06. While exports of commodities from Kerala suffered a setback, there was a rise in the import of commodities (into the country) which had been traditionally produced and exported from the state. The removal of quantitative restrictions and lowering of import tariffs resulted in large-scale imports of products like rubber, pepper, cardamom, coffee and tea in India. The average annual growth of imports was 88.6 per cent for cardamom, 44.5 per cent for coffee and 40.1 per cent for natural rubber during 1996-97 to 2005-06. As a result, imports as a percentage of domestic production increased considerably. To give an example, almost one fourth of pepper and three-fourths of cashew consumed in the country was imported in 2000-04 (the percentages were much lesser in the pre-trade liberalisation period). 14 A manifestation of lower exports and higher imports was a decline in domestic prices of most of the commodities. During the
114 Harvesting Despair: Agrarian Crisis in India 1990s, till 1996-97, the farm prices of rice and non-food crops like coconut, rubber and pepper were rising at a rate of above 10 per cent a year. However, with trade liberalisation, the rise in price was very low (for paddy and pepper) or negative (for cardamom and coffee) during the period from 1997-98 to 2005-06. In general, crops with high export intensity or facing import competition experienced wider fluctuations in prices than the other crops.15 The opening up of the agricultural sector to international trade made the farming community in Kerala vulnerable due to a surge in imports, decline and high volatility in prices, as happened in the case of many other developing economies. While the prices received by farmers were either declining or rising at a lower rate, the prices paid by them for inputs were increasing at a very high rate. This affected the incomes of most farmers, and especially small and marginal cultivators (who have lower yields and high costs of cultivation). The indebtedness of farmers kept on rising and eventually they were driven to suicide. More than 900 farmers committed suicide from 2004 to February 2007. It should be noted that farmer suicides occurred more in districts like Wayanad and Idukki, which concentrated more on cultivation of export-oriented commercial crops.16 This is the price that the farming community of Kerala had to pay for India’s participation in the WTO regime. Despite large-scale farmer suicides over the past ten years, the Indian government has not learnt the basic lesson that international agricultural markets are not level playing fields, they are extremely volatile, and agricultural prices are prone to fluctuations. Opening our economy to this volatility and removing all public support to agriculture at the same time, has proved catastrophic for our farmers. The need to protect our economy and farmers from the vagaries of the international market is obvious. Yet our governments carry on with the propaganda of ‘free trade’ and its imaginary benefits to the economy and farmers.
Impact on agricultural trade
The liberalisation of agricultural trade under the aegis of WTO was a part of the model of export-oriented agriculture that policymakers adopted after 1991. Farmers were told to stop growing food grains and grow export-oriented cash crops in order to increase their incomes, as well as the foreign exchange earnings of the country. The liberalisation of trade, it was believed, would provide farmers with incentives to produce for the world market.
Freedom to Trade and Freedom to Plunder 115 However, the liberalisation of trade in agriculture has worsened the situation for farmers and for the country as a whole. The export oriented agricultural policy has only made the country more dependent on agricultural imports. Between 1990-91 and 2003-04, the rate of growth of value of agricultural imports has been close to double than that of value of agricultural exports (at 24.86 per cent and 13.31 per cent respectively). The share of agricultural exports in total exports has fallen in this period (from 15.53 per cent in 1990-91 to 9.68 in 2003-04), while the share of agricultural imports in total imports has risen in this period (from 2.79 in 1990-91 to 5.26 in 2003-04). 17 It is not surprising that India has been unable to profit from the much-announced benefits of trade liberalisation, given the high subsidies and protection provided to the agricultural commodities and markets of the developed countries (as has been shown in the earlier sections). The share of agricultural exports in agricultural GDP increased from 3.47 per cent in 1990-91 to 5.41 in 2003-04. However, the share of agricultural imports in agricultural GDP has increased at a much rapid pace, from 0.83 per cent to 3.57 per cent in the same period. 18 Thus, the opening up of agriculture to international markets has increased agricultural imports at a much more rapid pace than agricultural exports (as percentage of agricultural GDP). This has adversely affected the interests of farmers as well as consumers in the country. This is seen best in the case of edible oil.19 In the early eighties, India imported 20-40 per cent of its edible oil requirements. The Oilseeds Technology Mission launched by the government of India in 1986 (and other support measures such as price stability and restrictions on imports) had helped to increase domestic edible oil production (from primary sources) to levels where imports become negligible and the country became self-sufficient in edible oils by 1994-95. However, this was not liked by the World Bank – it claimed that India did not have a comparative advantage in producing edible oil and hence would be better off importing edible oil (because imported edible oil would be available at a lower price for the consumers). In 1994, the government shifted its policy and placed certain edible oil imports under the Open General License – which meant that imports could be made freely after paying duty. From 1995 onwards, as part of its obligations under AoA, the government
116 Harvesting Despair: Agrarian Crisis in India removed quantitative restrictions on edible oil imports and replaced them with import duties. In succeeding years, even the import duties were lowered rapidly, from 65 per cent in 1994 to 20 per cent in 1996 and 15 per cent in 1998. This lowering of duties combined with a sharp fall in international edible oil prices in 1999 led to a flood of cheap oil being imported into the country, initially in far greater quantity than the requirement. By 1998-99, imports reached the level of 4.3 million tonnes, a ten-fold increase in four years. The flood of cheap imported oil had a disastrous effect on India’s edible oil farmers. Oilseed prices crashed and remained depressed for the next three years. There were massive distress sales of oilseeds by farmers at prices much below the Minimum Support Price (MSP), since the government was not ready to buy at the MSP. Over a period of time, farmers reduced the acreage under oilseeds, and domestic edible oil production from primary sources fell sharply in the period 1996-97 to 2002-03. Now, we are completely dependent on edible oil imports again – 40 per cent of our domestic requirements are met through imports. India is now the world’s largest importer of edible oil. The recent world food price inflation has meant that wholesale price of imported oil (RBD Palmolein) was 60 per cent higher in July 2008 than average prices in 2005. This is despite the fact that the government has reduced the duty on edible oil imports to zero. Today, the food security of the country – edible oil is an important part of our food requirements – stands compromised and consumers have to bear high prices because of World Bank-induced policy measures and trade liberalisation under the AoA. It must be remembered that India has not been the only victim of the ill-effects of export-oriented agriculture, WTO-induced trade liberalisation and IMF and World Bank-imposed Structural Adjustment Programmes. Almost all countries of South Asia, Latin America and Africa (especially sub-Saharan Africa) which were forced to undertake such policies show similar results – decline in food availability, falling mass nutritional levels, agrarian distress and increases in rural poverty. Instead of learning from these experiences, our government has continued to implement the same policies with greater vigour with an ostrich-like blindness.
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DIFFERENTIAL IMPACT ON FARMERS OF THE DEVELOPING AND THE DEVELOPED WORLD
If developing country farmers suffered due to the fall in world prices, why did the developed country farmers not share the same fate? The answer lies in the huge amount of subsidies, income support, cash transfers and bail-outs given to the rich farmers and agri-business corporations of countries of the EU, Japan and the US by their respective governments. The 24 countries of the OECD group increased their transfers to the agricultural sector by nearly 60 per cent between 1996 and 1999. In absolute terms, these annual transfers to a few million farmers by the United States or Japan exceeded the entire gross national product (GNP) of the majority of developing countries. Annual ad hoc increases in subsidies totaling $30.8 billion were made in the US in the four years up to 2002. In November 2002, the US Congress approved a farm bill giving a total of another $57 billion over the next six years.20 The case of cotton is a good example of how differently farmers in the developing and developed countries fare in the “free market” of international trade. World cotton prices declined by more than 60 per cent from 1995 to 2003, resulting in thousands of farmers suicides in India. To protect its 25,000 cotton farmers, the US doubled its subsidies to 3.9 billion dollars from 1992 to 2001-02. 21 The value of subsidies provided by American taxpayers to the cotton barons in 2001 exceeded the market value of output of cotton by around 30 per cent. In addition, this subsidy was provided to only the richest 10 per cent of US farmers who received 73 per cent of the total cotton subsidies. These subsidies acted as an incentive for the US cotton farmers to grow more cotton, much in excess of domestic demand. This surplus produce was then dumped by the US in the international market using subsidies disguised as export promotion programmes. This further contributed to the decline in world cotton prices. Meanwhile, the US increased its share in international cotton exports from 18 per cent in 1998-99 to 39 per cent in 2002-03. 22 The refusal to reduce cotton subsidies by the US has adversely affected the condition in many developing and least developed countries, which are exporters of cotton. The government of India puts its losses at $ 1.3 billion, Argentina at over $ 1 billion, and Brazil at $ 640 million in 2001-02. However, countries located in Africa, especially Benin, Burkina Faso, Chad and Mali, which
118 Harvesting Despair: Agrarian Crisis in India depend heavily on cotton exports, have been hit the hardest by the secular decline in prices. And this is despite the fact that costs of production for one pound of cotton are three times higher in the US than in Burkina Faso (Oxfam report of 2001)! 23 The situation is ironical – a less protected international agricultural market, and the removal of subsidies by the developed countries was supposed to improve cotton prices and therefore improve the lot of poor farmers in poorer countries. However, the logic and results of ‘free trade’ have turned out to be different in a world politically, economically and militarily dominated by the US. Thus, in the period of declining world prices, the developed countries increased the subsidies and support to their farmers, under the pressure of the farm lobbies. This encouraged the farmers to produce even more, resulting in overproduction. This overproduction by the developed country farmers is then sought to be offloaded in the markets of the developing world. Therefore, during this period, there was even more pressure on developing countries to remove protective barriers and open up their markets. As a specific example, US took India to the court of dispute settlements at the WTO and forced it to remove all its quantitative restrictions on imports in 2001.
It is abundantly clear by now that the rules of the game in WTO negotiating rounds are heavily biased in favour of the developed countries. It is also obvious that the developed countries have always tried to, and will continue to try to, protect their own markets, rich corporate farmers, and agri-business corporations from the imports of developing countries like India. How much countries like India can wrangle out of the WTO for themselves depends on their bargaining prowess on the negotiating table. For this, India and other developing countries have grouped themselves into blocs and alliances (like the G-20 and G-33) to negotiate with the OECD countries, US and the European Union. However, these blocs are not stable as the interests of constituent countries like Brazil, Russia and China differ with respect to different commodities. For example, for a particular commodity, one member of G-33 might be an importer and another member might be an exporter. In that case, their interests would be diametrically opposite at the negotiating table. The alliances
Freedom to Trade and Freedom to Plunder 119 are borne out of common economic interests, and they can be easily broken or compromised if a country’s interests are better served elsewhere (like, by directly negotiating with US or the EU). Much of the gains from trade will also depend on who are presently India’s political, economic and military (now nuclear?) friends and who are the foes. Increased agricultural trade may come at the cost of India having to give concessions on other spheres of foreign or economic policy. The same is true for intra-WTO negotiations as well. If the US and EU actually agree to larger cuts on their farm subsidies, India and other developing countries will have to agree to larger concessions in the areas of Non-Agricultural Market Access (NAMA) and Trade Related Intellectual Property Rights (TRIPS). There can be no benefit to India’s agricultural exports, without our economy having to give concessions in some other area related to trade, services, foreign investment and intellectual property rights. In return for dubious gains and promised benefits, India has ended all possibilities of planned development of its domestic agricultural sector by joining the Agreement on Agriculture. The sector has now become so sensitive to the price fluctuations and volatility of the international market that it has become impossible to protect the livelihoods of our farmers or the food security needs of our country. Rather, the liberalisation of agricultural trade has thrown many more farmers into the clutches of despair and finally, suicide. While the alleged benefits of ‘free trade’ under the WTO regime remain elusive, and are likely to remain unclear for a long while, its high costs for our farmers and our economy is explicitly visible. In such a scenario, the well-advertised bravado of our Minister for Commerce and Industry at the different rounds of WTO Ministerial Conferences and negotiations, matters little. The question that has to be asked is whose interests our governments are actually serving by continuing to be a part of the WTO and agreeing to this regime of unequal and unfair trade agreements. Notes
1. 2. Bhaskar Goswami “Doha Round: Mercantilist not Developmental for Agriculture”, 10 October 2008 , http://bhaskargoswami.wordpress.com/ Devinder Sharma “The Great Trade Robbery” September 2003, www.indiatogether.org
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3. 4. 5. G.S. Bhalla “Globalisation and Indian Agriculture”, Volume 19 in State of the Indian Farmer: A Millennium Study, Ministry of Agriculture, Government of India, January 2004. G.S. Bhalla 2004 op. cit. Tariffs are taxes imposed on imports from other countries. Because of tariffs, the price of the imports increases in the importing country. Thus, tariffs discourage imports and therefore protect domestic producers of those goods from the competition. Quantitative restrictions, especially import quotas, imply that imports of certain goods are not allowed beyond specified quantities. This is different from tariffs, since goods for which there are tariffs, can be imported up to any amount provided that the tariffs are paid. In the European Union, for instance, products like meat, edible offal of animal origin, milk and cream, some cheese, rice, wheat flour and bran carry tariffs of over 120 per cent. Japan has a duty of 700 per cent on their rice. Similar examples can be found in milk powder, sugar and even cereals. Value added is the difference between the value of output and the cost of raw materials. Value added increases as a commodity is processed further and further. Parthapratim Pal “Implementation Issues in Agreement on Agriculture and its implications for Developing Countries”, 9 September 2002, www.networkideas.org Utsa Patnaik “Global Capitalism, Deflation and Agrarian Crisis in Developing Countries” Social Policy and Development Programme Paper Number 15, United Nations Research Institute for Social Development, October 2003. Ibid. Ibid. P.D. Jeromi “Farmers’ Indebtedness and Suicides: Impact of Agricultural Trade Liberalisation in Kerala” Economic and Political Weekly, 4 August 2007 Ibid. Ibid. Ibid. Dhanmanjari Sathe and R.S. Deshpande “Sustaining Agricultural Trade: Policy and Impact” Economic and Political Weekly, 30 December 2006 Ibid. Kannan Kasturi “Edible oil policy on the boil”, 10 August 2008, www.indiatogether.org Ibid. Ranja Sengupta “Cotton and International Trade: Unfair Prices for the Developing World” 29 September 2003, www.networkideas.org Ibid. Ibid.
8. 9. 10.
11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23.
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Total Aggregate Measure of Support (AMS) in Selected Countries: Actual Estimated by WTO Secretariat
Country Value of AMS in the Base Period (1986-88) (in US$ billion) 116.54 69.61 60.93 5.92 3.32 Percentage share of AMS in agricultural GDP in 1986-88 79.97 99.11 68.89 102.07 118.76 Value of AMS in 1998 (in US$ billion) 114.61 47.75 58.30 4.45 3.00
European Union Japan USA Switzerland Norway
Source: G.S. Bhalla “Globalisation and Indian Agriculture”, Volume 19 in State of the Indian Farmer: A Millennium Study, Ministry of Agriculture, Government of India, January 2004
Total Support Estimate of Select OECD countries (in million US$)
Country Australia European Union Japan Korea USA OECD 1986-88 1,674 109,654 58,165 14,204 68,540 302,078 1999-2001 1,376 112,628 64,775 21,489 95,455 329,564 Percentage change – 17.82 2.71 11.36 51.29 39.27 9.10
Source: Parthapratim Pal “Implementation Issues in Agreement on Agriculture and its implications for Developing Countries”, 9th September 2002, www.networkideas.org
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WTO sought to homogenise the rules for tariff and non-tariff barriers for all the countries, differentiating only between developed and developing countries. It recognised the needs of the latter to have a higher degree of protection of domestic markets compared to the developed countries. Market access can be divided into four elements – tariffs, bound and applied tariff rates, tariff quotas and special safeguards. 1. Tariffs According to the AoA, market access for agricultural products is to be governed by a ‘tariffs only’ regime. The agreement states that there can be no restrictions on farm trade except through tariffs. This meant that all the non-tariff barriers (NTBs) had to be converted to tariffs by using a formula (i.e. the extent of protection provided to a commodity remained the same, but the form of protection had to be changed from NTBs to tariffs). This was known as the process of tariffication. The formula for tarrification is given below. Tariffication formula: Tariffication meant the conversion of the full extent of protection given to a product through both tariffs and NTBs to an ordinary tariff rate. The tariff equivalent was calculated as follows: T = (Pd – Pw)/ P w X 100, where T = ad valorem tariff equivalent Pd = domestic price (e.g. wholesale price) Pw = world reference price (import or export parity price) Base year – the average of three years, 1986, 1987 and 1988 After this, the second step for all countries was to decide their own bound tariff rates for different commodities. Bound tariff rates refer to the maximum possible rates that can be applied on a commodity at any time. The actual tariff rates (known as the applied tariff rates) have to be lower than or at most, equal to the bound tariff rates. The third step was tariff reduction – to reduce all the tariffs (including bound tariff rates as well as tariffs resulting from the tariffication process) that had now been decided. Developed countries had to reduce their tariffs by an average of 36 per cent over six years (from 1995) and developing countries had to reduce their tariffs by an average of 24 per cent over ten years. A minimum reduction of 15 per cent had to be made on all tariff rates. The fourth condition was that current market access had to be maintained by all countries and minimum access opportunities had to be provided in cases where they did not exist before. Current market access referred to the quantity of
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imports in the 1986-88 period (imports of commodities could not be banned up to these levels at least). Minimum access commitments were allowing imports up to 3 per cent of domestic consumption (at a reduced tariff rate) in the first year (1995), which had to increase to 5 per cent by end of the implementation period (2001 or 2004). GATT 1994 has a provision titled ‘Balance of Payment (BoP)’ under which members can impose or maintain quantitative restrictions over and above the tariffication measures, in case they have a Balance of Payments crisis. India used this provision for many years to continue with QRs after 1995. 2. Tariff Rate Quotas (TRQs) Under the AoA, Tariff Rate Quotas are quotas, allocated by members to different partners, which attract low tariff rates up to the quota limit but much higher rates after the quota limit has reached. For example, a country may allow imports of a commodity up to 3 per cent of its domestic consumption with a tariff of 25 per cent, and thereafter increase the tariff rate to 150 per cent to discourage further imports. In this case, 3 per cent of domestic consumption becomes the quota limit for that particular commodity. Thirty-six WTO members have tariff quota commitments and the total number of individual quotas introduced by them was 1370. Out of these 36 members, 19 are from developing countries. The developed countries accounted for bulk (67 per cent) of the TRQs, Norway with 232 quotas ranking first and alone accounting for 17 per cent of the total. Other members with high tariff quotas are Poland (109 commodities), Iceland (90), the EU (87), Bulgaria (73) and Hungary (70). 3. Safeguard Measures Under the AoA, in theory, members cannot adversely affect the interests of other members by using subsidies to protect their own markets or to exploit the markets of other countries. The Agreement provides remedies, or safeguard measures, to affected countries in the event of harm caused by such subsidies. For example, members can consider imposing countervailing duties (taxes) on imports to neutralise the effects of injurious subsidies given by other members. Safeguard measures were present under GATT (like anti-dumping provision and protection for infant industries) and some have been introduced under WTO as well. There was a peace clause in the WTO for nine years (from 1995 to 2003), under which countries were to restrain from undertaking remedial actions against subsidies and other forms of domestic support. This was the same period when countries were implementing their commitments to reduce agricultural subsidies
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(both export subsidies and domestic support, which we will study later). The peace clause meant that no country could question the subsidies given by the developed countries (about which, we shall study below) for nine years. The Special Safeguard (SSG) Provision of the AoA The AoA states that for products whose NTBs have been converted to tariffs, governments can impose additional tariffs if the volume of imports of that product increases above a certain threshold, or if the price of imports of that product falls below a trigger price. Both conditions indicate situations where imports could flood the domestic market, and greatly harm the domestic producers. This provision cannot be invoked for products which were protected only by tariffs before 1995, or for products for which bound tariff rates were declared after 1995. The agricultural SSG is the simplest of all WTO safeguards. The right to make use of the SSG provision has been reserved by 36 developed countries (for a limited number of products). Since majority of the developing countries chose to declare bound tariff rates for their commodities instead of undertaking tariffication, they do not have access to this provision.
The main complaint against domestic support measures is that they encourage over-production and are trade-distorting in nature. For example, if the government buys wheat at a support price higher than the market price of wheat, it acts as an incentive for more and more farmers in the country to grow wheat. It is alleged that this overproduction increases supplies in world markets (by reducing demand for imports or increasing the supply of exports) and depresses world prices. Domestic support measures often undermine (nullify) commitments in the areas of market access and export competition; this was another reason for disciplining them. A key objective of the Uruguay Round was to discipline and reduce domestic support while at the same time leaving some scope for governments to design domestic agriculture policies, to suit the state and needs of agriculture in individual countries. Thus, all domestic support measures were divided into two categories – those that could be exempted from reduction commitments, and those which necessarily had to be reduced. Exempt Measures Support measures which are exempt from reduction commitments are classified as Green Box measures, development measures, Blue Box measures, and de-minimus exemptions.
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1. Green Box subsidies Green Box subsidies refer to all those subsidies that have no or minimal trade distorting effect on production and trade. They must be provided through a publicly funded government programme not involving transfers from the consumers (meaning that the finance for these subsidies should not be obtained by levying a tax on consumers of the country) and they should not provide, or have the effect of providing, price support to producers. The expenditure on green box subsidies can be increased without any financial limitation under WTO rules. Direct payments to farmers can be placed in the Green Box (i.e. they can be exempted from reduction commitments), if the amount of such payments is “decoupled” from production, prices or factors of production. This means that these payments should not be linked to the price of the product or the amount produced by the farmer. Examples are decoupled income support measures, income insurance and safety net programmes. 2. Developmental measures The exemptions under developmental measures (Special and Differential Treatment for Developing countries ‘SDT’) include all direct and indirect measures that fit into the development programmes of the developing countries and are designed to encourage agricultural and rural development. 3. Blue Box subsidies Direct payments under production limiting programmes, called Blue Box measures, are also exempt from reduction commitments. These are especially used by the developed countries of EU and the US to make payments to their farmers for not undertaking cultivation – leaving the fields fallow – for specified periods of time (or limiting cultivation to a specific area and yield). 4. De minimus exemptions The de minimus exemptions allow any support for a particular product to be excluded from the reduction commitment if the support is not greater than 5 per cent of the total value of production in a year for that agricultural product. In addition, non-product specific support (i.e. support for all products) that is less than 5 per cent of the value of total agricultural production is also exempt from reduction. The 5 per cent threshold applies to the developed countries whereas in the case of developing countries the de minimus ceiling is 10 per cent. Non-exempt Measures All domestic support measures in favour of agricultural producers that do not fit into any of the above exempt categories are called amber box measures
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and are subject to reduction commitments. Amber Box subsidies are measured in terms of “Total Aggregate Measure of Support” (Total AMS). Total Aggregate Measure of Support is the sum of the annual values of § Product-specific AMS (the total level of support provided for each basic agricultural product through price support, direct payment etc.) § Non-product-specific AMS (the total level of support provided by policies that are directed at the agricultural sector as a whole for e.g. input subsidies) § Equivalent Measurement of Support (product-specific support for which it is impractical to use the AMS methodology). Total AMS is expressed as a percentage of the total value of output of agriculture. It does not have to be reduced if it is less than 5 per cent in case of the developed countries and 10 per cent in case of developing countries. Otherwise, as per the AoA, developed countries have to reduce their AMS by 20 per cent in equal annual installments over the implementation period of six years and the developing countries have to reduce it by 13.3 per cent over a period of ten years. The initial AMS calculations were to be based on the levels of support that existed during 1986-88. Product-specific AMS (or market price support) was calculated using the gap between the applied administrative price and the fixed external reference (world) price.
Science of Profit 127
Science of Profit
Technological Changes in Agriculture
There is no doubt that Indian agriculture had reached a stage of crisis by the decade of the sixties. Stagnation, food crisis and the widespread peasant unrest were some of the warning signals. Instead of undertaking changes in the institutional structure of agriculture, the state adopted a technological solution to the situation that confronted it. The technology of Green Revolution was introduced in the late sixties. It definitely improved yields and productivity of certain crops in certain regions. But the question that the proponents of Green Revolution fail to answer is – if this technology was so munificent for the farmers of our country, then why are large numbers of them committing suicides in those very parts where Green Revolution was introduced in the first place? This chapter has been divided into two sections. The first section deals with the genesis, history and politics of Green Revolution, and the violence it wreaked on the ecosystem and soil and water resources of our country. The second section of the chapter deals with another technology which is gaining credence amongst policymakers as the solution to the crisis facing Indian agriculture today – genetically modified seeds. Both the sections illustrate the fact that technology in agriculture has always been imposed in the interests of forces that only seek to maximise profits.
Green Revolution refers to the transformation of agriculture that began in 1943 in the developing world which led to increases in agricultural production in some regions. This transformation took place as the result of programmes of agricultural research, extension, and infrastructural development, initiated and largely funded by the Rockefeller Foundation, Ford Foundation and other research agencies. In India, the Green Revolution strategy was adopted in 1967-68 under considerable pressure from the US government and corporations, as the foremost technique for combating the food crisis of the fifties and sixties. Agriculture in Punjab is often cited as the most successful outcome of the Green Revolution techniques. A closer inspection reveals an altogether
128 Harvesting Despair: Agrarian Crisis in India different story. On the one hand, the application of high yielding varieties of seeds, fertilisers and pesticides increased the agricultural production, however, on the other hand, in the coming years, all countries including India, witnessed its negative impacts on their environment, economies and the societies; so there is definitely more to Green Revolution than meets the eye.
A brief history
In 1889, Dr. John Voelcker was appointed by the Secretary of State to India to advise the imperial government on the application of agricultural chemistry to Indian agriculture. In his report to the Royal Agricultural Society of England he stated: - “I explain that I do not share the opinions which have been expressed as to Indian agriculture being, as a whole, primitive and backward...Whilst where agriculture is manifestly inferior, it is more generally the result of absence of facilities which exist in the better districts than from inherent bad systems of cultivation. I make bold to say that it is a much easier task to propose improvements in English agriculture than make really valuable suggestions for that of India. Certain it is that I at least, have never seen a more perfect picture of careful cultivation combined with hard labour, perseverance and fertility of resource.”1 Under British rule, Indian peasants had been forced to shift from food grains cultivation to cultivation of commercial crops (like indigo and cotton). This added to their misery and pushed them into the clutches of landlords and moneylenders. Moreover, the partition of 1947 threw the country into disarray. The upheavals during this period left India facing a huge food crisis. India’s first agriculture minister, K.M. Munshi, devised a meticulous strategy in 1951 to rebuild the ecological base of productivity in agriculture. It was clearly understood that the wide diversity of India’s soils, crops and climates had to be taken into account, a fact that was overlooked when the government adopted the famed Green Revolution. This strategy of consideration of every village and sometimes every individual field was regarded essential to the programme called ‘land transformation’. Again, we see a stark difference between the land transformation programme and the Green Revolution, in that the latter focused only on the infrastructurally-abled states. The Community Development Programme (CDP) was undertaken with help provided by the US in the early fifties. In
Science of Profit 129 1952, fifteen community development projects, each spanning about ten villages, were undertaken with the Ford Foundation’s financial assistance. It aimed at changing the face of Indian villages and improving the quality of village life. This step reflected the political need of the Congress to do something to improve the socio-political conditions prevailing in rural areas, so the growing menace of peasant movements could be curtailed. Nehru expected it to serve “as a model for meeting the revolutionary threats from left-wing and communist peasant movements demanding basic social reforms in agriculture.”2 It was claimed that the Community Development Programme would bring about a holistic development of the villages through mutual co-operation and self-help of the villagers themselves. The programme focused not only on intensive agricultural development, but also on the improvement of health and education, social welfare, road-building and so on. While the “community projects budgeted only one-third of the costs of land reclamation, drainage, and irrigation and road-building schemes” they depended for the rest on “village contributions in labour and money”. Thus the entire face of rural India was expected to be transformed – peacefully. Nehru discovered “a sense of almost family kinship” among the inhabitants of a village — between the landlords and their tenants, the usurers and their victims, the upper castes and the serving castes. The masses of the peasantry, cruelly oppressed and exploited for centuries, were expected not to attack the property structure and change it, but to be enthused enough to contribute voluntary free labour and donations.3 The CDP was abandoned in 1959 when a Ford Foundation delegation of agronomists visited India. They argued that it was practically impossible to make simultaneous headway in all of India’s 550,000 villages. Their recommendations for a selective and intensive approach amongst farmers and amongst districts led to the demise of the Community Development Programme and the launching of the Intensive Agricultural Development Programme (IADP) in 1960-61. The IADP methodology was a top-down, chemically intensive one; industrial inputs like fertilisers were to be employed at a massive scale, helping Indian agriculture break out of the “shackles of the past”.4 Under this Ford Foundation programme, agriculture was transformed from being based on internal inputs to being dependent on external purchased inputs for which credits became necessary; this, of course, ensured the dependence of the Indian farmer on the transnational corporations
130 Harvesting Despair: Agrarian Crisis in India (TNCs). The IADP created special pockets for agricultural development to which material and financial resources of the country were diverted, which would further deepen the socioeconomic disparity already existing between the different regions in the nation. The IADP was the precursor of the Green Revolution in India. It paved the way for the penetration and control of Indian agriculture by USA and a number of TNCs. The ‘Report on India’s Food Crisis and Steps to meet it’ by the Ford Foundation in 1959 implicitly criticised the entire approach of institutional change (i.e. change in the property structure) as the cornerstone of agricultural strategy and recommended the adoption of an intensive and selective development strategy, involving the concentration of a combination of modern practices – improved seeds, chemical fertilisers, and pesticides in “irrigated areas of the country” – in about twenty five districts of Punjab (which then included Haryana) and parts of Uttar Pradesh, Madhya Pradesh and Bihar. It stressed heavily on the use of chemical fertilisers, stating: “If food goals are to be reached, fertilisers must have greater emphasis and a top priority in both agricultural planning and allocations of foreign exchange, both for the fertiliser materials and for any machines needed for constructing new plants.” The policy was to ensure imports of chemical fertilisers from the Western countries as well as the import of capital goods and technology for building chemical fertiliser plants in India, which were to be set up by transnational corporations, either by themselves or with Indian collaboration. India was poised to become a captive market for fertilisers, pesticides and farm machinery manufactured by these firms. The food crisis of the 1960s best exemplified this dependence and the mood among our policymakers. Devinder Sharma, a researcher on food and trade policy, described the situation thus: “Agriculture Minister C. Subramanian sat huddled with his senior staff. There was tension in the air. Depending on imported food grains coming from 12,000 miles away, particularly when it came in driblets following US President Lyndon Johnson’s directive to “teach India a lesson” was humiliating enough. What worried him was that food stocks had reached such a precarious low that they were only sufficient for another two weeks. Still worse, there was nothing in transit. Recalls Subramaniam, ‘As a last resort, I told
Science of Profit 131 my officials and experts to identify the nearest food-carrying ships on the ocean throughout the world. I said we would identify those carrying wheat to other countries and appeal to the US President to divert them to India if other countries could wait for another six to eight weeks.’ This was in 1966-67, the critical year of drought when India imported 11 million tonnes of foodgrain. A year earlier, India had imported 10 million tonnes of foodgrain. The production of food grains fell steeply from 89 million tonnes in 1964-65 to an annual average of only 73 million tonnes in the next two years. Around this time, the Paddock brothers, often referred to as ‘prophets of doom’, concluded in their book, Famine 1975, that by the mid-’70s at least half of India would be led to a slaughter house.”5 In 1960, Norman Borlaug, the world’s foremost research scientist working on development of modern techniques in agriculture, addressing scientists and UN officials, proposed setting up a programme in CIMMYT, Mexico (which had been set up under the auspices of the Ford Foundation) for training agronomists from different countries. These scientists were schooled in genetics, agronomy, soils and plant breeding for a year and returned to their respective nations to put the knowledge to practical application. This model was called as the ‘Practical School of Wheat Apostles’. Dr. M.S. Swaminathan, considered India’s premier agriculture research scientist at that time and one of Borlaug’s wheat apostles, arranged for him to visit India in 1963 and make recommendations towards the betterment of agriculture in the country. Borlaug concluded “There is the prospect of a spectacular breakthrough in grain production for India. The New Mexican varieties will do well and grow beautifully in India if the quantities of fertiliser and other vital necessities are made available.” It was in the interests of American advisors and experts to shift India’s agricultural research and policy from an indigenous and ecological model to an exogenous input-intensive one. Lal Bahadur Shastri, the Prime Minister in 1965, had cautioned against rushing into a new form of agriculture that had been developed without considering the environmental and economic conditions in India, and which had also not been subjected to any rigorous field-testing. The Planning Commission, which approves all large investment in India, was also bypassed as it was viewed as a bottleneck. According to Felix Greene “At about this time several American oil companies were negotiating to establish fertiliser plants in India.
132 Harvesting Despair: Agrarian Crisis in India The Indian government wished to keep the distribution and the selling of the fertiliser in its own hands. This did not at all suit the oil companies. While countless Indians were starving, food shipments were ordered to be held to force the Indian government to capitulate to the demands of the oil companies. The US government refused to sign a fresh long-term agreement with India under the Public Law 480 scheme (PL 480)6 when the existing agreement expired in August 1965.”7 On 15 May 1965, New York Times reported that the US government and the International Bank for Reconstruction and Development [World Bank] had insisted that India provide easier terms for foreign private investment in fertiliser plants as one of the conditions for resumption of economic aid. They also asked the Indian government to take measures to curb the population growth and devalue the rupee. In November 1965 the Union Food Minister Subramaniam went on a tour to Washington and submitted his ministry’s programme for comment to the US Department for Agriculture. He came back with assurances that the new agricultural strategy would satisfy the basic conditions for a resumption of American food shipments. In December in another meeting between Subramaniam and US Secretary of Agriculture Orville Freeman, the specific policy proposals were reviewed item by item, including the plans for incentives to foreign private investment, especially in fertilisers. US President Johnson insisted that these proposals should be put in a written agreement, which was duly signed by the Indian government. The central government announced a new policy of concessions to foreign private companies willing to invest in the fertiliser industry; foreign companies were free to set their own prices and establish their own distribution apparatuses for a period of seven years. As directed by the World Bank, devaluation of the rupee was carried out by 36.5 per cent in 1966. India succumbed to the mounting pressure of the US government and the World Bank, which were actively promoting the interests of the corporate businesses; as a New York Times article put it: “India simply has nowhere to turn.” Taking advantage of the famine conditions prevalent in several regions of the country, by the mid-1960s Indian agricultural policies had been adjusted to utilise and promote the new seeds. The programme came to be known as the New Agricultural Strategy. It concentrated on one-tenth of the cultivable land, and initially, only on one crop—wheat. By the summer of 1965, India with Pakistan,
Science of Profit 133 had ordered 600 tonnes of wheat seed from Mexico. In the fall of 1966, India spent $2.5 million for 18,000 tonnes of Mexican wheat seed. By 1968, nearly half the wheat planted came from Borlaug’s dwarf varieties. By 1972-73, 16.8 million hectares were planted with dwarf wheat and 15.7 million hectares with dwarf rice across the third world. Up to 94 per cent of the hybrid rice area was in Asia, with half of it in India.
What did Green Revolution do?
Technically speaking, there were three basic elements in the Green Revolution approach: § § The quantitative expansion of area under cultivation, which was being done since 1947, continued. Double-cropping of existing farmland: Instead of one crop season per year, the decision was made to have two. The one-seasonper-year practice was based on the fact that there is only one natural monsoon per year; so the increase in demand for water for the two cropping seasons needed to be met with. Dams were built to arrest large volumes of monsoon water which was earlier being wasted. Simple irrigation techniques were also adopted. The most important aspect of Green Revolution was the use of high yielding varieties (HYVs) of seeds. Initially these seeds were used for wheat and rice cultivation, but later HYV millets and corn were also developed. These HYVs were in reality high responsive seeds, HRVs; this meant that high yields could only be attained under intensive application of fertilisers and water.
The Green Revolution resulted in a record grain output of 131 million tonnes in 1978-79, establishing India as one of the world’s biggest agricultural producers. India also became an exporter of food grains around that time. Yield per unit of farmland improved by more than 30 per cent between 1947 and 1979. The crop area under HYV varieties grew from 7 per cent to 22 per cent of the total cultivated area during the 10 years of the Green Revolution. More than 70 per cent of the wheat crop area, 35 per cent of the rice crop area and 20 per cent of the millet and corn crop area used the HYV seeds. The document ‘Towards a New Green Revolution’ produced in 1996 at the World Food summit claimed that the gains in production were in fact as dramatic as anticipated and that over the past 30 years the volume of agricultural production had doubled with world agricultural trade having increased threefold. The same
134 Harvesting Despair: Agrarian Crisis in India report also recorded that between 1970 and 1990, fertiliser applications in developing countries shot up by 360 per cent while pesticide use increased by 7 to 8 per cent per year. The Green Revolution was heralded to be a success, and viewed as a harbinger of socio-economic prosperity. Undoubtedly the yield of crops did increase for a number of years, but the Green Revolution had a wide range of negative impacts which became apparent only later. Apart from increasing the disparities amongst farmers and regions, Green Revolution meant the introduction of new hybrids at the expense of locally adapted indigenous varieties, forced changes in practice and an accentuated dependence on pesticides, fertilisers, machinery and the manufacturers of these inputs. The costs of farming increased manifold. Water resources were depleted. The quality of water, land and people’s health declined due to an increased exposure to chemicals. Nutrient levels in soils and crops decreased. Moreover pests and diseases, far from being eliminated, adapted and became more lethal than before. The promised yields also were not always forthcoming. In order to achieve high yields the farmers tried to emulate field-test conditions, meaning that large quantities of fertilisers and pesticides were put to use. But even this did not always result in the expected yields. For example, in Asia where the International Rice Research Institute, Philippines (IRRI), claimed that the Green Revolution rice varieties could achieve yields of 10 metric tonnes per hectare at research stations, most farmers could get only 3-6 metric tonnes per hectare, depending on the country. Maintaining a vast pool of genetic diversity had been a central principle of indigenous breeding strategies. Diversity contributed to ecological stability and hence to ecosystem productivity. The Green Revolution, on the other hand, focused on increasing genetic uniformity on farms as it became imperative both from the view of centralised production of seeds as well as centralised provisioning of inputs like water and fertilisers. Under Green Revolution, mixtures and rotation of diverse crops were replaced by monocultures of wheat and rice. Since this had to be reproduced over large scale, the genetic base became very narrow and hence susceptible to pest attacks, turning minor diseases like karnal bunt, alternaria leaf blight, glume blotch, foot-rot and seedling blight disease into epidemics. In 1973-74 the Philippines rice crop was almost wiped out by tungro, a disease (virus) carried
Science of Profit 135 by the brown plant-hopper – an insect pest which keeps developing new biotypes resistant to the latest crop strain’s immunity to it. In 1975, Indonesian farmers lost half a million acres of rice to tungro. When HYV seeds replaced native cropping systems, the diversity was lost irreplaceably. For example in Andhra Pradesh, one study found that the incursion of Green Revolution led to a loss of 95 per cent of traditional rice varieties in the absence of collection or documentation. Unlike the traditional high yielding varieties which have evolved along with the local ecosystems, the Green Revolution HYVs need to be replaced frequently. Seeds, a renewable resource, are thus converted into a non-renewable resource, with each variety usable for only one or two years before it gets overtaken by pests, with crop loss varying between 30 to 100 per cent. Obsolescence replaced sustainability. Cropping systems based on diversity have a built-in protection. Indigenous varieties are resistant to locally occurring pests and diseases. Even if certain diseases occur, some of the strains may be susceptible while others will have the resistance to survive. Crop rotations also help in pest control. Since many pests are specific to particular plants, planting crops in different seasons and different years causes large reductions in pest populations. On the other hand, planting the same crop over large areas year after year encourages pest build-ups. Pesticides also kill ‘friendly insects’ – crucial predators of pests or disease vectors. Massive use of pesticides helps pest resistance to develop rapidly as pest resistance is an ecological state, not an engineered one. The unwarranted pesticide use also affects soil productivity and is detrimental to human health. Fertilisers too have a very harmful effect on vital soil organisms. One of the most serious long term impacts of the so-called modern techniques has been on the soil and water resources. The Green Revolution technology omits the importance of the complex life of soil and does little for its preservation or replenishment. To retain the natural fertility of the soil and to get high yields, farmers end up using more and more fertilisers, getting caught in a vicious cycle. The introduction of Green Revolution irrigation methods marked a significant departure from any notion of sustainable water use. The canals, let alone solely rainfall, could no longer provide the much heavier irrigation needed for the Green Revolution seeds
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The International Rice Research Institute (IRRI) was set up in 1960 by the Ford and Rockefeller foundations, nine years after the establishment of a premier Indian institute, the Central Rice Research Institute (CRRI) in Cuttack. CRRI was working on rice research, based on indigenous knowledge and genetic resources, a strategy clearly in conflict with the American controlled strategy of the IRRI. The director of CRRI, Dr. R. H. Richharia was removed, under international pressure, when he resisted handing over his collection of rice germplasm to IRRI and asked for restraint in the hurried introduction of the HYV varieties. Reluctant to compromise even a little on his principles, Richharia went to the Orissa High Court, where for three years, he fought a legal battle that ruined his family, disrupted the education of his children, and brought tremendous strains on his wife’s health. The legal battle was successful, for in 1970 the Court ordered his reinstatement as director of the CRRI. Meanwhile, the Madhya Pradesh government had appointed Dr Richharia as an agricultural advisor, and he set about his disrupted work once again. By 1976, he had built up the infrastructure of a new rice research institute at Raipur (then in Madhya Pradesh, now in Chhattisgarh) where he maintained over 19,000 varieties of rice in situ on a shoestring budget of Rs.20,000 per annum, with not even a microscope in his office-cum-laboratory, situated in the neighbourhood of cooperative rice mills. His assistants included two agricultural graduates and six village level workers. Richharia had created, practically out of nothing, one of the most extraordinary living gene banks in the world. With regards to the IRRI hybrid rice variety introduced in Asia, all of Richharia’s predictions had come true: the narrow genetic base created alarming uniformity, causing vulnerability to diseases and pests, with crop losses ranging from 30 to 100 per cent. Most of the released varieties were not suitable for typical uplands and lowlands which together constitute about 75 per cent of the total rice area of the country. The IRRI counter-strategy involved breeding of varieties with genes resistant to such pests, taken from traditional cultivators of rice. This gene incorporation strategy made it imperative to collect vast germplasm resources, most of which were to be found in India. The recruitment of Dr M.S. Swaminathan would be instrumental in the task of collection. IRRI looked towards Richharia’s 19,000 varieties at the Madhya Pradesh Rice Research Institute (MPRRI) set up in Raipur. Richharia had uncovered a fascinating world of traditional rice varieties, some of which produced between 8-9 tonnes per hectare (better than the IRRI varieties); he had also discovered
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the susceptible dwarfing gene of the IRRI varieties. His extension work among the farmers would soon begin to pose a direct challenge to IRRI itself. IRRI staff members journeyed to Raipur and asked for his material. He refused because he had not studied the material himself. So IRRI did the next best thing: it got the MPRRI to shut down. The Indian Council for Agricultural Research (ICAR) floated a scheme for agricultural development in Madhya Pradesh, particularly for rice. The World Bank contributed Rs.4 crores. The condition laid down was: close down the MPRRI, since it would lead to a ‘duplication of work.’ At a special meeting of the MPRRI Board, Madhya Pradesh’s Chief Secretary was present, who was not a trustee and was earlier connected with the Ford Foundation. A resolution was passed closing down the Institute, and the rice germplasm passed over to the Jawaharlal Nehru Krishi Vishwa Vidyalaya (JNKVV)s. Scientists were sent to IRRI for training in germplasm transfer, and Richharia’s team was disbanded. This time too, they locked Dr. Richharia’s rooms and took away all his research papers. It is also relevant to point out here that Dr. Richharia’s collection of 19,000 rice varieties is today in the hands of the Indira Gandhi Agricultural University (IGAU), Raipur, which has since then added (only) another 5,000 varieties. The official number of samples existing with IGAU is therefore 24,000. In 2002, IGAU signed a MoU with Syngenta, for a collaborative “research” agreement that would have entailed the transfer of this rice germplasm collection from the University to the corporation’s laboratories. Syngenta was to have marketed new rice varieties developed by it using this gene stock and paid royalties to the University. A local newspaper “leaked” the story and the resultant outcry in the local media forced the University to cancel the agreement. Source: Vandana Shiva, The Violence of the Green Revolution
and technologies. The new hybrid wheat of the 1960s used three times more water than the traditional varieties. There was a huge increase in the number of wells to meet the growing needs. Many wells were made possible only through the installation of tube wells. The usage of water for irrigation fast exceeded the rate of recharge of groundwater creating “black zones” in many parts where Green Revolution was introduced. Water tables threatened to go down so deep that soon lifting water to the surface would require very heavy
138 Harvesting Despair: Agrarian Crisis in India capital investment in the form of high-power electric motors or submersible pumps, option only large farmers could avail. Water tables have fallen in 264 of the country’s 596 districts. As a result of its worsening condition, the soil’s response to inputs has been decreasing, necessitating larger and larger doses of chemicals and fertilisers. According to the Department of Land Resources in the Ministry of Rural Development, nearly two-thirds of India’s agricultural land is degraded or sick. In lowland areas, where the water table is relatively shallow but inaccessible through tube wells, intensive canal irrigation has waterlogged significant stretches of cultivated land. This in turn is the cause of “salt poisoning” or salination of land, which permanently destroys the ability of land to effectively grow crops. As the water table rises due to water logging, not only does salt leech into the soil but pesticides and chemicals that had previously sunk into aquifers are drawn back up into ground level drinking water as well. Modern plant breeding concepts under the Green Revolution reduced farming systems to individual crops and parts of crops. Traditional farming systems are based on mixed and rotational cropping systems of cereals, pulses, oilseeds with diverse varieties of each crop, while the Green Revolution package is based on genetically uniform monocultures. Usually the yield of a single crop like wheat or maize from traditional farms is singled out and compared to yields of new varieties. Even if the yields of all the crops were included, it is difficult to compare a measure of pulses into an equivalent measure of say, wheat because in the diet and in the ecosystem they have different functions. Similarly, the nitrogenfixing capacity of pulses and other legumes is an invisible ecological contribution to the yield of associated cereals. The traditional cropping systems are diverse and complex and hence it is unfair to compare them to the simplified monocultures of HYV seeds. The indigenous cropping systems are based only on organic inputs from the farm – seeds come from the farm, soil fertility comes from the farm and pest control is built into crop mixtures. In the Green Revolution package, yields are intimately tied to purchased inputs of seeds, fertilisers, pesticides and to intensive irrigation. High yield is not an inherent quality of the seed itself, but is a result of the application of required inputs such as specific amounts of water and fertilisers. These in turn have severe ecologically
Science of Profit 139 destructive impacts. In fact, in the absence of external inputs of fertilisers and irrigation the HYV seeds perform worse than indigenous varieties. The measurement of output is also biased by restricting it to the marketable part of crops. However, in India, crops have traditionally been cultivated to produce not just grain for man but also fodder for animals, and organic fertiliser for soils. In fact as an important fodder, the quantity of straw obtained per acre is important in India. The Green Revolution has been blamed for causing reduced levels of essential micro nutrients in food crops. This is due to a number of reasons such as the methods and inputs which have degraded the soil and killed off many micro-organisms that make those nutrients available. Communities also lost traditional sources of essential micro-nutrients and vitamins in the form of plants that were considered weeds under the new regime and were hence eliminated. There is no dispute when one states that chemical fertilisers are no substitute for organic matter and cannot replace these vital interrelationships or the essential nutrients in either the soil or the plant. The run for bulk varieties rather than ones with nutritional values has had serious impact on food quality and human physical and mental health. More than two million people today consume diets less diverse than 30 years ago, leading to deficiencies in micronutrients, like iron, vitamin A, iodine etc. Surprisingly the Green Revolution is said to have contributed to micronutrient malnutrition afflicting more than 40 per cent of the world population, and it continues to take its toll in the developing countries. The FAO has confirmed that these micronutrient deficiencies have a serious impact on human health, learning ability and productivity, which can be seen as high costs in terms of lost human potential and well being with serious socio-economic consequences. Also a widely acknowledged trend that this revolution brought about was the exponential increase in the costs of farming, which naturally had serious impact on smaller farmers. The need for expensive equipments and machinery gave larger farmers an advantage, since they found it easier to secure credit. This led to a rise in income disparities in the Indian villages. The reduction in economic viability of agriculture forced many farmers to migrate to cities in search of new means of livelihood.
140 Harvesting Despair: Agrarian Crisis in India The most daunting feature of the Green Revolution was the transformation of agriculture into agribusiness, which paved the way for the entry of avaricious corporations, whose sole motive was profit maximisation. The major family foundations – Kellogg, Rockefeller, and Ford – have played an active role in exporting the Green Revolution to India and other underdeveloped countries. It is worthwhile to note that out of all the international crop research stations, there is only one that has not come up through any of the ‘foundations’. With their control over the ‘seed end’, a few transnational corporations based in the West have acquired enormous economic and political power over developing countries. Burbach and Flynn write: “[T]hey (the transnational corporations) have foisted agricultural technologies on the Third World that have had devastating consequences. In the 1960s the fertiliser companies numbered among the main propagators of the myth that the hunger and malnutrition problems could be solved by applying the technologies of the Green Revolution. The corporations’ motive for pushing this approach was not based on a concern for world hunger, but on the need to get rid of the supplies of excess fertiliser that were depressing world market prices. Questions of adverse social and economic effects were not even considered as the fertiliser companies pressured the Agency for International Development (USAID), the World Bank, and other agencies to finance the use of Green Revolution technologies throughout the Third World.”8
The Cultivation of Profits
Transnational corporations are corporations that function in more than one country at a time. Today they are some of the most powerful political and economical entities of the world, some even more powerful than the nations across whose borders they operate. Out of the hundred largest economic entities in the world, 51 are corporations, not countries. Needless to say, interests of the most powerful governments in the world are often intimately intertwined with the expanding pursuits of the TNCs that they charter. Along with their host governments, the TNCs are re-organising the world economic structures and thus the balance of political power through a series of inter-governmental trade and investment accords. Many of these TNCs operate in the field of agricultural commodities. Cargill Incorporated is an international marketer, processor and distributor of agricultural, food, financial and industrial products and services. In 1997, its
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global revenue was $56 billion, generating net earnings of $814 million, making it wealthier than many developing nations. Cargill controls about one-fourth of the world’s grain production. This gives the company unparalleled power to control prices around the world. It does this by either flooding the markets with grain or by keeping its grain transportation ships at high seas for months. The company’s control over the market goes to the extent of owning satellites, which predict future drought prone or bountiful areas across the world. It is also the second largest phosphate fertiliser producer in the world. Monsanto, another US based company deals in genetically modified crops, agro-chemicals, seeds and bovine growth hormones. The company operates in 52 countries and is the largest seller of GM crops in the world. 80 per cent of the world’s farmlands planted with GM crops in 1999 were Monsanto products. It is the second largest seed company in the world with global sales of $ 1,700 million. A major chunk of Monsanto’s income comes from its Roundup Ready (brand name for glyphosate- resistant crop) GM crops and Roundup herbicides. Being the biggest seller of GM crops in the world, its major sales are in US, Canada and Argentina and smaller sales in India and South Africa. Monsanto has been unsuccessful in Europe as its campaign to commercialise GM crop misfired evoking a moratorium. DuPont’s acquisition of Pioneer Hi-Bred in 1999 has made it the largest seed company in the world. Dupont recorded a turnover of $ 247 billion in 2001, agriculture accounting for 16 per cent of that. Dupont’s acquisition is a step in its effort to shift in a direction of self-development of GE crops, resistant to its herbicides and pesticides. Dupont’s share in the seed market will facilitate the sale of these GM products directly to the farmers. The top twenty corporations of the world are responsible for a quarter of the world’s economic activity while employing less than one per cent of the population. Three companies – Cargill, Archer Daniels Midlands and Bunge – control nearly 90 per cent of global grain trade while DuPont and Monsanto dominate the global seed market. Eleven firms account for about half the world sales of seeds, of which about a quarter are sales of genetically engineered seeds. Syngenta, Bayer, Monsanto, BASF, Dow and DuPont together control 85 per cent of the annual pesticide market valued at 30 billion US dollars. Corporate takeover of agriculture has been achieved through a process of ‘vertical integration’ which means taking over of the entire food production cycle, from the development of proprietary strains of crop species and the sale of seeds to farmers right down to the distribution and retail sales of food products in supermarkets.
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Farm input suppliers have merged with, acquired or forged partnerships with other input suppliers and so have the food processors and food manufacturers. This implies that in the wheat market for instance, with the presence of a few large input suppliers and buyers, the wheat farmer has only a few suppliers of inputs or purchasers of final products to choose from and is forced to accept the offered prices in the absence of holding power. The companies, on the other hand, have access not only to the entire domestic market through their wide network of transportation facilities, but also to the international market. So they are under no compulsion to buy from farmers demanding higher prices. By integrating all the stages of the food system the companies have come to own the products from the farm to the shelf, consolidating their economic power. Cargill, for example, has been involved in agriculture right from supplying seeds, fertiliser and other farm inputs; to the procurement and processing of food grains and other farm produce. In 1998 Cargill embarked on a joint venture with the GE giant Monsanto. With this it now has access to biotechnology and the genetically engineered products, which it would market through its extensive worldwide network. Joint ventures and mergers of this type are fast becoming the norm and are not restricted to just two companies but involve more than two companies leading to the emergence of what are termed as ‘food chain clusters’. With new advances in gene research, such as the ‘terminator seed’ technologies developed by Monsanto, the farmers would end up depending on the companies at each stage of the production process. According to US laws, private companies like Cargill, Monsanto are not even required to publish or make public any information about their activities. Thus information on company details, test results and the like are very hard to come by. It is no wonder then that governments, public institutions and the public have such a foggy idea of new technologies being dished out to them every day. Biotech corporations use every trick in the book to create a positive image of their products in the public eye. They have been known to engage key scientists to speak about their proposed technology. Many vocal and visible scientists who speak in favour of GM reflect a strong pro-corporate bias. These corporations have a very strong lobby in the government and international institutions, working directly and indirectly through trade associations. Source: Amit Thorat ‘Rising Market Control of Transnational Agribusiness’, December 2003, www.networkideas.org
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FROM GREEN REVOLUTION TO GENETIC MODIFICATION
India’s first experience with Green Revolution has been termed successful because it increased yields and productivity of certain crops in certain regions. Now, several nations, including India are experimenting with a new technological revolution-that of genetic engineering and farming genetically modified crops. This is being termed as the next ‘great Green Revolution’. Genetically modified crops (GM) or more accurately genetically engineered crops, refer to crops that have had their DNA altered through the techniques of genetic engineering. GM crops are usually crop plants created for human and animal consumption using the latest techniques in molecular biology. The genetic material of these plants, that is their DNA, is altered in research laboratories to enhance certain desired traits in them such as an increased resistance to herbicides or an improved nutritional content. The technology of genetic engineering (GE), wielded by transnational “life science” corporations (such as Monsanto) is the practice of altering or disrupting the genetic blueprints of living organisms – plants, animals, humans, microorganisms – patenting them, then selling resultant gene-foods, seeds or other products for profit. “Life science” corporations proclaim, with great fanfare, that their new products will make agriculture sustainable, eliminate world hunger, cure diseases, and vastly improve public health. A sequence of scientific breakthroughs such as the discovery of DNA by Crick and Watson in 1953 and the creation of the first recombinant bacteria in 1973 i.e. Escherich coli (E. coli) expressing a salmonella gene, can be held responsible for setting in motion the revolution of genetic engineering and genetically modified organisms (GMOs). Herbert Boyer founded ‘Genetech’ the first company to use recombinant DNA technology. In 1978, the company had created an E. coli strain producing the human protein insulin. Around 1986, Advanced Genetic Sciences of Oakland, California and Monsanto were ready to hold field trials of bacteria genetically engineered to protect crops from frost damage (ice-minus bacteria) and microbes developed to incorporate pest resistance proteins respectively. Precise engineering of genetically modified plants first took place in 1982. In 1992, Calgene, in the USA obtained a patent for FlavrSavr, a tomato modified to delay ripening and thus enhance its shelf life. Since the first commercial cultivation of GM plants in 1996, GM plants tolerant to the herbicides Glufosinate and
144 Harvesting Despair: Agrarian Crisis in India Glyphosate and producing the Bt. Toxin, an insecticide, have dominated the agricultural seed market for corn and other crops. In 1998, Delta & Pine Land Company received a US patent on a method for producing plants with seeds, which are sterile when replanted – the ‘Terminator technology’. GM crops have been widely adopted in the United States. They have also been extensively planted in several other countries like Argentina, Brazil, South Africa, India and China. At least 64 GM crop varieties have been approved in the USA and Canada, 20 in Japan and 8 in Europe. The world market for agricultural seed is worth an estimated USD 45 billion a year, of which one third is commercial proprietary seed i.e. seed uniformly produced in bulk by commercial companies, one third is produced by governments or publicly funded institutions and one third is the value of seed saved by farmers for their own use in future crops. The commercial development of genetically modified crops is dominated by Monsanto and a few other major agro-chemical companies, including DuPont, Dow Elanco, Novartis, AgrEvo (jointly owned by Hoechst and Schering) and Zeneca. The efforts of these companies have so far been concentrated in high-volume crops that offer the most opportunity for sales large enough to recoup research costs and generate profits. The main targets have been soybeans, maize, cotton, oilseed rape (canola), potatoes and tomatoes. Between 1995 and 2005, the total surface area of land cultivated with GMOs had increased by a factor of 50. In 2003, countries that grew 99 per cent of the global transgenic crops were the United States (63 per cent), Argentina (21 per cent), Canada (6 per cent), Brazil (4 per cent), China (4 per cent) and South Africa (1 per cent). The Grocery Manufacturers of America estimate that 75 per cent of all processed foods in the US contain a GM ingredient. There has been rapid and continuing expansion of GM cotton varieties in India since 2002. Since its introduction, genetically modified food items and their safety as well as ethical acceptability has been one of the most hotly debated issues. There is a clear divide between those who endorse the new technology as the miracle answer to the hunger problems of the world and those who are concerned about messing with natural processes and the environmental apocalypse it could unleash. Many in the higher echelons of power and authority feel
Science of Profit 145 that with the current availability of land, water resources, labour, finance and crop production technologies it will be quite difficult to increase crop production to solve all of India’s food problems. GM technology is being looked upon as yet another technical fix to our problems. GM technology is supposed to have several benefits and mindboggling possibilities. It is claimed that GM technology can be used to develop pest resistance, herbicide resistance, disease resistance and drought, salinity and cold tolerance in different crops and vegetables. The propagators of GM claim that pest and herbicide resistance traits of GM plants have been designed keeping in mind the needs of the farming community; these are meant to increase yields and also bring down expenses on chemical inputs. However, the truth of these claims has been contested. In the case of the most cultivated GM crop, soybean, there is evidence to
Claims of GM Technology
Likely future developments in Genetically Modified seeds technology includes:
q Continued development of herbicide-tolerant, virus- and pest-resistant crops. q Methods to speed up traditional plant breeding. q Further development of fruit and vegetables in which the production of ethylene is
suppressed so as to delay ripening. q Modification of oils, fats and starches to improve processing or dietary characteristics.
q Improvement of flavour, texture, bio-absorbability, nutritional content and
elimination of genes for toxic substances and allergens.
q Identification of genes controlling salt tolerance, resistance to drought, flood,
and extreme temperatures, and response to day length. q GM crops that fix nitrogen with greater efficiency, thereby reducing the need for fertilisers.
q GM plants that produce vaccines or therapeutic agents. q GM bio-degradable plastics grown in plants such as rapeseed which could
begin to replace plastics from fossil fuels within a decade.
q GM plants for bio-remediation, i.e. removing toxic chemicals and agro-
chemical residues from the soil.
146 Harvesting Despair: Agrarian Crisis in India show that the yields have suffered. In India, excluding Gujarat, most states have had fluctuating yields with Bt cotton. In the very first year of commercial Bt Cotton cultivation in India (2002-03), the largest survey on performance was done in Andhra Pradesh, by the Department of Agriculture which covered 53 per cent of all Bt cotton farmers in the state. In the survey 71 per cent farmers reported low yields when compared to local hybrids. In 2004, the Andhra Pradesh government officially ordered Monsanto Mahyco Biotechnology Limited (MMBL) to pay compensation to the tune of Rs. 4 crores to Bt Cotton farmers who lost their crop, which the company refused to do. Though widespread scientific research has been going on for quite some time to study possible uses of the GM technique such as those mentioned above, there have been no large-scale successful field tests as yet. The potential risks of GM crops are many. First, we cannot know the exact content of these crops. It takes heavy finance to get this analysis done in laboratories. Most of the developing countries do not possess analytical techniques to compare GM with non-GM foods. Most results that are reported to the public simply quote laboratory results. Needless to say that the probability of these crops failing to show promised results once planted in the natural environment with less than perfect soil, water, and sunlight and nutrient conditions is quite high. Official data and documentation of test results is unavailable. Very few companies have participated in public debate regarding GM crops and not many are in the process of developing tools, which responsibly manage the potential risks and uncertainties with GM crops. GM technology also claims to solve nutrition problems. It was for this reason that ‘golden rice (I)’ was released in India. It is a strain of rice with an unusually high content of beta-carotene (vitamin A), which was supposed to address the vitamin A deficiency, common in India. This again is an overrated claim. India’s experiment with golden rice (I) and Bt crops has been discussed in detail later. For the nutritional benefits of GM crops such as golden rice (I) to be actually realised, one would need to consume abnormal quantities of the crop – this and the potential side effects are facts that are very conveniently kept out of public discussions by TNCs. It should be kept in mind that the technique of genetic engineering is not natural and its harmful effects cannot be reversed. It is a field of research where the scientific community needs to proceed with extreme caution.
Science of Profit 147 Most of these patents are held by large MNCs of the US such as Bayer, Monsanto, Dupont, Novartis etc. So once we adopt this technology we would have to depend on the MNCs for getting the seeds. This is a potential way of endangering the food sovereignty of the developing countries. Genetically engineered products have the potential to be toxic and a threat to human health. In 1989, a genetically engineered brand of L-tryptophan, a common dietary supplement, killed 37 Americans and permanently disabled or afflicted more than 5,000 others with a potentially fatal and painful blood disorder, Eosinophilia Myalgia Syndrome (EMS), before it was recalled by the Food and Drug Administration. The manufacturer, Showa Denko, Japan’s third largest chemical company, had for the first time in 1988-89 used GE bacteria to produce the over-the-counter food supplement. It is believed that the bacteria somehow became contaminated during the recombinant DNA process. In 1999, frontpage headline stories in the British press revealed Rowett Institute scientist Dr. Arpad Pusztai’s research findings that GE potatoes, spliced with DNA from the snowdrop plant and a commonly used viral promoter, the Cauliflower Mosaic Virus (CaMv) is poisonous to mammals. GE-snowdrop potatoes, found to be significantly different in chemical composition from regular potatoes, damaged the vital organs and immune systems of laboratory rats which were fed the GE potatoes. Dr. Pusztai’s research work unfortunately remains incomplete (government funding was cut off and he was fired after he spoke to the media). In 1994, the FDA approved the sale of Monsanto’s controversial GE recombinant Bovine Growth Hormone (rBGH) — injected into dairy cows to force them to produce more milk. This was despite warnings by scientists that significantly higher levels (400-500 per cent or more) of a potent chemical hormone, Insulin-Like Growth Factor (IGF-1), in the milk and dairy products of injected cows, could cause breast, prostate, and colon cancer. Mandatory labeling is also necessary so that those suffering from food allergies can avoid hazardous GE foods and so that public health officials can trace allergens back to their source when GEinduced food allergies break out. There is no known way to accurately predict the allergenic potential of GE foods. Any decision regarding the soil, water and plant resources must be taken with utmost care and scrutiny, in fact we need a good deal of
148 Harvesting Despair: Agrarian Crisis in India skepticism as the decisions affect not just the current generation of farmers but their subsequent generations as well. ‘Genetic pollution’ and collateral damage from GE field crops already have begun to wreak environmental havoc. Wind, rain, birds, bees, and insect pollinators carry genetically altered pollen into adjoining fields, polluting the DNA of crops of organic and nonGE farmers. European Union (EU) regulators are considering setting an “allowable limit” for genetic contamination of non-GE foods, because they believe genetic pollution cannot be controlled. Because they are alive, gene-altered crops are inherently more unpredictable than chemical pollutants – they can reproduce, migrate, and mutate. Once released, it is virtually impossible to recall genetically engineered organisms back to the laboratory or the field. Cornell University researchers in a startling discovery found that pollen from genetically engineered Bt corn was poisonous to Monarch butterflies. Pests and weeds will inevitably emerge that are pesticide or herbicide-resistant, which means that stronger, more toxic chemicals will be needed to get rid of the pests. We are already seeing the emergence of the first “superweeds” as GE herbicide-resistant crops such as rapeseed (canola) spread their herbicide-resistance traits to related weeds such as wild mustard plants. Laboratory and field tests also indicate that common plant pests such as cotton boll worms, living under constant pressure from GE crops, will soon evolve into “superpests” completely immune to Bt sprays and other environmentally sustainable biopesticides. GE patents such as the Terminator Technology could render seeds infertile and force millions of farmers to universal “bio serfdom”, where the farmers will be entirely dependant on a handful of global biotech companies for each and every one of their inputs for farming, paying hefty amounts in form of royalties and ‘technology fees’. Indigenous farmers will be driven off the land and consumers’ food choices will be dictated by a cartel of companies. Hundreds of millions of farmers and agricultural workers worldwide will lose their livelihoods. Despite an increasing number of scientists warning that current gene-splicing techniques are crude, inexact, and unpredictable to a large extent – therefore inherently dangerous – pro-biotech governments and regulatory agencies, spearheaded by the US, actively argue that GM foods and crops are “substantially equivalent” to
Science of Profit 149 conventional foods, and therefore require neither mandatory labeling nor pre-market safety-testing. In June 1998 Monsanto launched a USD 1.8 million advertising campaign to persuade European consumers of the benefits of GM foods. One advertisement was planned to include endorsements from some leading African academics and politicians, promoting the role of biotechnology in increasing the food supply and protecting the environment in Africa, Asia, Latin America and Central Europe under the banner ‘Let the Harvest Begin’.9 However, this plan attracted hostile comment in the European press and a rebuke from delegates of African countries at the FAO Commission on Genetic Resources meeting in Rome: “[We] strongly object that the image of the poor and hungry from our countries is being used by giant multinational corporations to push a technology that is neither safe, environmentally friendly, nor economically beneficial to us.”10 That same year Monsanto announced sponsorship of USD 150,000 for the Grameen Bank, launching the Grameen Monsanto Center for Environmentally Friendly Technologies which was aimed at providing access to new sustainable technologies including seed varieties, and to evaluate their usefulness for the people of Bangladesh, especially the poor farmers. However, the Grameen Bank, facing strong criticism both at home and abroad, withdrew from the deal in July 1998. In 2002 Zambia refused GM maize in food aid despite the threat of famine in the country and in 2003 India sent back a consignment of 10,000 tonnes of GM corn soy blend imported by CARE-India and Catholic Relief Services.
Genetically modified crops in India
The Indian government first issued rules and procedures for handling GM organisms in December 1989, and the Department of Biotechnology inside the Ministry of Science and Technology published these rules and procedures in January 1990. These were slightly modified in 1994 describing bio-safety measures, and later in 1998 elaborate procedures were issued for screening of transgenic plants. India has two committees which decide on the issues related to GM crops. The Review Committee on Genetic Manipulation (RCGM), under Department of Biotechnology, which consists of scientists from Council for Scientific and Industrial Research (CSIR), Indian Council of Medical Research (ICMR), Indian Agricultural Research Institute (IARI) and various experts from
150 Harvesting Despair: Agrarian Crisis in India universities which approves small-scale research on GM crops. The other committee is the Genetic Engineering Approval Committee (GEAC), functioning under Ministry of Environment and Forests (MoEF). This is the apex body to approve any GM crops in India. The GEAC was set up in 1998 to see the potential applications of GM crops in India. It is chaired by additional secretary of MoEF and co-chaired by expert nominees from various departments and ministries. The GEAC is designed to perform more than just a technical function. The GEAC can authorise or prohibit, conditionally or unconditionally, the import, export, transport, manufacture, processing, use or sale of any GM organism. Commercial plantation of Bt cotton was approved by GEAC on the 26 March 2002, after five years of field trials. A detailed examination of GEAC norms reveals glaring shortcomings in its regulatory procedures. Its policies clearly lack dynamism and do not seem to encompass social and economic aspects of the proposed technology. In fact now there are proposals of single window clearance for GM technology, which would do away with any hurdles that GM crops have to face and thereby, flood our markets with GM crops before we even have a chance to question their safety. The debate about GM has its thrust in the cost-benefit analysis of this technology. Some say that the benefits outweigh the costs while some say the exact opposite. GM technology was not actually invented for eradicating hunger and poverty, the reason now being given to increase its marketability. It was developed for the specific agricultural needs of countries such as USA, Argentina, China and Canada. These countries were the first target markets of the TNCs.
Bt cotton in India
Bt crops (Bt stands for Bacillus thuringiensis) are designed to be resistant to attack by the American Bollworm pest; the sap produced in the plant is toxic and fatal (as a result of the genetic modification in the plant) to the pest, thus reducing the amount of pesticide that needs to be applied during cultivation. This, as companies like Monsanto who produce and sell Bt crop seed claim, will increase profits for the farmers and reduce environmental damage caused by pesticide use. In India, Bt cotton is the only Bt crop that is cultivated till now. 64 varieties of Bt cotton seed are available in different states such as Andhra Pradesh, Maharashtra and Karnataka, and most of these have been patented by a joint venture Monsanto-Mahyco. Even though contrary claims are many,
Science of Profit 151 fact is that the introduction of Bt cotton in India has been a massive failure and a major cause of the agrarian crisis in the Vidarbha region of Maharashtra. The failure of the crop in Andhra Pradesh was conclusively depicted in a study conducted by the Andhra Pradesh Coalition in Defense of Diversity (APCIDD) in 2003-04, a year with plentiful rain in the state. The study was conducted in Warangal, Adilabad and Kurnool districts covering 28 villages with a sample size of 164 farmers. The results of the study show, in particular, that even in such a favourable year, the actual reduction in pesticide consumption by Bt farmers and the 2 per cent marginal improvement in yield, were not enough to offset the fact that Bt seeds cost 230 per cent more than Non-Bt hybrids. This means that total expenditures for Bt were 8 per cent higher than those for cultivation of non-Bt cotton, while net profits from Bt were 9 per cent lower than profits from Non-Bt hybrids. The benefit/cost ratio was clearly in favour of NonBt hybrids. On the other hand, the Monsanto AC Nielsen study, quoted as proof of the Bt cotton’s widespread success in India, paints an extremely rosy picture for Bt cotton in India. The following comparison highlights the stark differences between the two studies:
Monsanto Study Bollworm Pesticide Reduction Yield increase Increase in Net Profit 58 per cent 24 per cent + 92 per cent
APCIDD Study 14 per cent 2 per cent - 9 per cent
When the results of the APCIDD study for 2002-2003 conducted in the Warangal district of Andhra Pradesh came out and unmasked the disaster that Bt cotton had brought upon the farmers, there was a great outcry by the media which made the government sit up and take notice of the tragedy it had let loose on the farmers. This made the government institute its own survey which clearly came out with the finding that cost of cultivation for Bt crop was more and net returns too low in comparison with non-Bt. Later, the then State Minister for Agriculture Mr Shobhanadrishwara Rao made a public statement asking farmers to stay away from cultivation of Bt
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The Indo-US Knowledge Initiative in Agriculture (KIA) is yet another attempt by the US to facilitate the speedy and unhindered introduction of GM crops in India. US, being the largest cultivator of GM crops in the world, has great difficulty in peddling its GM produce in the world markets and needs to find more acceptance for such produce. The KIA initiative has been discussed in detail in the third section of Chapter III.
Cotton. But within a month or so the government retracted on its statement. Needless to say, the cultivation of Bt cotton continues unchecked in India, pushing lakhs of farmers closer to poverty and suicide with every cropping season. In fact, the cultivation of Bt brinjal has been on the GEAC table for long now and it will soon be that a Bt food crop will find its way into the Indian markets and households, unlabelled and “equivalent to conventional” crops.
The Golden Rice (I) Myth
The reason there is vitamin A deficiency in India in spite of the rich biodiversity and indigenous knowledge base is because the Green Revolution technologies wiped out bio-diversity by converting mixed cropping systems to monocultures of wheat and rice and by spreading the use of herbicides which destroy field greens. Vitamin A rice [also called ‘Golden rice (I)’] is a hoax which has introduced untested, unproven and unnecessary technology. It is not even known how much vitamin A the genetically engineered rice will produce. The goal is 33.3 micrograms per 100 grams of rice. Even if this goal is reached after a few years, it will be totally ineffective in removing Vitamin A deficiency. As pointed out by Vandana Shiva, in order to meet the full needs of 750 micrograms of vitamin A from rice, an adult would have to consume 2.272 kilograms of rice per day. This implies that one family member would consume the entire family ration of 10 kgs from the Public Distribution System in four days to meet Vitamin A needs through ‘Golden rice (I)’. This is a recipe for creating hunger and malnutrition, not solving it. Superior alternatives such as mangoes, spinach, coriander etc. exist and are effective. Thus a far more efficient route to removing vitamin A deficiency is biodiversity conservation and propagation of nature plants that are naturally rich in vitamin A in agriculture and diets.
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Soon after its invention, Golden rice (I) was hailed as a saviour for the masses dying of Vitamin A deficiency, especially the children in poverty-stricken African nations. But the myth was soon busted and behind all the positive advertisement and fanfare by the agribusiness houses, their true motives were exposed. Golden rice (I) was found to be a failed weapon in the face of world hunger, a fact that the TNCs quite conveniently hid from public eye. All it would do was increase the stronghold of these TNCs on the developing nations, and promote US political domination. Once this was understood and brought out in the open by researchers worldwide, the exuberance surrounding Golden rice (I) died down. According to the World Bank, global food prices have risen 83 per cent over the past three years. The UN and World Bank have conducted a broad scientific assessment of world agriculture, the International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD) in 2002. It concluded that biotech crops have very little potential to alleviate poverty and hunger. This fouryear effort, which engaged some 400 experts from multiple disciplines, originally included industry representatives. Just three months before the final report was released, however, Monsanto, Syngenta and chemical giant BASF pulled out of the process. This is merely a reiteration of the fact that genetically-modified crops propagated by the TNCs are not the answer to the problem of world hunger. The long-term impacts of GM crops are not yet known – not enough research has been done to evaluate the environmental and health risks of transgenic crops. Such knowledge is crucial before biotechnological innovations are implemented. There is a clear need to further assess the severity, magnitude and scope of risks associated with the massive field deployment of transgenic crops. Much of the evaluation of risks must move beyond comparing GM crop fields and conventionally managed systems to include alternative cropping systems featuring crop diversity and low-external input approaches. Unquestioned expansion of this technology into developing countries may not be wise or desirable. Source: Vandana Shiva ‘The ‘Golden rice (I)’ Hoax: When Public Relations replaces Science’ http://online.sfsu.edu/~rone/GEessays/goldenricehoax.html
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In the context of discussing appropriate technology in agriculture, the experiments with organic farming are worth mentioning. Organic farming is a form of agriculture that relies on crop rotation, green manure, compost and biological pest control to maintain soil productivity and control pests, excluding or strictly limiting the use of synthetic fertilisers and pesticides and genetically modified organisms. The experiments with organic farming in India are on a small scale, and mostly controlled by Non Government Organisations (NGOs), which in turn are funded by the same transnational corporations. The option of organic farming needs to be examined closely, but with state initiatives and state support. The technological fixes hitherto adopted in agriculture were implemented to avoid the much-needed structural changes in the countryside. One thing which can be said conclusively about both the Green Revolution as well as genetically Modified crop technology is that they firstly and foremostly, serve interests of developed countries and the transnational corporations. In the case of Green Revolution, the adverse impact on the environment, soil and water resources have become evident now. It has exacerbated the inequalities across different classes of farmers and different regions and states. In the case of genetically modified crop technology, the evidence remains inconclusive either way as yet. In such a scenario, to give permission for the commercial application of this technology (as has been done in the case of Bt cotton) is criminal and tantamount to using human beings as guinea pigs. Its possible benefits notwithstanding, it serves to increase the profits of those transnational corporations who are looking to control food and agricultural markets of the world. What is most dangerous is that any negative impact of genetic modification is/ would be irreversible. Hence, utmost caution is required in the adoption and propagation of this technology. The immediate need of the hour is to stop the ecological devastation being caused by the mindless application of chemicals, rejuvenate the degraded soil and preserve our land and water resources. Soil mapping needs to be done for the entire country and a judicious mix of organic and chemical fertilisers planned for different regions of the country. The question of appropriate technology cannot be divorced from the social priorities of a labour surplus country like ours. Finally and most importantly, no
Science of Profit 155 technological change can be a substitute for policy and institutional changes required in agriculture.
1. John Augustus Voelcker, Report on the Improvement of Indian Agriculture, Eyre and Spothswoode, London, 1893 as quoted in Vandana Shiva, The Violence of the Green Revolution: Third World Agriculture, ecology and politics, Third World Network, 1991. 2. George Rosen, Western Economists and Eastern Societies: Agents of Change in South Asia, 1950-1970, The Johns Hopkins University Press, April 1985 3. Suniti Kumar Ghosh, Imperialism’s tightening grip on Indian Agriculture 4. Vandana Shiva 1991 op. cit. 5. Agriculture And Food Security: Background & Perspective, Devinder Sharma, www.infochangeindia.org 6. PL 480: Public Law 480-Public Law 480 also known as Food for Peace (and commonly abbreviated PL 480) is a funding avenue by which US food can be used for overseas aid. 7. Felix Greene, The Enemy, Vintage Publishers, March 1971 8. Roger Burbach and Patricia Flynn, Agribusiness in the Americas, Monthly Review Press, New York, 1980 9. Dr Donald B Easum, Global Business Access Ltd, May 1998: letter seeking endorsement from African leaders 10. Selling Suicide: farming, false promises and genetic engineering in developing countries. Christian Aid, http://www.saynotogmos.org/ global_south2.htm
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Letter by ‘Doctors for Food & Bio- Safety’ to the Union Health Minister 4 December 2008 Dr Anbumani Ramadoss, Hon’ble Minister for Health & Family Welfare, Government of India, Nirman Bhavan, New Delhi. Dear Dr Anbumani Ramadoss, Sub: Stopping GM foods from entering into India We, a group of doctors working as “Doctors for Food & Bio-Safety”, approach you for your urgent intervention with regard to serious concerns related to the impending deluge of GM foods into India. Bt Brinjal is a first-of-its-kind food, with the Bt gene inside it, allowed nowhere else in the world and reports indicate that we are just a few months away from Bt Brinjal coming onto our plates, if the biotech industry has its way. You are also aware of the fact that some illegal GM foods in the form of imported products have already been discovered on Indian supermarket shelves. We seek your intervention in the matter on the following grounds: 1. GM crops are a product of an imprecise technology which changes the genetic structure of the plant irreversibly by adding or deleting a gene or a string of genes, usually from a completely unrelated organism. The technology is imprecise and induces instability at the genomic level, resulting in many changes at the cellular, organ, organism and eco-system levels. It is for this reason that the regulation of genetic engineering has to have a precautionary approach, since each genetically engineered organism is a biohazard and has the capacity to multiply uncontrollably and irreversibly. The implications of the deployment of this technology in our food and farming are very different from its contained use elsewhere. 2. GM crops have been proven to be unsafe – they should not be permitted without any long term and inter-generational tests. Today, the regulation prescribes at the most a 90-day feeding test on rats and goats. Even this is sought to be changed through the recently-issued ICMR guidelines which have been drafted based on the principle of substantial equivalence, which has been shown for its shortcomings again and again. This is inadequate to assess the full impact of a GM crop as food. Long term tests have always showed the adverse effects of GM foods. In 2005,
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after a decade of research, a field trial of genetically engineered (GE) peas was stopped in Australia because a study found serious health impacts in mice that were given the GE peas to eat. Two weeks back, on November 12, 2008, the Austrian government released findings from a study of a 20-month-long, multi-generational study conducted by the health department of the government of Austria. This GM Maize incidentally was permitted by the European Food Safety Authority (EFSA). Prof. Dr. Jürgen Zentek, Professor for Veterinary Medicine at the University of Vienna and lead author of the study, summarized the findings as: ‘Mice fed with GE maize had less offspring in the third and fourth generations and these differences were statistically significant. Mice fed with non-GE maize reproduced more efficiently. This effect could be attributed to the difference in the food source”. 3. Supreme Court’s appointee to the GEAC has serious objections about current regulatory regime in India: Special Invitee of the Supreme Court in the GEAC and eminent molecular biologist and founder of Centre for Cellular & Molecular Biology (CCMB), Dr Pushpa Bhargava, pointed out to the GEAC that there are many problems with Indian regulation and said that unless there is an overhauling of the regulatory testing, including setting up of testing facilities and unless there is a comprehensive review of Bt Cotton in the past seven years in the country, no further approvals should be undertaken. 4. Bio-safety Tests on GM crops should be conducted by independent, accredited laboratories and should undergo public scientific scrutiny: Today, the regulatory regime in India with regard to GM crops/ foods allows all biosafety data to be produced by the crop developer itself. For example, with Bt Brinjal, all decision-making so far was on the basis of the data submitted by Mahyco through studies done by it or commissioned by it. The company obviously has a conflict of interest in such assessments. Since the outcomes of Genetic Engineering could be anything from a missing or unexpected/unintended protein to serious malfunction of the normal activities of an organism, all the tests that are conducted on GM crops must be allowed for a free and fair re-assessment by civil society experts and put out for public scientific scrutiny. Sufficient time must be given for this and the suggestions received must be considered and acted upon. In the case of Bt Brinjal, the first level tests were submitted to the government in June 2006 - for more than 30 months, the data was not put out for independent public scrutiny. It is only after the Supreme Court’s intervention, that data has been put in the public
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domain but no review has been called for. Even the health ministry, which has a mandate of assessing foods from food safety perspective, did not undertake any biosafety tests on Bt Brinjal nor has asked for independent analysis of the biosafety data of the crop developer. 5. Bt Cotton’s emerging health effects from the ground to be investigated: Even though cotton was brought in by terming it a non-food crop, the past few years of cultivation of Bt Cotton have brought to the fore many health-related problems. It is now officially acknowledged by the Animal Husbandry Department of Andhra Pradesh that there have been animal deaths and illnesses after open, uncontrolled grazing on Bt Cotton fields; further, the department has also written to the GEAC about the shortcomings in the biosafety assessment of Bt Cotton and requested for comprehensive biosafety tests which were not undertaken to this day. The department has also put out an advisory to farmers not to graze their animals on Bt Cotton. Further, human allergies are being reported from different parts of the country when agricultural workers go into Bt Cotton fields to harvest cotton. These reports have not been acknowledged by the Health Ministry nor have scientific investigations been commissioned. 6. Consumers’ and farmers’ right to be GM-Free to be upheld: Consumers have a basic right to choose their food based on their ethical, cultural, health and moral choices and on informed choices. Farmers on the other hand must be given a choice to choose non GM seed based on their markets as well as moral and ethical choices. Present regulation in India does not uphold consumers’ and farmers’ rights over remaining nonGM. This amounts to denying a right of a consumer and farmer. In the current context, entry of GM foods will also violate the consumers’ right to know what they are eating. 7. No genetic engineering should be permitted on medicinal plants: Recent media reports have revealed that four medicinal herbs - Jivanti Holostemma adakodien; Brahmi Bacopa monniera; Ashwagandha Withania somnifera and Creat, kariyat or Indian chinacea Andrographis paniculata are being genetically engineered by institutes in Kerala after acquiring the consent of Review Committee of Genetic Manipulation (RCGM) under the Ministry of Science and Technology. This must be immediately stopped and health ministry under AYUSH must release a list of medicinal herbs that are never to be genetically engineered. Medicinal plants identified under the National Medicinal Plants Board must be declared as cultural and medicinal heritage of India. No genetic engineering should be permitted on them.
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Further, the implications for ayurveda (which uses plants of the Solanum species) of the release of a crop like Bt Brinjal have not been assessed. This once again reflects the inadequacies and serious shortcomings of the current impact assessment regime with regard to GM crops/foods in India. 8. Health concerns not addressed in the regulatory bodies: Through Right to Information, information has been obtained about the representatives who have attended various meetings of the Genetic Engineering Approval Committee (GEAC), the apex regulatory body in India, which has been scored as the regulatory body for decision-making by the Supreme Court. We have information that the health ministry representatives have not attended GEAC meetings regularly; one of them has not attended any meetings in 16 meetings in a row! Health concerns therefore have not been addressed in decision-making.
WHAT SHOULD THE HEALTH MINISTRY DO?
Befitting the stand of Pattali Makkal Katchi (PMK) as the first political party in India to have recognised and understood the adverse implications of GM crops/foods on India’s health and environment, the Ministry of Health and Family Welfare should immediately announce its recommendations against GM crops/foods and get the regulatory bodies in India to adopt a precautionary approach. The Health Ministry should highlight the known risks from all published evidence so far and announce that the Ministry is in favour of a precautionary approach and for a moratorium, as is being recommended by Dr Pushpa Bhargava. We urge you to instruct your officials to reflect this stand in their regulatory roles and that the Ministry should write to the GEAC, FSSA, RCGM and other ministries concerned in this regard. The grounds mentioned above should be used by the Health Ministry to ensure that no GM foods are allowed into India and by doing so, protect the health of all Indians. Sincerely Dr G P I Singh, Convenor, Environmental Health Action Group Dr. Mira Shiva Director, Initiative for Health, Equity & Society Dr R N Dutta, President, Orissa Homeopathic Druggists Association Dr. G.S. Kabra, Environmental Epidemiologist/Lawyer Dr Sivaraman, Member, National Siddha Pharmacopeia Committee Dr V G Udayakumar, President, Ayurvedic Medical Association of India
160 Harvesting Despair: Agrarian Crisis in India
vQykl t+nk ngdkuksa ds gy&cSy fcds] [kfygku fcds thus dh reék ds gkFkksa thus gh ds lc lkeku fcds & lkfgj yq/;kuoh
And of the poverty driven peasants ox ’n plough got sold, fields got sold for the very sake of living on the means of living too got sold – Sahir Ludhianvi
Chapter VII Harvesting Despair: Agriculture is becoming Unviable 161
Agriculture is becoming Unviable
The dictionary meaning of viability is to be capable of living or having the ability to grow, expand and develop. The viability of agriculture, from the point of view of the farmer, is affected by several factors. The cost of cultivation of crops, the price that the farmer receives by selling his crop (the value of output and therefore, his income), his expenditures and standards of living, and also comparatively the general standards of living in society – all cumulatively determine whether agriculture is viable for a farmer and whether he or she is satisfied with his/her occupation. Earlier there was at least some reverence for the farmer as the producer of food for the country. Now the farmer has become a non-entity and the only time we hear of him is when he ends his own life or before an election. The domestic media houses are going agog over the global financial crisis, but there is no concern about the crisis that affects two-thirds of the country’s population. Should we be surprised if many want to quit this profession? Forty per cent of farmers told the National Sample Survey in 2005 that they would prefer to leave agriculture, if they had a choice. Clearly, something has gone seriously wrong. The question before us is why do so many people desire to quit their profession? Agricultural work at all times consists of hard toil. The rigorous and back-breaking labour starts from ploughing the field for sowing and carries on till the time of harvest. A high degree of skill is required in preparing the fields, knowing which kind of seeds suit the soil, attending to the crop everyday and ensuring its protection from pests and diseases, identifying the right time for harvest and also responding to weather patterns. This kind of skill only comes through years of training which the farmer acquires from practical experience. Despite the importance of agricultural work as the lifeline of our society and economy, such labour has been bereft of any dignity. Farming is not considered a skilled activity, which tacitly implies that farmers are not liable to earn higher incomes which may raise their standard of living as in some other sectors of
162 Harvesting Despair: Agrarian Crisis in India the economy. After all these problems, the farmer still has to face many uncertainties at the end of the year – the crop may fail due to pests or bad weather, the price that he would get for the crop is uncertain, even when the price crashes in the market he has no option but to sell at the depressed prices and he is not even sure whether the year’s work will cover his costs of cultivation, leave alone bring in a surplus. The harvest, rather than signaling prosperity, brings with it accumulated debt and despair. The farmer is left with unfulfilled aspirations and also the realisation that they may never be fulfilled; a realisation that he may never be able to send his children outside in some other profession, that his profession has lost its dignity, and that his relatives and peers outside agriculture have a living standard which he cannot match. It is ironic that those who feed the rest of the country have insufficient means to properly feed, clothe and educate their families. Only as an exception and that too with great difficulty, do children of farmers manage to move out of agriculture. There are also no opportunities to acquire requisite skills to move outside agriculture as the state does not provide them the education or skills which would enable them to get employment outside agriculture. The withdrawal of the state from its responsibilities in the social sector and the privatisation of even basic education and health have turned these basic amenities into privileges rather than rights. In a period when the economic growth rate has touched dizzying heights, a significant section of the population has been left behind in the process. This growth has been accompanied by unbridled consumerism but has largely restricted itself to the sector of the urban rich and middle classes. The growing prosperity of urban India has generated aspirations amongst farmers in the rural areas, which are entirely understandable. For example a large farmer compares himself with the urban middle-class and realises that he is unable to purchase the same assets with his income, while a smaller farmer might look at his relative working as a clerk in a small town and find that his children can’t get the same kind of education and opportunities. There is no reason why farmers should practice austerity while the urban areas ride high on a cocktail of corporate salaries, Sixth Pay Commission, media glitz and luxury imports. While we do not subscribe to this economic growth based on wasteful consumption expenditures and personal debt, it is ridiculous to take the moral high ground and blame farmers for the
Harvesting Despair: Agriculture is becoming Unviable 163 crisis and for “consuming too much and beyond their means”. If we look at the actual consumption expenditures of farmers, i.e. their spending on food, clothes, education, health, or marriages, these are extremely low, but they still remain higher than their incomes. The table given below shows that farmers owning up to 10 acres of land (4 hectares) have a monthly consumption expenditure exceeding their monthly incomes. It should also be noted that these consumption expenditures by themselves are not very high and are for the entire family. These incomes are average incomes of households from all sources including net receipts from cultivation, wages, farming of animals and non-farm business. The average also hides the variations within a certain land-class and also amongst regions and states.
Average monthly income and consumption (in Rs) per farmer household, all India, for the agricultural year 2002-03
Size class of land in acres Less than 0.025 0.025 to 1 1.01 to 2.50 2.51 to 5 5.01 to 10 10.01 to 25 Above 25 All Sizes Total Income from all sources 1,380 1,633 1,809 2,493 3,598 5,681 9,667 2,115 Total Consumption expenditure 2,297 2,390 2,672 3,148 3,685 4,626 6,418 2,770
Note: We have converted the hectares in the original NSS table to acres using the approximate : 1 hectare = 2.5 acres. Source: From the Statements 10 and 11 of NSS Report no. 497 ‘Income, Expenditure, Productive Assets of Farmer Households’ 2003, NSS 59th Round
164 Harvesting Despair: Agrarian Crisis in India The table shows that at an all India level, farmer households earned (on an average) Rs. 2,115 per month from all sources i.e. wages, farm income and non-farm income. The average consumption was Rs. 2,770 showing that on an average, farmer households were running a monthly deficit of Rs. 665. Only farmers with more than 4 hectares or 10 acres of land (at an all-India level) could earn enough to meet their consumption requirements. These farmers actually constitute a small proportion of all farmer households at only 5 per cent (5.2 per cent)! This means that the majority of farmers (94.8 per cent) were running a deficit during 2003. In effect it means that at an all-India level a farmer household must possess more than 10 acres of land in order to meet their consumption expenditures. It should be underlined that the year 2003 was not a good crop year but this not withstanding it is clear that a large proportion of farmers are unable to make both ends meet. If one were to look at the inter-state variations we would see that in as many as 14 out of 18 states considered in the survey, land holding upto 5 acres was insufficient to meet consumption expenditure leave alone expenditure on capital assets (like tractors, borewells etc.). The only states where income from all sources was greater than consumption were Assam, Jammu and Kashmir, Jharkhand and Punjab. Incidentally both income and consumption levels were quite low in Jharkhand. In Karnataka farmers were just about breaking even. If one looks at the income patterns, J&K had the highest average income of Rs. 5488 per month followed by Punjab with Rs. 4960. The lowest income of Rs. 1062 was recorded in Orissa. Consumption expenditures also varied between Rs. 1697 in Orissa to Rs. 4840 in Punjab. 1 Even the higher end income and consumption expenditures are quite low when compared to urban middle and upper class incomes and expenditures. Today the expenditures in rural areas on ordinary needs and basic amenities are abysmally low. For example a person in the rural area on an average spends only Rs. 304 per year on all types of clothing and bedding (clothes, pillows, quilts, mattresses, mosquito nets, rugs, blankets, curtains, towels, mats etc.) and only Rs. 51 on footwear for the year. One struggles to imagine how these suffice for a human being. These are averages and 70 per cent of the people in rural areas live below this level.2
Harvesting Despair: Agriculture is becoming Unviable 165 Even as farmers in the rural areas of the country are facing an acute crisis, particularly after the economic reforms, the urban areas (specifically, the organised corporate sector) never had it better. The average monthly per capita consumer expenditure (MPCE) in the urban areas at an all-India level in 2004-05 was nearly double compared to that of the rural areas (for rural areas it was Rs. 559 and for the urban areas it was Rs. 1052). In seven major states out of seventeen, average urban MPCE was 180-210 per cent higher than average rural MPCE. 3 It does not require statistics to perceive that the rural-urban divide in our country is growing. While standards of living have gone up tremendously in the recent years for the urban rich, they have largely stagnated in the rural areas. According to one estimate, between 1994-95 and 2003-04, per capita real income of agriculture-dependent population was virtually stagnant when per capita real income for the country as a whole increased at a rate of more than 4 per cent on an average. The reason for the growing rural-urban disparity is not hard to find. The economics of efficiency dictates that capital (in the form of investment in industry and infrastructure) will go to those areas/ sectors of the economy where the rates of return are the highest. Since the urban areas already have the required infrastructure, it is but natural that capital will direct itself to the urban areas. And since it is the urban consumers who have the purchasing power, industry will cater to their needs and mainly produce luxury goods required for their satisfaction (not the goods demanded by the majority of the population living in the rural areas because they do not have the purchasing power). This determines the nature of investment and production in the economy. Even the government spends its money predominantly in the urban areas in building roads, flyovers, and metro rail and gives subsidies to the corporate sector. When urban-centric growth becomes the principal obsession of the government, rural development and the needs of farmers and the rural poor are necessary casualties. If in this scenario farmers are increasingly finding agriculture unviable and insufficient to meet their consumption requirements, it is inevitable that they would want to shift away from agriculture, but find no avenues are available elsewhere. Sometimes, an argument is raised that if agriculture is becoming unviable, then farmers should leave agriculture and seek employment elsewhere. What is overlooked is that there are no alternative employment opportunities for those dependent on agriculture. For one, they do
166 Harvesting Despair: Agrarian Crisis in India not have the skills or education which would make them employable in other sectors of the economy. Secondly, the pattern of industrialisation being followed in the country today is labourdisplacing or capital-intensive in its character. This kind of industrialisation is incapable of absorbing the large numbers of people who are presently employed in agriculture. It should be noted here that 92 per cent of India’s workforce is a part of the ‘informal’ sector, so called because of the uncertain nature of employment, low and irregular wages, and absence of any labour rights for the workers. The fault in the present situation does not lie with the farmers, it unarguably lies with the state’s policies and its continuous neglect of agriculture, which is making it an increasingly unviable activity.
DISTRESS OF AGRICULTURAL LABOURERS
Village community is not a homogeneous entity. It is divided on both caste and class lines. Apart from the cultivators of land, the ongoing agrarian crisis has impacted another section of rural population namely the section of agricultural labourers who are either owners of very small pieces of land or are completely landless. Agricultural labourers constitute around one third of total persons engaged in agricultural activity. This is the class which has always suffered the worst forms of class exploitation and caste oppression. They are predominantly from the socially marginalised groups – the Scheduled Castes (SCs), Scheduled Tribes (STs) and Other Backward Castes (OBCs). Even physically, the dalits and the tribals live in marginalised clusters or tolas on the fringes of the villages and have a limited social contact with rest of the village. The relationship that exists is that of employer-labourer or that of master-bonded labourer or creditordebtor in cases where the big farmers also emerge as the only source of credit (i.e. moneylenders). This antagonistic power relationship also explains the socio-economic backwardness of the agricultural labourers. Despite toiling the hardest, their condition is probably the worst and they have always suffered abject poverty. Many a time even small or marginal farmers or their family members work as agricultural labourers on others’ fields their subsistence. At an all–India level, for holdings less than one-fourth of an acre, wages constitute the main source of income. Of late, many are turning to some kind of self-employment or are migrating to the towns in absence of agricultural work.
Harvesting Despair: Agriculture is becoming Unviable 167 It is only to be expected that in a period of agrarian distress, agricultural labourers are likely to be the worst hit, through adverse impact on wages and employment opportunities in agriculture. There is a contradiction between the interests of cultivators and agricultural labourers, which gets accentuated in times of acute agrarian distress. When the farmer is in a state of distress, due to rising costs of cultivation and increasing indebtedness, he attempts to reduce wage costs and often perceives the wages that he has to pay, as part of his problems. Agricultural labourers themselves are affected by the crisis in different ways. Firstly, with agriculture becoming more and more unviable, many small farmers have had to sell off their land (or their land may have been confiscated in the case of non-payment of loans) and join the ranks of agricultural labourers. As per the NSS data, during 1990s, the share of agricultural labourers in officially defined total rural poor increased from 41 to 47 per cent. The proportion of households without any access to land in the total rural households has increased from 38.7 per cent in 1993-94 to 40.9 per cent in 1999-2000 and further to 43.1 per cent during 2004-05. 4 Secondly, the condition of agricultural labourers has worsened in terms of availability of work, real wages received, consumption and access to basic amenities like health, education and growing indebtedness. As it is, the agricultural labourer had no control over the number of days he could be employed. Each day is marked by uncertainty. The growth rate of employment in agricultural sector has stagnated at 0.2 per cent per annum during 1994-2000. In the last two decades, the number of employment days for an agricultural labourer has decreased from 224 to 209. One study5 shows that in the mid-1970s, wheat crop required on an average 72 person-days of manual labour, ranging from 55-60 days in Punjab and Haryana to 85 days in Uttar Pradesh (UP) and Rajasthan. By 2004-05, this came down to 63 person-days in Rajasthan, 56 in UP, 37 in Haryana and 20 in Punjab. According to the NSS data, during the second half of the 1990s, there was a decline in work days for households of agricultural labourers. The data suggests recovery of employment generation in the rural areas from the beginning of 2000 but this is due to increase in self-employment especially by women (for example, bidi making) and not due to any rise in wage employment.
168 Harvesting Despair: Agrarian Crisis in India The wages received by agricultural labourers have always been meager and uncertain. More often than not, they depend on the whims of the employer. The government has failed to implement the only available law ensuring minimum wages to this section of workers. The Minimum Wages Act, 1948 has failed to maintain any minimum standards in daily wage rates. Average daily earnings of an agricultural labourer were as low as Rs. 43 per man-day in 2004-05, which are much lower than the national minimum wage of Rs. 66 per day. The agrarian crisis has worsened this situation. The rate of growth of wages in agricultural operations (for the male farmer) during the period 1983-1987 was a little over 60 per cent, which came down to about 28 per cent during 1987-88 to 1993-94, it further fell to 16 per cent for the period 1993-94 to1999-2000, and was only 8 per cent for the period 1999-99 to 2004-05. The fall in the growth rate of real wages shows the serious impact of the agrarian crisis. In case of male field labourers, 96 per cent of the districts all over India had experienced a positive growth rate of real wages during 1980s but during the 1990s, only 50 per cent of the districts experienced a positive growth of real wages. The decline is sharpest in Maharashtra where as many as 23 out of 29 districts experienced a decline in absolute wages.6 Similar downward trend is noticeable for the female and child workers in agricultural operations. The disparity in wages between men and women persists till date. Sometimes women are not even entitled to wages separate from their family. Not surprisingly, the daily consumption levels are starkly low. In fact, real daily per capita consumption (at 1986-87 prices), was as low as Rs. 3.3 to Rs. 4.27 between 1983 and 1999-00. If it could fall any lower, it certainly did with withdrawal of the state from the arenas of health and education. The dismantling of universal Public Distribution System had added insult to injury.7 Obviously to keep afloat, a substantial number of labour households have to depend on loans. Banks and other formal credit institutions are reluctant to give loans to those without land so agricultural labourers certainly do not stand any chance. By 1999-00, moneylenders had emerged as the single most important source of debt for these households. The share of banks in the total debt to such households has nearly halved from 1983 to 1999-2000 (30 per cent to 16.6 per cent). The landowner-moneylenders who may give loans charge usurious rates of interest and impose harsh conditions on the repayment of loans. In case of non-payment, they sometimes
Harvesting Despair: Agriculture is becoming Unviable 169 force the labourer to enter into bondage. It is hardly surprising that most of the loans need to be spent on sheer survival requirements. In a scenario where prosperous landowning farmers are being forced to commit suicide, the plight of the impoverished landless classes can only be imagined. Landlessness, dependence on agriculture, lack of education and training, unavailability of other employment opportunities, absence of formal credit and indebtedness have become a vicious cycle from which they can seldom emerge. Notes
1. G.S. Bhalla, ‘Income, Consumption and Expenditure of Farmers’, Reforming Indian Agriculture by Sankar Kumar Bhaumik (ed), Sage India Publications Pvt. Limited, 2008 NSS Report no. 508 as quoted in Aspects of India’s Economy, No. 46 (RUPE). Report No. 508, Level and Pattern of Consumption Expenditure 200405, NSS 61st Round, National Sample Survey Organisation. Praveen Jha, ‘Some Aspects of well–being of India’s agricultural labourer in context of contemporary agrarian crisis’ 22 February 2007, www.macroscan.org M Raghavan ‘Changing Pattern of Input Use and Cost of Cultivation’, Economic and Political Weekly 28 June 2008 Praveen Jha 2007 op. cit. See Chapter VIII on Food Security
2. 3. 4.
5. 6. 7.
Chapter VIII 170 Harvesting Despair: Agrarian Crisis in India
Of Hunger and Greed
Issues in Food Security and Sovereignty
I asked the men, “What are you carrying wrapped in that Hammock, brothers?” And they answered, “We carry a dead body brother”. So I asked, “Was he killed or did he die a natural death?” “That is difficult to answer, brother. It seems more to have been a murder”. “How was the man killed? With a knife or a bullet, brothers?” I asked. “It was neither a knife nor a bullet; it was a much more perfect crime. One that leaves no sign”. “Then how did they kill this man?” I asked, and they calmly answered: “This man was killed by hunger brother”. – Josue de Castro Brazilian geographer and activist against hunger
In the five months from May to September 2008, at least 80 infants suffering from severe malnutrition succumbed to different diseases in two districts of Satna and Khandwa in Madhya Pradesh. This is only the most recent statistics of recorded malnutritionrelated deaths in our country. From April to July 2005, 2,675 children died of malnutrition in five tribal-dominated districts – Thane, Nandurbar, Nashik, Amravati and Gadchiroli – in Maharashtra. 1 Maharashtra is one of the more prosperous states of India, whose state capital is the financial centre of the country. The list goes on and on, endlessly repeating the tragedy of starvation amidst wasteful abundance in our country. Can the state still claim that we are a food secure nation? The issue of food security is somewhat independent of the agrarian crisis discussed in this book. However there are two important linkages. Firstly, the same policies which have brought about the agrarian crisis are responsible for accentuating the food crisis facing the economy. Secondly, food is the most important
Of Hunger and Greed 171 product of agriculture and the present crisis in agriculture adversely impacts food security in many ways. For these reasons, we must understand how and why the food security of our country is threatened today. Contrary to the widely held belief that India became self-sufficient in food after the Green Revolution, and that food is no longer a problem for majority of our population, here are some sobering statistics: According to the National Institute of Nutrition (NIN), the normative cereal requirement is 157 kilograms per person per year. The National Sample Survey of January to June 2004 shows that the average rural consumption of cereals in our country is just 149 kilograms per person per year while the average all-India consumption is 142 kilograms per person per year.2 Nearly half (47 per cent) of India’s children under the age of five years are underweight (low weight for age, indicating both chronic and acute malnutrition), worse than Latin America and Africa. 3 States like Punjab, Haryana, Karnataka and Maharashtra have 27 per cent, 42 per cent, 41 per cent and 40 per cent children (under the age of three years) underweight, to say nothing about Chhattisgarh, Jharkhand or Orissa. The situation has particularly worsened during the period of economic reforms. The net availability of food grains (pulses and cereals) declined from 177 kilograms per capita per year in 199192 to 158.37 kilograms in 2001-02. 4 The availability or absorption of food grains is defined as net output plus net imports minus net addition to public stocks in a year.5 Many economists claim that the falling absorption of food grains is proof of the rising prosperity of the economy, since more and more people are diversifying their diets and eating eggs, milk, meat and consuming other non-food products. Nothing could be further from the truth. The figures of availability of food grains include the absorption of food grains for all purposes – whether directly or indirectly (when it is used to produce milk, eggs and meat). According to Utsa Patnaik, in 200001, the average Indian family of four members was absorbing 93 kilograms less of food grains (whether in the form of chapattis and rice, or in the form of milk, eggs and meat) compared to a mere four years earlier – a massive and unprecedented drop, entailing a fall in average daily intake by 64 grams per head. 6 All the aforementioned figures are averages, they hide the worsening of the situation for majority of the population because
172 Harvesting Despair: Agrarian Crisis in India the consumption (absorption of food grains) of the urban rich has increased massively in the last two decades. When we consider that 77 per cent of our population has a per capita expenditure of less than Rs. 20 a day, the majority of which is spent on food, it boggles the mind to imagine the extent of deprivation and hunger. The question of food security remains an unsolved one for most people in our country. We now turn to an explanation of this food insecurity and large-scale malnutrition. The chapter is divided into three sections. The first section looks at what has happened to domestic and international production of food grains in the recent years. The second section is devoted to the public procurement and distribution system of the Indian government and how both have been impacted by economic reforms. The last section puts forward the argument of food sovereignty, in the context of past historical experiences and the recent world food crisis.
PRODUCTION OF FOOD GRAINS
Government policy in the last seven-eight years (before the recent food inflation and world food crisis) has been to discourage the production of rice and wheat. Former Prime Minister Atal Bihari Vajpayee told peasants of Haryana to “look beyond paddy and wheat and to switch to horticulture, floriculture, oilseeds and vegetable production” in a meeting in March 2001. The present Food and Agriculture Minister, Sharad Pawar said in February 2005, “I want Punjab and Haryana to reduce their production of rice and wheat, which is in abundance” and announced the Rs. 15,000-crore National Horticulture Mission. Indeed, the government of this country believes that consumers have abundant food to eat and there is a “problem of plenty” when it comes to cereals! The insistence on reducing wheat and rice production was despite the fact that per capita food grain output has stagnated in the decade of 1990s.7 The yield growth rate of wheat declined from 2.61 per cent during the period 1985-86 to 1995-96 to 0.56 per cent during 1995-96 to 2004-05. 8 The total wheat production in the country has stagnated at around 69 million tonnes between 1996-97 and 2005-06 with increases in some years and declines in some. 9
Of Hunger and Greed 173 The reasons for this stagnation are not far to seek. The state, in the period of economic liberalisation and globalisation, has been steadily discouraging farmers to stop growing food grains and switch to export-oriented cultivation of high-value crops. This has been done through explicit announcements of the kind mentioned above, in different policy documents (such as Economic Surveys) and through price signals and procurement policy. Eight million hectares of land under food grains cultivation has been shifted to exportable crops between 1991 and 2001.10 The policies of state which have encouraged cultivation of commercial crops for export have come at a time when majority of the people are suffering from chronic hunger and malnutrition.
The reduced emphasis on food grains production is based on the premise that we can import food grains to fulfill domestic requirements in times of need. However, the international supply of food grains is seriously threatened by a new menace – the growing demand for biofuels. The US and European Union have diverted a major part of their production of food crops towards producing ethanol and biodiesel, a factor which is held responsible for the recent inflation in food prices across the world. The US, which was not a major producer of biofuels until a few years ago, has overtaken Brazil as the topmost producer of ethanol in the world with a share of 39 per cent of total world ethanol output. Further, EU has become the largest producer of biodiesel in the world with a share of 66 per cent of world biodiesel output.11 As a result, there has been a phenomenal increase in the usage of corn, soybean, rapeseed-mustard and even wheat, barley and palm oil for making biofuels. The US now uses a quarter of its total corn output to produce ethanol.12 If we consider the fact that US has a share of 43 per cent in the world’s corn output, it is evident that a large proportion of total corn production in the world has already been diverted for producing biofuels.13 The US government is giving large subsidies to its farmers to grow corn for producing ethanol. If the US and EU have to meet their domestic targets for biofuel production, the diversion of cereals to produce biofuels would increase even more. The pattern of global demand for cereals for different uses shows the grim reality. From 2006-07 to 2008-09, the demand of cereals for food and animal feed purposes grew at only 1.5 per cent and 0.2
174 Harvesting Despair: Agrarian Crisis in India per cent respectively, while the demand for industrial use grew at more than 8 per cent.14 Clearly, this shift towards biofuels is and will remain one of the major factors threatening global, and consequentially, Indian food security. It is ironical that the ‘hunger’ for fuel to run cars and industries has gained precedence over human hunger and under nutrition in the priorities of global capitalism.
DISTRIBUTION: PDS AND THE TRAGEDY OF WHEAT IMPORTS AND EXPORTS
Winding down the Public Distribution System
The procurement (from farmers), storage, transportation and management of food grains are mainly the responsibility of the Food Corporation of India (FCI). Food grains are distributed to the foodinsecure households all over the country at subsidised rates through fair price shops of the Public Distribution System (PDS). Let us see the changes brought about in this system of distribution during the period of economic reforms. The PDS, despite all its lacunae (uneven performance across states, corruption and bad administration leading to leakages), performed several useful functions. For example, it succeeded in transferring grains from regions of surplus production (like Punjab and Haryana) to regions of deficit food grains production (like Kerala, Karnataka and the North-Eastern states). It also did manage to provide food at lower (and more stable) prices to poor consumers throughout the country, especially in states like Kerala where PDS administration was better. Universal PDS was reduced to Targeted PDS in 1997. This meant that henceforth, only households below the official poverty line would be ‘targeted’ by PDS. The change was brought about in line with conditions imposed by the Structural Adjustment Programme of the World Bank and IMF, and the reasons given were – the state had to bear heavy subsidies, PDS was distorting market prices and private trade, and it was incompatible with the WTO regime. The thrust of official policy was to dismantle PDS and rely on food grains imports, if necessary. In March 2000, the prices of grain for above poverty line (APL) ration card holders were increased, and the gap between prices for below poverty line (BPL) and Above Poverty Line (APL) households widened. 15 In many states, APL prices of grain were close to market
Of Hunger and Greed 175 prices and as a result, households with APL cards stopped buying grain from the PDS. The Antyodaya programme introduced a new category, the ‘poorest of the poor’, for whom rice and wheat are available at even lower prices than for BPL households. In the present situation, a person who belongs to a household that has neither a BPL nor an Antyodaya card is effectively excluded from the PDS. 16 The dubiousness and irrelevance of the official poverty line does not need to be discussed here, since much has been written about it elsewhere. By relying on the poverty line, TPDS achieved what it had set out to achieve: large-scale exclusion of the poor and the needy from the public distribution system. The recent report of the National Sample Survey ‘Public Distribution System and Other Sources of Household Consumption 2004-05’ gives us an insight into the magnitude and nature of this exclusion from the PDS. At the all-India level, 70.5 per cent of rural households either possessed no card or held an APL card. Since households with APL cards are effectively excluded from the PDS, the majority of rural households in India are excluded from the PDS. In states like Bihar, Assam, Uttar Pradesh, Himachal Pradesh and Rajasthan, over 80 per cent of the households held an APL card or no card. The most vulnerable occupations and the most oppressed sections are wellrepresented in this picture of exclusion. In all states, except four, at least two thirds of agricultural labour households were excluded from the PDS (i.e. they did not hold a BPL or Antyodaya ration card). Similar is the story with Scheduled Castes as well as Scheduled Tribes. The farce of the poverty line and the errors of targeting can be judged by this fact: in Dharavi, Mumbai, Asia’s largest slum with a population of half a million persons, only 151 families were issued BPL ration cards. The fair price shops are now increasingly becoming unviable and unprofitable because of the large-scale exclusion of APL households, and the resultant lower sale of food grains.17 According to an official estimate by the Government of Kerala, the earnings per fair price shop in the state fell from Rs. 3,711 before March 2000 to Rs. 1,493 in August 2001. 18 The basis of allocation of grains to the states has been changed with TPDS. Earlier, the central government gave grains to the states according to their demands, past utilisation and requirements of statutory rationing. With TPDS, size of the BPL population and
176 Harvesting Despair: Agrarian Crisis in India entitlements for BPL families is decided by the central government. Earlier, cereals through PDS went most to those states which had lower cereal production, low cereal consumption and high cereal prices (Tamil Nadu, Kerala, Maharashtra and Gujarat). Now, the policy of targeting and allocation of grain on the basis of poverty line has worked against the objective of price stabilisation, which was earlier achieved through grain movements from cereal surplus to cereal deficit regions. There has been a sharp fall in the purchase of grain by consumers from PDS, at a time when nutritional deprivation and malnourishment are rising. The distribution of grains through PDS fell from 21 million tonnes in 1991 to 11 million tonnes in 2001. This decline has been mainly due to reduced purchases by all those who have been left out as APL consumers.19
Food grain stocks – ‘problem’ of abundance20
The decline in offtake of food grains from PDS was accompanied by an accumulation of stocks with FCI. Food grain stocks with FCI increased from 24 million tonnes in 1997 to 63.1 million tonnes by the end of July 2002 (nearly 40 million tonnes in excess of buffer norms). 21 This accumulation of stocks was taking place at a time when per capita food grains availability/absorption was declining. According to Utsa Patnaik, the decline in absorption of food grains was the result of an unprecedented decline in purchasing power in rural areas. This occurred because of two factors – domestic policies of the state and the sharp fall in international prices of exportable crops (which meant a fall in the incomes of the farmers). On the one hand, state’s policies and actions decreased the ability of the rural population to buy food grains, and on the other hand, the state excluded a large section of the population from PDS. Both these actions pushed many more in the country into hunger and starvation and at the same time, accumulated vast stocks of food with FCI. What did the government do with these food grains stocks? A study estimates that these stocks would be worth Rs. 37,800 crores, if they were to be valued conservatively at only Rs. 6 per kilogram. Much of this huge capital could have been used as wages in foodfor-work schemes to create rural assets – thus increasing the country’s productive base, its storage of farm products, its rural roads, and its education and health infrastructure. 22 Instead, the government did the following:
Of Hunger and Greed 177 Between 2000-01 and 2004-05, 29.9 million tonnes of FCI’s food grains stocks were exported at a heavy subsidy. During November 2000 to February 2004, FCI subsidised wheat and rice exports by Rs. 14,135 crores. From 2000-01 to 2003-04, the grains were exported at considerably below the Minimum Support Price paid to the farmers. The beneficiaries were giant multinational agricultural traders such as Cargill and domestic trading firms who bought the grain for export. Further, 18.7 million tonnes of wheat and rice were sold, largely at subsidised prices, to domestic traders under the open market sales scheme (OMSS) between 1999-2000 and 2003-04. 23 The Government of India was selling subsidised food grains to foreigners and their cattle at a time when millions of Indians starved and slept on empty stomachs, all the time benefiting private traders and multinational agri-business companies. In some instances, the price at which government exported food grains was lower than the domestic BPL price i.e. lesser than the price at which it gave subsidised food to the officially recognised poor of the country.24 Some democracy!
From abundance, how did we get to wheat imports in 2006?
The story becomes even uglier here onwards. For all the conscious policy-driven reasons mentioned above (and due to some other reasons, like the disappearance of 14.7 million tonnes of food grains from FCI’s stocks and increased food stocks required for rural employment guarantee and welfare schemes), the excess food stocks of FCI declined rapidly. Wheat stocks as on 1 April (i.e. before public procurement every year) fell from 26 million tonnes in 2002 to 15.6 million tonnes in 2003 and to 4 million tonnes in 2005 – below the required norm for buffer stocks. The government of India was well aware in April 2005 that it required at least 18.5 million tonnes of wheat for distribution through the welfare schemes and food-for-work schemes in the following year. Despite this, it deliberately procured only 14.7 million tonnes in the 2005-06 marketing season. The government told the FCI not to procure in Uttar Pradesh, the largest producer of wheat crop that year.25 This was admitted by the Union Secretary for Agriculture, Radha Singh. The decision by the government to procure less left the field open for multinational corporations and other grain speculators, at the expense of both farmers and consumers. According to Radha Singh, private players including
178 Harvesting Despair: Agrarian Crisis in India multinationals, purchased around 4-5 million tonnes of wheat in Uttar Pradesh that year.26 There was a fiasco in wheat procurement again in April-May 2006. The total public procurement of wheat that year was 9.2 million tonnes, only 13.3 per cent of the wheat output – a historic low. The way in which the government intentionally did not procure wheat has been described in a box in the chapter on economic policy reforms. In both these years, the government could have procured enough to meet its domestic requirements, but chose not to do so. This was done so that there could be an excuse for importing wheat from outside. As we have said in the aforementioned box, underprocurement was necessary to create the case for wheat imports. In 2006, the government imported 5.5 million tonnes of wheat at an estimated cost of $1.13 billion, or over Rs. 5000 crores.27 The government preferred to buy wheat from the Australian Wheat Board, Glencore, Toepfer and Cargill but did not offer a higher Minimum Support Price (MSP) to the farmers.28 It preferred to pay multinational agri-businesses rather than the farmers of the country. The inferior quality red wheat imported from Australia was fed to the poor through ration shops and mid day meal schemes in government schools. The quality of wheat was so poor that it was fed to cattle in many parts of the country. In March 2007, despite predictions of a bumper harvest in the country, US Wheat Associates (a trade body funded by the US federal government and wheat producers) predicted that India would import 3 million tonnes of wheat in 2007. The government of India exceeded the expectations of US Wheat Associates and even before May (when peak procurement is done), announced that it wished to import 5 million tonnes of wheat. In June 2007, the government imported 0.51 million tonnes of wheat at Rs. 13,349 per tonne. On 3 September 2007, it again decided to import 0.79 million tonnes of wheat from three multinational companies at an even higher price of Rs. 15,967 per tonne. 29 The government was paying farmers only Rs. 850 per quintal of wheat in 2007, but it imported wheat at prices as high as Rs. 1,334 per quintal and Rs. 1,596 per quintal respectively. The message to farmers was clear: the government will not undertake procurement from the farmers even if it has to import at a higher cost from multinational agribusinesses.
Of Hunger and Greed 179 In these two years, India became the world’s second largest importer of wheat after Egypt. Its purchases had a contributory effect of increasing grain prices on the world market. Even the Central Vigilance Commission has been forced to take cognizance of this loot. It has asked the Union Ministry of Consumer Affairs, Food and Public Distribution whether wheat imports of 2006 and 2007 could have been avoided if government agencies were sincere in procuring enough wheat for the buffer stock, by adequately raising the MSP for farmers. It has also questioned as to why wheat imports were planned and announced before the harvest.30 What justifies this loot and plunder? Who is answerable for this transfer of wealth from millions of farmers and the poor to multinational grain trading corporations? The game that the Indian state has played with food security requirements of our country has had brutal consequences.
SOVEREIGNTY, NOT JUST SECURITY
Food self-sufficiency is a peculiarly obtuse way of thinking about food security. There is no particular problem, even without self-sufficiency, in achieving nutritional security through the elimination of poverty (so that people can buy food) and through the availability of food in the world market (so that countries can import food if there is not an adequate stock at home)… The focus has to be on income and entitlement, and the ability to command food rather than on any fetishist concern about food self-sufficiency. The real issue is whether a country can provide enough food for its citizens – either from domestic production or imports or both… [Emphasis added] – Amartya Sen The Observer,London, 16 June 2002 April 2008 was a significant month for all those who are concerned with global hunger and food security. There were food riots in three countries in three continents. At least five people were killed in the Caribbean nation of Haiti in food riots and the national government fell as an after effect. There were riots in Egypt (Africa) for two days over the doubling of prices of basic foods in a
180 Harvesting Despair: Agrarian Crisis in India year. Thousands of textile workers protested against rising food prices and clashed with the police in Dhaka, Bangladesh (Asia). These are not isolated incidents. People burnt government buildings and looted stores in three cities of Burkina Faso over rising food prices in January 2008. A taxi drivers’ strike over fuel prices in Cameroon in the same month turned into a massive protest about food prices, leaving around 20 people dead. There were similar protests in Senegal and Mauritania in 2007. Food riots have been reported from Indonesia, Philippines, Namibia, Zimbabwe, Morocco, Uzbekistan, Austria, Hungary and Mexico. In countries such as Pakistan and Thailand, military troops have been deployed to guard food stocks and prevent seizure of grain from warehouses. The food crisis is one of the major crises affecting the world today. In terms of its effects, the food crisis is likely to have the most devastating impact on the world’s hungry and poor population, a major part of which resides in India. What is the extent of the recent rise in food prices? According to UN’s Food and Agriculture Organisation (FAO), worldwide cereal prices grew by 88 per cent, oils and fats by 106 per cent and dairy products by 48 per cent between March 2007 and March 2008. According to the World Bank, in the 36 months ending February 2008, world wheat prices rose by 181 per cent, and overall world food prices increased by 83 per cent.31 The impact of the food crisis has been felt most acutely in those developing countries in which majority of the people spend 50-60 per cent of their incomes in purchasing food. It should be noted here that there is no shortage of food in the world. The growth in food production has been more than the growth in world population, and the FAO estimates that enough food exists in the world to provide over 2800 calories a day to everyone in the entire world. 32 The present food crisis is explained by different factors. The reasons for the recent food price inflation point to the necessity of a country like India producing sufficient food grains domestically to meet its own requirements. One of the most important reasons for the rise in world food prices has been mentioned above – the diversion of food crops for industrial use in US, EU and other countries since 2006, for producing biofuels. Secondly, the rapid increases in the price of oil (till before the ongoing financial crisis) is also responsible for rising food prices. Petroleum is required to manufacture fertilisers and pesticides and to operate agricultural equipments. It is estimated
Of Hunger and Greed 181 that it takes ten calories of fossil fuel energy to produce one calorie of food energy. In addition to this, an increasing proportion of world’s food production is traded internationally, which means that the freight (transportation) costs of food rise directly with any increase in the price of fuel. The third significant factor behind the rise in food prices is the irregular weather brought about by climate change. Australia and Ukraine, major wheat exporters in the world, have had a succession of bad harvests. Floods last year in places such as Bangladesh and North Korea and years of low rainfall in the western United States have also adversely affected food grain production. Former US President George Bush has also suggested that India and China are responsible for the present food price inflation since “they are consuming more”. This is a ridiculous claim and only serves to show the ignorant approach of US policymakers. However, the growing demand for food and meat in the world (including India and China) is likely to have contributed to the recent surge in food prices as well. The above factors have been listed to show that all the factors responsible for the rise in world food prices are beyond India’s control. All these factors are likely to worsen in the future, and hence the rise in food prices is not a temporary or short-term phenomenon. It is no secret that the five major-rice producing nations of Asia (Thailand, Vietnam, Cambodia, Myanmar and Laos) are planning to form a cartel in order to control world rice prices.33 It is thus of utmost importance that India becomes self-sufficient in food grains production. The need for self-sufficiency, contrary to what Prof. Amartya Sen says, becomes even more apparent when we consider the role of multinational agri-business corporations. Multinational corporations dominate the global food industry today. They control the storage, processing, distribution, trade and retail sale of large proportions of the food consumed in the world. These agri-businesses have had a major role to play in precipitating the present food crisis. The speculation by these companies in the international grain market and the hoarding of agricultural commodities has also significantly contributed to the rise in food grains prices. Only three companies control the world’s grain trade: Cargill, Archer Daniels Midland and Bunge. The profits made by these three companies (and some others) in 2007 are given in the table below. 34
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Company Cargill (US) Archer Daniels Midland (US) ConAgra (US) Bunge (US) Noble Group (Singapore) Marubeni (Japan) Source: Compiled from corporate reports.
Profits 2007 (USD million) 2,340 2,200 764 738 258 90*
Increase from 2006 (in per cent) 36 67 30 49 92 43
*Data is for Marubeni’s Agri-Marine division only. Absent from this list is Louis Dreyfus (France), a private agricultural commodities trader with annual sales in excess of USD 22 billion, which does not report its profits.
Needless to say, these companies have made huge profits from the present food crisis. On 14 April 2008, Cargill announced that its profits from commodity trading for the first quarter of 2008 were 86 per cent higher than the same period in 2007. Cargill’s chairman and CEO boasted that “Prices are setting new highs and markets are extraordinarily volatile. In this environment, Cargill’s team has done an exceptional job measuring and assessing price risk, and managing the large volume of grains, oilseeds and other commodities moving through our supply chains for customers globally.”35 The food crisis also presents immense opportunities to multinational agri-businesses, especially seed and agrochemical companies. It gives them an opportunity to sell more fertilisers, pesticides and genetically modified seeds to farmers and countries which are looking to increase agricultural production. For example, the pressure by World Bank and FAO on countries to accept GM foods as a “solution” to the present food crisis will naturally help Monsanto, which controls around 60 per cent of global seed production. Monsanto reported a 44 per cent increase in overall
Of Hunger and Greed 183 profits in 2007. Syngenta, the top pesticide manufacturer and thirdlargest company for seeds, saw profits rise 28 per cent in the first quarter of 2008. 36 The world’s big food processors (like Nestle and Unilever), some of whom are also agricultural commodity traders, are also making huge profits from the crisis. Multinational corporations, aided by the policies of their respective governments and institutions like the World Bank and IMF, seek to control the entire food chains of the developing nations – from inputs, production, storage, processing, retail and distribution. In this scenario, initiatives of the Indian government to allow the entry of transnational corporations in more and more spheres of our agriculture and food economy, clearly show where its loyalties lie.
The chapter on technology (Science of Profits) illustrates in detail the ways in which the US and its multinational corporations pressurized and arm-twisted the Indian state to accept policies which suited their interests during the food crisis of 1960s. It seems that the Indian state has not learnt (or has forgotten) the bitter lesson of that period: food aid can be used as a weapon of political control. It is in the context of this lesson that we must reiterate the need for food sovereignty, not just food security. The need of the hour is to give adequate incentives and support to the country’s farmers to produce more food grains, to universalise the public distribution system, follow policies which provide purchasing power in the hands of the majority of our people, and above all, to retain our independence from the avaricious interests of the developed countries and their transnational corporations. When the Indian state fails to do any and all of the above, it is time to realise the interests and institutions it is actually working for.
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Haiti: Riots perpetrated by the US and IMF
The present food riots in Haiti have a history. Rice is the staple crop of Haiti and till late 1980s, Haitian farmers were able to produce enough rice to satisfy 95 per cent of the country’s domestic consumption requirements. Although Haitian rice farmers received no government subsidies, the domestic rice market of Haiti was protected by import tariffs. In 1995, Haiti had to take a loan from the IMF to meet its foreign-payments crisis. One of the conditionalities of the IMF loan was that the country should reduce its tariff on imported rice from 35 per cent to 3 per cent, the lowest in the Caribbean. The result was predictable: a massive import of US rice at half the price of domestically grown rice. Thousands of rice farmers in Haiti lost their lands and livelihoods. Today 75 per cent of the rice eaten in Haiti comes from the US. It is important to note that US rice-growers were not necessarily more efficient than Haitian rice farmers. Rather, rice exports were being heavily subsidised by the US government. In 2003, US rice growers received USD 1.7 billion in government subsidies, an average of $232 per hectare of rice grown. That money allowed US exporters (mostly, large landowners and agribusiness corporations) to sell rice at 30-50 per cent below its actual production cost. Haiti was coerced to abandon its domestic protection to rice production, while US rice growers used government subsidies to take over the Haitian rice market. Today, the Caribbean nation, once self-sufficient in rice, is witnessing food riots. Source: “The failed harvest of food policy” by Aseem Srivastava, Himal South Asian, 8 June 2008
Notes 1. 2. 3. 4. 5. Kalpana Sharma, ‘The Sensex, Sania and Starvation’, The Hindu, 18 September 2005 “Wheat Imports: A Tool for Reshaping India’s Agriculture” Aspects of India’s Economy (AIE) No. 42, RUPE. Ibid. Table 4 of Utsa Patnaik “Republic of Hunger” Social Scientist, Vol. 32, No. 9/10 (September-October 2004). For example, if the output of a country is 100 kgs of grains in a year, it imports 30 kgs and exports 10 kgs that year, 25 kgs get consumed from the public stocks (of organisations like FCI) and 35 kgs are added to the public stocks – then net availability of food in the country will be 110 kgs [100 + (30 – 10) – (35 – 25)] that year.
Of Hunger and Greed 185
6. 7. Utsa Patnaik 2004 op. cit. The per capita output of food grains was 178.77 kgs in the three year period ending in 1991-92 and 177.71 kgs in the three year period ending in 2000-01. (Utsa Patnaik 2004 op. cit.) Bihar and Madhya Pradesh witnessed a fall in output (negative growth rate) and Uttar Pradesh witnessed a sharp decline in the growth rate of wheat yield between these two periods. The three states account for 60 per cent of the area under wheat in the country. Tables 7 and 8 of AIE No. 42 op. cit. Utsa Patnaik 2004 op. cit. Anil Sharma “Is Higher Demand for Biofuels Fuelling Food Prices?” Economic and Political Weekly, 9 August 2008. It was using only 11 per cent of its corn output to produce ethanol in 2004. 81 million tonnes of corn was being used to manufacture ethanol in 2007. The total world trade in coarse cereals was 114 million tonnes in 2007-08. Anil Sharma 2008 op. cit. It was announced in the budget of 2000-01 that central issue prices (the prices at which FCI sells food grains to state governments for PDS) would be set at half the “economic cost” incurred by the FCI for BPL households and at the full “economic cost” for APL households. In effect, there was to be no subsidy component for APL consumers. Madhura Swaminathan “Public Distribution System and social exclusion”, The Hindu, 7 May 2008 Economies of costs due to distribution of smaller quantities, such as in the case of transport, are also likely to make many shops unviable. Madhura Swaminathan “Liberalisation and Policies of Food Security: The Indian Experience” a background note for presentation at the Meeting of the Ethiopian Economic Association, 3-5 January 2003 Ibid. Title of a section in the Economic Survey 2001-02, Government of India. The food subsidy bill increased from 0.4 per cent of GDP in 1990-91 to almost one per cent in 2002-03. According to the Committee on Long Term Grains Policy, about half the food subsidy bill was being spent on holding stocks in excess of the buffer stock levels necessary for food security (Aspect’s of India’s Economy Nos. 36 and 37, RUPE, March 2004) AIE No. 42 op. cit. Ibid. Utsa Patnaik 2004 op. cit.
9. 10. 11. 12. 13.
16. 17. 18.
19. 20. 21.
22. 23. 24.
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25. A possible reason why U.P. was targeted could be the absence of strong peasant organisations in the state, unlike in Punjab and Haryana (where the government is forced to procure from the farmers). 26. Business Standard, 17 June 2005 27. AIE No. 42 op cit 28. Bhaskar Goswami “Wheat imports: subverting procurement” 21 May 2007, www.indiatogether.org 29. Sunil “Genhu Aayat ka gorakhdhanda avam bharatiya kheti va khadya suraksha ki vinash yojna”, Samajwadi Jan Parishad 30. “CVC squeezes government on wheat imports” The Financial Express, 30 September 2007. 31. Aseem Srivastava, “The failed harvest of food policy” Himal South Asian, 8 June 2008 32. Ian Angus “Capitalism, agri-business and the food sovereignty alternative”, 11 May 2008, www.globalreserch.ca 33. The Hindu, 2 May 2008 34. “Making a killing from Hunger”, www.grain.org, April 2008 35. Ibid. 36. Ibid.
Flaming Fields 187
Agrarian Crisis and Farmers’ Movements
Here we are, the dead of all times, Dying once again, but now in order to live – From the Chiapas’ movement, Mexico Our visit to Vidarbha gave us the feeling that every farmer of the region was fighting a lonely battle. The individual struggle of every farmer has perhaps accentuated the despair so tangible in the region. The need for a collective struggle against a common enemy was evident. The absence of any strong movement in Vidarbha today, however, is an aberration if one looks at the legacy of peasant movements in our country. Throughout history, farmers and agricultural labourers in India have organised themselves to agitate for their demands. Different kinds of struggles with different demands and modes of protests have been recorded in many parts of our country. Some regions like Bengal, Bihar, Andhra Pradesh and Punjab have had a stronger tradition of peasant mobilisation than others. All sections of the peasantry – landless labourers, tenants, sharecroppers, small and marginal farmers, middle and even rich farmers – have fought for immediate economic demands, as well as more political demands, such as the struggle for independence. At the risk of simplification, we can divide the farmers’ movements into two categories – those that mobilise the poorest sections of the peasantry i.e. landless and agricultural labourers and tribals, and those whose base is amongst the middle and the rich farmers. The first kind of movements is centered on the issue of land reforms. They have been led by organisations of varying ideological persuasions, Lohiaites, Gandhians, socialists and communists. The second type of movement i.e., the movements of the rich and middle farmers raised issues such as remunerative prices for agricultural products, especially since the 1980s. Some important struggles during the early period of British rule were the Indigo revolt of 1860, Pabna uprising of 1873, Moplah
188 Harvesting Despair: Agrarian Crisis in India rebellion in Malabar, and Wahabi and Faraidi uprisings in Bengal in the 1930s. These movements were not as organised and massbased as movements of the later period, such as Kaira uprising, Kheda Satyagraha, Champaran Satyagraha, Bardoli uprising and Oudh movement. Movements in both the periods also differed in terms of their demands and modes of protests. In the 1920s, kisan unions started forming at regional levels in Bengal, United Provinces and Punjab. The All India Kisan Sabha (AIKS) evolved from these regional groups in 1936. The demands of AIKS did not remain as localised and the movement became more organised and participatory in nature. After the 1940s, the leadership of the AIKS was provided by the Communist Party of India. The peak of the Indian freedom struggle coincided with militant peasant movements in Bengal and the Telengana region of Andhra Pradesh. The Tebhaga movement in Bengal (1946-47) was for a greater share of the produce for the sharecroppers. The Telangana movement (1946-51) was against the oppressive rule of the Nizam of Hyderabad. The Naxalbari struggle started in Bengal in 1967-68 and spread to other parts of the country. This was organised around the slogan of radical land reforms and seizure of political power. Land reforms undertaken after Independence were partly due to the pressures generated by these movements. However, the half hearted and incomplete nature of these reforms has meant that the issue of thoroughgoing redistribution of land remains pending. Not surprisingly, movements around this issue continue till date. The introduction of Green Revolution technology in the late sixties brought about significant changes in the rural areas. Cultivation became more dependent on inputs purchased from the market, and farmers began to sell a greater share of the crop in the market. A section of farmers in states like Punjab, Haryana, western Uttar Pradesh, Karnataka, Tamil Nadu, Maharashtra and Gujarat benefited from this new technology. However, there were problems associated with Green Revolution which soon resulted in newer kinds of farmers’ movements in the country. With the passage of time, farmers in Green Revolution areas faced a paradoxical situation: their yields were increasing but their incomes remained stagnant or were not rising proportionately. The rising costs of cultivation and uncertain prices in the market were the factors responsible for this. The new farmers’ movements across the country addressed these issues. The farmers’ organisations in Punjab and
Flaming Fields 189 UP in the 1970s, such as Khetibari Union and Zamidara Union, were of the rich farmers and did not represent the interests of the middle and small farmers. Their initial demands even included the repeal of land ceiling laws. Other organisations of the new farmers’ movements were: Shetkari Sangathan in Maharashtra led by Sharad Joshi; the Bhartiya Kisan Union (BKU) led by Mahinder Singh Tikait in UP, and by Ajmer Singh Lakhowal, Balbir Singh Rajwal and Bhupinder Singh Mann in Punjab; the Bhartiya Kisan Sangh in Gujarat; the Tamil Nadu Agriculturalists’ Association (Tamilaga Vyavasavayigal Sangham or TVS) led by Narayanswami Naidu; and the Karnataka State Farmers’ Association (Karnataka Rajya Raiyat Sangh or KRRS) led by M.D. Nanjundaswamy, Puttannaiah, Basavaraj and M.S. Shankarikoppa. In the next paragraphs, we will look at some of the organisations, their demands and their struggles. The Bhartiya Kisan Union in Punjab mobilised ten thousand farmers and gheraoed the Governor House in Chandigarh in 1987. The farmers were demanding supply of free electricity and withdrawal of the chungi that was levied on their crop when they brought it to the market. In 1990s, BKU led a struggle against increase in electricity tariffs imposed by the government. Farmers rallied behind BKU and withheld payment of electricity bills for eighteen months. The government could not take any action against the farmers for non-payment of bills. Some of the other demands of BKU included higher remunerative prices for wheat and sugarcane, reduction of input prices like water rates, electricity tariffs, rates of fertilisers and for replacing defective tractors etc. There was widespread discontent amongst the cotton growers of Karnataka due to the rising prices of fertilisers and other inputs, and the indifference of the state government. The Karnataka Rajya Raiyat Sangh (KRRS) emerged in the 1980s and raised demands for increasing minimum support prices, crop insurance, government procurement, availability of credit, lowering interest rates and waiving of farm loans. Another set of demands concerned the distribution, availability and user charges of water. The Shetkari Sangathan in Maharashtra raised demands of the shetkars – those who work on land, owner or non-owner. It launched its first agitation in 1979-80. The farmers responded to the organisation’s call for raasta roko (road blockade) in Nasik region during September-November 1980. They were demanding
190 Harvesting Despair: Agrarian Crisis in India remunerative prices. The tobacco growers of Nipani also launched their agitation under Shetkari Sangathan to draw the government’s attention to their grievances. In 1982, Shetkari Sangathan launched its struggle against the government’s milk pricing policy. Milk producers were being denied remunerative prices for the milk that they supplied to the dairies. The demand for higher cotton prices was taken up by the organisation in 1985-86. According to Sharad Joshi, the real contradiction lay not within the village between big and small farmers and the landless, but between the agrarian society and the rest of the urban-industrial society. His slogan of ‘Bharat against India’ symbolised this. In the 1990s, Shetkari Sangathan underwent a split. Sharad Joshi became an advocate of the policies of globalisation. From time to time, efforts have been made by these movements to come together at the national level and lead a united struggle based on a common minimum agenda. So far, these efforts have not been very successful. The leading organisations of these movements remain divided on many issues, significantly their approach towards the World Trade Organisation. Of late, some of these organisations are making an effort to reach out to agricultural labourers and landless peasants. These efforts are reflected in the new demands such as parity between wages of agricultural labour and urban workers. But these efforts are inadequate. These organisations still represent largely the rich and the middle farmers. Apart from these farmers’ organisations, the movement which emerged from the Naxalbari struggle, known as the Naxalite movement, has also raised issues concerning the middle and rich sections of the peasantry. Remunerative prices, subsidies on inputs and scrapping of WTO agreements are some of the demands. However, the base of the Naxalite movement is primarily the poor peasants, landless labourers and tribals. Today, another kind of movement waged by those who are dependent on agriculture has gained prominence. This is the antidisplacement movement by farmers against the forcible acquisition of their lands for the corporate sector. Whether it is Mukesh Ambani’s SEZ in Raigad (Maharashtra), the Salim group’s SEZ in Nandigram, the Tata car factory in Singur or the Posco steel project in Orissa, farmers all over the country are fighting a bitter struggle against the state and private companies in order to protect their livelihoods. Objectively, anti-displacement movements are also
Flaming Fields 191 against the same processes and policies which are responsible for the agrarian crisis today. The policies of the Indian state which are in the interests of imperialism and big capital are on the one hand, unfavourable to the agricultural sector and on the other hand, transfer scarce and valuable resources like land to the private corporate sector. In conclusion, we wish to stress the importance of collective struggle against problems which are social and structural in nature, like the agrarian crisis. The lack of organised opposition to state policies is perhaps responsible for the extreme hopelessness amongst the farmers today. Weak, scattered or disunited as they may be, the peasant movements that exist today are the only hope for farmers and agricultural labourers getting back their dignity and due share in the country’s growth. All alternatives to the present crisis in agriculture have to begin with strong movements to usher in the same.
192 Harvesting Despair: Agrarian Crisis in India
Demands by some peasant organisations related to the present agrarian crisis
Charter of Demands by eight organisations from Punjab 1. All government and private debts of common peasants and agricultural labourers should be written off. A compensation of Rs 10,00,000 to be given to the families of suicide victims. 2. A census should be undertaken to determine the actual number of suicide deaths on account of debts. 3. Compulsory license for moneylending. Debts and documents of unlicensed moneylenders to be cancelled. Even in case of loans by the former, the debt should be recovered in easy installments over a long period of time. 4. The lands of the farmers, sold-mortgaged, attached-auctioned, ten to fifteen years prior to the phenomenon of suicides should be returned and all relevant documents nullified. 5. Co-operative societies and agricultural banks should be strengthened so as to prevent the farmer from going to the moneylenders. 6. A permanent natural calamity fund should be created and the losses on this account should be fully compensated. 7. Proposals for a new debt law:
§ Rate of interest should be 4 per cent per annum (for loans by government,
cooperative, agricultural banks, financial companies or moneylenders) and crop loans should be given interest free. § Interest over interest and recovering more interest than the principal should become punishable.
§ The credit limit of the banks should be half of the minimum selling price
of the land as fixed by the District Collector. Agricultural loans should be outside the purview of Company Act.
§ In case of default by helpless peasants, there should be complete ban
on attachment-auction of the land, residential house or agricultural implements.
Flaming Fields 193 § Laws, which allow warrants, arrests, declaration of proclaimed offenders
at the time of recovery of loans, should be annulled. Methods which defame and humiliate the peasants should be declared as punishable crime. § In case of death of the indebted peasant, recovery of debt from the next of kin should be banned.
§ Police and courts should not interfere in case of recovery of unlicensed
loans. § Non-government loans should be in accordance with the bank rules. Passbooks should be issued and official records should be maintained on a monthly basis. § Restrictions should be imposed on purchase of agricultural land by rich persons outside agriculture. Issued by: Bharatiya Kisan Union (Ekta-Ugrahan), Kisan Sangharsh Committee, Punjab, Jamhoori Kisan Sabha, Kul Hind Kirti Kisan Sabha, Punjab Kisan Sabha, Bhartiya Kisan Union (Ekta-Sidhupur), Punjab Kisan Union, Zameen Bachao Committee (Barnala)
Source: People’s Democratic Front of India Bulletin Year 1, Volume 2, August 2008
Other Demands by BKU (Ekta) of Punjab 1. Commission of Agricultural Costs and Prices should fix the price of the produce before the sowing of the crop. 2. Every peasant should have a pass book attested by the tehsildar and it should be given legal recognition. Details of the commission agents should be there as well as the details of the ownership of farmers’ land. 3. Industries should be established in the rural areas to reduce dependence of rural areas on agriculture and 75 per cent of jobs in those industries should be reserved for the people from that particular village alone where the industry is established. 4. Farmers with less than 10 acres of land should have 50% (direct) subsidy on inputs.
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Charter of Demands by Kisan Coordination Committee led by Vijay Jawandiya 1. Remunerative prices to be declared and assured procurement by the government at these prices. 2. All loans should be written off at least once. 3. Crop insurance should be extended to village level. There should be insurance of consumption expenditures as well. 4. Protective irrigation through tanks, canals, wells should be increased. 5. Direct subsidies should be given to the farmers with unirrigated land. 6. Agriculture is a state subject as per the constitution. It should be included in the concurrent list. 7. Farm labour (wages) should be decided by the Sixth Pay Commission and the entire work from sowing to harvesting should be brought under NREGA. Source: Interview with Vijay Jawandiya
Demands Raised by Marxist-Leninists on Agrarian Issues 1. Land redistribution should start on the basis that in every village every family should have minimum land irrespective of what the Land Ceiling Act may say. In case where the big peasants possess land above their family needs or in case any family has other sources of income, that land should be seized and distributed among the landless poor. This distribution in a village should start with the dalit and weaker sections. In particular, temple lands should be distributed among the dalits. The family should be taken as the unit and the land deed should be given in the name of the woman as the owner. No compensation should be paid to the landlords. 2. The records of the common lands and government lands of the village should be found and land must be seized from illegal occupiers and it should be distributed. 3. The peasants should be given the land they acquired through struggle. 4. The government must ban corporate and contract farming. 5. Agricultural expansion services that emphasise food grain crops should be established. Desist from encouraging export oriented crops.
Flaming Fields 195
6. Proper marketing facilities must be provided for agricultural produce and remunerative prices must be guaranteed. 7. The ‘free electricity to peasants’ scheme [in the context of Andhra Pradesh] should be expanded and care should be taken to se that it reaches the poor, marginal and middle peasants. 8. The government must extend at cheap rates all the agricultural inputs – cattle, seeds, fertilisers, pesticides, crop protection, facilities for the evaluation of land fertility, credits – to the small peasants who get land through land distribution. The government’s help should continue for at least three years until the new peasants are able to sustain by themselves. Employment opportunities should be provided along with the land. 9. Agro based industries should be set up either in the public sector or in the small scale private sector – at least one in each mandal [block]. It should be ensured that they take up production using local resources, providing employment to the locals and utilising indigenous machinery. 10. Concrete plans should be drawn to provide irrigation facilities and to make additional land fit for cultivation. Emphasis should be on small scale irrigation projects. Tanks and ponds should be repaired. 11. The peasants with small holdings should be encouraged, and all kinds loan and credit facilities should be extended after establishing agricultural co-operatives. The Reserve Bank’s credit policy should be implemented in favor of the small peasants. 12. The agricultural lands on which activities unrelated to agriculture are undertaken, like film studios, industries, news papers, education, hospitals, entertainment, real estate, farm houses etc. should be seized and distributed to the poor. The land the government gave away in the urban areas to various institutions in excess of their requirement and the agricultural land which can possibly turn into real estate should be taken back and distributed to the poor. Source: A document brought out by CPI(ML) People’s War during the 2004 talks with the Andhra Pradesh government and quoted in ‘Veekshanam’, September 2007
Chapter X 196 Harvesting Despair: Agrarian Crisis in India
Towards an Alternative
Agriculture is a unique occupation in many ways and more so in a developing country like India. Growing crops involves certain risks which are absent in most other economic activities – the risk of bad weather; more, less or untimely rainfall; pest attack – all carry with them the possibility of a lower yield or crop failure. Even as we write this concluding chapter, we have received news from Vidarbha that the Bt cotton crop, resistant to the American bollworm, has been hit this year by another pest – the laliya. The farmer has no control over these factors. Moreover, he does not even have control over the prices that he will receive for his output. In the event of a significant price decline in the market, his (and his family’s) entire season’s hard labour maybe rendered worthless. In India, agriculture is the lifeline of the economy and our society. Two thirds of our population is dependent on agriculture. The present neglect of agriculture is therefore, a neglect of the vast majority of our country’s population. Perhaps, no other country metes out such step-motherly treatment to the agricultural occupation. The developed countries of the world are notorious for providing extensive support to their agriculture in the form of subsidies, income insurance and protective import tariffs. The discrimination against agriculture is unjustifiable given its importance to our economy – in terms of livelihoods, food sovereignty and for a sustainable and equitable model of economic development. Rather than being treated as a ‘residual’ sector, agriculture needs to be hauled out of its present stagnation and crisis and made the basis for the country’s development. If the agrarian distress has to be ended, and suicides stopped, a holistic solution to the problem is required and not patch-work measures like the Prime Minister’s relief package. This would entail thoroughgoing land reforms, massive doses of public investment, support to agriculture in the spheres of inputs, credit and output, reversal of the skewed terms of trade between the rural and urban sector through subsidies to agriculture and above all a pattern of industrialisation which accords priority to social needs.
Towards an Alternative 197
“Land to the tiller” has been a long cherished dream of the Indian peasantry. When this is actually realised, it is bound to unleash the productive potential of the people. Today, the bulk of peasantry is seeped in poverty and does not have control and (or) ownership over land. This is largely responsible for the persisting stagnation in the countryside. When modernisation is conceived only in terms of technological advances, it does not address the root cause of agrarian distress. Moreover, this modernisation is introduced primarily in the interests of transnational corporations, and very often works to the detriment of the farmer. Such modernisation has certainly meant devastation for our ecology and environment. Thus, a key aspect for alleviating agrarian distress is thoroughgoing land reforms and transforming the ways in which production is organised in agriculture. Land redistribution by itself cannot be sustainable; it must be accompanied by state support in critical areas. Wherever fragmentation of land makes small or marginal landholdings unviable, cooperative agriculture should be encouraged. This also requires the advancement of human consciousness and replacing the feudal mode of thinking with modern and scientific ideas. This, however, is a long drawn process. Even in the immediate future, there are several measures that need to be taken in order to provide support to agriculture.
SUPPORT TO AGRICULTURE
Public investment in agriculture needs to be increased massively. Not only should the current trend of reduction in public investment in agriculture be reversed, but heavy investment is required to build the rural infrastructure. Investment is required for rural electrification, repairing the damaged soil and forestation, leveling of soil, canal irrigation systems, water harvesting, watershed development and rainwater management. The latter set of measures will ensure that farmers are not only dependent on groundwater extraction, thus conserving this important and fast depleting natural resource. Agricultural universities set up and funded by the state should be carrying out research in the development of appropriate seeds and technology. Multinational
198 Harvesting Despair: Agrarian Crisis in India corporations should not be allowed to make profits from ecologically destructive and unsustainable technologies at the cost of farmers. Agricultural universities also have the responsibility of mapping the soil in different geographical regions of the country, and disseminating information about the optimum and judicious usage of fertilisers in accordance with the needs of the soil. As we have argued earlier, there will be an incentive for private investment only when there is public investment and infrastructural support. However, private investment does not mean investment by the corporate sector. In fact, multinational corporations should be barred from entering any domain of agricultural activities.
Inputs required for cultivation, especially agricultural equipments, seeds, fertilisers and pesticides should not be under the control of private corporate interests which are seeking to make profits out of these. Industrial units should be set up in rural areas to manufacture these inputs. This would, on the one hand generate rural non-agricultural employment, and on the other hand, keep a strict check on the price and quality of these inputs. Spurious seeds and escalating costs of inputs have been major reasons for the present distress faced by farmers. These inputs should be provided at cost price to the farmers through a network of distribution centers so that all classes of farmers can avail them easily. The low price and good quality of the inputs needs to be guaranteed.
Cultivation, like any other economic activity, requires credit in adequate amount, at the appropriate time, and without undue harassment. The rural credit system in our economy needs to be completely overhauled. It needs to be rescued from its present dysfunctional state and stagnation. The most important argument to remember is that profitability can never be the sole criterion when it comes to providing credit to a sector as important as agriculture. The cost of credit i.e., interest rates must be decreased and the access to formal credit for all sections of the farmers must increase. This means that the government must strictly impose priority sector lending regulations on commercial banks. Banks should provide credit to agriculture at concessional rates, much below the rates at which credit is given to the urban consumer to satisfy his luxury
Towards an Alternative 199 consumption. The definition of agricultural credit should not include credit to agri-business corporations and multinational food processing units. Public sector banks like NABARD, Regional Rural Banks and cooperative societies should be revitalised with fresh infusion of funds and the area of their operation should be greatly expanded. Many more bank branches need to be opened in the rural areas in order to compensate for the withdrawal of formal credit that occurred over the last two decades. The credit needs of small and marginal farmers with lesser landholdings (therefore, lower collateral) should be the prime focus of the formal credit institutions. The present credit limits available to farmers are ridiculously low. For example, a farmer in Vidarbha could have received a maximum loan of Rs. 4,200 per acre of land mortgaged, much lesser than the value of his land or his actual costs of cultivation. This deliberate under financing of agricultural operations is an important reason why farmers have to resort to loans from private moneylenders. The normal credit limit must be equal to at least half the value of land mortgaged by the farmer. This is quite reasonable for the banks as well, since they have the right to sell the land mortgaged in case of a default. Special measures should be introduced in areas of acute agrarian distress like Vidarbha, and parts of Punjab and Andhra Pradesh. For example, commercial banks should write off the (production and consumption) loans of families of all suicide victims, and provide interest-free loans to their families for continuing agricultural operations. Strong arm tactics of banks and moneylenders to recover loans (often with the help of the police) must be stopped immediately. An important indicator of a vibrant and functional rural credit system is a decline in the dependence on informal credit. Till date, the majority of farmers are forced to depend on moneylenders and make exorbitant interest payments. The humiliation and insult that a farmer faces at the hands of moneylenders when he is unable to repay his loans only compounds his distress. With the advance and growth of rural institutional credit, private moneylenders should ultimately be made irrelevant in the rural economy.
There are two kinds of risks a farmer faces when he is ready to harvest his crop and sell it in the market – the risk of crop failure (due to drought or pest attacks) or a price crash in the market. These risks have increased with the introduction of new variety of
200 Harvesting Despair: Agrarian Crisis in India seeds which are heavily dependent on water and with the opening of agriculture to international markets. It is important that farmers should be insured against both risks. For the former, there should be a government sponsored insurance scheme covering all farmers in the eventuality of crop failure in a region or district. A system of government procurement at minimum support prices should be in place for all regions and all crops, so that the farmer does not have to engage in distress sale and suffer drastic income losses in particular years. The costs of cultivation, on which MSPs are based, should include imputed costs such as the rental cost of owned land, and family labour. Agricultural labour should be considered as skilled labour, and its valuation should be done accordingly. Other anomalies in calculating the costs of cultivation should be eliminated. The minimum support price declared by the government, calculated as a margin over the costs of cultivation, should act as a real floor price. For this, it is important that the government actually undertakes procurement (through institutions like the FCI and CCI) if market prices fall below the MSP in any region. It is important that the government should announce MSPs for different crops before every sowing season, so that the farmer is able to take an informed decision about the crop he will sow in that season. The government must prohibit multinational corporations and private traders from hoarding food grains and speculating in the grain trade. Futures trading in agricultural commodities must be banned as this increases the volatility of agricultural prices without any benefit to the farmers.
The Agreement on Agriculture (AoA) signed by India as part of the WTO agreements has meant adverse consequences for the agricultural sector with few real benefits, if any. India must withdraw from the AoA and all other agreements which have negative implications for our agriculture. Agricultural trade with other countries can be carried out without entering into multilateral agreements which are biased towards developed countries and their farmers. Food sovereignty for the country must be ensured. The government must take steps to encourage the production of cereals, pulses and edible oils and stop the diversion of agricultural land
Towards an Alternative 201 from food grains to export-oriented cash crops. Food sovereignty must be accompanied with a universalisation of the Public Distribution System, so that the rural and urban poor have access to adequate food and nutrition. In order to address the increasing rural urban disparities in the economy, agriculture should be subsidised. Instead of pampering the urban corporate sector with infrastructure, tax concessions and subsidies, the government must focus on indigenous industrialization and infrastructure development in the rural areas. The massive subsidies (direct and indirect) given to the big corporate sector must be diverted to the rural economy on which the bulk of our population depends. In the final analysis, the present crisis in agriculture has expressed itself in two ways – the widespread debt, distress and suicide in the countryside, and the absence of a structural shift in the economy, wherein the population dependent on agriculture remains trapped within this sector with little possibilities of moving out. There is much talk of the need to shift people out of agriculture, but there is little discussion on where they would actually find dignified alternative employment. We now turn to an alternative model of industrialization, which suggests a possible way forward for our people and the country.
WHAT SHOULD BE THE ALTERNATIVE MODEL OF INDUSTRIALIZATION?
There is little doubt that economic development necessitates a structural shift in the economy. However, the present model of industrialization has failed to bring about this shift. Presently, there exists a perverse pattern of development – the services sector contributes the highest share to the output of economy (more than half) while the agricultural sector has the majority of the population dependent on it. The population dependent on agriculture does not have either the skills or the opportunities to move out. The present pattern of industrialization also does not and cannot provide employment to vast numbers who can be potentially released from agriculture. This is because the techniques employed are not meant to create jobs but to maximise profits. These also produce goods which are not required by the majority of people.
202 Harvesting Despair: Agrarian Crisis in India First and foremost, if there has to be industrialization of the rural economy, the purchasing power of the people must develop. With the bulk of the masses of rural India immersed in poverty and backward land relations, no market for local industry can develop. A pre-requisite for developing the home market for industrial commodities is thoroughgoing and genuine land reforms. Along with this, it is only with development of agro-processing industries and indigenous industrialization that the crisis of rural India can be addressed. Public investment in rural infrastructure and a large number of industries geared to make goods like bicycles, footwear, and myriad other things needed for mass consumption can offer a solution. The employment potential of such industries can be assessed from the fact that in 2005, all organised private sector manufacturing employed only 4.5 million people in contrast to 29.5 million people employed by small scale industries alone. This would also generate rural non-farm employment and increase the purchasing power of the masses. This in turn will reduce the pressure on agriculture and also create an impetus for growth of the economy. This however will happen only when the direction of investment and choice of technology is based on social needs rather than to serve the profit-generating interests of the private corporate sector.
WHAT KIND OF TECHNOLOGY SHOULD BE ADOPTED FOR AGRICULTURE?
The devastation of non-renewable resources like soil and water is proceeding at such a rapid pace that it now threatens not only cultivation as we know it, but the future of humanity itself. The technological changes brought about in agriculture till now, have largely been in the interests of the transnational corporations – giant grain traders, agro-chemical companies and food processing multinationals. It has led to widespread ecological devastation, soil degradation, and depletion of water tables, destroyed the biodiversity and increased the incidents of pest and insect attacks. At this stage, it is important to pause and carefully assess the conditions of soil and water availability in different agro-climatic zones of the country. There should be soil mapping and water resource checks in every region, so as to suggest the techniques better suited to the local requirements and ecosystem. This would indicate the appropriate mix of fertilisers to be used and cropping patterns that should be adopted in different agricultural regions.
Towards an Alternative 203 An immediate attempt should be to replenish the soil and arrest any further damage to its fertility. A combination of organic and chemical fertilisers needs to be used in agriculture, with the objective of gradually reducing the dependence on the latter. Experiments of this kind are being carried out in some pockets of the country, although they are small in scale. The example of Cuban agriculture is noteworthy in this regard. The country was forced to experiment with organic farming due to trade embargoes by the US in the 1970s, but chose to continue with it at a countrywide level even after import of fertilisers became possible. State owned regulatory bodies should focus on preservation and application of indigenous varieties of seeds. In all decision making bodies relating to technology, the presence of farmers’ representatives should be mandatory. Agricultural universities ought to be the centers of technological research in agriculture. Funding to them should be increased so as to encourage autonomous decisions, regarding the research initiatives, whose objective is to benefit the farmers. These universities should also take the responsibility of disseminating proper information about the technology and its possible impacts to the farmers. There should be much greater scrutiny while considering the application of new technology. No new technology should be introduced without adequate number of field trials whose results should be available in the public domain. Above all, the technology used in agriculture should preserve the bio-diversity of the environment, be geared to meet the needs of a labour surplus economy like ours and be ecologically sustainable.
TOWARDS A NEW SOCIETY
The steps needed to bring agriculture and population dependent on it out of current distress requires a strong political will. For this, far-reaching changes are needed at socio-economic and political levels. The developments of past sixty years have shown that no government is willing to bring about these changes. These can come about only in a system where there is both economic and political democracy. Economic democracy entails that economic resources and their benefits should be equitably distributed. Political democracy means that people themselves should be involved in major decisions regarding their lives. Today it is the nexus of big corporate sector-rural elite-bureaucrats-politicians which dominates all decision making in our country. Genuine democracy entails that
204 Harvesting Despair: Agrarian Crisis in India this stranglehold is replaced by people’s decision making bodies. On this democratic base, higher structures can be built at the block, district and the central levels. This, of course, is not possible until the present nexus is broken. Thus, it is meaningless to talk about eliminating the agrarian crisis unless the very path of development followed up till now is questioned and a new path can be chartered. The crisis in agriculture is a result of conscious and deliberate state policies. Unless these are reversed and there is a state-system which restores to agriculture the dignity and priority it deserves, no piecemeal measures can avert the crisis and stop its most horrible manifestation, farmer suicides. This can only happen when the transition to a new society begins.
Towards an Alternative 205
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