After deliberately turning a blind eye to the acute agrarian crisis through the first four years of its first term, a crisis that became so acute mainly because of its brazen neo-liberal anti-farmer policies, the UPA, just on the election year before the last Lok Sabha polls, announced the one-time loan waiver. By their own admission, the move paid them rich electoral dividends. But one year into the UPAs second term, the fury of the agrarian crisis is back with a vengeance. The following features and symptoms are quite prominent: (i) agricultural growth rate is again declining after registering 4% in the first year of the Eleventh Plan (2007-12), the growth rate dipped to 1.6% in 2008-09 and then minus 0.2 per cent in 2009-10 according to the latest Economic Survey; (ii) a renewed wave of farmers suicides is being seen not only in the old suicide belts but also in several other states; (iii) agriculture in many parts of the country is reeling under the disastrous impact of a debilitating drought, and (iv) together with agricultural stagnation, the country is experiencing acute food inflation.
Support Price Hypocrisy and Food InflationPer cent
change
Arhar : 2007-08-- 1,700 Rs/quintal, # 2008-09-- 2,000 Rs/quintal, # 2009-10-- 2300 Rs/quintal --- 35.29 %
Moong : 2007-08-- 1,700 Rs/quintal, # 2008-09-- 2,520 Rs/quintal, # 2009-10-- 2760 Rs/quintal --- 62.35 %
Urad : 2007-08-- 1,700 Rs/quintal, # 2008-09-- 2,520 Rs/quintal, # 2009-10-- 2760 Rs/quintal --- 62.35 %
Source : PTI
The MSP for arhar dal increased by 35.29 per cent but the market price of this dal skyrocketed by 600 per cent. Moong and urad MSP went up by 62 per cent but the market prices of these dals shot up by 300350 per cent.
That is, while the government paid Rs.2025 per kg for different varieties of pulses in 200809, the market prices for these dals had already crossed Rs.6570 per kg. Reports indicate that private traders paid much less in pulse areas to farmers even compared to the low MSP and farmers were forced to resort to distress sale to the private traders as the government, despite increasing the MSP marginally, has not opened adequate number of procurement points in pulse hinterlands in the countryside. The government itself fixing the MSP at one-third of the going market rate, and the farmers getting output prices even lower than this paltry MSP, supports our contention that high market prices or even mere nominal increases in MSP alone will not help in overcoming the agrarian crisis which now finds acute expression as pulse crisis. The story doesnt end here in 2008. The next year, in 2009, the government increased the MSP for different varieties of dals by Rs. 240300 per quintal and the farmers got Rs.2328 per kg for different types of dals but the market prices for arhar had shot up in 2009 to nearly Rs.120 per kg!
This is true not only in the case of pulses, but also for wheat and paddy/rice. Yet, in the face of such acute disparity between the official support price announced for farmers and the reigning market price paid by consumers, rank neo-liberal reactionaries like Montek Singh Ahluwalia, the Deputy Chairperson of the Planning Commission, vociferously argue for giving fullest play to the market forces and dismantling the outdated� support price-procurement mechanisms! His contention is that these mechanisms were needed when India had not attained self-sufficiency in foodgrains and having attained self-sufficiency in food now these have become irrelevant and he further argues that the market has the inbuilt ability to correct distortions in prices. But the illogical situation of farmers getting one-third of the market prices as support� price for their produce doesnt strike this key bureaucrat of the UPA and Manmohans right-hand man in policymaking, who is coming up with such fraudulent anti-farmer arguments.
Markets, and the mercantile bourgeoisie, thrive all the more so when there is distress and scarcity and only by reversing the dominance of the mercantile capital over production in collusion with the state, over the farming community, can the farmers get any real relief.
Instead of giving policy concessions to the corporates, giving price incentives to the millions of farmers can better take care of the need to offset the decline in public investment and improve farm incomes and capital formation.
Food security is not just a humanitarian gesture, a measure to eliminate hunger and alleviate poverty. If food security and food availability are threatened, the entire economy will go into a tailspin. For instance, if high food inflation continues for long, it will put pressure on wage goods, turn into generalized inflation, lead to a hike in interest rates, bring down aggregate investment in the economy and hence also the growth, affect exports, devalue currency and hamper imports also and thus lead to a series of macro-economic destabilization. In this sense, food security is an economic fundamental guaranteeing stability. After introduction of the green revolution, as far back as 1960s, India proudly proclaimed to the world that it had achieved self-sufficiency in food. That food self-sufficiency is now under threat despite the deceptive manifestations like export of foodgrains in some years as it turns a full cycle soon and food is imported. We must also understand that the nation cannot have food security if farmers cannot have economic security.
Unregulated International Trade: Sure Recipe for Disaster
Apart from this support price� humbug, indiscriminate imports and exports of agricultural commodities is even worse a recipe which is an underlying factor behind the ongoing agrarian crisis. Far from addressing this calamity by setting up an autonomous tariff and quantitative trade regulatory commission along the lines of the Agricultural Costs and Prices Commission as demanded by academics and farmers movements, the UPA is continuing with its reckless trade practices in agri products.
Let us take the case of wheat. India exported 24 million tonnes of wheat every year in the first four years of this decade and imported around 6 million tonnes in 200607, imposed an export ban in 200708 and again imported 5 million tonnes in 200809.
INDIA WHEAT IMPORTS AND EXPORTS
(In thousand tonnes)
200102 : IMPORTS-- 1.25, EXPORTS-- 2649.38
200203 : IMPORTS-- 0, EXPORTS-- 3671.25
2003-04 : IMPORTS-- 0.46, EXPORTS-- 4093.08
200405 : IMPORTS-- 0, EXPORTS-- 2009.35
200506 : IMPORTS-- 0, EXPORTS-- 746.18
200607 : IMPORTS-- 6079.56, EXPORTS-- 46.64
200708 : IMPORTS-- 1793.21, EXPORTS-- 0.23 Export banned
200809 : IMPORTS-- 5000.00, EXPORTS-- Export banned
200910 : IMPORTS-- --, EXPORTS-- Export ban lifted in July 2009
Export ban lifted in July 2009
Despite drought, thanks to the recovery during the rabi crop, in 200910, the total wheat production was comfortable 80.68 million tonnes, and this year, with predictions of a normal monsoon, this level is expected to be exceeded. Apart from projected record output, India had a buffer stock of 206.23 lakh tonnes of wheat and 256.58 lakh tonnes of rice as on January 31. This buffer stock is supposed to be twice the normal level usually maintained and in case of a second successive drought this would have come in handy. There is no reason why the country, which maintains more than $350 billion as foreign exchange reserves to provide a safety cushion to the big business and corporates, cannot afford to maintain this much or even more food stocks to ensure food security. But right in the middle of the drought year, in July last year, the ban on wheat exports was revoked and reports indicate that UPA is planning to revive export of wheat in a big way, even when the international wheat prices are low, for the simple reason that there are no adequate godown facilities to stock foodgrains! Rice exports have already started.
Private traders and futures market speculators have unlimited storage capacity to hoard grains but the government doesnt have the necessary infrastructure even to assure food security to the citizens or to intervene in the international markets only when the prices are ruling high. Foodgrains are exported at prices lower than the domestic BPL prices and foreign companies are paid money for imports at rates more than what the Indian government pays to our own farmers. It is a common knowledge that from foreign suppliers and export houses the politicians get massive kickbacks. Foodgrain import-export scams have become an annual feature with the UPA government and, worse still, the criminals let nearly 2 million tonnes of wheat, worth nearly Rs. 1800 crore, to rot in the FCI godowns in Punjab. Not a single bureaucrat has been made accountable for this and punished. Ironically, the shocking news came on 19 March 2010 even as the Union Cabinet was discussing a proposal to increase the APL PDS price of wheat and rice from Rs. 6 and Rs. 8.30 to Rs. 11 and Rs. 15.37 respectively under the pretext that government is incurring a loss by supplying wheat and rice to APL buyers at these rates in view of the higher procurement and issue prices. Some observers have opined that this is a move to scuttle the demand for universalisation of the PDS and to pave way for abolishing PDS for the APL category altogether. Whatever it is, presently the consumers and tax-payers, of course, will have to bear the additional cost of this rotten governments criminal inefficiency.
The trade scandal is not limited to wheat alone. The Rs. 2500 crore rice export scam of 200809 reads like a nail-biting crime thriller. The UPA allowed indiscriminate export of rice which caused a steep increase in domestic prices. When the steep increase in domestic rice prices snowballed into a major political issue, the UPA imposed a ban on non-basmati rice exports in October 2007. The ban caused a nearly threefold increase in the world market rice prices as India was a major exporter of rice. The market dynamic is such that even an anticipated 1020 per cent supply shortfall would trigger a doubling and even trebling of the prices. The OECD lashed out against India for causing a global food crisis due to a very sharp increase in rice prices resulting from the ban. The shaken Indian government promised to revoke the ban in 34 months. But three months after the ban, illegally bypassing the ban and capitalising on the rise in international rice prices, and even bypassing the state trading corporations, in the name of humanitarian gesture, some select private companies were allowed by Sharad Pawar-Kamal Nath duo to export 10 lakh tonnes of rice to some African countries. In March 2008, the companies purchased rice from the domestic market at $280 per tonne and sold them at $470 to some African governments like that of Sierra Leone. The rice farmers, of course, did not get a single rupee more. They got only their bare Minimum Support� Price and nothing more. Worse, much of the rice was not purchased at the open market rates even but some PDS mafia supplied the diverted PDS rice at even much lower rates. The scam is estimated to be to the tune of Rs. 2500 crore and it contributed in no small measure to further domestic price rise of rice in the open market. The Outlook magazine exposed the scam in a story in its issue dated 27 July 2009. The Prime Minister didnt bother to order even an enquiry. Sharad Pawar and Kamal Nath, the main architects of this scam, till date continue to be honourable� members of the supposedly clean government of Manmohan-Sonias UPA. Clean and neat loot indeed!
In another major scam, Union Agriculture Minister Sharad Pawar allowed the sugar lobby to reap super profit first through massive export and then through domestic sales at exorbitant prices even as the government sought to rob the farmers through a patently unjust ordinance that depressed the support price for sugarcane. In a very unusual move, in November 2009, the UPA Agriculture Minister got an ordinance passed that sought to ban the State governments from fixing increased amounts for sugarcane to be paid by the sugarmills as State Advisory Price (SAP). Accordingly, the farmers were to get what the union government had fixed which would have been Rs. 10 less than what the sugarcane farmers got the previous year in Uttar Pradesh. The incensed farmers took to the streets and there were numerous demonstrations, not only in UP but also in Haryana and Punjab and even in Maharashtra, Karnataka and Tamil Nadu. The issue quickly snowballed into a major political issue and lakhs of farmers from nearby States rushed to the capital for a parliament gherao. The Congress High Command got alarmed at the fallout and Rahul Gandhi was sent to Manmohan Singh in a stage-managed show and the ordinance was withdrawn in the face of nationwide protests.
First exports of sugar were allowed on a large scale when the international prices were high and the sugarmills made enormous profits. But when the domestic prices shot up due to artificially generated scarcity due to exports, imports were allowed at prices higher than export prices. Claiming that the imports were hurting their profit margins, the millowners lobby refused to pay even the frozen price announced by the Centre and refused to take sugarcane from the farmers. But ultimately, due to defiance from the canegrowers who refused to supply their cane at such lower prices, the mills had to pay double the amount of what Mayawati had initially offered. This is not just a flip-flop. Sharad Pawar who has emerged as one of the unabashed representatives of the corporate lobby clearly manipulated these flip-flops in sugar policy and brazenly pushed for promulgation of the ordinance.
The government has been putting lots of emphasis on horticulture in it strategy and even suggests that diversification to horticulture is an escape route from the agrarian crisis and low-income scenario. True, now horticulture accounts for a third of the total agricultural output. But though the vegetable production has grown by 5 per cent annually in recent years which, of course, is on a higher side compared to foodgrains growth and there is no reason to expect that the growth in consumer demand would be much higher compared to this, the average vegetable prices have doubled and even trebled in recent years, even after accounting for seasonal fluctuations within a year. But vegetable growers keep losing heavily in the absence of adequate coldstorage and cheap transportation facilities. The horticulture scenario also shows that there is no close relationship between the market price, the price that the farmer gets, between the supply and the price and between the high price and the rate of growth in horticulture output. Except for some marginal role in market intervention for Markfed and other cooperative vegetable marketing federations like Hopcoms in Karnataka and Mother Dairy in Delhi, there is no administered price regime for vegetables and if the argument of the neo-liberals that market itself will set right distortions in production and prices and generate more income to the farmers, then the vegetable growers would have become millionaires and most of the farmers would have taken to vegetable growing.
If only state governments can come forward to provide a few hundred marketing outlets for farmers and even retail hawkers and arrange public transport backed by coldstorage and warehousing, the vegetable prices can come down by more than half for the urban consumers even as the farmers incomes can more than double. But such facilities are not available in majority of the States. This is an important issue for organising the peri-urban farmers as well as hawkers.
Relentless Increase in Input Prices
FERTILISER PRICE HIKE
Various studies have shown that in India the price elasticity of fertiliser use is very high. This means whenever the prices of fertilisers go up the use of fertiliser sharply comes down, reducing productivity and output and thus threatening food security. The impact of fertiliser price increase in Indian conditions cannot be mitigated by increase in agricultural output prices and this is mainly because here the share of small and marginal farmers is very high and their marketed surplus constitutes a small share of their total produce; the price increase for their outputs cannot neutralise the higher prices they pay for fertilisers. If the fertiliser subsidy had crossed one lakh crore rupees in 200910, it is not because of any generosity towards farmers from this otherwise stingy UPA government but due to this grim reality. In spite of such a scenario, Mr. Montek Singh Ahluwalia and the Planning Commission had the gall to recently propose halving of fuel and fertiliser subsidies. If fertiliser subsidy is halved, the fertiliser prices would rip through the roof and not only agriculture but all other sectors of the economy would go into a tailspin in the resulting shortage in foodgrain production and food inflation.
Under the retention price scheme presently being followed, in theory, the government fixes 12 per cent (profit) margin on net worth for fertiliser industries but the cost of the worst efficient unit is taken to be the benchmark for calculating this 12 per cent profit. Not only that, this 12 per cent profit is calculated as post-tax profit, that is after the government pockets a good amount as tax for its own kitty. If the government reduces the tax, the cost increase due to increased prices of crude oil the raw material for chemical fertilisers in the international market can be considerably neutralised. But no, as it adamantly refused in the case of petroleum products, it is refusing to bring down taxes on fertilisers. In other words, the government takes away with the other hand a sizable part of what it gave with one hand. The net worth (i.e., total assets minus total liabilities of the fertiliser companies on which 12 per cent margin is calculated) figures are highly inflated figures which are not taken seriously in the share market when investors buy the shares of fertiliser companies. All the fertiliser companies employ contract labourers to the tune of 8090 per cent of the labour force and they often get not even 50 per cent of what the companies cite as labour costs. Thanks to the most inefficient units with relatively higher cost, the more efficient units in the private sector get more than double the fixed rate of 12 per cent as profit due to their lower costs.
In the era of liberalisation starting in the early 1990s, fertiliser prices were partly decontrolled for phosphatic and potash fertilisers and removed the pricing and distribution controls and the use of these fertilisers drastically came down and it created an imbalance in the proportion of nitrogenous-phosphatic-potash (NPK) use and resulted in ecological damage to the soil and environment. When prescribed amount of fertiliser use, especially in irrigated areas, was a precondition for green revolution agriculture, the very high cost green revolution farming becomes meaningless and high expenditure on other inputs does not yield the result when a key input is not used in specified quantity. No wonder green revolution would still remain a mirage in vast tracts of eastern India in a regime of fertiliser price decontrol.
The price of urea was also repeatedly increased. This is one of the important reasons for the agrarian crisis. In 200001, the total fertiliser subsidy was around Rs. 8500 crore and by 200910 it had crossed one lakh crore more than tenfold/1000 per cent increase. But in this decade the growth in output was about 20 per cent! The subsidy is paid on the imported fertilisers also and since imports have been liberalized the importers mafia inflate the cost through over-invoicing and garners huge subsidies. Recent history shows that around 30 per cent increase in prices led to about 18 per cent reduction in fertiliser use in the 1990s. One study established that in 19992000, only 45.85 per cent of the total fertiliser subsidy went to the farmers and fertiliser industrys share was 54.05 per cent (See the study Fertiliser Pricing Policy available at http://knol.google.com/k/fertilizer-pricing-policy#). It was in this kind of backdrop, the UPA-II has gone in for a 10 per cent hike in urea and, worse than that, giving a free hand to the industry to fix phosphatic and potash fertiliser prices. In fact, in a short-sighted approach, to bring down the aggregate fertiliser subsidy amount, the government created an artificial scarcity and fertiliser was not flowing freely.
In fact, a powerful lobby of policymakers and academics keep advancing the adventuristic argument that the subsidy to agriculture is four to five times the total investment and the ratio should be reversed. Well, investment can be brought up to the level of subsidy without reducing it as the subsidy can be reduced only at the cost of putting the total agriculture in peril. If tax waivers and stimulus subsidies to the corporates in a single year, 200910, could be about ten times more than a rare election eve one-time loan waiver to farmers the previous year, then if at all any reversal is needed, it is the ratio of subsidy to the corporates and subsidy to hundreds of millions of farmers.
DIESEL PRICE HIKE
By 30 June 2009, there were 16 million energized pumpsets in the country. But number of diesel pumpsets is also increasing steadily and the rate of conversion of diesel pumpsets to power-driven ones is negligible. The diesel pumps are cheaper to install but recurrent operational costs are very high. Some 3035 energy saving can be achieved easily by converting diesel pumps to electric pumps. The borewell irrigation schemes based on pump subsidy like Million Wells Scheme failed in UP and Bihar because of the high operational costs of the diesel pumps. The share of electric pumps is the whole of eastern India is less than 15 per cent of the total.
If only the Central government could have evolved a strategic policy for rural electricity supply and pricing in cooperation with States with appropriate federal incentives, farmers could be spared the blow of repeated hikes in diesel prices. Use of electricity instead of diesel for irrigation would also result in lots of carbon saving. The UPA National Action Plan on Climate Change document however doesnt address this issue at all. Now there is an exclusive ministry for renewable energy and in the name of renewable energy thousands of crores worth of incentives are being extended to the corporates but assuring power supply to dissuade farmers from using diesel pumps doesnt figure as a climate response at all. In this backdrop, repeated increases seven in this decade in diesel prices will cripple irrigation development and increase the cost and make agriculture unviable for farmers. By contrast, four per cent growth in agriculture per year can be achieved quite easily if power supply to the rural areas can be doubled in the next ten years.
A New Chapter in the Neo-Liberal Agenda
Recently, Montek Singh Ahluwalia, and later the full Planning Commission, called for 50 per cent reduction in fuel and food subsidy. He also called for a greater role for private sector and agribusinesses. This is in the backdrop of India signing a MoU with the USA on Agricultural Cooperation and Food Security. Other than this, there is also a Green Partnership with the USA which might pave way for conversion of foodgrain lands to biofuel plants cultivation. There is also a move in this backdrop to hustle through this budget session itself a Seed Bill which, like the waiver to the US companies supplying reactors and other N-power equipment from any nuclear liability in the case of accidents, would give a waiver to the US MNCs from any liability from seeds failure.
Thus, while making it easier for US MNCs to enter the agricultural arena via wholesale and retail trade and contract farming, there is also a move to rope in SHGs and to convert them into intermediaries for the big capital, especially in procurement, retail distribution and food processing. In the name of value chain improvement and skill development, all sections of rural India are being subordinated to the interests of the global capital. For this purpose, like the DFID of the UK, the USAID has roped in a private US consultancy NGO, ACDI/VOCA (Agricultural Cooperative Development International/Volunteers in Overseas Cooperative Assistance) to do policy steering in India. Funded by the USAID, the ACDI/VOCA, which is working in 145 developing countries, has already started working in India with multimillion projects in areas like agribusiness systems, (micro) enterprises development, financial services, community development and food security. This outfit is playing a key role in US disaster capitalism� project in Haiti. It is also into generating green jobs� and evolving a rural green economy� to put American blueprint on Climate Fund utilization in developing countries.
In India, the ACDI/VOCA has already implemented USAIDs first enterprise development project, the 4-year, $6.3 million India Growth-Oriented Microenterprise Development Program (GMED) under its Accelerated Microenterprise Advancement Project (AMAP). GMEDs agribusiness component focused on fruits and vegetables, organically certified food products and maize value chain improvement and so on. It has promoted a farmers cooperative called Nandani in several States including AP, Maharashtra, Uttarakhand and Karnataka etc., in league with big corporates like ITC and Radhakrishna Foods and has made these cooperatives the supply channels for corporates in the name of integrating the smallholder fruit and vegetable farmers into the commercial supply chain�. It is also into skill development related to processing procedures for organic food. It works with MNCs to diffuse maize processing technology in India. It claims to be developing a model of food security through the market. It is working with several leading donor governments/agencies and funding agencies and trains the NGOs in taking up these activities in the name of capacity building. In the name of rendering technical services, it is dictating policy to a pliable UPA Government. In other words, even before the February MoU on Agricultural Cooperation and Food Security could be signed into a full-fledged Indo-US Agri Deal like the N-Deal, this ACDI/VOCA has started doing the groundwork for greater role for the US agribusiness firms in India. Since it mainly works with the top government officials, corporates and NGOs, it activities have not come into limelight much. But it is clear that this less known outfit is evolving the framework for multinational corporate invasion of Indian agriculture.
Corporate Invasion of Agriculture
We prefer to use the expression corporate invasion of the agricultural sector instead of corporate farming. Direct large-scale mechanised farming by the corporate sector is still marginal in India and Indian agriculture is still characterised overwhelmingly by small-scale peasant cultivation. But corporate invasion of agriculture in areas other than direct cultivation is substantial.
Of course, corporate invasion of agriculture is also not new. Agriculture used to supply the main raw materials for industries like cotton, jute and sugar mills, tobacco industries, edible oil mills and certain traditional processed foods and the corporate sector used to supply agricultural machineries and inputs like fertilisers. But these didnt exactly fall in the category of contract farming where the price is agreed upon before the farmer starts cultivation and the entire produce is bound to be sold at the pre-fixed price to the corporates with possible other clauses in the contract that may or may not involve supply of inputs and technical assistance in farming etc.
Apart from a significant rise of corporate farming, corporate capital is also entering the agricultural arena through retail trade and food processing. Big capital is also making forays into fruits and vegetables, organic food, seeds and herbal medicinal plants in a big way. There are also tripartite and multiparty contracts involving the banks, insurance companies and input dealers which however leave little bargaining capacity for farmers and make them virtual slaves of the capital with interest rates, premiums and even input prices remaining much higher compared to market rates but the procurement price much lower compared to open market prices. About 20 big business houses, some of them in league
