Signs of Deepening of the Agrarian Crisis
Within a couple of months after the Union Budget, in the absense of any fresh official data, it would be difficult to assert with comprehensive data that the agrarian crisis in the country is deepening. But whatever limited data, official and otherwise, are available they indicate sure signs of the crisis deepening in the coming agricultural year.
Contrary to the UPA's claim of raising farm sector growth to 4% per annum in the last Budget compared to 2.3% achieved last year, almost all predictions this year have put the agricultural growth far lower: the CII – 3% and the NCAER – 2.1%. Both RBI and CSO estimates have also projected lower growth of GDP as well as agricultural sector even after assuming normal monsoon. Grain output in 2005-06 was estimated at 209 million tonnes the level reached six years ago.
Farm incomes are declining. Compared to 1996-97 level of incomes, by 2004 the incomes of wheat farmers had declined by 10% and paddy farmers' incomes in West Bengal had slumped by 28% and the sugarcane growers' incomes had eroded by 32% in UP and by 40% in Maharshtra. ( The Telegraph, March 1, 2004 ) The incomes did not go up in the next two agricultural years and there is no sign of these incomes reviving this year also.
Perhaps, strong signs of the aggravating agrarian crisis come from Punjab . Debt per farmer is Rs.45,000, the highest in the country. CM Amrinder Singh himself came out with the fact that the aggregate annual income of farmers in Punjab was Rs.7,200 crore and their aggregate debt is Rs.24,000 crore. There was a forceful demand from the farmers and protests for increase in MSP for wheat to Rs.950 and the state government offered only a bonus of Rs.50 above the MSP of Rs.650 a quintal. But Amrinder himself has gone on record admitting that the input prices have risen by Rs.112 a quintal.
Chidambaram promised to reduce the rate of interest on agricultural loans to 7% in his budget as against the recommendation of the National Commission on Farmers to bring it down to 4%. But even this promise has not been implemented so far. He had a meeting with the chiefs of PSU banks on April 24 and the bank bosses were against lending below 9.5% and reportedly demanded Rs.2,000 crore from the Union Government to lend at 7%. Coming out of the meeting, the Punjab National Bank Chairman Mr.Gupta told reporters that, “there was no directive from the Finance Minister to reduce lending rates to agriculture”. ( The Economic Times (ET) , April 26, 2006 ). Khariff season is approaching and still there is no sign of reduction of rates for kharif season loans.
Actually, the average cost of funds for banks is only 5.4% and remaining 4% accounts for operational costs! Government has so far not taken a decision to subsidise banks to the tune of Rs.2,500 crore to provide agricultural loans at 7%. The government is citing high fiscal deficit as a pretext and even planning to increase PDS issue prices once again. But this fiscal deficit argument is the usual humbug. Chidambaram's Union Buget itself, in an obscure sub-section discernible only to the careful reader – in Annexure 12 of the Receipts Buget – has revealed that in 2004-05 the tax exemptions [of course, to the rich and the corporate houses – RV] have eroded Rs.1,58,000 crore worth of taxes. This was more than the fiscal deficit of Rs.1,25,202 crore in 2004-05! And Chidambaram in this year's budget also refused to tax rich farmers which could have generated revenue more than needed to offer remunerative prices to all farmers.
Another sign of intensification of the agrarian crisis in the country this year is the government's controversial decision to further import wheat (See box). The government is paying only Rs.700 per quintal to the farmers. But the market price of wheat for consumers shot up from Rs.940 a quintal in the beginning of April to Rs.1,104 per quintal in May, an unprecedented 20% rise within a single month. This only shows the racketeering by the wholesale traders' lobby. The government declared its intention behind wheat imports as market intervention to bring down the prices. The Australian wheat – imported from big business AWB at Rs.950 a quintal, a price higher than what the Indian government pays to its own farmers – has started arriving in April itself but there is no sign of prices easing but inspite of imports there is a sharp rise. The AWB wheat is sub-standard and thanks to timely objections by Chennai port authorities the ship has not beeen allowed to unload. Secondly, the government has now allowed private corporates to import wheat which is contradictory to its declared intention of market intervention through the STC.
The government is also continuing with its conspiracy to systematically subvert state procurement. For example, last year, in Uttar Pradesh, the third major wheat producing state after Punjab and Haryana, the FCI had procured, for inexplicable reasons, hardly 20,000 tonnes against a procurement target of 2.5 million tonnes. By offering a low MSP, the government is deliberately pushing the farmers towards traders. But private traders are looting farmers. Though open market purchase prices are supposed to rule at Rs.800-810, in Punjab , Haryana, Rajasthan, UP and Maharshtra farmers were forced to sell wheat below MSP. The story was the same in 200 rice mandis all over the country. The Punjab government has allowed MNCs to buy directly from the farmers but debarred FCI which should buy only from the commission agents paying a huge commission. Till April end the government agencies had procured only 8.2 million tonnes of wheat compared to 11.7 million tonnes procured last year and this year's target of 16 million tonnes. At this rate, there will be no wonder if imports increase beyond the anticipated 5 million tonnes. The meterological department has forecast that the monsoon would be sub-normal this year. If there is a crop failure and procurement continues to be low after this kharif season also then by this year end there will be an acute food crisis in the country and the PDS issue prices will be dramatically raised. The present wheat imports at 3 million tonnes are estimated to be at a cost of Rs.2,400 crore and this much money is being lost by our farmers.
Not just wheat prices but prices of most of the agricultural commodities like channa dal, mustard, urad (black gram), moong dal (green gram) and red chillies have shot up. There seems to be no relationship between crop size and prices. For instance, despite a bumper harvest of mustard, the prices are ruling high. Though urad is harvested in February-March, despite a good crop, the prices have shot up by more than 50% in April-May. Commentators attribute this to hoarding by corporates who speculate in commodity futures which is a new phenomenon in India . Pulses output has been stagnating for several years. In 2004-05, output fell short of target by 2 million tonnes and pulses worth Rs.2,261 crore had to be imported.
The Congress-NCP poll promise in Maharashtra was to provide Rs.2,700 as procurement price for cotton. But the Congress-NCP combine has badly cheated the cotton farmers. Far from increasing the MSP, the Maharshtra government even scrapped the advance bonus in October 2005, thus effectively reducing the procurement price from Rs.2,250 to Rs.1,700. This was the price farmers used to get as far back as 1994. Vidarbha Jan Andolan Smiti, which is spearheading the farmers' protests, has claimed that since a month after the government scrapped the advanced bonus 322 farmers have committed suicide. Maharashtra CM Vilasrao Deshmuk promised a Rs.1,000 crore debt-relief package in December but reneged on that promise also. Under pressure from the World Bank, the Maharashtra curtailed its Monopoly Cotton Procurement Scheme and allowed privated traders to play havoc with cotton prices and it also scrapped the free power scheme to farmers from June 1, 2005 . The results are there for all to see.
The Situation Assessment Survey conducted by the NSSO last year revealed that while the incidence of indebtedness among farmers in Maharashtra rose from 29% of households in 2001 to 88.97% in 2003, the extent of indebtedness per household (debt in rupees per household at 1986-87 prices) rose by 232% in this period. The average annual profit from cultivation in Maharashtra was barely Rs. 4,363. The annual net income of a farmer's household in Maharashtra was less than their annual consumption expeniture. According to SAS, the average monthly income of a cultivating household in the country was Rs.969 from cultivation.
One reason behind the crisis of cotton growers in Maharashtra is that the seeds supplied by Monsanto through its subsidiary Mahyco have utterly failed in the Vidarbha region. In Andhra Pradesh also the cotton yields last year were reported to be much low despite Monsanto's lofty claims and there was total failure of cotton crop in 25,000 acres in Warangal where Monsanto's seeds were planted. The AP Government, under farmers' pressure, demanded Rs.3,000 compensation per acre from Mahyco-Monsanto which initially agreed but later refused. Monsanto is extorting monopoly prices from cotton farmers and the AP Government has already taken it to court under the MRTP Act and the Gujarat Government is desperately pleading with Monsanto for negotiations to reduce seeds prices. As against the approved sales price of Rs.604.20 per a seed packet of 450 grams, Monsanto GM cotton seeds are being sold for Rs.1,818 per packet. The Director General (Investigation & Registration) of Monopolies and Restrictive Trade Practices Commission has recently pulled up Monsanto for overpricing its genetically modified Bt cotton seeds and issued an order not sell seeds at a high price and Monsanto has gone to the Supreme Court appealing against the MRTPC order. Both the NDA and the UPA governments have handed over the seeds business to MNCs but they have not met the demand of farmers' organisations for a legislation on liability of seeds corporations for crop failure which could force them to pay compensation.
This season onion growers in Nashik were in tears. Prices fell to Re.1 a kg and then to 10 paise per kg! Farmers incurred a loss of Rs.500 per each quintal. Since it is his home state, Union Minister of Agriculture appeared promptly before the TV cameras announced a ‘relief package', for a paltry sum of Rs.30 crore – which worked out to 50 paise per kg.! Compare this with Rs.1,850 crore package given by the Maharshtra government to the sugar industry last year at the intervention of Pawar and one can understand the strenghth of the sugar lobby. No wonder, Pawar was pelted with onions by farmers in Nashik.
Many states are reeling under acute power crisis and the power supply to the agriculture sector is the worst hit. Gujarat , Rajasthan, UP, Bihar , Madhya Pradesh, Haryana – it is the same sad story all over the wheat belt. And all these states as well as Gujarat and Maharashtra supply only 6-8 hours of power to the agricultural pumpsets. To add further suffering to farmers' woes, the UPA Government is also planning to increase diesel prices and in the Hindi belt most of the farmers are dependent on diesel pumpsets. This is bound to aggravate the ongoing agrarian crisis. The prices of seeds, fertiliser and cattlefeed – all are going up and are bound to increase sharply in the coming agricultural year.
The government has also made a controversial decision to export sugar. The international prices are ruling at $477 (Rs.21,369) a tonne and the domestic prices are at Rs.17,500 a tonne but sugarcane growers are not going to get a single paisa from this difference and all this advantage would be cornered by exporters and some sugar mill barons who are already pressurising the government to relax monopoly exports through State Trading Corporation. Even before a policy decision is taken the UPA Government has allowed the Hyderabad-based GMR industries to export sugar.
Promoting corporate farming was the stated alternative of the UPA Government to overcome the farm crisis. Corporate houses are making a hayday while the crisis shows no sign of abating. After PepsiCo several corporates including Reliance, Hind Lever, Tatas' Rallis, Sunil Mittal's joint venture with Rothschild, Ballarpur Industries and Mahindra and Mahindra have entered corporate farming. Tatas and Godrej have formed separate agri divisions like Tata Agrico and Godrej Agrovet. Retail majors are also entering agriculture in a big way. Telecom czar Sunil Mittal wants to ensure that, “everyone in India would soon be purchasing food and grocery from Bharti retail outlets”. [ ET, May 6, 2006 ] Since Mittal Group is entering retail trading in a big way in collaboration with the notorious US MNC Wal-Mart, the Maharshtra government has hastily amended the Agricultural Produce Marketing Committee Act in April to allow direct procurement of agricultural produce from farmers by corporates for shopping malls and retail chains. The corporates are exempted from paying market fee even. This amendment has been carried out at the behest of retail MNCs like METRO Cash & Carry, ITC, Cargil Foods, Hypercity and ShopRite and Wal-Mart. Wal-Mart is also collaborating with Reliance and Reliance Retail has already acquired large tracts of land in Haryana and a similar exercise is on in states like Andhra Pradesh, Gujarat, Himachal Pradesh, Karnataka, Punjab, Tamil Nadu and Uttar Pradesh. The government's offer of low MSP to wheat appears to be a conspiracy to break the so-called “wheat monoculture” in Punjab in favour of corporates which want to enter contract farming in a big way in the state in other crops like fruits, vegetables and flowers. All this corporate farming invasion, far from mitigating the crisis of farmers, is only paving way greater plunder of their resources by corporates.
Even the National Commission on Farmers chaired by MS Swaminathan has called for a new agricultural policy, “to bring farmers out of the vicious debt circle that is driving some to suicide,” in its fourth report since its formation in 2004, submitted to Sharad Pawar. Like the three earlier reports this report has also been consigned to dustbin. "Already three reports have been submitted. This is the fourth one, all running into more then 400 pages. Do I have the time to read all this?" said Pawar. (NDTV.com, April 21, 2006 ) According the data obtained by India Invest Economic Foundation through its own surveys, the total outstanding loans farmers had to pay private moneylenders stood at Rs.67,000 crore. Of course, MS Swaminathan has not bothered to explain how this amount of private loans can be written off even if the Union Government is forced undertake one-time waiver of institutional loans.
The US is also applying arms-twisting tactics to pressurise the UPA. Since the first wheat import orders went to Australian companies, the US has woken up and has started building up diplomatic pressure to divert orders to American MNCs. There is pressure in other areas also. US Under Secretary of Commerce for International Trade, Mr.Franklin L.Lavin said, “While India has significantly lowered tariffs on non-agricultural products, agricultural tariffs remain around 40%”. He openly demanded that India should reduce its agricultural tariffs. Lavin also darkly hinted at the possibility of linking services imports by the US from India with India 's agricultural imports from the US . Pressure is also mounting on India in the WTO for reduction of agricultural tariff. The WTO chief Pascal Lamy also issued a threat that, “ India would lose if agricultural trade talks fail”. Despite all tall talks from Kamal Nath, it is only a matter of time before India succumbs. After all, the offical negotiating position of India itself was “no extra sacrifices”!