Farmers' Suicides in Maharashtra

Over 14000 farmers in different states of India have committed suicide between 2001 and 2006. Death is haunting the farmers of Vidarbha region of Maharashtra . Karnataka, Andhra Pradesh and Maharashtra are competing with each other to stake the highest claim to farmers' suicides in India .

Despite the tall claims of containing the crisis by the Congress government in Andhra Pradesh after initiating a number of ad-hoc measures such as interest waiver, moratorium on debts, waiver of electricity dues, providing free power for agriculture use, streamlining seed supply etc., farmers' suicides still continue in Telangana and Rayalaseema regions of the state. The official figures put the number of suicides at 1,261 till March 2006, during two years of Congress rule in the state. It is said that on an average, three to five suicides are being reported every week in the state. The same is the fate of farmers in Karnataka and till now largest number of farmers' suicides occurred in this state. Agriculture is almost becoming obsolete in Punjab . There are attempts to pump in more agricultural credit and other ad-hoc interventions to salvage the situation. Time and again this has misfired. It is only like tightening the noose around the neck of already debt-ridden farmers. The basic cause for the malady lies elsewhere.

The farming community in India is exposed to the volatility of international market under the WTO regime, thanks to the policy of bringing in a range of agricultural commodities under the Open General Licence imports. Planning Commission member Abhijit Sen says: "Clearly, even across regions, the most common problem is the essentially high level of debt relative to incomes. Between the last two NSS surveys, both debt to GDP and debt to consumption ratios for farmers have simply doubled. Also, the highest suicides are in the regions with the highest debt. Most of them are also in cotton belts in the case of Maharashtra , Andhra and even Karnataka, while in Kerala, it's spices like black pepper. These are cash crops which suffer from highly volatile prices and need superior market and technical knowledge. When the unaware farmer diversifies into a cash crop lured by high prices in a particular year, it's like entering the stockmarket when the prices are unrealistic; you can face a crash the next year."

It is said that the cotton crop killed many debt ridden farmers in Maharashtra . But the suicides of farmers in Vidharba region clearly shows that it is the policy of central and state governments that has pushed many of the vulnerable farmers in to debt/death trap.

Sharad Pawar's package to arrest farmers' suicides

In Andhra Pradesh, Karnataka and Maharashtra the state governments have already been announcing packages to curb farmers' suicides without much result. There is already a package announced by the Centre during June 2004 for the entire country, comprising rescheduling of repayment of outstanding debt over five years with two year moratorium, rescheduling of loans in default, fresh credit for 'ineligible' farmers, OTS for farmers declared as defaulters and loans for farmers to pay off moneylenders. These packages along with Chidambaram's budget 'commitments' to rural sector have not effectively addressed the basic issues of crisis in agriculture as evident from the continuing farmers' suicides across the country. In this backdrop, Union Agriculture Minister Sharad Pawar has recently announced a special package to be implemented within two months to arrest farmers' suicides. This is done in consultation with the chief ministers and agriculture ministers from Kerala, Maharashtra , Andhra Pradesh and Karnataka in Hyderabad . The government has chosen 30-35 problem-ridden districts from these four states, including 15 from Andhra Pradesh, six each from Maharashtra and Karnataka and three in Kerala.

Agriculture Minister has said that the new package would supplement and support the State Governments' efforts. It is said that the package would address problems relating to credit, insurance, irrigation, agricultural productivity, lack of extension services and lack of marketing infrastructure.

· The draft package envisages conversion/rescheduling of loans from six to nine years or even more, including moratorium of three years, no compounding of interest and waiving of interest during moratorium period at the end of the loan tenure.

· A special one-time settlement (OTS) package would comprise waiving of interest and allowing three to four years for payment of settlement amount to be made applicable to cooperatives and the creation of a credit risk fund for interest relief to small and medium farmers.

· The package envisages farmers to pay maximum premium of 4% and liability beyond that to be shared by the government. The government proposes to launch weather insurance and individual assessment where a scheme on actuarial basis is not applicable.

These are not something new and have been already announced as policies both at Central and State government levels. Finance Minister, Mr. Chidambaram, has offered some announcements in his budgets over the past two years, the main one being increasing credit flow into rural areas by Rs. 1,70,000 crores. These already existing packages have not meant anything to farmers who are caught in the crisis of unremunerative prices and volatility of international markets. Under such circumstances pumping in more credit without control over trade would only intensify the crisis and push farmers deeper into debt.

Pawar's proposal also includes increasing cropping intensity by increasing intensive irrigation. One of the main ailments of agrarian sector in India is shift to capital-intensive crops, on the one hand, and reduction in protection to such farmers under the WTO regime, on the other. This has pushed farmers into debt and suicide.

The National Sample Survey Organisation (NSSO) survey has shown that 50% rural debt is due to capital-intensive farming such as high cost Bt. Cotton seeds and agrichemicals. According to the National Sample Survey, 48.6% of farm households are in debt. The two most important purposes of taking loans were stated to be "capital expenditure in farm business" and "current expenditure in farm business". At the all India level, out of every 1000 rupees taken as loan, 584 rupees were borrowed for capital-intensive agriculture.

Thus, any package that is devoid of measures protecting the farmers from the volatility of the international market and prices is bound to be a failure.


Killer Cotton?

In the Vidarbha region, the cotton belt of Maharashtra , over 980 cotton farmers have committed suicide between 2001 and 2006. Of the 3.4 million cotton farmers in this region, 95% are believed to be struggling with heavy debt, according to Jan Aandolan Samiti.

Cotton is an important commercial crop grown in Maharashtra constituting around 15 of the gross cropped area, accounting for the highest area under cotton in the whole country. Nearly 97% of the cotton cultivated in Maharashtra being unirrigated, yield from cotton is lowest and much below the all-India average. While the all-India yield was 191 kg per hectare in 2000-01, the yield in Maharashtra during the same period was 100 kg per hectare.

The four major cotton growing districts of Akola , Amravati , Buldhana and Yavatmal together constituted 43% of the area in the state. For most farmers in this region, cotton is the primary cash crop and therefore the principal source of income. However, this has turned out to be most unremunerative in the last decade.

The Maharashtra State Agricultural Prices Committee data shows that for the year 2002-03 the cost of production of H-6 variety was Rs 2357.61/- per quintal whereas the Minimum support price (MSP) announced by CACP was Rs 1875/- per quintal. Again with respect to NHH-44 and LRA-5166 while cost of production was Rs 2318.84/- and Rs 2185.33 per quintal respectively, the MSP was Rs 1620/- and Rs 1750/- per quintal respectively. This indicates that the MSP fixed is about 20 to 30% lower than the cost of production. (Sangeeta Shroff, GIPE, Pune, Cotton Sector in Maharashtra ).

The newly introduced, genetically modified seed, Bt.Cotton, that was enthusiastically endorsed by the government has wreaked havoc on cotton farmers' lives. Its manufacturer, Monsanto, said it was resistant to boll weevil - the main cotton pest - and required just two sprays of insecticide for every crop, instead of the usual eight. This seed sold for about four and a half times the cost of normal seed, but many farmers opted to buy it because they believed it was indestructible and would give a higher yield. They were devastated when many of the Bt cotton plants were afflicted with a reddening that destroyed much of the crop leaving the farmers with unusually high debts.

On the one hand promoting multinational giants such as Monsanto, the government has withdrawn market controls, tariffs and subsidies for agriculture under the diktats of the World Bank. This is done without providing proper infrastructure such as irrigation and marketing facilities. This has pushed Indian farmers to compete with farmers in the United States and the European Union who are protected by trade restrictions and provided with billions of dollars as subsidy. The 2002 Farm Bill in the U.S. alone gave $190 billion to large companies growing cotton, wheat, corn, soybean, rice, barley, oats and sorghum.

Ten years back, the international price of cotton lint was $1.10 a pound ($2.42 a kilo) but now it is 52 cents. The retail price of cotton then was Rs.40 a metre, and it is now Rs.80. Retail prices have doubled but farmers are forced to sell their produce at half the price.

The Central Government can protect cotton growers from imports and crashing international prices by hiking the import duty on cotton. But this is not done. At present it is only 10%. With respect to imports of cotton, since 1970 they were canalized through Cotton Corporation of India . However, in April 1994, keeping in tune with globalisation, cotton lint imports were placed under open general license (OGL) i.e., they were freely importable. Further, from July, 2001, raw cotton exports were also under OGL. With international prices being depressed there is hardly any scope for the Maharashtra Federation which was holding large stocks of cotton to capitalize on exports. (Sangeeta Shroff, GIPE, Pune). Falling global prices coupled with a low 10% import duty, made imports cheaper; imported cotton now sells at Rs 17,000 a bale compared to Rs 19,000 for Indian cotton. As a result more cotton is imported in the past five years than in the previous two decades.

The Maharashtra Monopoly Cotton Procurement Scheme set up in 1972 to purchase cotton from the state's 30 lakh cotton farmers has been systematically scarped since 2002 to allow the private traders to have their heyday (see box).

Cost of production being much higher than the prices, most farmers are running up huge losses and have to borrow heavily. Since most of them have defaulted on loan repayments the banks are unwilling to extend fresh loans. Their only recourse is to borrow from the trader-moneylender at 60 to 120% interest. This has ensured that the farmers are trapped in debt.

A report submitted to the government of Maharashtra by the Indira Gandhi Institute of Development Research, Mumbai during January 2006 on Suicide of Farmers in Maharashtra by Srijit Mishra has found out that the suicides are triggered by the import policies of the government and the resultant debt trap of the farmers. The study was focused in three districts in Vidharba region namely Wardha, Washim and Yavatmal.

The main findings of the IGIDR Report

•  Farmers in the selected districts are exposed to both yield as well as price shocks for their cotton crops. In 2004, the selected districts experienced acute water problems due to deficit rainfall. Though cotton cultivation was affected in at least some pockets of the selected districts, there has been record production in the state as well as in the rest of the country. Increased supply of cotton in 2004 was worldwide leading to a fall in its prices.

•  Price risk in cotton is further compounded due to large subsidy provided in the United States , low import tariff of only 5% in India and the failure of the Monopoly Cotton Procurement Scheme (MCPS) in providing a fair price to the farmers in Mharashtra.

•  The number of rural branches of Scheduled Commercial Banks (SCBs) has not increased and it has been declining as a proportion of total branches. Agricultural credit as a proportion of total credit disbursed by the SCBs has been declining. Credit lines of co-operative societies are chocked. Credit flow through primary agricultural co-operative credit societies indicate that loan per hectare gross cropped area is the lowest in the Vidarbha region.

•  The breakdown of formal credit structures has led to increased reliance on informal private sources of credit with greater interest burden. Under normal circumstances interest charged by private moneylenders is around Rs.25 ( sawai ) or Rs.50 ( dedhi ) for a loan of Rs.100 that is to be repaid in 4-6 months time.

•  In the absence of government extension service, farmers are advised by input traders leading to an increase in input costs through supplier-induced-demand.

•  Share of input costs for seed, pesticide and fertilizer in cotton is higher than that for other crops. In fact, 90% of the total insecticide/pesticide usage in the five major crop groups in Maharashtra is in cotton.

•  Cotton's share of gross value addition in Maharashtra 's agriculture is much lower than its share of gross area under cultivation. In fact, estimated cost of cotton cultivation in 2004-05 would at best break-even with the price under Monopoly Cotton Procurement Scheme.

•  Expenditure under public intervention programmes like the Maharashtra Employment Guarantee Scheme (MEGS) is not commensurate to the regions share of poor. The share is even lower for agriculture and irrigation schemes, which together account for 44% of the state's expenditure under MEGS during 2001-4.

The study also reveals that the suicide mortality rate among male farmers in Maharashtra trebled from 17 in 1995 to 53 in 2004. This is much more intensive in the selected districts of Vidharba region. Farmers' suicides were neutral to education and social groups. The most important reason is found to be heavy indebtedness to both institutional and non-institutional sources. Reliance on the latter has been increasing in the recent past.

Response of the State Government

Alarmed at the phenomenal scale of farmers' suicides, Chief Minister of Maharashtra announced farm loans at the rate of 6% interest, 1% less than the previous rate. He also announced that, "If a farmer repays the loan on time, he will get an additional subsidy of 2% in the interest rate and state will bare the cost of giving loans to farmers at subsidised rate." This announcement is a farce as the farmers are already with high debt burden that they are unable to repay. In the absence of remunerative prices the farmers cannot repay the loan. 1% reduction in the interest will hardly relive the farmers from the large gap between cost of production and prices. A recent study by the state-run National Bank for Agriculture and Rural Development (Nabard) revealed that small and marginal farmers holding up to five acres were more vulnerable. And borrowings from institutional and non-institutional sources were almost equally responsible for farmers' indebtedness. The average outstanding per sample farmer was Rs 38,444. Given that most of the farmers are indebted to the non-institutional sources of credit, there is no strict action to curtail the private moneylenders.

Besides financial relief, the state government is trying to uplift the morale of farmers by organising social events like prayer meetings, plays, talks by experts etc. Instead of addressing the root causes, efforts to start counselling camps for the farmers, asking them to join Art of Living classes, or attend morning bhajans is a cruel joke on dying farmers.

While the state government packages are yet to take off, there is yet another package for the suicide prone states announced by Pawar which is almost on similar lines (see box).