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The Deliberate Destruction Of Agriculture - Le Monde diplomatique (nabadip)

Madhava - Sat, 20 Mar 2004 02:23:37 +0530

(September 2002 @ Le Monde diplomatique)

- India: free markets, empty bellies -

The outgoing World Trade Organisation director-general, Mike Moore, said the WTO's greatest motivation was the people it served. India's small farmers do not see it that way. The nation's agricultural policy has long been geared to meeting its own needs and being self-sufficient in food. But the WTO is pressing India to open its markets, and so agriculture is being destroyed as big foreign producers flood in. And people stay hungry.

- By our special correspondent ROLAND-PIERRE PARINGAUX

"IT'S too hard being a farmer here. I've tried everything, but I always lose." BT Gangappa, 33, farms at the village of Kalmala, 20 km from Raichur, Karnataka state, in southern India. His only resource is three hectares of land on which he grows rice and peppers. But for several years this has not been enough to feed his wife and four children. Like many others in this corner of the Deccan plateau, he made a profit growing cotton for a long time. In 1996 he made 130,000 rupees ($2,600) on an investment of 35,000 ($745). Everything was cheaper then. Seed, pesticides, water, electricity, fuel and even credit were subsidised by the state. A kilo of cotton cost seven rupees to produce and fetched 26 rupees. Now the situation is reversed: production costs 25 rupees a kilo, but the market price is only 17. The Raichur spinning mill has closed down, victim of bad management, competition and the quality of local cotton. In 1998 violence followed attempts to introduce transgenic cotton in the region (1).

Many farmers fell back on growing rice and peppers. But last year the market offered only 350 rupees ($7) for a quintal of paddy rice that had cost 400 rupees ($8) to produce. That was half the price paid for the same quality the year before. Some stored their crops, hoping for better days when prices would recover or the government intervene. Pressed by creditors, others sold at a loss. Gangappa sold to a moneylender who paid him 10% less than the market rate. The price of peppers fell last year. Gangappa made a loss of 10,000 rupees ($200), putting him even more at the moneylender's mercy.

For his neighbour, MB Yellapa, things were better before too. He used to grow sunflowers and groundnuts, but two years ago falling subsidies, competition from imports and rising production costs defeated him. The prices of certain seeds sold by an Indo-American multinational increased almost tenfold, from 25 rupees to more than 200 a kilo in a few years. "Except for rice, we have to buy seed every year because it produces little in the second year," he explains. Last year he invested in rice and peppers and fell heavily into debt.

The situation is the same in nearby hamlets bordering an irrigation canal. One major rice grower there refused to sell, blaming imports of cheap rice for the low prices. Another left his land fallow and is hiring himself out by the day as a labourer; he says it is not enough to live on. The villagers speak of a man called Satiah who did not have the strength to
carry on. Trapped between market forces and the moneylender, he swallowed pesticides and killed himself. Sometimes the state compensates the family for low prices. The money is used to repay the moneylender; otherwise he takes the land and the family ends in a shantytown.

A few thousand kilometres to the north, the desert state of Rajasthan is the victim of a good harvest (see box). Here, too, farmers' organisations and opposition movements accuse the World Trade Organisation (WTO) and its liberal creed. They believe the agreement that forced India to throw open its borders to international trade to be responsible for the crisis in agriculture. More than 700m Indians who eke out a living in the countryside are affected.

Over the last few years opponents of Atal Vajpayee's government and its neo-liberal policies have demonstrated against the WTO, World Bank and Western transnationals, accusing them of pushing for an industrialised agriculture totally unsuited to Indian reality. Their policy plays into the hands of the rich countries and agri-business giants, and it is
ruining the subsistence economy and systems of food security which until now enabled tens of millions of small farmers and workers to survive. The consequences for a country of a billion people are all too evident.

The WTO does not have sole responsibility for the difficulties agriculture is experiencing. In January 2001 an official report on the application of the WTO agreement in Karnataka state underlined the deficiencies in infrastructure, training, technology, quality, competitiveness, education, and information (2). It is a mess, but not an exceptional mess. WTO
precepts have not been the panacea that some promised to persuade the Indian government to open India's markets.

India joined the Uruguay round of multilateral trade negotiations in 1994. The agreement, which created the WTO, for the first time required trade in agricultural products to be liberalised by lowering tariffs and non-tariff barriers. Those who signed were to open their doors to imports, cut support measures and abolish export subsidies. Like other developing countries, India was allowed time to adjust. But the course was set.

In theory, the law of the market and fair prices ought to make Indian agriculture more competitive internationally while reducing public sector involvement. That was said to be the best way to revitalise a sector that had remained insular, overprotected, undercapitalised and uncompetitive. But Indian farming had remarkable success; in a few decades it had moved from food dependency to self-sufficiency and even exported.

With India's many small farms, averaging one hectare, high production costs and poor yields, agricultural performance lags far behind industry and services, driven by a communications boom and a high-spending urban middle class.

With a supposed comparative advantage, agriculture was to have been the first to benefit from the post-WTO opening-up. But plummeting world prices caused a crisis, and the measures imposed by the WTO made matters worse. Growth slowed in the 1990s, and farming fell behind in infrastructure and credit. The gap between urban and rural incomes widened. Absolute poverty, which had fallen from 55% to 35% of the population in the 1970s and 1980s, began to increase again.

In 2000 an Indian ministry of agriculture booklet summed up the situation: "The growth in agriculture has slackened during the 1990s. Agriculture has become a relatively unrewarding profession due to an unfavourable price regime and low value addition, causing abandoning of farming and migration from rural areas. The situation is likely to be exacerbated in the wake of integration of agricultural trade in the global system, unless immediate corrective measures are taken" (3). RC Jain, additional secretary at the
Department of Agriculture, says there was a 15% erosion in farmers' incomes last year. Many now barely earn a dollar a day and most are in debt.


Farmers have seen little benefit from the 1994 agreement. Between 1999 and 2001 import restrictions were lifted on more than 2,700 products. The latest list took effect in 2001, two years ahead of the deadline. Some commentators saw such haste as a gesture to the US to get it to lift the embargo on technology transfers. The embargo was imposed on India after its 1998 nuclear tests.

This is worrying. The first major test on imports did not reassure. In the years after WTO accession, the government cut customs tariffs on vegetable oils, commodities much in demand by industry and households. The Indian market was almost self-sufficient and world prices high. But world prices fell and local producers were disadvantaged. They were too expensive to export and they lost part of the home market. Within a few years, cheap oil from Malaysia, Indonesia, the US and Brazil took 40% of the market. For some that was a blessing. But for millions of farmers and local processing industries it was a disaster. More than 100 out of 115 oil works have closed down in Karnataka (4).

The government is trying minimise things. According to Jain, "apart from oil there have been no massive imports in recent years and no negative effects of imports on agriculture". He claims the WTO agreement allows the government to reimpose duties and tariffs on about 800 products. But GM Nagara, a trade union official in Bangalore points out the government has not done so for vegetable oils. He fears the same will happen with sugar and dairy products. India is self-sufficient in these but external pressure is strong.

Liberalisation is damaging the system of subsidies, price guarantees and food aid that much of the population has long enjoyed. It is considered too complex and expensive. Cuts in public sector support for production, marketing and incomes are planned. As is the gradual dismantling of the Public Distribution System (PDS), the national network of state shops that provide low price food aid to tens of millions of Indians. The government decided to increase the price of cereals supplied by the PDS to make it profitable. Many people below the poverty line (less than a dollar a day) could no longer afford them. Others found cheaper food on the market. The system lost customers. Shops closed. Subsidies were cut, putting millions of people in a precarious position.

For the first time in many years food consumption is declining while cereal stocks are piling up. "It makes you wonder whether the lives of millions of people are valued or whether they are considered insignificant when productivity is the issue," says Professor Kamal M Chenoy of Nehru University, New Delhi; he is critical of "policies imposed by a minority of citizens" ignorant of the reality of the countryside or indifferent to its fate. But it is impossible to understate the responsibility of Indian governments; they have been unable or unwilling to create the environment and infrastructure for developing a sector on which almost three quarters of the population depend.

The state still has protection measures. But they violate the spirit of the WTO, and they are often costly and difficult to deploy. Some 20 agricultural products are covered by a minimum support price, but it is often below the market price and the government cannot afford to buy every unsold crop. "Indian farmers have been more affected than ever by the drop in world prices, despite price guarantees on 23 agricultural products. Before the market opened, this price support system operated in a closed circuit and international prices have hit it hard," explains Abhijit Sen, professor of economics and former chairman of the Agricultural Prices Commission. He also says that these support measures are "far below what the WTO allows".

Jain points out: "India can't afford to give more than 1% of its GDP in support, while the WTO agreement allows up to 10%". He is referring to the third component of the WTO agreement, the elimination of export subsidies.

India is under pressure from the WTO to reduce aids and subsidies and lower tariff barriers. But the industrialised countries are constantly raising theirs and access to their markets is still difficult. Figures published by the Organisation for Economic Cooperation and Development (OECD) show that in 1999 its members spent $283bn on agricultural subsidies (European Union $114bn, US $54bn and Japan $58bn), while India spent only $7bn. That represents 65% of agricultural GNP for Japan, 49% for the EU, 24% for the US and 6.5% for India. When it comes to tariff barriers, India often cites the 2,000% duty Japan imposes on foreign rice. India is a major rice producer.

Many feel they have been drawn into a system of double standards that increases the inequalities between nations instead of correcting them. Poor countries are forced to cut vital subsidies while the rich are allowed to increase theirs. With WTO blessing they use liberalisation to take control of markets and destroy commercial activity by dominating them. This causes a sense that there has been profound injustice, if not deceit. "The West is making the rules and cheating as well," a senior official says. Jain puts it more diplomatically: "The WTO still has serious shortcomings that work in favour of the developed countries." A very experienced negotiator, he believes that "Indian agriculture would become competitive if subsidies were abolished the world over".

There are regular calls for the WTO agreement to be abandoned or revised. Some believe its effect on food security has been devastating. Former prime minister Haradanahalli Dodde Deve Gowda considers it impracticable in the light of Indian reality, especially the many small marginal farmers. SM Krishna, chief minister of Karnataka state, calls for it to be renegotiated and for better consultation with central government. Caught between WTO restrictions and its obligation to assist rural areas, the government would very much like to renegotiate. "We keep telling the WTO that you can't put Indian agriculture on the same plane as that of the developed countries geared to export. We need to be treated differently with special exemptions to protect our farmers."

Jain explains that India is trying to get more advantageous protection measures. It wants countries where much of the population is living in absolute poverty to be allowed to support agriculture. That is the only way to meet the challenge of food security, safeguard the environment and protect rural jobs.

This is not about taking decisions that will distort trade but about survival. The conventional approach of market rules needs to be made more flexible. Money spent in these areas should not therefore be included in aggregate measures of support (AMS). The WTO agreement on agriculture states that AMS must not exceed 10% of the total value of agricultural production in developing countries and 5% in developed countries.

More aid to the rural sector is essential. Millions of lives are at stake. It is also important to prevent a mass exodus to the towns by people with few other prospects of employment. It is an explosive issue and the authorities are doing all they can to get people to stay in the countryside.

Dr S Swaminathan, an agricultural expert, is not against a modest dose of WTO. But he believes quantitative restrictions on imports should be restored when they are obviously having a detrimental effect, very much the case with vegetable oils. "Jobs and livelihood security for all Indians must be the bottom line of all public policy, national and global" (5), he says, implying that such priorities have not always been the case.

(1) In 1998 farmers in the Rashur region destroyed crops of Bt Cotton, an insect-resistant transgenic variety created by US multinational Monsanto. They said there had been insufficient investigation of the risk of contamination from a genetically modified organism (GMO). Since then, experimental crops have been grown in several states. Last year trafficking in seed resulted in an illegal but substantial harvest of Bt Cotton in Gujarat state.

(2) "Report on WTO and Related Issues in Agriculture and Food", Government of Karnataka, January 2001.

(3) National Agriculture Policy, Ministry of Agriculture, New Delhi, July 2000.

(4) "The farming crisis", Frontline magazine, Chennai, 2 February 2001.

(5) "The farming crisis", op cit. Translated by Malcolm Greenwood


(September 2002 @ Le Monde diplomatique

When even too much is not enough


Last September's millet harvest in Sikar district, Rajasthan, was exceptional. "The best in 20 years," farmers say. It came as a blessing after three years of drought when millions suffered privation and got into debt. Especially since farmers' production costs had risen steadily during the 1990s while subsidies were cut.

But euphoria quickly turned into nightmare. Demand and market prices remained very low. One local farmer, Dayal Singh, says merchants initially offered 250 rupees a quintal, a third of what it cost to produce. "At that price it is better to keep the harvest for animal feed," he complains. After two months of inaction, the government set a guaranteed price of 480 rupees. Subkaran Bhuria is a farmer in the village of Chalasi. Not only was that price too low, he explains, but it was hard to obtain and many were deterred by the effort and paperwork involved. Millet will keep for six months, so those with the least debts could wait. Others sold at a loss and many fell below the poverty line - in fact a quarter of the village's 1,500 inhabitants.

The government's policy of buying food cereals for a guaranteed minimum price while cutting back on their distribution through the Public Distribution System (PDS) has been widely criticised. Over the last few years it has resulted in a situation many see as scandalous when millions of vulnerable people are short of food. The good harvests of the last two years together with the scaling back of free or low-price distributions and the inability of many to pay have boosted stocks held by the government. Last year these were put at over 60m tons of grain (wheat and rice) although storage capacity is less than 30m. The cereals mountain is growing and no one seems to know what to do with it. Malnutrition and hunger are growing too. The World Bank estimates that India has over 250m poor, more than a quarter of its population. Others speak of 300m or more.

Some say the government is doing too much, others not enough. Agricultural expert Dr S Swaminathan says: "The unfortunate side of producing a surplus crop is that in spite of good production, farmers face a price crash. Owing to political pressure, the government rushes to some place and purchases sub-standard grain at high price. This is a relief operation and not a trade operation. This is because we are a country with a relief mind set. The government is seen as a do-gooder. If you have floods, drought or trade problems, the government rushes there. But this is not the way to build forward" (1).

He adds: "We will always live in the paradox of plenty in the midst of poverty and under-utilisation of the PDS so long as people have no purchasing power. I would consider this the number one challenge facing the country today. That is why I have been saying that jobs/livelihood must be the bottom line of all public policy."
Jagat - Sat, 20 Mar 2004 05:37:42 +0530
I just read Le Monde Diplomatique yesterday, as I had to go to the dentist and I picked it up to read in the bus. Depressing!

It's good to read from another point of view, especially as we are so inundated with the American way of seeing things over here. But, I was not feeling joy afterward.

The other day I heard Vandana Shiva. This report sounds like it comes from her.