Agriculture remains at the receiving end. Even a nominal hike in the minimum support price for paddy at Rs 10 per quintal invites sharp criticism. Every time the government announces the procurement prices, an impression is generated that the increase in prices will jolt the economy and send it into a topsy-turvy spin.
The decision of the Cabinet Committee on Economic Affairs to endorse the price recommendations made by the Commission for Agricultural Cost and Prices (CACP) for the Kharif season 2004 is a welcome one. This will cost the state exchequer an additional Rs.100 crores. Since the government buys only paddy from farmers, the relatively higher increase for pulses and oilseeds (Rs 40 per quintal for moong and urad, and Rs 100 per quintal for groundnut) will only help in raising the floor prices for the farmers. This is merely an indication of the minimum price the private trade should pay to the farmers.
The first and foremost criticism is that any hike in procurement price will result in a corresponding rise in the prices for the consumers. This is based on the assumption that food is the basic requirement for an average household and any rise in the production cost will have to be borne by the unsuspecting consumer. That the farmer too is a consumer, and has to incur an increased cost for the farm inputs (including diesel, fertilizer, seed and labour) that gets translated into a higher cost of cultivation, is conveniently ignored. The hike in procurement prices is the consequence of the general rise in prices and services, not the other way around.
Numerous studies have shown that the average farmer does not earn more than a peon or a lower division clerk in the government. But while the government clerk - and for that matter all government employees - continue to get the benefit of unwarranted pay hikes, annual increments, medical allowances, paid holidays (some even get leave travel concession for the family), and of course financial loans at the drop of a hat, the farmer remains out of bounds for all these bounties. Only a fraction of the 16 lakh farmers that have been short-listed as credit worthy in suicide-torn Andhra Pradesh have been provided with bank loans so far.
The bias against the farmer is so well entrenched in nations psyche that no questions were asked when the procurement prices for paddy and wheat were frozen two years ago. At the same time, no eyebrows were raised when the BJP-led coalition merged half the Dearness Allowance with the basic salary of the government employees in February 2004. This measure alone will bring an additional burden on the government to the tune of Rs.12,000 crores a year. However, the financial ministry is always quick to raise the issue of widening fiscal deficit whenever the procurement prices have to be increased. And how much does the hike in farm prices translate into? A Rs.10 increase in procurement price of wheat or rice costs the state exchequer an additional Rs.100 crores.
The serial death dance that continues unabated in Andhra Pradesh and the Vidharba region in
Maharashtra, the plight of the farming community elsewhere, and the declining income
resulting in an unprecedented loss of livelihoods have yet to pick on the nations
consciousness. Studies by the Ministry of Agriculture point to declining farm incomes during
the past five years. Rice farmers in West Bengal for instance earn 28 per cent less in
2002-03 than they did in 1996-97. Incomes of sugarcane farmers decreased in Uttar Pradesh by
32% and in Maharashtra by 40%. Farm incomes across north India have eroded by 10%. The sharp
decline in farm incomes is happening at a time when urban areas are witnessing an upswing.
The argument that the minimum support price (MSP) has over the years turned into a "maximum support price" too is fallacious. Comparing MSP with international prices is a clever way of expressing the bias against the farmers. The international grain prices are lower because of the huge subsidies being provided for both agriculture as well as freight. Take the example of cotton. In America, there are only 25,000 cotton growers. They produce a cotton output of US $3 billion. The American government provides these farmers a subsidy of US $4 billion a year, or in simple terms US $ 10.7 million a day. On top of it, it subsidies the companies to the tune of US $180 million to buy the subsidised cotton from the farmers.
The monumental subsidies on cotton depress the global cotton prices. Brazil's case against US cotton subsidies in the WTO Dispute panel has shown that the cotton subsidies lower the international price by a little more than 40 per cent. The negative impact is therefore being borne by cotton growers in India (and elsewhere in the developing world) who find the imported cotton cheaper than the price at which they harvest. This holds true for almost all agricultural commodities.
Crop diversification cannot be brought about by prices alone. Justifying the higher increase in support prices for oilseeds in the name of encouraging crop diversification is again a clever ploy. If prices alone could have brought about the change, the task could have been accomplished several decades ago. The fact remains that the government is not at all keen to bring in self-sufficiency in oilseeds production. It had since 1993-94 been lowering the import duties thereby allowing cheaper and subsidised edible oil to flow in. As a result of the government's misplaced policy, more than 63 per cent of the edible oils consumed - worth US $3.2 billion a year - are now imported. Ten years back, India was almost self-sufficient in oilseeds production.
Stopping imports will encourage farmers to return to oilseeds. The US $3.2 billion that the country pays to oilseed farmers in Southeast Asia, Brazil and the United States, should instead be paid to Indian farmers.
A healthy and vibrant farm sector is to the benefit of the industry. Both have to operate in synergy rather than being pitted against each other. It is in this context that the faulty proposal to provide for an insurance scheme, especially tailored for the genetically modified crops, considering that the new technology includes enhanced risks, needs to be nipped in the bud. It is true that the GM seed manufacturing sector is being globally controlled by private enterprise, particularly by multinationals. It is also true that the GM seeds are a costly proposition as a 400 gram pack of Bt cotton costs around Rs 1,600.
But to say that appropriate legal measures are needed to compensate the farmer in case GM seeds fail to deliver the pronounced results is merely an effort to pass on the cost associated with environmental risks and technology failures to the state. Unless this cost is entirely borne by the GM seed industry, the farmers as well as the consumers will continue to suffer. Such unwise measures have already pushed farmers into a suicide trap, and the nation can no longer afford the luxury of the heavily tilted terms-of-trade against agriculture.
