At the third annual international conference on ‘policies against hunger’, organized by the German government at Berlin in October 2004, a World Bank economist was at pains to defend the domestic subsidies being doled out to European Union farmers. In 1999, 56 per cent of all EU agricultural expenditure of approximately 78 billion euros was in the form of direct payment to farmers.

These subsides are believed to be not trade-distorting and therefore were justified. At the same time, the indirect input subsidies that the developing country farmers receive were painted as the villain of the free trade regime and needed to be immediately discontinued according to the World Bank economist. Asked what the developing countries should do in the event of withdrawal of the miniscule agricultural support being made available through cheaper farm inputs, he replied: “In the World Bank’s thinking, the best way to encourage agriculture in the developing countries is to shift the farm subsidies to laying out rural infrastructure like link roads, providing electricity etc.”

In simple words, infrastructure development is the surest way to make agriculture productive, he concluded. “If rural infrastructure is what is needed to prop up agriculture than you will agree that the rich industrialized countries – comprising the Organisation for Economic Cooperation and Development (OECD) – have already got a well-knit infrastructure in place,” this writer said, and asked: “Why should the European farmers or for that matter a few million farmers on either side of the Atlantic be getting such huge support as direct payments?”

You guessed right. The World Bank economist very conveniently ignored to answer the question. The OECD countries provide a farm support of US $ 320 billion a year to its agriculture.

It is now the turn of the deputy chairman of the Planning Commission, Mr Montek Singh Ahluwalia, to echo the same faulty prescription. Inaugurating an international conference on Soil, Water and Environmental Quality organized by the Indian Society of Soil Science at New Delhi on 28 January, just prior to the presentation of the ensuing Budget 2005-06, he said he was not for taking away farm subsidies but is advocating their redistribution in the construction of roads and improving land use. At the same time, he blamed the prevailing bad policies for compounding ‘irrationalities’ that were leading to the ‘systemic’ failure in agriculture. He particularly referred to the wrongly distorted prices (minimum support price of farm commodities) for short-term effects.

Mr Ahluwalia continues to bank upon the World Bank’s flawed understanding of the complexities of Indian agriculture. He had earlier advocated the unbridled opening up of the agriculture sector to meet WTO obligations, supported the defective hypothesis of ‘big bang’ theory in agriculture that indicated quantum jumps in agriculture exports once the WTO came into effect, and also has been relentlessly backing the World Bank advocacy (in tune with the WTO obligations) to dismantle the food procurement system. No wonder, the pre-Budget discussion with ‘like-minded’ farmer representatives and experts is in this direction, aimed at destroying the food self-sufficiency built so assiduously.

While the intention of the World Bank to force India to shift subsidies to infrastructure is actually to help the OECD countries strengthen their food dominance over the rest of the world, such a myopic prescription would only acerbate the crisis that afflicts Indian agriculture. The World Bank is aware that doing away with indirect farm subsidies in developing countries will create a food shortage, thereby leading to more imports from the rich countries. This defective prescription also comes at a time when thousands of farmers throughout the country continue the spiral death dance. It comes at a time when farm incomes all over the country are dwindling, and rural-urban migration is increasing at a stupendous rate.

Mr Ahluwalia is probably aware that cheaper inputs to farmers (for which farm subsidies in India are provided) help keep low the production cost of foodgrains. If the cost of producing food is low, less is the consumer price and less is the food subsidy that is required to reach the grains to the poor and needy. In any case, much of the benefit of cheaper inputs actually goes to the industry. A study done by the Commission for Agricultural Costs and Prices (CACP) had earlier concluded that 52 per cent of the farm subsidy benefit is reaped by the chemical industry. At the same time, cheaper inputs means that more farmers can afford these inputs – fertilizer, pesticides, seed, water and credit – thereby helping the country reap bountiful harvests year after year.

This does not however make any economic sense to the Planning Commission. Interestingly, the Commission has already committed to the agribusiness and food processing industry its willingness to make available Rs 1,40,000-crore in the next ten years for infrastructure development. This huge amount – which, in simple words is a subsidy for agribusiness corporations – is being provided at a time when farming communities are somehow surviving in huge debt. Mr Ahluwalia has no funds to even provide the minimum support price to farmers, but has all the money for the corporations that are venturing into agriculture. Such a faulty macro policy has already brought Indian agriculture into the throes of a serious crisis visible through the spate of suicides and the second-generation environmental effects in the technology-rich areas.

The spread of water guzzling crops have sucked the groundwater and played havoc with the drylands turning the lands not only further unproductive but also barren.
 •  Entitled to subsidies!
Water is another area of growing concern where Mr Ahluwalia echoed the World Bank line. He said: “Giving it free to farmers makes them waste it through use of subsidized power, leading to imbalances in soil. If we do not price water than there is a danger that farmers will switch to water intensive cropping pattern…. If property rights are not defined and water is not conserved then benefits will not accrue to all. Water should be treated as a community resource.” What probably he is not aware is that much of the water crisis is the result of faulty cropping patterns introduced by agricultural scientists.

All these years, hybrid crop varieties with higher yields were blindly promoted in the dryland areas. The flip side is that these varieties are water guzzlers. For the sake of comparison, let us take the example of rice. In Punjab and Haryana, farmers cultivate high-yielding varieties of rice. These varieties require about 3000 litres of water to produce a kilo of grain (The International Rice Research Institute's compilation of the water usage for rice at 5000 litres for a kilo, is being questioned). Instead of bringing in varieties that require less water for the water deficit areas of the drylands, hybrid rice varieties with water requirement exceeding 5000 litres per kilo of grain were promoted.

Not only rice hybrids, all kinds of hybrid varieties that require higher doses of water – whether it is of sorghum, maize, cotton, bajra, and vegetables are promoted in the dryland regions comprising 75 per cent of the country. The spread of water guzzling crops have sucked the groundwater and played havoc with the drylands turning the lands not only further unproductive but also barren. The water table plummeted, the impact of deficient rainfall became more pronounced forcing farmers to abandon agriculture and migrate. Don’t blame the farmers, it is the seed industry and the agriculture scientists that need to be held accountable. Mr Ahluwalia surely needs to take a lesson or two in agriculture.