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Business Commentary/Dilip Thakore

Government needs to get off the backs of India's farmers

Responding to a call attention motion in Parliament, expressing concern about the large number of suicides by farmers across the country, Union Agriculture Minister Som Pal admitted on July 7 that 395 farmers have killed themselves this year because of crop failure and consequent indebtedness.

According to the minister, 269 farmers resorted to suicide in Andhra Pradesh, 44 in Karnataka, 82 in Maharashtra and 52 in India's granary state of Punjab. Most of these recent suicides by farmers were prompted by the failure of the 'white gold' cotton crop planted with high hopes during the last winter season.

There is a tragic irony about a Union minister of the 18-party Bharatiya Janata Party-led coalition government having to admit this spate of suicides among the nation's farmers. Because in its electoral manifesto and subsequent pronouncements, the BJP has made the renaissance of Indian agriculture its main policy plank.

The party is committed to allocating 60 per cent of national investible resources to the agriculture sector and is working on amending the Ninth Plan (1997 to 2002) accordingly.

Moreover, in the widely condemned Union Budget presented to Parliament on June 1, Union Finance Minister Yashwant Sinha has increased the Union government's budgetary allocation to the agriculture sector by a handsome 58 per cent to Rs 127.66 billion or $ 3 billion (including Rs 99.12 billion to the ministry of rural areas and employment) though critics of the Budget tend to quibble about this government's definition of agriculture. Economic pundits also tend to stress the point that under the Constitution, agriculture development is essentially a state government subject and therefore the Centre's larger budget allocation is of limited value.

Nevertheless, even if there is a populist sleight-of-hand quality about the BJP-led government's commitment to giving top priority to the development of the agriculture sector, the suicide epidemic in rural India has -- or should have -- brought this issue to the forefront of national consciousness. Quite clearly, the ills that plague agriculture require stronger remedies than the Rs 100,000 ($ 2,400) compensation that the state governments have reportedly given to the grieving families of farmers driven to suicide.

If the needs of rural citizens and the agriculture sector which provides a livelihood to 70 per cent of India's population are to be seriously addressed, it is important to understand the history of planned development in post-Independence India. Ever since the development methodology of Soviet-style central planning was adopted in the mid-'50s to create a "socialistic pattern of society" in India, in keeping with the tenets of the Soviet model, the savings of the rural population were siphoned away to finance the construction of the country's public sector dominated industrial base.

However, in a concession to the democratic system of government, the neglect of Indian agriculture in post-Independence India has been cleverly disguised by a seemingly attractive array of subsidies on farming inputs. Thus irrigation, water and electricity (when available) are provided almost free of cost to the rural population; and fertiliser prices are heavily subsidised.

But as farmers champion Sharad Joshi has been arguing for decades, these benefits (which are largely illusory because under-pricing has encouraged widespread and unchecked bribe-taking by the rural bureaucracy) have been outweighed by the bewildering variety of formal and informal price-depressant controls that have been imposed upon agricultural produce.

Until they were lifted very recently, formal controls had been imposed upon the movement of foodgrains from one state of the Union to another. Even now informal controls by way of arbitrary sales tax and octroi levies are imposed without let or hindrance upon farm produce moving from surplus areas to distant markets.

Moreover, for cash crops such as cotton, several state governments have introduced complex monopoly procurement schemes which compel farmers to sell their produce at less than best prices to government agencies. And Indian farmers have never been permitted to develop overseas markets for their produce because poor infrastructure apart, export bans and compulsory procurement levies are imposed on farm produce the minute their prices harden in the domestic market. The nation's politicians and bureaucrats have not been able to shed the mindset that even modestly prosperous and highly risk-prone (as the cotton suicides indicate) farmers are Soviet-style kulaks.

The Union Budget for 1998-99 which imposed an additional eight per cent excise duty on all packaged and branded foodstuffs indicates that this mindset is transfixed within the government establishment. One of the less publicised characteristics of the Indian economy is that India is the largest horticulture (fruits and vegetables) producer in the world.

However, because of persistent government discouragement of the food processing industry, an estimated 40 per cent of the horticulture produce of the nation spoils before it can get to market. The consequence of 50 years of central planning is that while a (developing) nation like Brazil processes and packages 70 per cent of its horticulture produce, India processes 1 or 2 per cent.

And just when foreign and domestic companies are beginning to exhibit a renewed interest in the high-potential food processing industry which would have meant better farm-gate prices and less wastage, the mandarins of the finance ministry have imposed a stiff dose of taxes on branded foodstuffs unmindful of the reality that food adulteration is perhaps India's largest industry.

There are many other government-imposed inequities and privations which the nation's farmers are heir to. For example, in most states, farm holdings are permitted to be sold only to other farmers; this has the effect of depressing rural land prices and has prevented rural capital formation and the development of village-based agro-industries. Despite high-sounding promises from generations of politicians, timely credit is a rarity in rural India and bank loan procedures are complex, cumbersome and ridden with unchecked corruption.

Little wonder that the great majority of the 269 cotton farmers who were driven to suicide in Andhra Pradesh this year were in the grip of village money-lenders charging high rates of interest and using relentless enforcers.

Indian agriculture does not require marginally higher monetary allocations as much as it requires hands-off market-driven government policies. The dramatic increase in foodgrain and horticulture produce in post-Independence India proves that the nation's farmers have the capability to absorb technology and improve crop yields. All that the nation's farmers require of government is speedy construction of a rural infrastructure which facilitates the movement of farm produce to markets and for government to get off their backs.

Dilip Thakore