Aug 25, 2014

What going wrong with Indian agriculture?


Reisernte in AssamReisernte in Assam (© picture-alliance/AP)



























It's a paradox. With its grain silos bursting at the seams, and unable to store a massive surplus of wheat and rice, India is looking for every opportunity to export. After exporting 22 million tonnes of rice and wheat in the fiscal year 2013 (April 2012 to March 2013), India is expected to export another 18 million tonnes in 2013-14. In other words, India's food exports will touch a record 40 million tonnes in just two years. By the time the general elections are over in May 2014, another 31 million tonnes of wheat harvest is expected to be purchased by government agencies. This comes in the wake of a bountiful harvest expected this year – a record foodgrain production of over 263 million tonnes. 

Strangely, food exports are being encouraged at a time when close to 250 million Indians, one-fourth of the world's hungry population, somehow struggle to meet their basic food needs. It is primarily to address the growing food insecurity in a nation saddled with huge food reserves that the government has finally enacted the National Food Security Act 2013 making legal provisions for a monthly per capita entitlement of five kilogram of wheat, rice or millets at a highly subsidized price to those living below the poverty line. Even though this is not enough to meet the nutritional requirement of an average household, it will provide some relief to those living in absolute hunger. To meet the food distribution requirements under the new food security law, the government will annually require about 61 million tonnes of food reserves. The Act caters to 67 percent of the population or roughly 830 million people, including the destitute, the old and infirm, as well as the homeless and migrating populations. 

WTO objects

It isn't that India cannot produce enough food to feed its burgeoning population. But what is coming in the way is the international pressure that aims at limiting domestic production and opening the Indian market to cheaper food imports. At the Ministerial Conference of the World Trade Organisation (WTO) held at Bali in Indonesia in December 2013, the United States backed by the European Union had challenged the food security provisions. An agreement was reached wherein India accepted the "Peace Clause" for an interim period of four years. The clause originally provided exemption to those countries that used export subsidies for agriculture beyond the permissible limit. It had expired at the end of 2003, but is being reintroduced to ensure that India's subsidies are not challenged. 

At the heart of the problem is the increasing amount being spent on public stockholding of foodgrains and thereby the rise in administered prices for wheat and rice that is procured from small farmers every year. According to the WTO Agreement on Agriculture, the administered or subsidised price paid to farmers by the government cannot exceed the de minimis level of 10 percent of the total value of the annual production. India, however, has already exceeded the limit in case of rice where the procurement price has shot up to 24 percent from the cut-off period 1986 to 1988.

It is not the food subsidy bill that is actually under the radar, but in reality it is the procurement price system that India administers to its small farmers that is now on the chopping block. If India is forced to limit the rice procurement price at 10 percent of the total value of production, and similarly refrain from increasing the wheat procurement price in the years to come, it will spell a death knell for agriculture already reeling under a terrible distress. Procurement price cushions farmers against the distress price that markets extract at the time of harvest. 

According to the US-based Environment Working Group, America had paid a quarter of a trillion US Dollars (179,7 billion Euros) in subsidy support for agriculture between 1995 and 2009. In the 2014 Farm Bill, these subsidies have been further extended. It provides for nearly 1 trillion US Dollars (718,6 billion Euros) in support for agriculture in the next ten years, including 756 billion US-Dollars (543 billion Euros) for the food aid programmes administered under the Supplemental Nutrition Assistance Programme (SNAP). 

Agricultural subsidies results in massive dumping of foodgrains across the globe thereby dampening farm gate prices, and pushing farmers out of agriculture. In any case, 14 agricultural commodity exports organizations have written to the US Trade Representative lamenting the temporary relief accorded to India under the "Peace Clause" thereby dampening the US export opportunities. In India on the other hand, wheat and rice growers have merely received 9.4 billion US Dollars (6,8 billion Euros) as procurement price in 2012. 

Agrarian Crisis

The effort by WTO to reshape Indian agricultural policies is happening at a time when Indian agriculture itself is faced with a terrible agrarian crisis. What began to be called as Second Generation Environmental Impacts resulting from the intensively-farmed Green Revolution has now blown into a full grown crisis in agriculture sustainability. With soil fertility devastated, underground water table plummeting as a result of relentless water mining, environmental contamination from excessive use and abuse of chemical pesticides, the entire farming equation has gone wrong. 

With agriculture becoming unremunerative over the years, and with the farm incomes steadily declining, a majority of the farmers want to quit farming if given an alternative. A recent survey by the New Delhi based think-tank Centre for the Study of Developing Societies (CSDS) has shown that 76 percent farmers want to leave agriculture. This is because farming has becoming an economically unviable proposition. According to the National Sample Survey Organisation (NSSO), the average monthly income of a farming family in India stands at a paltry 2,115 Rupees (about 25 Euros). In other words, a majority of the farmers are somehow surviving below the official poverty line. Farmers as a class are certainly at the bottom of the pyramid. 

No wonder, Census 2011 has shown that on an average 2,300 people are quitting farming every day and migrating to the cities looking for a menial job. Ironically, the crisis in agriculture is happening at a time when the country's economy has been on a growth trajectory. In the past decade, India's annual GDP growth had been at an average of 7 percent. Even between 2005 and 2009 when the average rate of growth was 8.3 to 9 percent, a Planning Commission study shows that 140 million people had left agriculture. 

Normally those who abandon farming should be joining the manufacturing sector. But even in the manufacturing sector, 53 million jobs were lost. More recently, CRISIL, a global analytical company has shown in a study that since 2007, over 37 million Indian farmers had abandoned agriculture and migrated into the cities. But in the last two years – between 2012 and 2014 – when economic growth had remained sluggish, an estimated 15 million have returned back to the villages in the absence of job opportunities. 

With roughly 54 percent of the population involved directly and indirectly with farming, and with the share of agriculture in country's GDP dipping to 14 percent, all is not well on the farm front. This is also reflected in the serial death dance on the farm that continues unabated. As per the National Crime Records Bureau (NCRB), approximately 300,000 farmers have committed suicide in the past 17 years. Even in the frontline agricultural State of Punjab, the country's food bowl, two farmers on an average are taking the suicide route every day. Nearly 60 percent of the farmers are deep in debt. What is more shocking is that a majority of those who produce food for the country actually go to bed hungry. 

Green Revolution

Nearly half a century after the Green Revolution was launched in 1966 by then Prime Minister Indira Gandhi, India has emerged out of the throes of a "ship-to-mouth" existence when food aid would come directly from the ships into the hungry mouths. The quantum jump in food production over the years has turned India into a net agricultural exporter. But while the Green Revolution certainly helped the country take care of its food needs, it bypassed the small and marginal farmers. At the same time, while production increased manifold, hunger too grew. 

Technology alone did not turn the tables. It was essentially the two planks of a "famine-avoidance" strategy that sustained increased production. Setting up a Commission for Agricultural Costs and Prices (then Agricultural Prices Commission) ensured an assured minimum support price for the farmers thereby providing them with an incentive to produce more. At the same time, Food Corporation of India (FCI) was set up to mop up the surplus harvests flowing into the dedicated agricultural markets, which was used for public distribution among the needy across the country through a vast network of ration shops. 

Prior to the Green Revolution, and before the Agricultural Prices Commission was set up, farmers were free to sell their produce to anyone who offered them good prices. It was known to be an exploitative system wherein the trade squeezed the profit margin of farmers at the time of harvest. It was only when procurement prices were introduced that farmers got an assured price for their produce, and that is what encouraged them to produce more. Procurement prices help farmers realise a fair and better price for their produce. 

India's Green Revolution success story owes much to the administration of procurement prices. But the same procurement prices have now become the villain of the story. Pro-reform economists now call it as an "archaic provisions of a socialist era" and are seeking the removal of the Agricultural Produce Marketing Committee Act (APMC) that allows farmers to bring the produce to the designated mandis (markets) where the private trade is first allowed to make purchases. It's only when there are no private buyers left that the FCI or the State procurement agencies step in to lift whatever is available at the minimum support price or procurement price. 

It is therefore not only WTO that is asking India to restrict the reach of the procurement prices within the de minimis level. The Commission for Agricultural Costs and Prices itself is on the forefront asking the procurement system, built so assiduously over the decades, to be dismantled. The argument is that farmers should be left free to sell to whomsoever they want thereby encouraging better competition and thereby realize a higher price. Considering that only 30 percent of India's 600 million farmers have access to procurement prices, the markets should have helped the remaining 70 percent farmers to reap a bounty. But that did not happen. In fact, the agrarian crisis is the worst in those areas where markets operate freely. 

Take the case of paddy in Bihar, which is the only State to have repealed the APMC Act way back in 2006. It had therefore allowed farmers the freedom to sell their produce to whosoever they like. Against the procurement price of 1,310 Rupees (15,3 Euros) per quintal (100 kilogram) that Punjab farmers got this year, Bihar farmers have somehow managed to sell paddy at something around 800 to 900 Rupees (9,4 to 10,5 Euros) per quintal. This is nothing but a distress price, a classic example of ruthless exploitation by the private trade. If Punjab too is directed to remove the procurement system, Punjab farmers will go the Bihar way. 

Agriculture refugees

In a quest to move from Green Revolution to the Second Green Revolution, India is on fast track to bring agriculture under corporate control. Amending the existing laws on land acquisition, water resources, seed, fertilizer, pesticides and food processing, the government is in an overdrive to usher in contract farming and encourage organized retail. This is exactly as per the advise of the World Bank and the International Monetary Fund as well as the international financial institutes. 

The World Bank had in 1996 estimated that the number of people migrating from the rural to the urban areas in India by the year 2015 would be equal to twice the combined population of the United Kingdom, France and Germany, which is 200 million. So the World Bank had predicted that 400 million people would be moving out of rural areas in India. In the subsequent World Development Reports, especially 2008, the Bank had even suggested setting up of a vast network of training institutes where the young farmers could be trained to become industrial workers. It has also been pushing for land rentals in the rural areas enabling the industry to easily acquire farmlands. 

Although the exact estimates are not available, rural areas are on a boil as a result of the protests over land acquisitions. Foreign companies are also being allowed to get into joint collaborations for which large swaths of farmland is being made available. Industrial corridors, real estate projects, express highways, special economic zones are being aggressively pushed without ascertaining how much of farm land must be kept under cultivation for meeting the country's food security needs. 

The crisis therefore is two-fold. While the rural areas are being emptied, moving the population into the urban areas is leading to the collapse of the cities. It is expected that by 2035, roughly 50 percent of India's population will be urban based. Secondly, the population shift from rural areas along with prime farmland being diverted for non-agriculture purposes will create a food deficit thereby leading to an unforeseen crisis on the food security front. But somehow, the agrarian crisis as well as the economic growth paradigm does not pass through rural India. Nor is any political party before the elections 2014 deliberating on the consequences of the growth model sans a sustainable and economically viable agriculture. 

But what is crystal clear is that sooner than later, India will be heading back to the days of a "ship-to-mouth" existence. #

Source: Agriculture in 'terrible crisis.' http://www.bpb.de/internationales/asien/indien/190207/agriculture-in-terrible-crisis

In German: http://www.bpb.de/internationales/asien/indien/189174/landwirtschaft-in-der-krise


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