The Hindu Business Line : Budget 2004-05: Mirage of goodies for farm sector

Despite the Government's right noises on support to the agriculture sector, there is no clear roadmap to boost farm growth. Addressing the debt-related crisis by promising more credit can only lead to greater indebtedness. What the farmers need is an assured income and the same kind of direct investment that the Government is willing to pour into the industry sector. Also, the blind advocacy of crop diversification should cease, as it will lead to a food security crisis, points out Devinder Sharma.

"WE have shown that we are a caring government by addressing agriculture, the rural economy and infrastructure," the Finance Minister, Mr P Chidambaram was quoted as saying in one of his many post-Budget interviews on television.

Has Mr Chidambaram raised the outlay for agriculture or allied sectors? And has he indicated a roadmap for boosting farm sector growth? For, there was little mention of the growing crisis on the farm front that is forcing farmers to end their lives.

It is true that agriculture requires massive investments. But to say that such investments have to be made through credit-enabled private and enhanced public investments (for which no indication is available) shows the step-motherly treatment being meted out to the sector. But when it comes to industry and the corporate sector, the government never shies away from making a direct investment in the name of boosting efficiency and competitiveness; for agriculture, it has to be through enhanced credit.

Doubling the flow of agricultural credit in the next three years is not the answer to the crisis in the farm sector, a direct fallout of the Green Revolution equations gone wrong. A majority of the thousands of farmers continue to take the easiest route to escape the humiliation that comes along with increasing indebtedness. Credit is, therefore, the crux of the problem, and how the policy-makers can think of solving the problem (the inability to repay loans) by extending more loans surely defies logic. What the farmer needs is an assured income. Like others who live in the urban areas, he too needs an adequate monthly package that can take care of his family needs and leave him with a little surplus to sow the next crop.

Successive governments, through the process of annual Budgets, have actually ignored the plight of the farming community, thereby exacerbating the agrarian crisis. So much so, that for the BJP-led coalition, Bharat had simply disappeared from the economic radar screen. Is the UPA too going the same way?

Studies by the Ministry of Agriculture show that farm incomes have fallen in the past five years. Rice farmers in West Bengal, for instance, earned 28 per cent less in 2002-03 than they did in 1996-97. Incomes of sugarcane farmers fell, 32 per cent in Uttar Pradesh and 40 per cent in Maharashtra. Farm incomes of North Indian farmers eroded by 10 per cent, on an average.

The sharp decline in farm earnings is happening at a time when incomes in the urban areas are, generally, on an upswing. If nothing better, Mr Chidambaram could have at least extended the crop insurance cover. For the past 20 years, the government has been talking of introducing crop insurance. It has not gone beyond the pilot plan. Even at times when insurance has become a strong plank of globalisation, this service industry refuses to touch the farm sector.

Doubling horticulture production in the next 10 years and launching a National Horticulture Mission are faulty prescriptions too. This is further compounded by the assertion that horticulture production will be enhanced by adopting the cooperative dairy structure. First, India is among the world's top producers of fruits and vegetables. The average availability of horticultural products is around 780 gm per day. However, against the prescribed minimum nutritional norm of 90 gm to be consumed daily, an average Indian only manages to get 40 gm. Increasing horticulture production, therefore, cannot be the answer. The challenge is to see how to increase the consumption of existing horticultural produce. Or how best to market it in India and abroad. For the bulk of the population, the capacity to buy food is eroding fast. This worsening poverty is causing acute malnutrition. The Economic Survey clearly states that cereal consumption within the year had fallen drastically in 2002-03 from 2001-02, indicating worsening poverty levels.

Moreover, if the dairy cooperative system is indeed the right mechanism to boost production, there seems to be no justification for all the effort being made to dismantle the Amul cooperatives. Is it not, therefore, surprising that, on the one hand, the Government is increasing joint ventures in dairy cooperatives, thereby taking away the spirit of cooperation, and, on the other, the same system is being advocated for a new thrust area.

Exemption granted to the tractor industry by scrapping the excise duty of 15 per cent comes only a few months after the industry reaped a bonanza by lowering the bank interest rates for the farm sector. Aggressive tractor marketing has lured small and marginal farmers to buy tractors on easy loans. Since the majority of land-holdings fall much below the viability criteria of at least ten hectares of land needed to maintain the machine, a majority of them get into a debt trap within a year of buying the tractor. And many such farmers end up committing suicide. Perhaps, tractors out of the reach of the small farmers is best despite the industry crying foul.

Too much is also being made of the new scheme promised for water harvesting. Already over 70 schemes for water harvesting are operational; another scheme with an additional outlay of Rs 100 crore is not going to make any difference unless the structural flaws in the cropping pattern that lead to a water crisis are removed. It seems the policy-makers and planners have exhausted all other options to prop up the farm sector. No wonder, crop diversification has become the easy way out to those trying to find ways to help agriculture. This is exactly what the World Bank and the IMF have been telling the developing countries to do, and this is exactly what is being perpetuated under the free trade regime being enforced through the World Trade Organisation.

The developing world is being repeatedly asked to stop growing crops that are being negatively impacted by the monumental subsidies that the rich and industrialised countries provide for their agriculture. What is the politics behind the emphasis on diversification? The World Bank and the IMF have under the Structural Adjustment Programme (SAP) very clearly tied up credit with crop diversification. They continue to force developing countries to shift from staple foods (crucial for food security) to cash crops that meet the luxury requirement of the Western countries.

The Fund/Bank combine has, therefore, been arm-twisting developing countries into dismantling state support to food procurement, withdrawing price support to farmers, ending food procurement, and relaxing land ceiling laws so that corporates can move into agriculture. Farmers need to be left at the mercy of the market forces. Since they are `inefficient' producers, they need to be replaced by industry.

The same prescription for farming has never been suggested for the rich and industrialised countries. Let us be very clear: One part of the world that needs to go in for immediate crop diversification is the industrial world. These are the countries that produce mounting surpluses of wheat, rice, corn, soyabean, sugar beet and cotton, and that too under environmentally unsound conditions, setting the stage for an ecological catastrophe.

These are the countries that inflict multiple damage — they destroy the land by highly chemical-intensive crop practices, pollute the groundwater, contaminate the environment, and then receive massive subsidies to keep these unsustainable practices artificially viable. These are the countries that are faced with the tragic consequences of massive farm displacements, and are in the grip of food calamities arising from industrial farming.

If India or, for that matter, other developing countries fail to understand the politics that drives the agriculture trade agenda, the world will soon have two kinds of farming systems — the rich countries will produce staple food for the world's six billion-plus people, and developing countries will grow cash crops such as vegetables, peas and lentils, sunflowers and strawberries, and cut-flowers. The dollars that the developing countries earn from exporting these crops will eventually be used to buy foodgrains from the developed nations — in reality, back to the days of `ship-to-mouth' existence.

All this is being attempted in the name of growth and development. All this is being pushed by the corporate sector, which has shown little responsibility towards the social sectors, including agriculture. This is where the economic thinking has gone wrong.

The former Finance Minister of Pakistan and author of the UNDP's Human Development Report, the late Mahbub-ul-Haq, had once remarked: "We were wrongly taught that we should take care of GDP and it will automatically take care of poverty. Let us reverse it. We need to take care of poverty and it will automatically take care of GDP".

And the World Bank reluctantly acknowledged, though belatedly, that: "The gap between some of India's largest and poorest States exhibits the slow progress in human development indicators; low growth rates, particularly in the agricultural sector. If the present trends continue, the bulk of the poor in these States will be unable to participate in future growth."

(The author is a New Delhi-based food policy analyst.)