Financial Daily from THE HINDU group of publications
Friday, Mar 08, 2002
Agri-Biz & Commodities - Budget
Budget 2002-03: Nurtures middle-men, not farmers
THE Finance Minister, Mr Yashwant Sinha's prescriptions for reforming agriculture aimed at ensuring freedom of the farmer kisan ki azadi actually translates into economic freedom for the middlemen. Mr Sinha has not only legitimised the exploitation of gullible and hapless farmers at the hands of middlemen but has further strengthened the process. By applying to agriculture the same economic prescription that he had earlier applied to industry, Mr Sinha has only exacerbated the crisis on the farm front.
Will Budget 2002-03 signal the beginning of the end of Indian agriculture? Keeping the economic prescriptions in tune with the obligations of the World Trade Organisation (WTO), the Finance Minister has ensured that the food needs of the country in future are met by a few million farmers on either side of the Atlantic.
Indian agriculture, on the other hand, is in an era of unforeseen crisis increasing suicides among farmers, mounting rural indebtedness, swelling rural to urban migration, falling crop yields clear pointers of the gathering storm clouds over the farm sector.
In fact, ever since liberalisation became the economic mantra, and the impetus shifted to business and industry, the persistent neglect of agriculture has cast an ominous shadow.
It is sad that Mr Sinha refuses to understand what ails Indian farming, refuses to see what pains the hand that produces the golden grain and, thereby, continues to turn a blind eye to the human suffering and dismay that persists in the countryside.
Wide-ranging reforms in the industrial sector included removing entry barriers to investments, opening up of trade, providing free access to foreign technology, opening up foreign direct investment and removing barriers inhibiting access to capital markets have failed to result in higher growth in industrial production. The same principles cannot be applied to agriculture, which employs nearly 75 per cent of the country's manpower and is based on meagre landholdings hovering at 1.47 hectares on an average.
The second Green Revolution that Mr Sinha talks about cannot be built on the foundations of a horticultural revolution promised (and is now forgotten) by the multinational Pepsi Foods. Mr Sinha has said in his Budget speech that the key to agriculture is not so much money as changes in law and removals of clamps on private investment and trade. He also referred to the pre-Budget decision to remove restrictions on storage and movement of foodgrain.
Many an expert have welcomed the move saying that such an initiative will help the Punjab farmer, for instance, to sell his produce in Orissa and Rajasthan, when food stocks run short in these drought prone states. Farmers will therefore be able to realise more for their produce.
In reality, it has to be understood that Indian farmers do not have the capacity to move foodgrain to different parts of the country. Unless, of course, we are considering farmers of the like of Mr Prakash Singh Badal. With an average landholding of less than two hectares, more than 70 per cent of the country's farmers somehow survive against all odds year after year. These farmers do not need removal of restriction on free movement of grains or future trading to pull them out of the economic morass. These measures will only help the middlemen who will now have the freedom to market the grain far and wide.
Past experience shows that the gains (from higher profits) have never been passed onto farmers or to the consumers. Allowing private companies in purchase, storage, sale and movement of food grains is a recipe for disaster. The food management report that he referred to, and which is still to be presented, is aimed at withdrawing the State from the purchase and procurement of grains.
By doing so, Mr Sinha will be dismantling the safeguard measures that were built assiduously over the years to usher in food self-sufficiency, the measures that helped the country to avoid famines and acute starvation. All he has done is to pave the way for the agribusiness industry to step in and milk the farm sector dry. Last year, he had scrapped duties on branded processed foods. This year, he has announced exemption of excise duty on processed products and processing machinery. As if this is not enough, the Finance Minister has also called it a day for the cooperatives.
The decision to amend the Milk and Milk products Order, 1992 (MMPO) to remove restrictions on new milk processing capacity actually spells a death-knell for the milk cooperatives a sector which provides economic empowerment to over 80 million people, mostly rural women. The decision means that private milk processing plants and companies can now set up dairy plants processing more than 10,000 litres a day without any registration that requires a declaration of a "milk shed'' area.
What happens to the largest cooperative movement in the country in the milk sector is a lesson for other cooperative ventures. The Finance Minister also emphasised on crop diversification. Most of the economists, agricultural scientists and the policy-makers invariably talk of crop diversification as the escape route for the ills that continue to plague Indian agriculture. But no one tells us diversifying crops to what? After all, India already tops the world in fruit production and is second in vegetable production. Increasing production of these crops will create more problems. Take the case of Punjab.
There has been talk of crop diversification for nearly 20 years now. But Punjab farmers, being wise, have refused to accept the diversification mantra. They obviously know better as to what is good for them. What is not known is that if Punjab were to increase its fruit and vegetable production by just one percent, there would be an unmanageable glut. And one knows what has been the fate of those farmers who shifted to cash crops. There is hardly a day when one or two farmers do not commit suicide. Majority of the farmers who have preferred to take the fatal route to escape the growing indebtedness in agriculture are engaged in cultivating cash crops, and that includes vegetables, potato, sugarcane, and so on.
Crop diversification cannot be a reality till an alternative marketing infrastructure is created. A series of ad hoc measures for agri-processing, and that to under pressure from the industry, does not provide any silver-lining and a long term solution. Too much is also being read from the decision to free agricultural exports of controls. These are the measures that are being enacted in the name of farmers but, in reality, will only benefit the middlemen.
If the removal of export controls could help farmers and I mean big farmers like those in the western countries the US and the European Union would not have provided massive export subsidies. In the same logic, of future trading and the dominance of market were an attraction, the US and EU wouldn't have doled out subsides of $360 billion or, in simple words, $ one billion a day, to keep agriculture and farming viable. Although, India is following the WTO dictates of doing away with the food procurement system, any tinkering with what is generally regarded as the ``famine-avoidance'' strategy, can be catastrophic.
The Finance Minister needs to take corrective measures to reduce inefficiency in the system while, at the same time, making it broad-based and widespread. PDS also needs to be extended to upcoming agricultural areas in Bihar, Orissa, West Bengal and the North-East.
Resurrecting agriculture should, therefore, have been the challenge for the Finance Minister. Agriculture has to be the flavour of the subsequent Budgets.
Mr Sinha, however, has done a great disservice by resorting to facile decisions, presenting a range of centrally-sponsored schemes like what has been done almost every year by his predecessors which are nothing but a mere rescheduling of the Budget outlays to look innovative. Instead, agriculture needs some harsh and unorthodox decisions that restores confidence in farming and brings back the lost glitter. What is needed is a fresh approach that takes the ground realities into consideration before embarking upon any policy imperatives.
Following the National Agricultural Policy as the starting point for the Finance Minister to base his proposals, would certainly be at his own peril. After all, the agriculture policy that has been hurriedly put together is nothing but a political party resolution.
It is a resolution that is aimed at keeping everyone happy, but is cleverly drafted to support the corporatisation of Indian agriculture. And when corporates start getting into agriculture, it is the turn of small and marginal farmers to get out of farming and join the growing ranks of landless labourers. Unless, of course, Mr Sinha thinks that corporatisation of Indian agriculture is the right kind of recipe needed to revive the agrarian sector, the agricultural policy needs to be confined to the dustbin. The sooner it is done, the better it would be for the nation.
(The author is a New Delhi-based food and trade policy analyst. Responses can be emailed at: email@example.com)
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