TISS Report

'Government policies killed farmers'
By B. Diwakar

Suicide of farmers are still continuing in Maharashtra despite the CM of Maharashtra’s announcing a relief package of Rs. 1075 crores for farmers. After more than 500 farmers’ tragic deaths, the CM is saying that he would like to know the reasons behind these suicides. The farming community has been facing this kind of crisis ever since the British Raj. But in independent India, the present crisis is unprecedented.

A group of economists and leaders of farmers (Dr. WR Korpe, Dr. MG Bokare, Dr. Govindrao Gudadhe and many others) had during early 1970s established Maharashtra Cotton Growers Sangh (MCGS) and carried out detailed study of major problems faced by the community and briefed the then state CM, Vasantrao Naik. Being a farmer himself, Shri Naik took whatever steps were necessary to help the cotton growers of his state by enacting State Monopoly Cotton Procurement Scheme thereby guaranteeing fair prices for the cotton crops. Despite opposition from strong lobbies of traders and bureaucrats the scheme is continuing even after 35 years. No one could find any alternative to this. The prices were based on actual cost of production added with some margin of profit towards returns on investments.

But the present government has been doing nothing worthwhile for uplifting the standard of living of farmers. The incumbent CM still wants to study the ‘real’ problems of the farmers even after three decades of farmers’ crisis.

However, as the Bombay High Court, on the request from The All India Biodynamic and Organic Association, has taken up the matter, the state government is now finding it very difficult to maintain silence on the matter. Reacting to the request, the Hon. Court entrusted Mumbai based the Tata Institute of Social Sciences (TISS), reputed for its quality research work and education, to carry out detailed study of the farmers’ crisis and submit its findings and suggestions for improvements. TISS has accordingly submitted its report on 15th March 2005. The report is now available to the public on its website.

The TISS report has brought out many fundamental issues for the consideration of the Hon. High Court. It has said loud and clear that successive governments’ wrong agricultural policies of the past five decades have been mainly responsible for the present pathetic condition of agri-sector in general.

Wrong policies created indebtedness

The agriculture sector is the backbone of our economy for thousands of years. Most of our people make their living out of this activity. It feeds the entire nation and employs huge number of people. Due to its importance in our national economy, primary focus of all our economic policies should have been agriculture sector. Also, all the planned investments as well as annual budgetary expenditure should be agro-centric. But our planners and governments have been following the western economic model and they strongly believe that industrial growth alone can alleviate the poverty of large number of people. Surprisingly the western countries’ economic development model gives contrary results. New York Times editorial of 10th May 06 states: 37 million Americans lived below poverty line (BPL) in 2004, and additional 54 millions are just above this BPL line. Despite huge investments in industrialization, the USA could not get rid of poverty even today.

The TISS report states that the decrease in investment in this sector is huge over the Plan periods of five decades despite having over seventy percent of population dependent on this sector and contributing about 25 % of our total GDP. Let us be clear that about three-fourth contribution to GDP from this sector is from subsistence agriculture. Due to wrong priority of achieving economic growth, the investments in this sector have been brought down from 14.9% of the total planned investments during the First Plan to only 5.2 % during the Tenth Plan. The decrease is steep particularly during the last seven years as per data available with TISS. This observation is further strengthened when we look at the total investment to the GDP ratio. This is declined from 1.6% to 1.3%. The following table should clear any doubts in this regard:

The sector has been suffering from shortage of water for irrigation, including the ground water, in many affected states despite many irrigation schemes on paper. As a result, agriculture is mostly rain dependent. There is at least one, or some time two, dry spells in a period of four years, thereby, making farming an uneconomic activity. Also, due to this uncertainly, many farmers have, during late 1980s, shifted their priority in favour of cash crops.

The report exposes government’s apathy in not providing required information to farmers whenever needed to over come any kind of calamity. Instead the farmers are forced to depend on dealers and manufacturers of fertilizers and chemicals. These suppliers provide the information as regards patterns of cropping, controlling pest-menace, declining land productivity, etc., with a vested interest to increase their products’ sale. Many farmers from the study samples complained that they did not get any timely guidance from the concerned government agencies on matters relating to supply of spurious seeds by manufacturers and dealers, crop patterns and use of unlimited fertilizers and chemicals, etc. But when the crops failed on this account, none of them turned up for claiming the responsibility. Government machinery was nowhere to be seen in such a situation. Some farmers committed suicides due to this reason.

TISS, by taking some clues from other research studies, says, “Under the guidance of the IMF and World Bank, successive Indian governments slashed their expenditure on rural development from 14.5% of GDP in 1985-90 to 5.9% in 2000-2001. Rural growth is now flat; per capita food grains consumption has fallen dramatically to levels lower than the 1939-44 famine, the situation is calamitous.” (emphasis original).

The report says that roots of crisis in the agrarian systems can be seen in pre-liberalization era. However the said problems have accentuated due to the changed global context.

Government programs have induced farmers to go for large-scale use of fertilizers and other chemicals with a hope to reap the benefits of higher productivity. Over dependence on fertilizers, pesticides, and even HYV seeds, demands more water. However, TISS has found that farmers have been spending more on fertilizers even while crop performance had been showing a declining trend. The research team is categorical in saying that such large-scale use of these chemical products by the farmers has only given benefits to suppliers and not to farmers. As such the report says, “the Court should direct the Central Government to come up with policies that focus on farmers rather than seed and fertilizer corporations, who enhance their profit margins at the cost of millions of farmers. The Court could direct the Central Government to frame policies that would support the marginal and small farmers to remain on land.” This is nothing but exposing the government machinery which prefers to remain out of tune of what is happening in reality to its people.

Farm products are always sold at huge loss

Raising for the first time in India the issue of cost-of-production-based selling prices for all agriculture products, was a major contribution made by MCGS in early 1970s. It demanded repeatedly from the governments to fix prices of all farm products on the basis of scientific cost study of all crops. The farming community was all the time suffering due to price manipulations by traders and speculators. They were all the time incurring losses as the prices obtained for farm products were invariably much less than the actual cost of production. Interestingly the TISS team has also found out a serious mismatch between actual cost of production and realization from sale of agriculture products. This is a single major issue affecting the entire farming community for more than five decades and making the agriculture activity unviable, and, as such unsustainable. Government prefers to ignore this reality for decades and allows the situation to go out of control as we are now seeing in the form of mass suicides of farmers.

The research team of TISS has obtained most of the data from the government departments to understand the minimum support price (MSP) mechanism as well as the extent of losses suffered by marginal and small farmers on this account. The MSP is fixed and declared by the Ministry of Agriculture at the Centre. The report has quoted a statement of Jt. Director, Agriculture Price Cell. This exposes a very strong bias at the government level against the farming community and also its unconcerned attitude on this subject. I quote the statement from the Report:

“Favourable / unfavourable agro climatic situation among the State (of Maharashtra) leading to variation in per hectare yield: The agro climatic situation varies from state to state. This leads to variation in per hectare yield. The per hectare yield in Maharashtra State is less in comparison with the yield of other states due to irrigation facilities and unfavourable agro climatic situations. This leads to more cost of production. However, due to favourable climatic situation and sufficient irrigation facilities, the per hectare yield in Haryana and Punjab is more. Therefore the cost of production of these states is conducive for the states where a particular crop is grown on a large scale. This adversely affects states like Maharashtra who have unfavourable agro climatic situation and higher cost of production. The Minimum Support Price declared by Government of India does not cover the cost of production of the agriculture produce to the full extent. Therefore, the Minimum Support Prices do not give full justice to the farmers of the State having high cost of production. (emphasis added). Therefore, instead of declaring one Minimum Support Price at the national level, separate prices may be declared for groups of states according to cost of cultivation.”

It is the well-known fact that the Government of Maharashtra does have a difference of opinion on the methodology used by the Commission for Agriculture Cost and Prices (CACP) in respect of the working of the cost of cultivation. However, despite this kind of difference of opinion, the Government of Maharashtra has been meekly accepting the final verdict of CACC all these years and making the farmers of the State suffer heavily and then commit suicides. It only shows how much these ministers and their governments are sensitive to the issues of farmers and common men of this country. Difference of opinion as well as wrong methodology followed by these governments have been causing huge losses to millions of farmers all these years.

Which businessman would continue to produce goods when he is not recovering even the bare cost of production of those goods, not only for one year but also for decades? This is a sure way to permanently push all these millions of farmers in indebtedness. Not a single minister in-charge of agriculture of the state government or the central government has yet been asked to resign by their party, nor the concerned minister himself, feeling ashamed of the act, offered to resign, when thousands of farmers are committing suicides everywhere on account of five decade old faulty policy of the government. The present minister for agriculture at the center though propagating himself as a saviour of farmers has never talked about such a mismatch between cost of production and minimum support prices declared by his government. During his regime as a CM of Maharashtra also, he never raised this issue for the benefit of state’s farmers. Today he prefers to talk more on rate of interest than the fair prices for the farm products. He is quoted for having said that ‘suicides are not new. These were there twenty years ago too’. If he is aware of this pitiable condition of farmers for such a long period of twenty years, what were he and his government doing all these years?

The farming community of the Maharashtra State and other similar states has lost very heavily on account of their governments using unscientific methods for arriving at MSP for decades. The Report cites a few cases of such mass scale exploitation of these farmers. Let us look at these:

1. “Not a single support price for the last ten years has met the cost of cultivation, except sugarcane for two years”.

2. “The average gap in the minimum support price and the cost of cultivation per crop as per the figures worked out to the following in terms of each crop over the period of eight years (1996-2004). The difference is given in the minus % from the price asked for and granted: Paddy (-38%); Bajra (-48%); Groundnut (-32 %); Tur (-40%); Cotton (-38%); Sunflower (-50%); Mug (-50%); Udid (-47%); Soybean (-37%); Sugarcane (-12); Wheat (-47%); Gram (-47%); Safflower (-39%).

Thus, all crops are being cultivated at a loss to the cultivators. The loss varies from 38% at the minimum to 50% at the maximum. The exception is sugarcane where the loss is minimized at 12%. Is sugarcane being cross-subsidised at the expense of other crops?”

3. “In connection with the price environment for the farmers, it needs to be pointed out that there has been considerable increase in the price of important farm inputs during the last five years. Between 1990-91 and 1995-96 the prices of wheat as measured by the average of wholesale price indices increased by 58%, that of fertilizer increased by 113%, that of irrigation by 62% and insecticides by 90%. While the recent revision in the administration prices of petroleum products, the price of diesel would be higher by 75% than their level during 1990-91. The report further points out that the small and marginal farmers do not ever get the administered price declared by the state”

How do we expect farmers to meet both ends and survive when they are cheated as mentioned above by their own governments? How do we expect them not to approach local moneylenders even for minimum survival support? How do we ask them not to commit suicides when they are all the time financially losers? Why did the government at the center as well as at Maharashtra and other states not bother to look into this pitiable condition of farmers over a long period? This issue was brought out almost 35 years ago by MCCS. Present agriculture minister at the center says he is aware of such a condition forcing the farmers’ suicides for the past twenty years. What did he do to correct the situation? What a cruel joke on our farmers!

Farmers have been made to believe by the government as well as multinational corporations that use of fertilizers would improve farmers’ gross income and thereby their standard of living. The Report states that the reality in this regard is the other way round. Excessive use of fertilizers and pesticides in the absence of adequate water has ruined the farmers two ways: one, the land productivity has gone down, and, two, the cost of production has been showing a rising trend all the time. The report has requested the Hon. Court to ask the government to propagate the alternative low cost organic/natural farming through a strong network of voluntary bodies, and activities working on these issues and farmers’ organizations.

Let us not forget that the effect of higher interest charges on loans from local moneylenders on cost of production. The rates of interest on such loans from moneylenders vary between two percent and five percent per month. That is, 60 percent per year? I am sure that CACP must not be taking actual interest charges into account while working out MSP. The government cannot deny the knowledge of such a reality. It must have preferred to ignore this killing-disease due to the vested interest developed by politicians and bureaucrats over a period of time. This additionally shows ineffectiveness of the formal banking structure. Why does the government machinery keep talking about six or seven percent interest charges when a majority of farmers are deprived of such a low rate banking facility? Why do farmers have to rush to local moneylenders despite much talked about banking network of the government?

The Report at one stage says, “Higher cost of production, in the absence of a corresponding increase in prices, affects the viability of farming. On the one hand, the cost of production increases due to increased input prices and at the same time market imperfections do not allow the farming household to generate sufficient profits to cover household expenses, exigencies and expenditure on social or family functions.” It again states that the indebtedness itself results from a mismatch in the cost of production and the support price and the market price that the cultivators are receiving at the end of each cropping cycle. This is, in my opinion, the single major issue affecting the very viability and sustainability of the agriculture activity, It however does not receive due attention of any one from the government. Pandit Nehru was once told that any rise in farm product prices would only stoke inflation. However, he was not rightly informed by his advisers by saying that the inflation was purely on account of continuous increases in product prices of the industrial sector. He was also not told that even wrong government policies were responsible for the inflation. He had never pursued this aspect during his lifetime. The position today is not different than what it was at Nehru’s time.

Other points raised in the subject Report:

I am reproducing here a few additional points from the TISS Report for the information of readers. This also tells us as to how the government machinery is careless and apathetic towards the farming community:

1. “The attitude of the government may be described as starkly apathetic. This is demonstrated by the fact that almost 80% of the victims have not received any kind of compensation from the government.” (“Castigating the state for poor distribution of relief, the Bombay High Court on Friday (5th May 2006) ordered the Maharashtra Government to implement a comprehensive plan to check the increasing number of farmers’ suicides. ……Causes of suicides are suppressed by the official machinery. The real causes are often camouflaged, the Judges said in a damning order, which cited a report by the Tata Institute of Social Sciences (TISS) saying 80% of the family members of farmers who commit suicide do not receive any compensation”……The Time of India/Mumbai/06. 05.2006)

2. “Repeated crop failure, inability to meet the rising cost of cultivation, and indebtedness seem to create a situation that forces farmers to commit suicide. However, not all farmers facing these conditions commit suicide – it is only those who seem to have felt that they have exhausted all avenues of securing support have taken their lives”.

3. “The tendency to take loans increased in the nineties. The farmers took their first loan from banks (banks gave loan only once, with a further loan possible only after repayment of the outstanding loan). The later loans were from private parties to repay the bank loan (default of which would result in attachment of land or mortgaged house). ….Thus, over 75% of the farmers had loan commitments to non-formal sources.”

4. “There is a total absence of safety net for the cultivators, especially the small and the medium ones.”

5. “The cash crop becomes a kind of compulsion, as subsistence farming alone does not provide for the need of liquid capital that the cultivator needs for survival”.

6. “It (borrowing pattern) suggests that the small and medium landlords are starved of credit – mostly institutional credit. They perforce have to turn to the moneylenders for survival and then fall into the debt trap.”

7. “ ….even after 55 years of the Independence, private money-lending remains the single largest source of credit to small and marginal farmers. This is so because the banking sector is fast moving out of the credit delivery mechanism.”

(Writer is a commentator on issues of national importance.)