India's Finance Minister
By Vandana Shiva
02 July, 2004
Dear Shri Chidambaram ji,
You have announced
a "bail-out" package for Indian farmers, thousands of whom
have taken their lives in distress and hopelessness, by asking the banks
in the commercial, cooperative and public sector to increase their rural
lending by 30% at Rs. 1,04,500 crore. Asking banks to lend more is not
the same as increasing public investment in agricultural research and
extension, rural infrastructure and irrigation as promised in the Common
Minimum Programme of the United Progressive Alliance.
Asking banks to
give more loans to solve the problem of suicides caused by indebtedness
is like asking a neighbour to turn on their taps to solve the problem
of a leaking water storage tank in your backyard. Firstly, you can't
force your neighbour to turn on his tap. Secondly, even he did, it won't
fix the leak in your tank. Processes that create structural and systemic
indebtedness are leaks in the farmers income and livelihood security.
Unless these leaks are fixed, more flow of credit will not bail out
the farmer and suicides and dispossession will continue. Farmers income
is like water in the tank. The new economic policies based on the paradigm
of trade liberalization and deregulation of commerce has created a double
leak and drain in farmers income.
Why are farmers
are a result of indebtedness, and debt is a result of rising costs of
agricultural inputs and falling prices of agricultural produce. Both
the rising costs of production and decline in farm prices are intended
outcomes of trade liberalization and economic reform policies driven
by agribusiness corporations. Farmers suicides are therefore an inevitable
outcome of an agricultural policy which favours corporate welfare and
ignores farmers welfare.
The farmers who
have committed suicide were driven to their tragic end by a threefold
crisis caused by trade liberalization and globalisation policies, deregulation
of inputs, imports and prices and the inevitable consequence in deepening
the input sector, the entry of seed MNC's and the creation of seed monopolies
has increased the costs of inputs and the risks of crop failure. In
2002, farmers of Bihar lost Rs. 400 crore due to the failure of Monsanto's
hybrid corn. Farmers of Andhra Pradesh and other States ran into losses
of Rs. 100 crore due to the failure of Bt. Cotton. Seed supplied at
Rs. 300 / kg by public sector farms costs Rs. 1600 / kg when bought
from Monsanto. Inspite of the high costs, Monsanto's Bt. Cotton performed
miserably in the first commercial planting in 2002. The deregulation
of the input sector has allowed seed MNC's into Indian agriculture for
the first time. In India's history, our seed security and sovereignty
was based on the time tested and adapted farmers varieties which accounted
for 80% of the seed supply and the varieties bred and tested in the
public sector seed farms for our diverse agro climatic zones, appropriate
to the socio-economic, conditions of the peasants, MNC's greedy for
quick profits have been selling untested, ill adapted, high cost seeds
which need high cost chemicals and intensive irrigation. This is a sure
recipe for a debt trap.
for farmers offers no relief to the farmers distress linked to seed
insecurity and more frequent occurrences of crop failure due to introduction
of untested seeds in a deregulated market. Drought is only a partial
explanation for indebtedness and crop failure. The deregulated seeds
untested for India's diverse soil and climatic conditions and rising
costs of inputs are a major cause for crop failure and farm debt. This
is why farm suicides are occurring in irrigated and rainforest areas,
they are taking place in Punjab and U.P, not just in Andhra Pradesh
and Karnataka. They are reported from tea gardens and sugarcane belts,
from potato agricultural export zones and the cotton belt areas growing
"high value" commercial crops. Farm suicides cannot be blamed
on nature and the rain. They cannot be stopped by asking states to assist
banks for formulating new "bankable investment project" like
plantation and horticulture. Bhagwan Singh a prosperous farmer from
Agra took his life when potato prices crashed to Rs. 40-100/quintal
while costs of production were Rs. 250-300/quintal. The government fail
to regulate the procurement price announced at Rs. 195/quintal.
Even in plantation
and horticultural corps farmers suicides have started. Every crop, every
ecosystem is affected. The crisis calls for radical reform not business
Your proposal to
support organic farming can help because organic agriculture reduces
the drain of farmers incomes for toxic agrochemicals. But your announcement
of Rs. 12,700 crore subsidy for urea and DAP undermines the incentive
to farmers to go organic. Even organic producers need just and fare
prices to survive, and even they need public investment in research
and extension and input support for organic fertilizers and ecological
pest control. Bank loans cannot be a substitute for public policy and
public supportive role to public policy.
You offer no budget
commitments to rebuild seed security, the first link in the farmers
livelihood and income security. More credit will not fix this leak of
farmers scare and hard earned incomes for unreliable, and costly seeds.
It will just increase the debt burden, and farmers distress. This crisis
will deepen when corporations extract even more resources from resource
poor farmers for royalty patents as a result of the implementation of
the TRIPS agreement of WTO. Given that corporations like Ricetec patented
the Indian Basmati, and Monsanto has patented Indian wheat, without
TRIPs reform the future drain of farmers incomes will make agriculture
totally unviable for Indian peasantry.
The second leak
in the farmers income is the collapse in farm prices due to deregulated
of trade, especially after the removal of quantitative restrictions.
Removal of quantitative restrictions has led to depression of domestic
prices of farm products due to the artificial lowering of international
prices because of $ 400 billion of subsidies in rich countries, which
is leading to dumping and depression of domestic prices through global
price signals reaching domestic markets unattenuated through QR's. The
level of dumping has increased since 1995 when the W.T.O cam into force,
even though the proclaimed aim of W.T.O is to "reduce distortions
in trade." While the full cost of U.S wheat in 2001 was $ 6.24/bushel,
its export price is $3.5/bushel. In the case of soya bean, the cost
was $6.98/bushel, the export price was $4.93/bushel. For maize, the
full coast was $3.47/bushel, export price was $2.28/bushel. In the case
of cotton, the cost was $0.9313/bushel. and the export price was $0.3968/bushel,
a dumping of 57%. The cost of production of rice was $18.66/bushel and
it was sold internationally at $14.55/bushel. From 1995 to 2001 dumping
jumped from 23% to 44% in the case of wheat, 9% to 29% in the case of
soya beans, 11% to 33% in the case of maize, from 17% to 57% in the
case of cotton. Removing of QR's implies making the Indian peasant vulnerable
to the distortion of international prices. Annual looses of farmers
cross Rs. 1.2 trillion / year. The non-procurement by government at
MSP levels has also led to a fall in farm prices and hence a fall in
On the basis of
the fall in the prices of agricultural commodities, the annual losses
Indian farmers are bearing are :
Crops Per Year
Oilseeds Rs. 25,000 crore
Potato Rs. 5,000 crore
Sugarcane Rs. 1,500 crore
Wheat Rs. 21,000 crore
Rice Rs. 27,000 crore
Milk Rs. 34,000 crore
Tea Rs. 2,100 crore
Spice ad Plantation Crops in Kerala Rs. 100 crore
Total Rs. 1,15,800 crore
This loss in incomes
is more than what you are asking banks to lend. If farmers have no incomes,
how will they pay back their loans?
It is in light of
this devastating impact that in a petition to the Prime Minister on
August 26, 2003, given before Cancun meeting the Indian People's Campaign
against W.T.O. demanded:
agrarian distress is being experienced in the country. Anti-peasant
anti-people policies of Government have engendered the crisis. Exposure
of Indian agriculture to the notoriously volatile and highly distorted
global agriculture market in aggravating the crisis. The WTO perspective
on agriculture and the so-called international discipline that is evolving
there on agriculture, are totally detrimental to peasants, the agricultural
workers, the rural and urban poor. In the circumstances, we insist that
the Government recognize the crisis situation in agriculture, put an
end to their anti-people policies, and, in particular, firmly reclaim
and assert out unqualified right to impose quantitative restrictions
on imports to promote the development of our agriculture and to safeguard
the livelihood of seventy percent of our population."
The CMP has made
a commitment that "the UPA government will ensure that adequate
protection is provided to all farmers from imports, particularly when
international prices fall sharply". Since the international prices
are below cots of production, it is necessary to bring back QR's to
allow Indian farmers to survive and stop farm suicides.
III. Deepening Debt
Rising costs of
production and falling prices of farm products, implies growing rural
indebtedness. The withdrawal of government from rural investments and
rural credit has implied that farmers are indebted to private moneylenders
charging high interest rates. Rural branches of banks declined from
35,329 in 1992 to 32,481 in 2002. Agricultural credit was only 9.8%
of total outstanding of scheduled commercial banks. While 43% borrowers
are from rural centers, they account for only 13.4% of outstanding loans.
This is the ultimate cause, which has driven farmers to take the drastic
step of taking their lives. Farmers suicides are in fact the direct
outcome of policies of globalisation and economic reform designed to
expand the markets and profits of seed and agribusiness MNC's. Your
instructions to banks to lend more to farmers are one element of the
commitment in the Common Minimum Programme. Even this needs public investment
without corresponding action on other commitments it will do nothing
in terms of enhancing the farmers livelihood and income security in
the context of rising costs of inputs and falling farm prices.
We expect a farmer
centered budget from a government brought to power by the distress and
discontent our farmers are experiencing as a direct result of trade
liberalization and deregulation policies. We want to see reform, but
farmer centered reform to prevent farmers suicides, protect farmers
livelihood security and food sovereignty.
For this the economic
policies of the new government will have to address the following :
1. Rebuilding seed
security in public hands by reviving seed farms and starting community
2. Regulate seed
MNCs and hold them liable for crop failure, and false promises, and
genetic contamination. Regulate seed prices - put ceiling on seed costs.
3. Exclude food
staples from IPR regime - both patent laws and the plant variety legislation.
4. Prevent biopiracy
and patenting of traditional varieties eg. Basmati by Ricetec, Wheat
by Monsanto in both national and international law.
5. Shift subsidies
to organic farming / low external input agriculture to reduce costs
of production for farmers and conserve natural resources.
Livelihood And Income
1. Bring back QR's
to defend farmers livelihoods in the context of dumping and artificially
low international prices.
2. Ensure that both
private and public procurement is governed and regulated by a Minimum
Price, which guarantees peasants a just price fair wages and sustenance.
Put a floor on procurement price.
Freedom From Debt
1. Increase rural
credit through cooperative and public sector banks.
2. Regulate interest
rates charged by private moneylenders, and make high interest rates
illegal. Put ceiling on interest rates charged by private lenders.
3. When crops fail
because of unreliable, untested seeds, the private company selling seed
should pay compensation to farmers.
4. Write off debt
of farmers based on high seed costs, unreliable seed supply and high
These steps are
necessary to stop the "leakage" of our rural economy. Many
of these actions need public investment to rebuild seed sovereignty
and food sovereignty. The withdrawal of the state from creating the
context of livelihood security and income insecurity of farmers is the
real cause of the farming crisis. To address the crisis fully, some
actions are needed by other ministries. But you hold the key to public
investment in agriculture. We hope your budget will reflect the mandate
rural India gave you and the commitment the CMP of the UPA has made
to the Indian farmers. Your budget will be a litmus test for the new
governments commitment to take concrete steps to stop farmers suicides.
If you fail the farmers, they will fail your government like they failed
the last one. Do not betray the mandate given to you by India's farmers.
Dr. Vandana Shiva