Harvesting Dispair: Agrarian Crisis in India

HARVESTING
DESPAIR
Agrarian Crisis in India
PERSPECTIVES
January 2009
homicide, not suicide
Ramdas has an old and gnarled babul tree in the courtyard of his
home. A dilapidated mud hut with a roof of black plastic sheets. A
small courtyard surrounded by a boundary wall made of thorns
and wood. Three acres of land in Bharumri village in Yavatmal
district, Vidarbha. At the end of our hour-long conversation, Ramdas
pointed towards the babul tree and said, “Madam ji, when there is
no other option left for me, this will still be an option…”
When Ramdas and thousands of farmers like him across the country
decide to exercise their last option – end their own lives – it does not
make much news. People in the cities do not come out on the streets
asking why so many farmers have committed suicides in the last
fifteen years. Ministers of the state and central government do not
acknowledge their mistakes or policy failures and resign from office.
When an economic activity which provides livelihood to more than
five out of ten people suffers from stagnation and crisis, the
government does not announce crores of rupees of stimulus
packages, interest rate cuts, and daily assurances. Newspapers and
television channels do not scream for help and demand immediate
bailouts. There is so much brouhaha over the global financial crisis
in India, but hardly anyone seems bothered about the agrarian crisis
which has killed, on an average, one farmer every half hour in 2007
alone. After all, it is not the Sensex, banks or companies whose
survival is threatened. It is a question of survival for merely half the
population of our country. The population which remains invisible
in the villages, mandis and fields. The population which feeds the
country but is uncertain of its own future.
We, at Perspectives, started thinking about agriculture when we
were struggling with our earlier work – development and
displacement. The forced acquisition of agricultural land along with
lack of alternative employment opportunities for those displaced
made us think about the plight of those dependent on this sector. In
our opinion, no meaningful development of the economy is possible
without the growth and development of the agricultural sector.
In June 2007, a Perspectives team went to Mansa and Patiala districts
of Punjab. The myth of the unending prosperity of Green Revolution
was busted. The misery of farmers in one of the richest states of our
country convinced us that this was a matter worth investigating
and understanding. In May 2008, a team of seventeen people from
Perspectives visited the Pandharkawada tehsil of Yavatmal district,
one of the suicide-hit districts of Maharashtra. We interviewed
farmers in fifteen villages, some families where members had
committed suicides, and the peasant leaders of the region.
The desolation and hopelessness of Vidarbha farmers continues to
haunt us. The grim situation in Vidarbha galvanized us to
understand the complex causes of the larger crisis in Indian
agriculture. Suicides are only the proverbial tip of the iceberg. The
agrarian crisis in India has been deliberately engineered by the state,
to serve profit-seeking interests and to pursue the urban-centric,
growth-obsessed model of development. Credit to agriculture, public
investment, irrigation, subsidies, costs of inputs, minimum support,
public procurement, technology, trade-related international
agreements – the list of areas where governments could have acted
in the interest of our farmers, but chose to do the contrary, goes on and
on. During the course of our work, we have realised how much the
rulers of this country have neglected the agricultural sector,
especially in the period of liberalisation, privatisation and
globalisation, and made it possible for transnational corporations
of the developed countries to earn profits from this sector. They
have ensured that the occupation of agriculture loses all dignity and
respect, becomes unviable and unsustainable, and leaves the farmer
with no option but to seek ways – including suicide – to get out of
his profession.
We have divided the book into ten chapters. The first chapter
describes our experience of Vidarbha, our study and the analysis
and conclusions that follow from it. The second chapter introduces
the larger agrarian crisis and gives a historical overview of policies
and approach of the state towards agriculture. Chapters three, four
and five discuss policies at the domestic and international level
related to agriculture and their impact, especially during the period
of liberalisation, privatisation and globalisation. Credit policy
reforms, agricultural subsidies, public investment in agriculture,
costs of cultivation, market and procurement policies, and the
Agreement on Agriculture are discussed in these chapters. The sixth
chapter discusses the content and impact of the technological changes
that have been brought about in agriculture. Chapter seven traces
the impact of these policies on the viability of agriculture, on
cultivators and on agricultural labourers. Chapter eight deals with
the issues of food security and sovereignty. The penultimate chapter
talks of the farmers’ movements around the issues underlying the
present crisis. Agriculture plays a crucial role in our economy and
society. The last chapter tries to suggest the kinds of support that
this sector requires, and an alternative model of development for
the country, in which agriculture would get its due recognition and
priority.
In our work, we have received help, support and encouragement
from many individuals and organisations. First and foremost, our
gratitude goes to the people of Punjab and Vidarbha. We would
also like to thank the peasant leaders and activists of the two regions,
in particular Bharatiya Kisan Union (Ekta), Vidarbha Jan Andolan
Samiti (VJAS) and Vijay Jawandiya. Professor Amit Bhaduri,
Professor Sucha Singh Gill of Patiala University, Dr. Sukhpal Singh
of Punjab Agricultural University, Professor D.M. Diwakar of
DRISTI, Dr. T. Haque and Bhaskar Goswami helped with valuable
insights. Thanks are also due to those friends who suffered stoically
the demands made by us: cover designers, page setters, translators,
proof readers, those who were forced to read chapters endlessly
and give their feedback, and the tea makers. Needless to say, the
errors remain ours.
We hope our work communicates the gravity of the situation.
The Perspectives Team

Delhi
December 2008
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This harvest of hopes, my friend
Cut down
All these wilted plants
Don’t leave them thirsty and sobbing
Tear down
These restless blossoms
Don’t leave them weeping on the bough
This harvest of hopes my friend
Will go waste once again
All toil, of mornings and evenings
Will still again go in vain
In every nook and corner of the field

Feed again the manure of your blood
Yet again water the soil with your tears
Yet again agonize over the season to come
Agonize, yet again over the season to come

When we are to be uprooted once again
Once this yield is harvested we will be done
Till then we do what thus remain
Faiz Ahmed 'Faiz'

Translated by Perspectives
P
ERSPECTIVES was conceived while some students and
teachers of Delhi University got together to work on the
question of development and displacement. The first edition
of our first work ‘Abandoned: Development and Displacement’ was
brought out in February 2007 and the second revised edition was
brought out in January 2008. Our effort has been to investigate
and understand issues of social, economic and political relevance,
and propagate our understanding as widely as possible. Of late,
students from Jawaharlal Nehru University, Delhi, have also joined
us in our endeavour.
We try to engage with undergraduate and postgraduate
university students through seminars, conventions, public meetings
and newsletters. We also hope to reach out to those who are working
in different parts of the country on issues of social concern. Our
publication on displacement was translated in Hindi as dgka x, os
yksx% fodkl vkSj foLFkkiu. We try to understand the issues first hand
on the ground. For this we have organised field trips in and outside
Delhi, for example, in Asansol and Durgapur in West Bengal,
Saraikela Kharsawan and East Singbhum districts of Jharkhand,
Mansa and Patiala districts of Punjab, Yavatmal in Maharashtra
and Gurgaon in Haryana.
Our experience at Perspectives has taught us not to accept
what is usually taken for granted. We do not believe that economic
growth is synonymous with the well being of the people, that people
have equal opportunities in this society, and that human rights
can be located in an ahistorical social vacuum. Instead we look at
social, political and economic development also from the point of
view of those who are ignored, or are adversely affected by such
development. Whether it is land acquisition for industry, special
economic zones or corporate agriculture, our understanding is built
on the maxim – development has to be for the people, not at the
cost of the people. In our work, we have given importance to social
movements and their role in challenging and changing the status
quo.
Perspectives is open to all individuals who are concerned about
these issues. Information and arguments presented in our work
can be used by any individual, institution or organisation. Ours is
a non-funded organisation, which depends on voluntary
contributions by all democratic and concerned individuals. If you
wish to write to us, email to the Perspectives team at:
contact.perspectives@gmail.com
I. VIDARBHA 1
Debt, Despair and Death
II. BACKDROP TO THE CRISIS 33
III. ECONOMIC POLICY REFORMS AND THEIR IMPACT 43
IV. TIGHTENING THE NOOSE 73
Credit Policy and Reforms
V. FREEDOM TO TRADE AND FREEDOM TO PLUNDER 100
WTO and Indian Agriculture
VI. SCIENCE OF PROFIT 127
Technological Changes in Agriculture
VII. HARVESTING DESPAIR 161
Agriculture is becoming Unviable
VIII. OF HUNGER AND GREED 170
Issues in Food Security and Sovereignty
IX. FLAMING FIELDS 187
Movements against Agrarian Crisis
X. TOWARDS AN ALTERNATIVE 196
List of Appendices on reverse
Appendices
Chapter I
Vidarbha Survey Findings 21
Questionaire 29
Chapter II
Public investment in agriculture 70
Government expenditure on irrigation 70
Plan expenditure on agriculture 71
Agricultural subsidies in India 72
Chapter IV
Growth of rural banking 97
Relocation of RRB business 97
Priority sector advances of commercial banks 98
Bank advances outstanding to agriculture 98
Outstanding loans by size of farmer 99
Chapter V
Aggregate measure of support to agriculture 121
Total support to agriculture in select countries 121
What is market access? 122
What is market support? 124
Chapter VI
Doctors for food and bio-safety letter to Home minister 156
Chapter IX
Demands by some peasant organisations 192
Chapter I Debt, Despair and Death
Vidarbha: 1
Vidarbha
Debt, Despair and Death
The first thought that comes to mind when we hear the name
of Vidarbha is suicides. Something as morbid as people taking their
own lives due to despair and helplessness has translated into a
mere statistic now. When nightmares become a pleasant and
preferable preoccupation for an entire community, and death an
opportunity for a better life its time to jam the brakes and take a
check.
Eleven districts strong, Vidarbha region of eastern Maharashtra
is known for the cultivation of cotton, soybean and of late for its
alarming rate of farmer suicides. In fact six of these districts have
been declared as ‘suicide districts’ viz. Yavatmal, Amravati, Wardha,
Akola, Buldhana and Washim. Vidarbha lies just 700 km from the
thriving state capital Mumbai, also one of the centers of global
finance, yet the two are worlds apart.
According to the National Crime Records Bureau (NCRB),
suicides by farmers in Maharashtra crossed the 4000-mark in 2007
for the third time in four years. The exact number was 4,238, one-
fourth of the total number of farmer suicides in the country in that
year.1 This is after one-and-a-half years of farm relief packages of
around Rs. 5000 crores and a visit by the Prime Minister in mid-
2006. According to a study, the suicide mortality rate (the number
of suicide deaths per one lakh people) for male farmers in
Maharashtra trebled from 17 in 1995 to 53 in 2004 which is nearly
four times the national average. 2 In affected districts like Amravati,
the figure at times is ten times the national average. Since
September 2005, post-mortem centers in Maharashtra are open 24
hours by government order.
In Vidarbha alone, there has been a suicide every eight hours
in just three months (June-July to August- September) of 2008.
According to some reports, more than two hundred farmers of this
region committed suicide after the announcement of waiver of farm
loans by the central government. At the beginning of September
2008, nine farmers ended their lives in the midst of one of the biggest
festivals of this region, ‘Pola’. An increasing number of suicide notes
today directly address the Prime Minister or the Chief Minister,
2 Harvesting Despair: Agrarian Crisis in India
taking the form of a public statement accusing the state of betrayal.

Kuchankar (age 27), literally spoke from his grave; “The cotton price
has fallen to Rs.1, 990 a quintal. We cannot manage with that. Which
is why I am giving up my life,” said the suicide note of this farmer
who left behind among many dependents, a widow of just 17, whom
he had married only 6 months ago. The hypocrisy of the government
became evident when the family of a suicide victim in Kolezari
village of Yavatmal district received a cheque for Rs. 30,000 in 2006
only when it became public knowledge that this village was on the
itinerary of the Prime Minister’s visit. The farmer had committed
suicide as he did not have the money for his niece’s dowry.
The enormity of the issue, overwhelming as it is, is also
undermined to a large extent due to lack of specific information
and criteria which invisiblise or simply deny the existence of large
sections of the victim population. Over 450 women farmers
committed suicide in the same districts, yet their numbers did not
add up to any government liability since they did not own any land
and hence were disqualified as victims of the crisis. Their names
only surfaced due to the meticulous records maintained by a local
doctor. While addressing the Parliament in September 2006, noted
journalist P. Sainath said that in Yavatmal district in the preceding
month, every single claim of suicide was rejected by a six-member
‘independent’ committee consisting of top government officers of
the district plus two non-government officials chosen by the
government!
At the time of our survey, we were told by the local tehsildar
that only those suicide victims were ‘eligible’ for compensation who
had land records in their name, and a default notice for any bank
loan that they had taken.
Vidarbha is only one of the many regions of the country
reporting suicides by the farmers. And suicides are merely
symptomatic of a much larger malaise, a much larger crisis facing
the country. In order to try and understand this, a Perspectives
team went to Pandharkawada tehsil of Yavatmal district in May
2008.
THE REGION
The districts of Vidarbha region were part of the Maratha
kingdom uptil 1803 and came under direct British rule in 1853.
The Ryotwari system of land tenure adopted in the area vested
property rights in the hands of cultivators. Consequently, the better
Vidarbha: Debt, Despair and Death 3
off castes like Brahmins and Rajputs began acquiring ownership

rights to land, though it was Kunbis who gained control over the
largest amount of agricultural holdings, while the lower castes
became tenants. Mahar, Chamar, Mang etc., who were at the bottom
of the rural hierarchy largely worked as agricultural labourers and
were considered untouchables.
Under the British, area under cultivation increased and
pressure was exerted for farming of commercial crops especially
cotton. The area under cotton cultivation increased during the
American Civil War on account of rise in British demand for Indian
raw cotton (American exports of the crop had stopped). The growing
demand in both foreign and Indian markets resulted in continued
increase in the sown area even after the war. The building of a
railway line through Nagpur facilitated the transportation of cotton
and further stimulated cotton cultivation. In Yavatmal district, the
area under cotton rose from 29 per cent in 1891-92 to 45 per cent in
1925-26. 3 However, since the output was dependent on monsoons,
low rainfall led to a near crop failure in Yavatmal district in 1896-
97 and 1899-1900. This forced many lower caste farmers and
landless labourers to borrow from large landholders and traders in
cotton or grain at exorbitant rates of interest. This period also saw
migration to nearby cities. At a socio-political level, many lower
caste cultivators and labourers either converted to Christianity and/
or joined the Satyasodhak movement led by Jyotiba Phule, who
worked for the abolition of the caste system and against the socio-
economic power exercised by the higher castes.
With Independence came land reforms. Land reforms were mere
lip service in most regions of the country as will be shown in a later
chapter. However, Vidarbha did witness some positive outcomes.
This process, combined with the pressure generated by the dalit
movement led to a small increase in the area and number of holdings
operated by the Scheduled Castes. Today, peasant cultivators can
be seen amongst the Scheduled Castes as well. This however, does
not mean that the caste-class hierarchy does not exist today—only
that there have been some changes in the extent and intensity of
discrimination and exploitation.
In 1970s with the promotion of High Yielding Varieties (HYV)
by the government, there was a rise in the use of both chemical
fertilisers and pesticides. Consequently, costs of cultivation
increased. This further increased with the adoption of Bt cotton.4
Agricultural co-operative societies did not suffice to meet the
growing credit requirements of the farmers. The area still depends

on monsoons for irrigation. Almost the entire region is unirrigated.
Even the government admits that almost two-thirds (66 per cent)
of the area under cotton was cultivated under rain fed conditions
(i.e. without irrigation) during 2000-01. Only those farmers who
have a source of income or remittances outside of agriculture have
managed to arrange for private irrigation.
Today, India is the third largest producer of cotton in the world
behind China and U.S. It accounts for one fourth (25 per cent) of
the world acreage and 14 per cent of the world production.
Maharashtra, Gujarat and Andhra Pradesh together occupied 65
per cent of India’s total area under cotton cultivation in 2001-02.
Maharashtra alone accounted for more than one-third (34 per cent)
of the acreage in the same period. Within Maharashtra, Vidarbha
accounted for more than half (52 per cent) of the total area under
cotton cultivation during 2001-02. However of late, there has been
a discernible shift away from cotton and towards soybean.
SUICIDES: MANY CAUSES, MANY EXPLANATIONS
An act of extreme desperation committed by such large numbers
of people over a prolonged period of time can only be explained by a
combination of economic, social, psychological and political factors.
A number of explanations are being put forward by various
agencies, institutions and individuals for the spate of suicides. The
state has attributed these deaths largely to crop failures. Often
statements have been made suggesting that the victims needed
psychological counseling. The state has responded to the crisis either
through random and meaningless relief packages or through
psychological ‘healing’ sessions of the farmers and even bhajans-
kirtans as part of the atma vishwas jagruti abhiyan campaign. There
are others who forward arguments such as drunkenness, disputes
within the family, ‘herd mentality’ etc. as the reasons for suicides.
Unfortunately, all these explanations ignore the systemic nature
of the problem.
According to Vijay Jawandiya, a leading peasant activist of the
region and the country, the economic squeeze accentuated by
escalating costs, fluctuating crop prices on account of opening our
markets internationally, and a growing disparity between rural
and urban incomes, are the factors responsible for the crisis leading
to farmers’ suicides. He says that agriculture is becoming unviable
even for a farmer with 50 acres of land. Kishore Tiwari, leader of
VJAS (Vidarbha Jan Andolan Samiti), is of the opinion that the

spate of suicides has increased after the scrapping of Monopoly
Procurement Scheme (MPS) for cotton in Maharashtra. According
to him, banks consciously under-finance the farmers pushing them
into the clutches of the moneylenders. According to a study5 in 2004,
87 per cent of the suicides out of all surveyed were on account of
indebtedness. Fall in economic position (due to indebtedness or sale
of land and other assets) was the next most important reason
reported and accounted for 74 per cent of the suicides. Another
study6 based on field surveys conducted in Amravati and Yavatmal
districts in 1999, concluded that it was a combination of economic
and social factors which compelled farmers to take their own lives.
According to this study, the largest numbers of suicides were
committed by small cultivators (belonging to medium or lower
castes) who grew mostly cotton. For them, crop failure and the
resulting economic distress, adverse impact of the policies of
economic reforms along with a trend towards ‘individualisation’
were responsible for the suicides. Suicides amongst the larger
farmers were due to business failures, family disputes and
diminished social esteem.
OUR SURVEY
Perspectives team visited fifteen villages and met approximately
one hundred and fifty families in these villages. We met farmers
owning different sizes of landholdings and also some families where
suicide deaths had taken place. Our observations are based on these
interviews but the survey did not follow any particular method.
Thus it is quite possible that these results may not be applicable
for the entire region. The survey was conducted in a period where
the transition to Bt cotton was already in place. This is also a period
after the scrapping of monopoly procurement of the crop by the
government. What was found in the course of the survey was that
farmers owning different sizes of land were indebted; the specific
details did vary but what held true across all sections of farmers
was the universality of debt, an increasing pressure of economic
squeeze, and a palpable feeling of despair and hopelessness. Only
the source, purpose and amount of borrowings differed.
Those with landholdings of up to three acres had to work as
agricultural labourers on others’ farms simply to ensure survival.
These farmers had loans ranging between Rs. 15,000 to 17,000.
They had to depend on the moneylenders or the local krishi kendras
for loans. Krishi kendras are the private suppliers of seeds, fertilisers
and other inputs, which are increasingly evolving as moneylenders.
This class of farmers (up to three acres), sometimes had to pay
rates of interest as high as 25 per cent. Farmers with land between
five and ten acres were not much better off. They also needed to
hire out labour at times i.e. work on other people’s farms. Often
they were forced to sell land or other assets in order to finance the
education of their sons or marriages of their daughters. Incidentally,
those with more than five acres of land will only get 25 per cent of
their loan waived as part of the revised loan waiver scheme
announced by the central government. The next category of farmers
with land holdings between ten and twenty five acres also needed
to supplement agricultural incomes routinely by activities such as
running a grocery shop unless they had relatives employed outside
agriculture who could send them money. For these farmers, the
average amount of loans taken every year was between Rs. 50,000
to 60,000. In this case, loans were taken largely from the cooperative
banks. Only those above twenty five acres of land could manage
with just returns from agriculture but the pressure of growing
economic squeeze and disenchantment with agriculture was evident
amongst them as well. Their average debt amounted to about Rs.
two lakh per year and was usually taken from scheduled commercial
banks. The loans are usually taken for production purposes. The
team met a large farmer (80 acres) who had to sell off nearly half
his land in order to buy a car and make a pucca building, thus
demonstrating the impossibility of incurring the same expenditures
from agricultural income. The impact of agrarian crisis is felt by all
classes of farmers, only the specificities vary.
Most of the farmers interviewed, talked of a steep increase in
the cost of cultivation and the uncertainty regarding the price their
crop would fetch. Almost everyone was dismissive of the loan waiver
as being a political gimmick and did not consider it a solution.
The details of different aspects of cultivation have been
presented towards the end of the chapter. The raw findings of our
survey are given in the appendix to the chapter.
FROM CRISIS TO SUICIDE

Agrarian crisis is not a recent phenomenon. Why is it that more
and more farmers are being driven to the point where they simply
end their lives? As explained by various people, there is a very
complex combination of economic and social factors underlying this
situation. There is evident economic distress, unfulfilled aspirations

of a better future, a strong sense of public humiliation especially at
times when loans cannot be returned (there are instances of coercive
and humiliating methods being used by the lending agencies) and
a psychological feeling of complete isolation. Alcoholism and family
tensions also exist but these are often the result of above factors.
But what exactly leads the farmer to the point of ‘no return’? It
is true that costs have increased, price that the crop fetches in the
market has become extremely uncertain, debts keep on mounting
but when and how is the threshold actually crossed? Most of the
factors seem to converge and the following explanation can be
offered.
At an economic level, the threshold is crossed when the sole
source of livelihood is seriously threatened or cultivation becomes
impossible for the farmer. When can this happen? This can happen
when either the farmer loses his/ her land (or the right to use the
land) or when he can no longer access the inputs to be used on the
land. In other words, either his fixed capital (land) or working capital
(needed to buy seeds, fertilisers, pesticides) is no longer there. In
our survey, we found the latter to be the primary cause for suicides.
A point in time is reached when the farmer does not have the means
to undertake cultivation in a new season. This breeds a sense of
complete hopelessness. Along with this, at a socio-political-
psychological level, it is the feeling of extreme isolation and
helplessness accentuated by lack of political organisations and
movements of the peasants. In such a situation, economic
hopelessness can easily translate into a feeling of social shame,
lowering of self-esteem and seeing suicide as the only option
especially when others in the village are seen to do the same.
At the root of the economic crisis in Vidarbha lies the fact that
the cultivation of cotton and soybean has become completely
dependent on purchased inputs. This means, most importantly, that
one cannot begin sowing in a new season without access to adequate
cash or credit. If adequate credit, from any or all possible sources
(public or private sector banks, cooperative societies, moneylenders,
input dealers, friends or relatives), is not available, the farmer is
not left with any hope of continuing in agriculture.
In Vidarbha, as in most other agriculturally advanced regions
of the country, costs of cultivation have been steadily increasing.
And with the introduction of Bt cotton, they have increased at an
even greater pace. Given this, availability of adequate credit

becomes a crucial factor for the purchase of these inputs. The fresh
sowing of crop critically depends on the availability of credit. As we
stated earlier, sources of credit depends on the landholding size of
the farmer. Larger farmers with land as the collateral can access
bank loans within the credit limits prescribed by the scheduled and
the cooperative banks. However smaller farmers have to depend
on krishi kendras for providing inputs on credit or on moneylenders
for loans. During our visit we found that private krishi kendras
(input sellers) are now beginning to give credit to the farmers. Here,
we would like to point out what we saw in Punjab (during our visit
in June 2007), where the arhatiyas (commission agents) completely
control the sale of inputs, the procurement of the output in the
mandi and give credit to the farmer for agricultural operations at
the same time. The extent of dependence on (and indebtedness to)
arhatiyas has increased to such an extent that they even finance
the farmers’ marriage expenses and his sons’ education in the city.
Thus, lack of credit can easily translate into complete inability
to cultivate in the new season. This according to us is the
predominant explanation for farmers’ resorting to such drastic
measures as suicides. One can hypothetically think of a farmer
whose credit options dry up completely over time threatening his
very livelihood. Suppose a farmer takes loan from the bank in one
sowing season. In all likelihood, this loan would be inadequate to
meet his requirements so he would also need to borrow from the
moneylenders. In Maharashtra, the credit limits of the banks i.e.
the maximum loan that can be given per acre of land is quite low,
much lower than the costs of cultivation so this situation is very
common. Even if the bank loans were sufficient, in case of a default
(possibly due to crop failure or due to price of the crop crashing in
the market), the banks would not extend loans in the next season.
Thus, a new season may begin with the purchase of inputs on credit
from the local krishi kendra. Another round of default would
probably force him to ask his relatives to use their credibility in
order to buy another round of inputs, again on credit. Or it would
force the farmer to borrow from the moneylenders. Both ways, this
situation cannot be stretched continuously. In case of either a crop
failure or a crash in the price of the crop for two or more successive
years, continuous defaults are quite possible. It is possible to
visualise a time when there are no more options for credit left. In a
situation where cultivation is completely dependent on purchased
inputs, this essentially means that there is no possibility of sowing

in the fresh season. The farmer would be moving down the credit
ladder till a time comes when he does not have any more options.
This moving down the ladder is likely to be associated with a feeling
of fall in social esteem and prestige.
It needs to be understood that defaults are quite likely. Under-
financing by the formal credit agencies and lack of control on the
output market has made the farmers more vulnerable. It should be
noted here that the farmer has virtually no control over the quality
or price of his crop. Crop failures have been a common occurrence.
Apart from a minimal amount of crops grown for self-consumption,
most of the output is grown for sale in the market. It is well known
that the market for agricultural produce especially that for cash
crops is a buyers’ market. This means that individual farmers have
no influence over the prices that they receive for their output. This
price, in the case of cotton in Maharashtra, was determined by the
state government till 2003. With the scrapping of the Monopoly
Procurement Scheme, this price is now being determined by the
international cotton market. Now there is absolutely no guarantee
that the price that a cotton farmer will receive in a season will
cover his costs of cultivation. This certainly increases the risk of
default on loans and of credit line being cut completely for the next
season.
As long as sowing can take place, at least there is some hope.
But if sowing itself is not possible then this would be a situation of
complete hopelessness. The only way to tide over the situation could
be if there are some avenues of earning other than cultivation. We
came across a farmer with three acres of land who told us quite
clearly that since he did not have the money for sowing this year,
he would work on someone else’s land for wages. Others have to
depend on family members earning an income outside cultivation,
whether in the form of self-employment in the village (small grocery
shops etc.) or employment in cities like Nagpur from where
remittances are sent. However when this option is also unavailable
(often due to social, psychological factors which would deter an upper
caste farmer from working as agricultural labourer) there seems to
be no way out of this dark abyss.
There are some reports which have documented cases of
confiscation of land of the farmer by the sahukar or the moneylender
in the Amravati-Akola belt of the Vidarbha region.7 However we
did not come across attachment of land in the course of the survey.
In this situation of complete helplessness and despair, presence

of strong farmers’ movement could have provided some source of
hope. The lack of such a movement has undoubtedly contributed to
the large numbers of suicide victims. Political movements are a
source of hope everywhere which enables people to locate their
individual problems within a larger social, political context; which
enables people to draw strength from each other and bank upon
their collective might. Unfortunately, these do not seem to exist in
Vidarbha today. The team did not come across any strong farmers’
movement against the policies which are driving them into the
present state of despair. Absence of organised struggles has
definitely accentuated the psychological feeling of ‘no way out’.
DIFFERENT ASPECTS OF CULTIVATION
Costs of cultivation
Till the 1970s, there were virtually no costs of cultivation.
Indigenous varieties of seeds were used which did not need to be
bought from the market. Fertiliser requirement was also negligible.
It was after 1970 that is after the advent of Green Revolution,
that hybrid varieties of jowar and cotton were introduced. Before
1980, agricultural universities of the state released cotton seeds. It
was post 1980 that private companies were allowed to release their
seeds in the market pushing up the seed cost. As a result, the cost
of a 450 gram packet of cotton seed rose from Rs. 100 to Rs. 250 and
further to Rs. 300. After the 1970s, agricultural practices became
more capital intensive and thus costlier with the introduction of
chemical fertilisers and pesticides. After the oil shock of 1973, the
price of urea doubled overnight from Rs. 50 per kg to Rs. 101 per
kg.
In 2002, the government gave a formal approval for the
cultivation of Bt cotton. Bt (Bacillus thuringiensis) is a genetically
modified variety of cotton which is supposed to resist the attack of
the American bollworm. Although this has been found to be true
and there has been no crop failure since 2001, the crop is not free
from attacks of other pests such as millibug. We were told that
during the time of harvesting in 2007 this pest was found on the
plants. There were reports that the cotton crop was attacked by a
pest called laliya in 2008.
With the introduction of Bt seeds, costs of cultivation have risen
dramatically. The cost of cultivation for one acre of land comes to
approximately Rs. 7,000 to

Table 1
8,000 for non-irrigated land.
Approximate Costs in the In case of cultivation on
Cultivation of Bt Cotton irrigated land, pesticide and
(per acre of unirrigated land) labour costs double whereas
the cost of fertilisers more
Heads Cost (in Rupees) than doubles. The costs of
Land Preparation 1000 cultivation on an average
comes to Rs. 15,000 to 16,000
Seeds 1000 (breakup of costs for
unirrigated land is given in
Fertiliser 1000
Table 1). A field survey 8
(DAP and urea)
comparing the costs of Bt and
Pesticides 1500-2000 (depends non Bt in Yavatmal district
on the season) showed that Bt cultivation
requires more manual as well
Weeding 2000-3000 as bullock labour, greater use
of tractors, greater use of
Inter cropping 700-1000
fertilisers, more use of FYM
Plucking 1000 (farm yard manure) thus
pushing up the costs
Marketing 500 significantly. It was claimed
by the seed companies that
Total 8,700-10,500
there would be a decrease in
Source: Interviews with farmers and Vijay the requirement of pesticides
Jawandiya by the Perspectives team. but this has not been proved
conclusively on the ground.
According to the above study,
number of pesticide sprays had fallen but the quantity per spray
had increased (in millilitres) raising the costs of pesticides as well
(See Table 2).
Due to exceedingly high seed cost for Bt cotton, relatively
smaller farmers especially those with no sources of irrigation, are
reluctant to use it. During our survey, we came across a few farmers
who would have preferred to use hybrid seeds but were unable to
do so, as they are not available any more.
Yield of the Crop
With the introduction of Bt cotton, the yield per acre of the
crop has definitely risen. We were told that one acre of non-irrigated
land yields approximately two to three quintals (under favourable
conditions) and the same is five to

Table 2
six quintals for irrigated land. The
Comparison of Costs for Bt study referred to earlier also found
and non Bt Cotton in that the productivity difference
Yavatmal District between non Bt and Bt was
estimated as 65 per cent for
Heads % change in
Yavatmal district, i.e., cultivation
cost of Bt over
of Bt cotton gave 65 per cent more
non-Bt
crop as compared to non Bt cotton.
Ploughing and -5.06 Whether the increased yield is due
preparation to the inherent quality of the seed
itself or due to increased usage of
Harrowing -7.20 fertilisers and other inputs cannot
Seed 190.93 be answered conclusively. There is
greater uncertainty about the
Sowing -4.69 produce in rain fed areas.
Fertilisers 82.12 As both the cost of cultivation
FYM (farm yard 56.97 as well as the yield is higher, the
manure) price at which the crop can sell
becomes all the more crucial.
Pesticides 16.77 Marketing and Selling Price
Weeding and 5.11 Maharashtra had a Monopoly
interculture Procurement Scheme for cotton
Irrigation 107.67 from 1973 to 2003 wherein the
Maharashtra State Cooperative
Harvesting 61.51 Cotton Growers’ Marketing
Transport and 57.11 Federation (MSCCGMF), a state
marketing government appointed body,
bought cotton from the farmers at
Others 486.57 an assured price. It then sold it in
Total 49.29 the open market to mills and
traders. The body never had a
Source: A. Narayanmoorthy, S.S. farmers’ representative. The
Kalamkar, Economic and Political Federation used to charge 3 per
Weekly, 30 June 2006 cent of the crop price as
commission from the farmers
though this was returned by the government at the time of the
suicides. The payment was usually made within a month (although
it was claimed that it would be made within 15 days) and Rs. 500
per quintal was given as advance before sowing. This advance bonus
used to be added on to the

Table 3
minimum support price
for cotton declared by the Price of Pesticides and Cotton
Centre. According to Seeds over time
noted journalist of the
Period Pesticide Seed
region, Jaideep Hardikar,
the scheme ran well till (Rs. per litre) (Rs. / 450 gm)
the nineties but after that 1970 16 100
the huge influx of cotton
imports (import duty on 1980 200-250 250-300
cotton fell to a mere ten (Hybrid seeds)
per cent in 1997) led to
Post 1980 — 300-450
losses for the Federation
which could not resell its GM (2001-02) — 1,600-1,700
procurement at higher
prices. According to some Today 500 750
people, even in the earlier
Note: Prices are not adjusted for inflation
period the Federation
acted more as a tool of the Source: Interviews with farmers and Vijay
textile lobby. This was the Jawandiya by the Perspectives team.
time when market prices
were above the prices offered by the Federation, yet the farmers
were prohibited from selling their produce in the open market. In
fact during the plucking season, the police was posted all along the
border to neighbouring Andhra Pradesh in order to confiscate
bullock carts trying to cross the border for sale in the open market.
Around the mid nineties, the Federation started defaulting on
payments due to the farmers. The manipulation in gradation of
cotton varieties began around the same time and good quality cotton
was graded as low yield variety and priced accordingly. The
Federation had also become a coterie of parliamentary leaders and
was immersed in corruption and incurred huge debts. In March
2005, a decision was taken to scrap advance bonus and in June of
the same year, Rashi Bt (which had failed in Andhra Pradesh) was
introduced. The state admits it costs around Rs. 2200 to produce a
quintal of cotton. Yet the scrapping of the advance bonus meant
farmers received Rs. 1700 a quintal, a price last seen in 1994.
Usually, Vidarbha cotton used to be procured at Rs 2100 per quintal.
The Monopoly Procurement Scheme (MPS) was scrapped in the
fiscal year 2003-04 and subsequently the situation worsened for
the farmers. Presently, the Agricultural Produce Marketing
Committee (APMC) takes the initiative to conduct auctions for the

purchase of cotton. Private traders have entered the auction market.
Some of these traders have ginning and pressing units while some
have oil plants to make oilcake from the cotton seeds. The Cotton
Corporation of India also has a procurement centre in the market.
The Federation too remains a player in the auction market. Now
the prices are determined by the international market. The
international market affects the cotton prices in two ways, through
the price of cotton seeds and the price of cotton. 60-65 per cent of
lint (the crop of cotton plants) is actually cotton seeds which are
used to extract oil. With the reduction of import tariffs on palm oil
resulting in imports of the same, price of lint has fallen. The
remaining part of the lint is used to process cotton. Domestic cotton
prices have also suffered a decline during the years of high cotton
imports.
With the scrapping of the MPS, farmers have become completely
vulnerable to the volatility of the international market for cotton.
There was considerable fall in prices from Rs. 2500 per quintal in
1995 to Rs. 1600-1700 perquintal in 1997. The international price
between 1997 and 2003 was extremely low, although this had almost
no impact on the farmers in Maharashtra, as MPS was still in place
here. This was the period when suicides by cotton farmers were
reported in Andhra Pradesh. However the year of scrapping of MPS
was incidentally also a year of good prices internationally. The
benefit of the high prices largely goes to the private traders and
not to the farmers. In 2003-2004, traders in Vidarbha procured
cotton from the farmers at Rs. 2800 to Rs. 3200 per quintal and
sold at higher prices in the international markets. The traders have
been exploiting the situation to full by passing on the fall in
international prices to the farmers but not doing the same when
the prices rise. For example, as a result of the global recession of
2008, no trader is willing to pay more than Rs. 2500-2600 per
quintal. In fact, many traders have become moneylenders and some
of them have their own seed and fertiliser shops or krishi kendras.
Kishore Tiwari of VJAS says that the trader earns a minimum of
Rs 400 for every quintal of cotton sold and some would have made
crores of rupees just by the way of commissions!
The transportation, weighing and brokerage costs have to be
borne by the farmers. Brokers charge a commission of 1.25 per cent.
The rule is that the farmers are to receive payments within twenty
four hours but often farmers end up paying a commission of two
per cent in order to get immediate payment. Of late, krishi kendras

have begun buying the produce from the farmers in the villages
itself.
With the scrapping of Monopoly Procurement Scheme, the
procurement by the state-run Federation fell dramatically as it
offered a lower price than the traders. The number of government
procurement centers also fell but the fall in procurement has been
more drastic than the fall in the number of government centers.
According to Jaideep Hardikar, the Federation managed to procure
only 3200 quintals in 2003-04 as against a previous annual average
of 200,000 quintals. In 2006, there were 411 official centers to
procure cotton, which fell to a mere 141 in 2007. “But that’s because
open market prices are better,” insists N.P. Hirani, chairman of
the MSCCGMF. But on the ground, his claim is challenged by
farmers in Vidarbha. Most of them say that Federation’s prices are
even lower than the Minimum Support Price recommended by the
CACP. According to Vijay Jawandiya, “It is a policy move to reduce
procurement…The government is pushing farmers towards private
traders.” This can be seen clearly in the case of procurement in
2008. Although the government announced a price of Rs. 3000, it
did not open any procurement centres to actually buy the crop till
end October. Consequently, the farmers were being forced to sell to
the traders at a lower price.
Due to this insecurity and loss faced by the farmer one of the
major demands of farmers’ organisations in Vidarbha (as also in
Punjab) is assured procurement by the government at remunerative
prices to protect the farming community.
Credit
It has already been noted earlier that the requirement of credit
has become a crucial factor in cultivation for the farmers in
Vidarbha. Institutional credit is provided both by the commercial
banks and the cooperative banks. In Yavatmal district, the latter
provided one-third of agricultural credit in 2007-08. The banks have
provisions for crop loans; loans for agricultural equipments like
motor pumps, pipelines, sprinklers etc; as well as loans for
motorcycles. In fact the team found that private banks like ICICI
did not provide loans for production purposes though plenty of loans
were given out for purchasing consumer durables like motorcycles.
For all bank loans, land records are required which are locally
known as saat-barah forms. The banks give loans based on a normal
credit limit (NCL) determined by the District Technical Committee,

which comprises of bankers, professors of agricultural universities,
government officials etc. with no representation of farmers. The
NCL varies for different crops and also differs for irrigated and
unirrigated land. According to the Branch Manager of the District
Central Cooperative Bank in Pandharkawada, the NCL in the case
of cotton crop (lint) for irrigated land is Rs. 19,000 per hectare or
Rs. 7,600 per acre. The same limit for cotton crop on unirrigated
land is Rs. 14,500 per hectare or Rs. 5,800 per acre. However Vijay
Jawandiya claims that the maximum permissible limit is Rs. 4,200
per acre for unirrigated land. This is much lower than the value of
land mortgaged and also lower than the cost of cultivation. In
addition the manager of the local branch of State Bank of India in
Pandharkawada informed us that a 25 per cent extra on the loan
amount can be given at the discretion of the branch manager.
The credit available from banks is directly related to the size of
landholding. This means that there are no special measures taken
to help out the smaller farmers, who are in any case more
vulnerable.
The rates of interest charged by the banks in 2007-08 were 7
per cent on the crop loans and 10.5-11.5 per cent on loans for
agricultural equipments (tractors, borewells etc.). Till 2002, a
premium was deducted for crop insurance but now that has been
made optional. The bank officials the team met admitted that both
the NCL and the rates of interest have no relationship with the
costs of cultivation. In other words it means that the NCL is not
adequately raised or the rate of interest lowered when the cost of
cultivation increases.
The banks are also increasingly giving loans to Self Help Groups
(SHGs). The agricultural advances made by SBI Pandharkawada
in 2007-08 included almost one-third as advances to SHGs (out of a
total advance for agriculture of Rs. 9 crores, Rs. 2.5 crores were
given to SHGs as advances). 9
The farmers and their representative organisations claim that
the banks deliberately under-finance farmers so that they have no
choice but to depend on the moneylenders. Secondly, since the entire
land is mortgaged to the bank, in the case of a default, there is no
possibility of taking fresh loans from the banks in the next season.
This again accentuates the dependence on moneylenders and krishi
kendras.
Everyone we spoke to, whether farmers or bank officials,

dismissed the loan waiver as being completely useless.10 A majority
of the farmers do not stand to gain from the loan waiver, since
farmers having less than 5 acres of land (for whom it is largely
applicable) mainly depend on informal credit. Also a mere waiver
of 25 per cent of the outstanding loan for farmers with more than 5
acres of land is meaningless. According to the officials of the District
Cooperative Bank in Pandharkawada, despite their having sent
detailed information to the central government, they had not
Divine Intervention
We came across a tribal hamlet in Pandharkawada where no one had land in
their own names. Here annas (big brothers) from the Balaji Tirupati Trust
would come from adjacent state of Andhra Pradesh and give loans. For every
100 rupees given as loans, 150 would be taken back after six months. We
were later told that this money comes from the offerings to Lord Balaji!
received any payments even as late as 29 May 2008 (the loan waiver
was announced in March) and therefore they were in no position to
extend fresh loans to the farmers. This time is very critical as sowing
takes place towards the beginning of June.
All the above factors compound to ensure that majority of
farmers are dependent on informal sources of credit. The team came
across only one farmer who said that he did not need to take loans
from informal sources, but he was a large farmer owning more than
25 acres of land. Informal sources of credit also charge exorbitant
rates of interest sometimes as high as 25-100 per cent. Although
moneylending is illegal but it is still widely prevalent, with the
village postmaster, teachers, large farmers and input dealers all
dabbling in moneylending. In fact at present, input dealers are
increasingly taking on the role of moneylenders and supplying
inputs on credit. These loans often put a lot of social pressure on
the farmers and defaulting is associated with a strong sense of
shame.
CONCLUSION
Suicides by the farmers of Vidarbha are not individual acts of
desperation but part of a systemic problem located in a much larger
socio-economic-political context. It cannot be and should not be
reduced to a phenomenon confined to the individual self. In fact
Soybean: The New Killer

Vidarbha is witnessing a shift from cotton to soybean. According to one
estimate, area under soybean in the eleven districts of Vidarbha went up by
nearly two lakh hectares in 2007 to 17 lakh hectares in one year. At the same
time cotton saw a reduction of nearly three lakh hectares, falling to about 14
lakh hectares.11 Vijay Jawandiya says that today 60-65 per cent of the land in
Yavatmal is under soybean cultivation. This percentage is higher in other
districts such as Wardha.
In a discussion with an agricultural development officer of Pandharkawada,
the Perspectives team was told that the government is encouraging soybean
cultivation as it takes lesser time (four months) compared to cotton, which
would mean that if irrigation is available, gram and wheat can be grown as
additional crops. Also soybean is not as dependent on irrigation as cotton.
Soybean cultivation requires much less labour and no pesticide which lowers
the costs relative to cotton. Additionally in recent times soybean has been
fetching fairly high prices, roughly Rs. 2,200-2,400 per quintal, which happens
to be double the minimum support price for soybean (Rs. 1,050).
Jawandiya points out that soybean is no less risky than cotton. Very specific
climatic conditions are required for this crop. Rains are indispensable at the
time of the flowering of the plant and there should be absolutely no rain at the
time of harvesting of the crop, or else the crop fails. He also refutes the
government’s claim that it does not require irrigation. Further, soybean draws
heavily on nutrients from the soil so it is possible that soil may be degraded
soon and the yields would fall.
According to him the high prices of soybean (till before 2008) need not
remain the same. The reason for these high prices was the high global prices
of soybean’s de-oiled cake. These in turn were high as the major producers
of soybean like Argentina and Brazil were facing problems and there was
reduction in the acreage under soybean in the USA. The situation has not
remained the same as can be seen this year. Thus it is quite possible that
soybean farmers may find themselves in the same or worse position in a few
years’ time.
the policies of the government are directly culpable for forcing more
and more people to this extreme step. They have driven an entire
community to a point of no return, a point where their livelihood
itself stands threatened.
As this book goes to print, we have received disturbing news.

Nine farmers have committed suicide over just three days of
December 2008 in Yavatmal, Buldhana, Bhandara and Amravati
districts. There is a famine-like situation in Vidarbha this year.
The rainfall was not even half of the usual. As a result, the yields of
both cotton and soybean have reduced drastically. The yield of
soybean has dropped to 1-2 quintals per acre compared to the normal
yield of 4-5 (and sometimes even 10) quintals per acre. Cotton yield
in the rain fed areas in Vidarbha (majority of the area is rain fed or
unirrigated) has also suffered. Some of the farmers had sown late
because they were waiting for the rains, and they are the worst
affected. Their crop is affected by the ‘laliya’ pest and they are
unlikely to get even one quintal per acre. Additionally, the global
recession has depressed the prices of both the crops. The price of
soybean this year has dropped to Rs. 1400 per quintal from Rs.
2700 last year. The recession in the textile industry has also meant
that private traders are not willing to purchase cotton, and the
maximum price they have been offering is Rs. 2500-2600 per quintal.
Although the government has announced a good procurement price
(of Rs. 3000), this is ineffective because of the absence of government
procurement centres. Other crops like wheat and chana have not
grown because the wells have dried up this year. The peasant leaders
in Vidarbha are demanding that the government should declare
the region to be drought-hit and take the requisite emergency
measures, including waiving of all loans.
Notes
1. P. Sainath, The Hindu, 12 December 2008
2. Study by K. Nagaraj of Madras Institute of Development Studies
3. B.B. Mohanty ‘We are like the living dead: Farmer Suicides in
Maharashtra, Western India’ Journal of Peasant Studies Volume 32,
No. 2, April 2005
4. Refer to the chapter ‘Science of Profits’ for discussion on genetically
modified seeds
5. Srijit Mishra ‘Risks, Farmers’ Suicides and Agrarian Crisis in India :
Is there a way out?’ An IGIDR Study
6. B.B. Mohanty 2005 op. cit.
7. P. Sainath, The Hindu, 27 August 2006
8. A Narayanmoorthy, SS Kalamkar ‘Is Bt Cotton Cultivation

Economically Viable for Indian Farmers? An empirical Analysis’,
Economic and Political Weekly, 30 June 2006
9. Refer to the box on microfinance in the chapter on credit policy reforms
10. For the details on loan waiver, refer to the chapter on credit policy
reforms
11. P. Sainath ‘Soybean trumps King Cotton in Vidarbha’s regime change’
The Hindu, 24 June 2008
Appendix
SURVEY FINDINGS
Farmers, Agricultural Labourers and Suicide Victims
1. Farmers who own 3-5 acres of land
Farmers who own 3-5 acres of land struggle to make their ends meet. Often,
they are not much better off than the landless labourers. Most of the farmers in
this category belonged to the lower castes. Some of them had received up to 3
acres of land during the land ceiling and land redistribution drive in 1975 but their
economic condition remains precarious in absence of any other support from the
state. Most of them have to work as agricultural labourers to ensure survival.
Some also collect tendu leaves to supplement their incomes. Some families lease
in land (generally of inferior quality) at the rate of Rs. 400 for 3 acres. Many
farmers said that they would not be sowing in the coming season as they were
not able to get credit from any sources. They were planning to rely on their work
as agricultural labourers. A strong desire was expressed to move out of agriculture
by the farmers of this category. Farmers with small and marginal landholdings
mainly use firewood from the forest as cooking fuel. They have to pay a bribe of
Rs. 500 to the forest guard for collecting the firewood. If they are caught by the
forest ranger, the bribe increases to Rs. 2000.
Farmers of this category have been using Bt cotton for the last 2-3 years.
The cost of cultivation of Bt cotton is Rs. 3000-7000 per acre. Farmers reported
that yield has increased by 2-3 quintals but their expenditures have also increased.
The problem of credit is severe for all classes of farmers, but especially so for the
people in this small farmer category. It was clear that they depend on moneylenders
for most part of their credit needs. If they do not repay the loan to the moneylender,
their land is mortgaged, animals and non-land assets taken away and sold. In
some cases, loans were taken from the moneylenders in order to pay back the
bank loans. Sometimes they would take loans from krishi kendras at
Pandharkawada town, but in this situation, they are forced to sell their crops to
them. Some farmers were of the opinion that, in the absence of institutional credit,
making moneylending illegal was in fact, going to leave them worse off.
According to the farmers, their cotton crop was sold at Rs. 1900-2000 per
quintal to the government and Rs. 2300 per quintal to the private traders. In the
absence of any storage facility for the produce, crop has to be sold immediately,
even at lower prices. Taking the produce to the market in Pandharkawada, requires
a further expenditure of Rs 1800. Most farmers rued over the low prices that they
received for cotton. For many of them, the price did not even cover the costs. The
farmers prefer not selling their produce to the Cotton Corporation of India, as CCI
offers them about Rs. 100 per quintal less than the private traders. Moreover,
there are middlemen who charge a commission of 5 per cent to sell the crop,
while the private agents charge a commission of 1.5 to 3 per cent for the same.
However, some farmers did reveal their preference to sell to CCI, as a bonus had
been given on some occasions in the past.
Some of the farmers were visited every 20 days or so by some agricultural
officers of the government who advised them to grow papayas and oranges.
Sometimes the small farmers were refused fertilisers by krishi kendras, because
of the fact that in case of shortages, they preferred selling larger volumes to the
larger farmers. This left the smaller farmers with no choice but to take assistance
of the big farmers for availing fertilisers, who demanded for unpaid labour in
return.
Consumption expenditure: The consumption expenditure of farmers in this
category ranged from about Rs. 50,000 to 60,000 per year. On many occasions
land was sold to pay off previous loans or to finance marriages of their daughters.
A farmer from Kosara village said, “Hum toh pehle se bhi kum khate hain (we
consume even lesser than what we used to earlier)”. In addition to this, state
support policies remain poorly implemented. For instance, job cards under NREGA
were provided almost a year back, but no work has been provided as yet. The
‘500 rupee’ relief package given by the Prime Minister for the ruined crop at the
time of laliya attack reached only a few farmers and that too after considerable
delay.
2. Farmers who own 5-10 acres of land
It is an indication of the growing unviability of agriculture in vidarbha that
farmers who own 5-10 acres of land are also forced to hire out their labour at
times. Some of them have to go to villages as far as 20 kilometers to search for
work. Women have to supplement their families’ income by collecting tendu leaves.
Despite this economic condition, farmers owning land above 5 acres were liable
to receive only partial loan waiver under the scheme of the central government in
2008-09. We saw in the villages that families have found myriad ways of self-
employment to sustain themselves such as tailoring, small grocery shops etc.
Farmers reported that their output has increased with the use of Bt cotton.
Some farmers said they would prefer to use hybrid seeds, but those were no
longer easily available in the market. The cultivation of Bt cotton has increased
the input costs of the farmers as they have to buy seeds every year. The cost of
cultivation of cotton is now Rs. 10,000 per acre. It is also perceived that the
shortage of labour has pushed up the wages of agricultural labour. The Madhyavarti
Cooperative Bank in Pandharkawada gave loans generally to the larger farmers
at an interest rate of 10 per cent per annum and a bribe has to be paid to avail of
these loans. A farmer also revealed that in practice, rates of interest were different
for rich and poor peasants as the latter had to pay a higher rate of interest. Some
farmers had taken loans from Self Help Groups (SHGs) at 24 per cent per annum.
However, they remained divided on its actual impact, with some farmers arguing
that the loans covered a very small proportion of the total input costs. Farmers
also felt that financial institutions favoured irrigated land over un-irrigated land as
collateral for giving agricultural loans. Private moneylenders gave loans at the
rate of 50 per cent per annum. In case of delay in the repayment of loans, assets
are taken away along with the crop yields.
During the sale of their produce, farmers get 97 per cent of the price at which
their cotton is sold. The remaining 3 per cent is kept by the private traders to
whom the cotton is sold. Government procurement is at a lower price than private
procurement. The payment made to the farmers is not immediate, it usually takes
one month. There are no storage facilities and therefore farmers have to sell the
cotton immediately after harvest (at the prevailing low prices).
Consumption expenditure: Consumption levels have worsened for this category
as well. “Earlier we used to eat wheat twice a day. We can no longer afford that,
so we have switched to jowar”, said one farmer of Bandhiwadhwa village. Some
farmers had sold their land or other assets to repay old loans, or to finance higher
education (computer and other vocational courses) for their sons, or to finance
their daughter’s marriage.
3. Farmers who own 10 to 25 acres of land
These farmers expressed a very strong desire to leave agriculture. They
wanted their sons to be employed outside agriculture and get jobs with regular
incomes in the town. Although irrigation is underdeveloped in general for the
entire area, some farmers in this category have private wells and tube wells. The
team came across the case of a farmer, who was in debt of Rs. 30,000 for boring
a well in his field. Unfortunately, he was unable to find water.
Most farmers of this category preferred to use Bt cotton over the hybrid
variety. Some of them gave the reason (amongst others), that higher yield added
to their social status in the village. Many of them had been using Bt for 5-6 years.
Initially, the larger farmers started using it and subsequently, the smaller farmers
followed. Farmers said that input costs had increased due to the use of Bt cotton
and buying seeds each year was a big problem. The prices of fertilisers and
pesticides increased each year by Rs. 50-100. Credit to farmers in this category
comes from the Madhyavarti Cooperative Bank or the moneylenders. A few farmers
complained that credit becomes most difficult to obtain, precisely when it is needed
the most (at the time of sowing and harvesting). Many SHGs exist in these villages
(between 10 to15 in most of them). Some farmers seemed to have a positive
view about its role and said that it is helpful in getting loans when they need it.
Farmers sell their produce to private traders, as the Federation (Maharashtra
State Cooperative Cotton Growers Marketing Federation) does not offer them a
reasonable price. In recent times, krishi kendras have also become buyers of the
produce. Since no storage facilities are available, farmers have to sell their produce
to avoid risking its spoilage, even if the prevailing price is very low. Two farmers
reported the case of crop failures some years back when they did not receive any
insurance money despite having paid the premium for crop insurance to the banks.
In the case of one farmer, the bank officials denied him insurance benefits on the
grounds that the crop insured was different from the crop cultivated.
Consumption expenditure: There were farmers in this category who had to
supplement their income by running a grocery shop or working as a carpenter in
the village. The income of farmers owning 20 to 25 acres of land was approximately
Rs. 1 lakh a year. Farmers said that they had witnessed considerable worsening
of their consumption pattern in the past 3-4 years. Medical expenses have
increased with heart diseases and cancer becoming more common place. Since
villages lack the required health infrastructure, significant expenses have to be
undertaken in taking the patient to Nagpur or to Mumbai and even Delhi for
treatment. The expenditure on marriages is quite high and is on a constant
increase. On an average, Rs.1-2 lakhs are spent on dowry for a girl’s wedding.
In the opinion of farmers of this category, the government should do the
following:
1. Provide irrigation facilities (that will increase the produce 3 to 4 times)
2. Increase the amount of credit given to farmers (by raising the credit limit of
institutional sources) so that they do not have to approach the moneylenders.
Credit should be made available at the appropriate time.
3. Schemes like NREGA and Loan Waiver should be properly implemented
4. CCI should procure the crop at a remunerative price and make payments
immediately.
4. Farmers who own above 25 acres of land
Farmers who owned more than 25 acres of land had private means of
irrigation. Water levels have fallen in the area as many of them have been using
bore wells for a long time. However, there is an absence of mechanisation (either
owned or hired) of cultivation, with only a few exceptions. Bt cotton is used because
it gives better yields than the hybrid varieties. Some farmers of this category
have completely shifted to cultivating soybean, because they were incurring losses
with Bt cotton. Some farmers have leased in land at Rs. 4000-5000 per acre. The
unavailability and high wages of agricultural labour was a problem cited by many
farmers who owned above 25 acres of land. The team met a large farmer from
Sonbatti village who expressed his helplessness and said that even he would
have to hang himself if the crop failed this year. The team also met a farmer from
village Deshmukh Khairgaon who owned two storage godowns. This farmer
reported that he had lost 150 quintals of his cotton crop to milli bug last year. The
main demand of farmers of this category was that the government should fix the
price of their output before the sowing season.
Cooperative banks, State Bank of Maharashtra and State Bank of India give
credit to farmers up to Rs. 10,000 – 15,000 per acre. Farmers of this category, in
general, denied that there was any requirement for loan from private
moneylenders. Some of them even denied the existence of moneylenders. It was
found out from other villagers that most of these big farmers act as moneylenders
for the rest of the village. The minimum debt on farmers of this category was Rs.
2 lakhs. SHGs could not meet the credit requirement of these farmers and hence
they were not very happy with them.
The selling price of cotton is around Rs. 2500 per quintal. Some farmers had
started the business of distributing cotton and soybean seeds to different villagers
in order to augment their profits. Farmers also had crop insurance. The premium
for crop insurance was paid from a part of the loan that they received from the
institutional sources.
Consumption expenditure: The total income from agriculture is around Rs. 5 lakh
per annum. This income is usually enough to cover consumption expenditures of
the families but not enough to meet the production expenditures. Many families
have members working in the towns who send remittances back home and the
family depends on that money to meet the consumption and production
expenditures.
5. Agricultural Labourers
It was observed that most of the people who worked as agricultural labourers
were either the landless, or those with marginal landholdings or the loan defaulters.
Most of them belonged to the Gond, Kolam (Scheduled Tribes) and dalit
Crops, Credit and Cotton Yield by Landholding Size

Land Crops grown Source of credit and Amount Yield of
holding interest rates charged of Credit cotton
size for production loans Required quintals
(acres) (in percent per annum) per year per acre
3-5 Cotton, Jowar, Moneylenders (50), Rs. 15000 3 – 4
Soybean and Tur Krishi Kendras (25) to 17,000
5-10 Cotton, Jowar, Cooperative banks (10), NA 3.5 – 5*
Soybean and Tur Moneylenders (50),
SHGs (24)
10-25 Cotton, Jowar, Tur, Cooperative banks (11- Rs.50,000 4 – 6**
Chana, Soybean 12), Public sector banks to 60,000
and Moong, Chili (8) Moneylenders (50)
Above Cotton (double Bt Cooperative banks, Rs. 10

25 variety), Arhar, State Bank of 20,000 to
Groundnuts, Chana, Maharashtra, State Bank 50,000
and Wheat of India (6)
*One farmer said his yield was 8 quintals per acre.
**Only in seasons with adequate and timely rainfall
communities. Even farmers who had land up to 3 acres worked as agricultural

labourers in order to supplement their income. All members of the family, including
women, worked on the field to meet their ends. The daily wages of agricultural
labour in the area the team visited was Rs. 80-100 for men and Rs. 50-60 for
women. Women were paid almost half the wages paid to men for the same amount
of work. The standard of living of agricultural labourers was one of subsistence
and bare survival.
Labourers do not find agricultural work in all months of the year, as cultivation
is mostly rain-fed. Employment is meager during off season when cultivation does
not take place. Agricultural labourers possessed NREGA job cards but they had
not received work or unemployment allowance under this scheme. Most of them
had Below Poverty Line ration cards which enabled them to buy wheat at Rs. 2
per kg and rice at Rs. 3 per kg. This was a major bone of contention with the
landowning peasants in the village as the latter perceived subsidised food as a
major benefit for the agricultural labourers. Apart from working on the fields,
collecting tendu leaves was another activity for subsistence. Some of them went
to Pandharkawada or nearby towns in search for work in the lean season. When
asked if they wished to migrate to a town, the agricultural labourers said that they
would not want to, for they had been staying in the same village for many years
now. The search for a better life was an impossible dream for them. Their
hopelessness had reached to such an extent that when they were asked what
alternative do they have in such a situation they said, “we have no other alternative
but to survive without complaining”.
6. Suicide victims
Out of the fifteen villages surveyed in the Pandharkawada tehsil of Yavatmal
district, farmer suicides had taken place in six of the villages. The option of suicide
and the inevitability of this option were omnipresent in the teams’ conversation
with the farmers.
In Kosara village, Eknath Kanauji Danande, a 56 year old farmer, committed
suicide on 3 May 2008. He had a debt of Rs. 13,000. He had been saving Rs.
3000 per year for 7 yrs in a SHG called Sanchayani. However, the NGO backing
the SHG closed suddenly and did not give his money back. Finding his hard
earned money embezzled and little hope of repaying his debt compelled this
farmer to end his life. Moreover, during the time of his death, his wife and daughter
were both ill, causing added expenditures which he was not in a position to incur.
In another case in the same village, Tukaram Paikaj Tonge had massive debts in
his name. He stopped eating, fell ill and died on 20 May 2008. However, his
death was not considered as a ‘suicide’ as per the definition of the term and
therefore his family did not receive any compensation. Suicide in this village did
not remain confined to the farmers, but their children as well. Madhukar committed
suicide as his desire to study further remained unfulfilled. This was an example of
how the agrarian crisis has impacted those dependent on agriculture in different
ways, attacking their livelihood as well as their psychology.
Indebtedness, impossibility of loan repayment and hopelessness were the
main reasons for suicides. In Yavra village, a farmer committed suicide as he was
finding it difficult to repay a loan of Rs. 50,000. His family received a compensation
of Rs. 1 lakh. They received only Rs. 30,000 as cash. The remaining Rs. 70,000
was put in a bank as a 6 year bond. Arjun Dhanraj Rathore’s father committed
suicide due to the same reason of indebtedness. He had become a defaulter and
the banks had stopped giving loans to him. His family members had not received
any compensation till the time of the team’s visit, despite sending repeated requests
to the government.
Some villagers argued that drunkenness, problems in the family and the
lack of desire to work, were the real reasons why men committed suicide, not
indebtedness. One farmer argued that the compensation amount received by the
suicide victims’ family could be the reason for a spurt in the number of suicides.
An observation cited by many of those interviewed was that reasons like
drunkenness were not the ‘cause’ of suicides but the ‘effect’ of the chief
predicament i.e., the debt that was haunting the lives of these farmers. It is the
impact of tremendous frustration and an extreme sense of helplessness that led
them to this miserable end.
Others farmers blamed the low price of cotton and indebtedness as the main
reasons for suicides. A Brahmin farmer owning 30 acres of land said he would
not hesitate to hang himself if the crop failed another year. Suresh Karla said that
increasing consumption expenditures because of social pressure worsened the
situation. He said, “If his (another farmer’s) daughter uses Fair and Lovely (cream)
then why not mine?” Marriage of daughters, a cause for worry and expenditures
in a majority of families in our society, has become a more difficult exercise for
the farmers of this region. Lack of funds for marriage, coupled with a bad crop
yield, has led many farmers to seek suicide as the last resort. Marriage costs in
this region range from Rs. 40,000 to Rs. 50,000. The dowry or hundi demanded
is worth Rs. 1-2 lakh.
QUESTIONNAIRE
I. (a) Name/ Age/ Caste/ Number of members in the household (M/F)

(b) (i) Amount of land (owned/operated) in hectares
(ii) Other assets and equipments owned
(c) (i) Land leased in- yes/no/hectares.
(ii) Land leased out-to whom/at what price
(d) Any member of the household employed in non-agricultural activity?
(e) Agricultural activity carried on with family labour or hired labour or both
(f) Do women in the family go out and work?
(g) Educational status of self and family
II (a) What crops are grown (changes from jowar to cotton)

(b) How many crops a year
(c) Have there been any changes in the cropping pattern over the years?
If yes, why
(d) How many quintals of cotton do you produce in a year?
(e) What is the yield per hectare, has it increased or decreased over time
(details)
(f) Reasons for changes in the yield
III (a) Degree of mechanisation of the agriculture

(b) Use of tractors-owned/hired/hire charges
(c) Type of seeds/changes in kinds of seeds-traditional/hybrid/BT –
are BT seeds better?
(d) Where and from whom, the seeds are bought? In cash or credit?
(e) Fertiliser - the use has increased or decreased?
(f) Risk of pests/pesticides
(g) Irrigation any facility—government or private?
(h) Is the agency selling inputs same as that which gives credit or buys
produce?
(i) Total costs in a year, Costs per hectare/per quintal
(j) Changes in costs
(k) Any subsidy by the government on inputs?
IV Market
(a) Sale to CCI/state government or to private parties
Who do you prefer to sell to?
(b) Is scrapping of monopoly procurement good or bad?
(c) Are green cards still applicable?

(d) Is opening to international economy good or bad
(e) Is remuneration immediate?
(f) Any storage facilities
(g) Total income from agricultural produce in a year
(h) Any relief at time of crop failure
V Consumption patterns
(a) Any food grains grown for self-consumption?
(b) Any changes in consumption? Why?
(c) Monthly Expenditure on food/health/education
(d) Does agricultural income cover consumption expenditure?
(e) Does agricultural income cover production expenditure?
VI Credit
(a) Need for credit
(b) How often?
(c) To meet consumption deficit or production expenditure?
(d) From whom?
(e) Any changes in institutional credit policy?
(f) Collateral/interest rate of institutions
(i) Moneylender/rate of interest
(j) Self Help Groups
(k) Are the agencies giving loans same as those selling seeds and inputs?
(l) Any switch from one agency to the other?
(m) Ability to pay back loans
(n) Loans as a per centage of agricultural incomes
(o) Pattern of recovery adopted by the agencies
(p) Agricultural credit societies or cooperatives?
(q) Will loan waiver help?
(r) Any distress sale of land?
(s) Amount of debt of a suicide victim’s family
VII Perceptions
(a) Corporate farming
(b) PM-relief package
(c) Crop insurance
(d) Why suicides?
(e) Would you want to continue with agriculture?
(f) Local support systems—panchayat/political parties/peasant organisations

(g) Compensation in case of suicides
(h) Solution to the problem
VIII Questions for agricultural labour families

(a) Number of months of employment/changes over years
(b) Wages—M/F
(c) Availability of work—M/F
(d) Structure of employment——M/F
(e) Employment opportunities other than agriculture
(f) NREGA
(g) Any decline in access to common property resources—impact
(h) Consumption deficit if any
(i) Loans
(j) PDS—TPDS
We owe respect to the living

To the dead, we owe nothing but the truth
– Voltaire
Chapter II Backdrop to the Crisis 33
Backdrop to the Crisis
The situation in Vidarbha described in the previous chapter is

not an isolated instance. In state after state, district after district,
village after village, hope is dying slowly. The living dead in India’s
once prosperous Green Revolution areas are now joining the already
dead and swelling the numbers of ‘suicides by the farmers’. The
feeling of helplessness and despair is almost tangible. Ironically,
the only ‘hope’ is seen in ending the hopeless existence.
Maharashtra, Andhra Pradesh, Karnataka, Kerala, Punjab… the
story is the same everywhere.
According to National Crime Records Bureau (NCRB) the
number of farmer suicides in the country from 1997 to 2007 has
been 1,82,936. 1 This means that on an average, one farmer was
taking his life every half an hour in the last ten years. Even this
number, shocking as it is, is in fact an underestimation of the actual
number of farm suicides in the country during this period. Suicides
are symptomatic of a much more serious malaise, an acute crisis in
Indian agriculture virtually doctored by the state.
In India, bulk of the population depends on agriculture for its
livelihood (66 per cent). Considering that there are very few
employment opportunities outside agriculture in our economy,
stagnation and crisis in this sector has serious implications for the
entire people and the country. All sections of people dependent on
agriculture viz. different classes of cultivators – rich, medium, small
and marginal peasants as well as agricultural labour, have been
affected by this crisis to varying degrees.
At a time when India is one of the fastest growing economies in
the world with growth rates ranging from 8 to 9 per cent,
agricultural growth has stagnated. The growth rate of agriculture
and allied activities has been merely 2.6 per cent in 2007-08. 2 It
has declined sharply compared to 1980s when it was over 3 per
cent. Agriculture contributed less than one-fifths (18.5 per cent) to
the country’s Gross Domestic Product in 2006-07. Despite its poor
performance, agriculture continues to support more than two-thirds
of the population. The share of agriculture in the output is in sharp
contrast to its share in the country’s employment.
The crisis in agriculture is evident in a variety of other ways.

According to the Ministry of Agriculture, the net sown area3 has
fallen from 143 million hectares in 1990-91 to 140.9 million hectares
in 2003-04. 4 Even the net irrigated area5 decreased from 57.1 million
hectares in 1999-2000 to 55.1 million hectares in 2003-04. The
cropping intensity has stagnated at around 1.35 i.e., only 35 per
cent of the area is cropped more than once. The per capita output of
food grains has stagnated in the 1990s. It was 178 kilograms in the
three year period ending in 1991-92, it did not increase even after a
decade and remained at 177 kilograms in the three year period
ending 2000-01. The yield of food grain crops as well as non-food
grain crops declined in the 1990s. The terms of trade for agriculture
worsened in the period after India entered the World Trade
Organisation. That is, agricultural prices relative to non-
agricultural prices fell by 1.7 per cent annually between 1996-97
and 2003-04. 6
The only visible and over-hyped step that the central
government has taken to address this crisis is the announcement
of the loan waiver for indebted farmers in the annual Budget of
2008-09. The low importance attached to agriculture is apparent
from the fact that the Rs. 71,000-crore waiver is not even one-third
of the tax concessions given to the private corporate sector in 2007-
08 under just three heads – customs duty, excise duty and
corporation tax. The loan waiver does not address the root causes
of the agrarian crisis. Not surprisingly, farmer suicides have
continued unabated even after the loan waiver. Meanwhile, the
attention of the government has shifted to another crisis: the global
financial crisis. It is now leaving no stones unturned to spend crores
of rupees in bailout packages for industry and financial sector.
The agrarian crisis that is the concern of this book encompasses
regions of the country where agriculture has become largely
commercialised. These are mostly those regions where Green
Revolution technology has been adopted and agriculture has moved
from subsistence to commercial cultivation. In these areas, only a
small proportion of the crop is grown for self-consumption, most of
the crop is meant for sale in the market. Cultivation is highly input-
intensive: it requires large quantities of water, hybrid or even
genetically modified seeds, chemical fertilisers and pesticides. In
many of these regions, considerable mechanisation of agriculture
(increasing use of tractors and combined harvesters) has taken
Backdrop to the Crisis 35
place. The increasing dependence on inputs which have to be

purchased from the market has also increased the need for credit.
It is not that agriculture in areas following traditional
agricultural methods, is not facing any problems. But the discussion
of agrarian crisis in this book is limited to the crisis in regions like
Vidarbha, parts of Punjab, Haryana, Karnataka, Kerala, Andhra
Pradesh and Maharashtra, from where farmer suicides have been
reported. Our understanding is based on visits to Vidarbha in May
2008 and Punjab in June 2007. The causes for the distress in
Vidarbha and Punjab would be applicable to other regions facing
large-scale farmer suicides as well.
Forty per cent of farmers in the country want to leave
agriculture, given an alternative, reports the Situation Assessment
Survey of Farmers (Report No. 496, NSS 59th Round). This is not
surprising. According to the same report, on the average, “farmer
households” in the country could meet only 35 per cent of their
consumption expenditures out of net receipts from cultivation. The
Indian state never carried out thoroughgoing changes in the pattern
of landownership in the country, despite the widely recognised need
for the same. Economic policies that it formulated and followed
since Independence have been consistently detrimental to
agriculture. Technological changes have been introduced without
a holistic idea of their consequences. The combined effect of all of
these has been widespread agrarian distress in the countryside,
with suicides in some areas and stagnation in others.
LAND REFORMS
At the time of Independence, India inherited a semi-feudal
structure with complicated tenancy arrangements (between
landowners and actual cultivators) over large parts of the country.
The ownership and control of land was concentrated in the hands
of relatively few landlords and intermediaries. The zamindars and
intermediaries’ principal interest was to extract maximum rent from
the land; they had no interest in increasing the productivity of land.
The actual tillers of the land also did not have any incentive to
invest or improve production techniques because they did not own
the land or its output.
There was a rationale for urgent and immediate land reforms
at the time of Independence – meaningful economic and social
equality could only be achieved with a more egalitarian distribution
of land and vesting ownership rights with the actual tillers of the
soil. Despite tall claims in various policies and plans, genuine land
reforms remained an unfulfilled dream for the Indian peasantry.
Land reforms involve three components – abolition of the
zamindari system, tenancy reforms and ceiling and redistribution
of surplus land. In all these respects, land reforms were seriously
lacking. Though the Parliament enacted legislations like zamindari
abolition and land ceiling acts, the enactment of these legislations
was merely an eyewash. Not only were the zamindars paid sizeable
compensation for their lands, they were also allowed to retain khas
land and more under the pretext of cultivating it themselves. The
land ceiling legislations, even after making liberal concessions, left
loopholes which allowed owners of large property to retain most of
their possessions. Before the enactment of the legislations, these
landowners were permitted sufficient time to divide their landed
property and hold it in their own, their relatives’ as well as under
fictitious names.
The land reform legislations were not intended by the reigning
political leaders to bring about any significant changes in the
ownership patterns. This was evident in the way land reform was
implemented. In a study, P.S. Appu has critically analysed the
implementation of land reforms in India since independence. By
1992 ownership rights had been conferred on some 11 million
tenants on 14.4 million acres of land which was not more than 4
per cent of the total operated area. As far as redistribution of land
is concerned, by 1992 only 2 million hectares of surplus land was
distributed to less than 5 million beneficiaries. In other words less
than 2 per cent of the operated area was redistributed. 7
The enormous inequality in land ownership in India has not
reduced in the last six decades. According to the National Sample
Survey (NSS), the top 5.2 per cent of the rural households today
own almost half (42.8 per cent) of the land, the top 9.5 per cent own
more than half (56.6 per cent) of the area, and the remaining 90.5
per cent of the households owned less than half i.e. 43.4 per cent of
the area. 8 Among the bottom 90.5 per cent, 41.6 per cent of the
rural households own no land except homestead land (the land on
which their houses are built). Another aspect of inequality arises
from the steady decrease in the common land and water resources
to which the rural poor do not have any legal rights but on which
they depend for fuel, grazing of animals and water for irrigation.
As a result of takeover of land for non-agricultural purposes by the
state and private interests (aided and abetted by the state, of course),
these resources have reduced considerably in the past decades.
AGRICULTURE AND THE FIVE YEAR PLANS
As far as economic policies are concerned, economic planning
in India began with setting up of the Planning Commission in March
1950. Till date a total of eleven five year plans and three annual
plans have been formulated. The country has entered the Eleventh
Five Year Plan (2007-2012).
Economic planning is not merely an economic exercise; it is a
political exercise as well. Society is not a homogeneous entity and
therefore it is meaningless to talk of universal goals which benefit
all classes, strata, sections and sectors equally.
In India, like in other developing countries, there was a
continuous rhetoric about changing the social structure. The
following Directive Principles of State Policy embodied in the Indian
Constitution were supposed to act as the basic terms of reference
for the Commission:
“(a) that the citizens, men and women equally, have the right to
an adequate means of livelihood;
(b) that the ownership and control of the material resources of
the community are so distributed as best to subserve the
common good; and
(c) that the operation of the economic system does not result in
the concentration of wealth and means of production to the
common detriment.”
From the very beginning, Indian plans have been heavily
dependent on loans, investment, technology and ‘experts’ from the
foreign countries. US ambassador to India in the fifties and sixties,
Chester Bowles, notes, “…Ford staff in India became closely
associated with the Planning Commission…”9 At the initiative of
the USA, the Aid India Consortium (renamed Indian Development
Forum in 1994)—a consortium of developed countries with the
World Bank—was set up in 1958 to provide the loans for Indian
plans. The policies regarding agriculture were shaped by the
interests of the developed world and in that sense were a
continuation of the colonial legacy. Even for food, India depended
on the US. As early as 1958, Prime Minister Jawaharlal Nehru and
the Planning Commission accepted the suggestion of the Ford
Foundation chief in India, Douglas Ensminger, that a group of
foreign experts might be set up to work with an Indian group to

make recommendations about Indian agriculture. Incidentally, it
was the Ford Foundation’s ‘Report on India’s Food Crisis and Steps
to Meet It’ which criticised the approach of institutional change
(land reforms), recommended a technocratic approach and paved
the way for Green Revolution.
At the time of independence, agriculture and ancillary activities
accounted for nearly half (49.1 per cent) of the total output of the
country. Despite this, there was not sufficient food to feed our people.
Although the First Five Year Plan (1950-1955) focused on public
investment in the areas of infrastructure and agriculture, there
was a major change at the time of the Second Five Year Plan (1955-
1960). This plan focused on capital goods production to the extent
of neglect of agriculture. It was ignored that a developing country
requires not only more machines but also more food. An effective
policy framework for agriculture was absent from this plan. It is
not surprising that agriculture could neither create much surplus
for investment in industry, nor could it create a sufficiently large
market for industrial goods. The urban bias of Indian planners also
started becoming evident from the Second Plan. It was assumed
that industrialization would absorb the surplus labour of the
agricultural sector and agriculture started being de-emphasised
fairly early in the course of planning. Although the Third Five Year
Plan (1960-1965) did have some lofty claims about agriculture, the
underlying assumption was that agriculture was supposed to
provide cheap labour as well as cheap food for the needs of the
developing economy.
The Community Development Programme, which formed an
integral part of India’s early plans, was undertaken with US
assistance. The programme was aimed towards an intensive
agricultural development amongst other things such as land
reclamation, irrigation, farm management, application of scientific
methods of cultivation like the use of improved seeds etc. It also
aimed at forming cooperative societies, credit cooperatives initially
and later cooperative farming and panchayats. Before the
inauguration of community projects in October 1952, an operational
agreement was signed by the governments of India and USA. US
Aid for International Development (USAID) and Ford Foundation
worked together on the programme. Since these programmes did
not intend to change the basic social and economic structure of the
villages, the main benefits of the projects were cornered by the
“dominant families”, as reported by the Planning Commission’s

Programme Evaluation Organisation.
The Intensive Agricultural Development Programme (IADP)
was initiated in 1960-61 in three districts with the inspiration and
financial assistance from the Ford Foundation. It was later extended
to another thirteen districts. IADP signified a shift to intensive
techniques in selected districts, which was to be carried forward
later under the Green Revolution. This programme concentrated
on rich farmers in irrigated areas and supplied them with subsidised
inputs, generous credit, price incentives, technical advice and
marketing facilities. This technocratic approach was supposed to
raise agricultural production. IADP was followed by the Green
Revolution.
GREEN REVOLUTION
Forty years have passed since Green Revolution was first
introduced in this country. Looking back at the phenomenon, we
tend to forget the domestic and world political circumstances in
which this new technology was introduced, not only in India, but in
many other similarly situated countries of Latin America, Africa
and Asia. Consider this.
After the end of the Second World War, the world found itself
divided into two camps of opposite ideologies, of opposite notions of
progress and development. The socialist camp led by USSR had
not only offered the most courageous resistance against fascism,
but was presenting a strong challenge to the capitalist model of
development itself. National liberation struggles had broken out
all over the Third World during and after the Second World War.
In the decade of fifties and sixties, countries of Latin America and
Africa were reverberating with the demand for freedom. In 1949,
there was a revolution in China, a country very similar to India in
its size, history of colonial exploitation, and backwardness of
agriculture and industry. The new government in China, led by
the Communist Party, was undertaking land redistribution and
agrarian reform in the countryside on a scale never seen before. In
1959, began the Vietnam War. Ordinary peasants and communist
guerillas fought an extraordinary battle against the world’s
strongest superpower, and proved that it was possible to survive
and win in the face of most brutal and inhuman military offensive.
The ‘spectre of communism’ was certainly haunting capitalism.
In our own country, even as the process of getting Independence

from formal British Rule was going on, sharecroppers and peasants
rose up in struggle, whether it was the Tebhaga uprising in West
Bengal or the Telangana struggle in the Nizam’s Hyderabad.
Further, in the late sixties, there were peasant uprisings in
Naxalbari in West Bengal and Srikakulam in Andhra Pradesh. The
demand for changes in the institutional structure and property
relations in the countryside were growing strong. There was a food
crisis to deal with as well.
This then was the backdrop to the Green Revolution. On one
hand was the urgent need to meet the peasant unrest and increase
crop yields to address the food crisis. On the other hand, were the
chemical industries of USA who were saddled with large unused
production capacities after the World War. The search for new
markets by transnational corporations of USA, the need of the
capitalist camp to beat back the challenge of communism, and the
interests of our rulers, all coalesced to introduce the new technology
of Green Revolution. In this sense modern science and technology
was used to postpone and to deny the pressing need of changes in
property ownership and consequently in the social relations of
production.
The implementation of Green Revolution in different parts of
the country over the past forty years has shown what mindless
application of technology can do to agriculture, an important lesson
for those advocating new technologies of genetic modification. Soil
and water resources of the country stand depleted to an extent
where their replenishment seems almost impossible. It is an
accepted axiom that more and more of chemical fertilisers would
be required every season to beat back the declining fertility of the
soil and maintain the same crop yields. The loss of biodiversity in
the environment is an irreplaceable loss. Farmers in Punjab have
high levels of pesticide in their blood. There are new varieties of
pests and weeds that have to be combated with higher potencies
and quantities of insecticides and weedicides every year.
As environmental activists have pointed out, the High Yielding
Varieties (HYVs) of seeds introduced as part of Green Revolution,
were actually High Responsive Varieties (HRVs) i.e. they responded
with higher yields when fed with adequate (read, large) doses of
water and chemical fertilisers. Whether the seeds had any inherent
quality to produce more, remains a point to debate about.
Seeds, fertilisers, pesticides, agricultural equipment, all have

to be bought from the market at ever increasing prices. All this has
meant galloping costs of cultivation for the farmers, one arm of the
scissors which is pushing them towards death and despair.
In accordance with the policy of ‘betting on the strong’ and
‘building on the best’ put forward by the Ford Foundation (in its
report to the Indian government in 1959), the Green Revolution
was introduced only in selected districts of the country – those
districts which had fertile land and adequate sources of irrigation.
Uneven development was a built-in feature of the Green Revolution
model. Large parts of the country stagnated with state neglect and
backward techniques of cultivation, while states like Punjab and
Haryana moved rapidly ahead in improving yields with
monocultures of rice and wheat. It is not surprising then that the
Green Revolution has exacerbated inequalities across regions and
class sizes of farmers. Only the large farmers were able to reap the
maximum benefits of a technology that required incurring of heavy
costs and investment.
ECONOMIC REFORMS
The dependence on developed capitalist countries and their
corporations showed itself not only in the use of technology in
agriculture, but also in the broader economic policies followed by
the Indian state. The decade of eighties saw the beginning of
liberalisation, privatisation and globalisation of the Indian economy.
The economic reforms were extended to all sectors, including
agriculture.
Domestic reforms manifested themselves in a variety of policy
changes such as liberalisation of the financial markets, liberalisation
of trade, withdrawal of the state from social sectors like education
and health, and sectors like power, telecommunications and
banking. Public sector units started being dismantled and
privatised.
In agriculture, public investment and expenditures by the
government declined steadily. Subsidies were targeted, especially
the food subsidies, which led to a shrinking of the public distribution
system. Public procurement of crops became more and more
dysfunctional. Laws were made and rules and regulations bypassed
or amended to facilitate the entry of the private corporate sector
(large agri-business companies) in different spheres of agriculture,
including selling of seeds, other inputs, cultivation and marketing.
The domestic agricultural market was opened to international trade

with the signing of the Agreement on Agriculture, as part of the
WTO negotiations in 1994.
The Mid-Term Appraisal of the Ninth Five Year Plan10 states
clearly that “Restrictions on movement, stocking, trading, credit
by financial institutions, monopoly buying, processing and exports
have to be removed…” so that the farmer can take … “advantage of
the free market”. It talks of encouragement of application of bio-
technology in agriculture and opening of lease market in land.
The technology adopted in agriculture necessitated the purchase
of all the inputs required for cultivation from the market. This, in
turn, meant larger requirements of credit from the banks. However,
the credit policy reforms starved agriculture of this much needed
credit. Profitability was made the basis for extending institutional
credit to different activities, which excluded a sector as crucial as
agriculture.
The crisis in agriculture which we are witnessing today has
definitely been aggravated by the economic reforms. We now turn
our attention towards post-reform policy measures and their impact
on agriculture and Indian farmers, in the next three chapters.
Notes
1. P.Sainath, The Hindu, 12 December 2008
2. Economic Survey 2007-08, Government of India
3. Total area sown with crops and orchards, counting area sown more
than once in the same year only once.
4. This could also be partly due to acquisition of agricultural land for
non agricultural purposes such as special economic zones.
5. Area irrigated through any source once in a year.
6. Report of the Steering Committee as quoted in Aspects of India’s
Economy No. 46, Research Unit for Political Economy
7. as quoted in S.K. Ray “Land System and Its Reforms in India”,
Indian Journal of Agricultural Economics, Volume 61, Number 192,
January-June 1996.
8. NSS Report no. 491
9. Bowles, Ambassador’s Report, p 340 as quoted by Suniti Kumar
Ghosh ‘Development Planning in India: Lumpendevelopment and
Imperialism’, 2002
10. Mid Term Appraisal Highlights (1997-2002), Planning Commission,
www.planningcommission.nic.in
Chapter
Economic IIIReforms and their Impact
Policy 43
Economic Policy Reforms and their Impact
The agrarian crisis of today has been precipitated by a steady

withdrawal of the state from most of the important spheres relating
to agriculture. The process of economic reforms has meant that
government expenditure on agriculture has declined steadily,
subsidies are being withdrawn impacting the costs of cultivation,
private companies are being allowed to sell inputs and buy the crop,
government procurement is getting dismantled and farmers have
been left to the mercy of the ‘free market’. As will be seen in the
next chapter, farmers’ access to credit is getting reduced and the
cost of credit has also increased. Agricultural extension services
have collapsed as has been admitted by the Finance Minister himself
in his budget speech of 2007-08. We shall look at various policy
changes in different sections of this chapter. The first section deals
with the neglect of agriculture in government policies, the next
section shows the impact of this on costs of cultivation and prices
received by the farmers, and the last section critiques various
‘patchwork’ measures being offered as solution to the crisis.
NEGLECT AND DISCRIMINATION

Public investment and expenditures
The state of rural infrastructure was pitiable at the time of
independence. The onus of developing the rural economy fell on
the newly formed government. Public investment in agriculture
was increased till about the end of 1970s. The beginning of reforms
coincided with a consistent decline in the proportion of public
investment in agriculture as a percentage of GDP although the
same period has been marked by a high savings and investment
rate for the economy as a whole. It should be remembered that
agriculture is a sector where public investment is needed to
encourage private investment. The majority of farmers in our
country are resource-poor i.e., they cannot afford to undertake
investments individually. They are dependent on government
irrigation system and infrastructure to carry out cultivation.
Individual farmers cannot be expected to carry out leveling of soil
and build irrigation systems. Rather, only when such infrastructure
is ensured by the state are farmers able to invest in their own fields.
In other words, public investment in agriculture cannot be

substituted by private investment.
It can be seen from Table 1 of the appendix that public
investment in agriculture as a proportion of GDP has consistently
declined since the 1980s. If we look at public and private investment
together, we will see that investment in agriculture as a proportion
of GDP has fallen from 1.92 per cent in 1990 to1.31 per cent in
2003. This is the time when the economy as a whole was witnessing
very high levels of investment. Investment levels for the entire
economy were 33.8 per cent in 2005-06 i.e., investment was almost
equal to one-third of the national output. These are high levels of
investment by any standards. However, agriculture did not get its
due share of investment during the same period. If the investment
levels in agriculture as a proportion of the output were the same as
that for the entire economy, then total investment (public and
private) in this sector would have been at least 6 per cent.1 It is
obvious that share of agriculture in investment is nowhere near
the share of other sectors of the economy.
Apart from a sharp decline in investment, the allocation by the
government to agriculture and allied sectors in successive Five Year
Plans has declined (See Table 3 in appendix). Moreover, the
expenditure on agriculture and rural development in the annual
budgets of the central and state governments have also shown a
downward trend.
Even if rural development expenditures are considered broadly
and were to include expenditures on agriculture, rural development,
irrigation and flood control, village and small scale industry, and
special areas programme, this has shown a decline since the 1990s.
In fact, plan expenses incurred on total rural development by all
the state governments was 42.9 per cent of the budget in 1990-91,
but declined to a little over 30 per cent of the budget in 2002-03;
this means a drop of almost 25 percentage points. Likewise, the
non-plan expenses incurred by all the state governments on total
rural development as a percentage of budgets, went down from 13.3
per cent during 1990-91 to 9.9 per cent during 2001-02 and further
to 8.4 per cent during 2002-03. 2
The central government’s expenditure on agriculture as a
percentage of total expenditure also deteriorated in the period of
economic reforms. It became less than half between 1990-91 and
2004-05 (from 2.6 per cent to 1.1 per cent). 3
Economic Policy Reforms and their Impact 45
Irrigation
Even after sixty years of independence, three-fifths of the
agricultural land in our country remains dependent on the monsoons
and cultivation takes place under rain-fed conditions. This
dependence on the monsoons makes the Indian farmer even more
vulnerable. Commercialisation of agriculture has meant that crops
which require lots of water are being grown in the unirrigated
regions of the country, like Bt cotton cultivation in Vidarbha.
Only two-fifths of the agricultural land is irrigated, and there
are severe regional imbalances and disparities in access to irrigation
across large and small farmers. It is not surprising that the
technology of Green Revolution was introduced only in those areas
of the country where a well-developed system of irrigation already
existed. The existing system of irrigation can be broadly classified
into different types – surface water irrigation, groundwater
irrigation (tubewells, and wells, with or without pumpsets) and
harvesting of rainwater (through tanks and other traditional forms).
In 1999-2000, less than one-third of the total irrigated area (31.44
per cent) was irrigated through canal irrigation and almost sixty
per cent (58.76 per cent) was through private wells.
The state has to take the primary responsibility for building
the irrigation systems and reducing the dependence of farmers on
the monsoon. There has been an utter neglect of this sphere by the
state. The expenditure by all state governments on major and
medium irrigation (works) and flood control as a percentage of total
budgets of all states fell from 7.8 per cent in 1990-91 to 5.5 per cent
in 2001-02 (see Table 2 in appendix). The central government’s
expenditure on irrigation as a percentage of total expenditures has
also fallen sharply during the period of economic reforms. It fell
from 0.3 per cent in 1990-91 to 0.1 per cent in 2004-05. After
adjusting for inflation, the centre’s spending on irrigation and flood
control fell by 15 per cent.4
The investment that takes place in irrigation is also influenced
by political clout rather than actual requirements. The Marathwada
region in Maharashtra – the sugarcane belt as well as the
constituency of the present agricultural minister Sharad Pawar –
has cornered most of the irrigation benefits in the state whereas
the Vidarbha region in contrast, stands neglected.
Canal irrigation has suffered the most. The area irrigated by
canal irrigation decreased from 40 per cent of the total irrigated
area in the first half of the 1970s (1970-71 to 1974-75) to only 31

per cent in the second half of the 1990s (1995-96 to 1999-2000).
Even in cases where the government has invested in irrigation
projects, it has chosen to do this by building big dams, which have
their own adverse consequences. The neglect of irrigation by the
government has meant that farmers have had to resort to methods
of private irrigation, which is mostly groundwater extraction. The
area irrigated by wells increased from 40 per cent to 57 per cent in
the period mentioned above. This dependence on private irrigation
has only exacerbated inequalities amongst the classes of farmers,
since only those with adequate means can invest in tubewells,
borewells and motor pumps.
Unfettered groundwater extraction has led to severe depletion
of groundwater levels across the country, especially in states like
Punjab and Haryana. In central Punjab, the prime area of rice and
wheat production, the cumulative fall in the water table for October-
over-October 5 was 3.26 metres in 1998 (since 1973). The water table
went down at an alarming rate after this. Its depth increased by
7.67 metres by 2003 and further by 9.28 metres by 2005 (since
1973). 6 The water table has fallen in 264 of the country’s 596
districts.
The fall in the water table has resulted in an ecological crisis,
for which policies of the state and central governments, and not
the farmers, are to be blamed. A study by three pumpset farmers
in 2005 in Andhra Pradesh calculated that the fixed cost of sinking
a borewell was Rs. 1,00,000 and the recurring expenditure per
annum was Rs. 38,000. 7 It is obvious that only a rich farmer can
undertake such expenditures. It is interesting to read what the
three authors of the aforementioned study had to say about farmers
and borewells (see Box).
As mentioned earlier, the favoured choice of public investment
in irrigation has been the creation of big dams. Today, India ranks
among the top three big dam countries, next only to China and the
US. There have been a number of studies which indicate that big
dams have serious environment costs, they are not cost effective
compared to minor and medium irrigation projects (the cost of minor
irrigation projects from the beginning of the planning period till
recently has increased only three times whereas the cost for major
and medium projects increased by eleven times), and most
importantly, the benefits of large dams are heavily skewed in favour
Borewell Technology: The Modern ‘Bhasmasura’?

Like the demon ‘Bhasmasura’ in Hindu mythology who won a boon from
Lord Shiva that whosoever is blessed with his hand will turn to ashes, the
Indian farmer is today armed with borewell technology. Wherever he sinks a
borewell, sooner or later, the water disappears, ultimately ruining the water
table and the farmer himself (just as Bhasmasura himself finally turned to
ash). There are laws of course to prevent indiscriminate sinking of borewells
which, like the Dowry Act, no one bothered about .Very soon, within 10 years,
by the early 1980s, utter chaos prevailed. Increasingly, open wells were
becoming unviable as a neighbour sinking a borewell automatically implied
one’s own well went dry, forcing one to sink deeper at great expense. As the
farmers went deeper and deeper, the cost of groundwater mining kept growing,
with old pumpsets discarded for new and more powerful submersible ones
demanding/consuming more power but drawing out less water and the life of
the borewell growing shorter (from an average of 10 years in the last decade
to 5 years now). Two or three years of consequent drought and all hell will
break loose, as wells dry up rapidly and new wells are sunk in desperation,
which in most cases, either fail to strike water or dry up as summer advances.
Source: G. Narendranath et al, EPW, 31 December 2005
of large landowners and organised industry. Even the major share

of electricity generated through big dams goes to urban areas and
the organised industrial sector. Recently, people in Orissa have been
protesting against diversion of water from the Hirakud dam for
industrial projects. The Hirakud dam adversely affected the
livelihood of more than one lakh people during the course of its
construction in 1948.
Farmers who do not have the means or access to any source of
irrigation, are dependent on common property water resources –
lakes, ponds and village rivulets. It is important to note that two-
thirds of the farmer households which use irrigation draw water
from such resources. The impending privatisation of water resources
will mean that these sections of the farmers will be denied access
to irrigation completely or they will be asked to pay for the usage of
these hitherto common property resources. There is also talk of
increasing the water use charges in the case of canal irrigation,
which will further increase the costs of cultivation for the farmers.
Subsidies
Subsidies to any sector are a form of support given to it by the
government. For example, if farmers are provided fertilisers at a
price lower than the cost of production of fertilisers, and the gap
between the two is met by the government, this would be the
fertiliser subsidy by the government. Agriculture is just one of the
sectors receiving subsidies from the government. Agricultural
subsidies take different forms, including food, fertilisers, petroleum
and power subsidies. The fertiliser, petroleum and power subsidies
reduce the cost of cultivation for the farmers, while the food subsidy
benefits both the farmers and the buyers of food. Subsidies for food,
fertilisers and petroleum account for about 38 per cent of total
government subsidies.8 In the period of economic reforms, there
has been a continuous attack on agricultural subsidies on the ground
that these are an unnecessary burden on the government’s budget.
Food subsidy: Food subsidies comprise of subsidies to farmers
through support prices and purchase operations of the Food
Corporation of India (FCI), consumer subsidies through the public
distribution system (PDS) and subsidies to FCI to cover all its costs.
Since June 1997, the Universal Public Distribution System has been
replaced by a Targeted PDS (or TPDS). The details regarding the
FCI are given in the section on marketing and price policies. PDS
is discussed in the chapter on food security.
Fertiliser subsidy: In the case of fertilisers, the Retention Price
Scheme (RPS) was introduced in 1979. According to this, the
retention price of fertilisers is determined by the government for
each fertiliser manufacturer on the basis of the input costs of the
plant producing the fertiliser. Each manufacturer is required to
sell the fertiliser to the farmer at a price fixed by the government.
The difference between the retention price and the retail price of
fertiliser is paid back to the manufacturer as a subsidy by the
government. The subsidy accruing to the farmer is on account of
the retail price being lower than the cost of production of the
fertiliser. Large part of the benefits of fertiliser subsidies is cornered
by the fertiliser manufacturers. Between 1981-82 and 2002-03, more
than one third of the subsidy (38 per cent) accrued to the fertiliser
industry and only the residual went to the farmers. The fertiliser
subsidy began to decline as a proportion of the GDP after 1989-90.
It fell from 0.93 per cent in 1989-90 to as low as 0.43 per cent in
2003-04. From 1994, the government decontrolled all fertilisers
except urea. Now, the fertiliser subsidy is due to the continuation

of retention price scheme in the case of urea and ad hoc concessions
in other fertilisers like di-ammonium phosphate (DAP) and muriate
of potash (MOP). Internationally, fertiliser prices have risen more
than oil or any other commodity in 2007 and 2008. Of the three
main types, DAP sold for $250 a tonne in January 2007 but rose to
$1,230 by middle of 2008. Potash-based fertilisers rose from $172
per tonne to more than $500 and nitrogen based fertilisers rose
from $277 to more than $450 a tonne during the same period. 9 In
the context of rising fertiliser prices in the world, withdrawal of
the fertiliser subsidy would have disastrous consequences for our
farmers.
Petroleum subsidy: Petroleum prices impact the costs of private
irrigation, transportation and urea. Subsidies on kerosene started
declining after 1999-2000 and those on Liquefied Petroleum Gas
began to decline after 2000-01. As part of the energy sector reforms,
prices of many petroleum products, for example, naptha, furnace
oil, low-sulfur heavy stock (LSHS), light diesel oil (LDO) and
bitumen have been liberalised since April 1998. High speed diesel
prices were linked to international prices resulting in rise in diesel
prices. This would impact those farmers who use tractors and diesel
pump sets to irrigate their fields.
Power subsidy: The agricultural sector accounted for one-third of
the total electricity consumption in the country in 2001. States like
Tamil Nadu and Punjab provided free electricity to farmers (for
using pumpsets for irrigation) and other states usually have low
electricity tariffs for farmers. The power subsidy to farmers is seen
as an unjustifiable burden on the government, and one that leads
to excess consumption of power by the farmers. The power subsidy
has been repeatedly targeted by governments in the process of
economic reforms. The World Bank has forced many state
governments to undertake power sector reforms as part of its loan
conditionalities. One essential feature of power sector reforms is
that it increases user charges for all users – including farmers.
This allegedly reduces wastage and excess consumption by the
farmers. However, the truth about claims of “power wastage” by
the farmers is revealed by a study of the World Bank itself. The
study (India: Power Supply to Agriculture, 2001) shows that in
Haryana, the actual electricity consumption by the agricultural
sector is only 36 per cent as against the 46 per cent claimed by the
Haryana Vidyut Prasaran Nigam Limited (HVPNL). The trans-
mission and distribution (T&D) losses of the state were

underestimated and part of the actual T&D losses were passed off
as consumption by the agricultural sector!10
This might be the case in many other states as well. It is, indeed,
difficult to believe how the farm sector in Madhya Pradesh,
Rajasthan, Gujarat, Maharashtra and Karnataka can account for
46 per cent, 38 per cent, 41 per cent, 31 per cent and 44 per cent of
power consumption, when the share of irrigated area to the gross
cropped area in these states are only 25 per cent, 30 per cent, 34
per cent, 14.5 per cent and 25 per cent, respectively.11 Studies like
the one mentioned above have not stopped the World Bank for
aggressively advocating and coercing state governments to hike
electricity tariffs for farmers in the process of power sector reforms.
Such increases in electricity tariffs increase the costs of cultivation
for the farmers and worsen their vulnerability and distress.
Table 4 in the appendix shows that in the present decade, there
have been some years where subsidies on fertiliser, electricity and
irrigation have actually declined in real terms. Even when they
have not declined, they have remained stagnant or shown a
marginal increase. The slashing (rationalisation) of all these
subsidies have had a major impact on agricultural costs.
Those who argue for lowering the burden on state exchequer
by reducing the subsidies to agriculture, remain silent about the
huge subsidies given to private corporate sector. By way of
comparison, it would be useful to note the transfers and subsidies
given to the corporate sector – disinvestment, land acquisition,
building of infrastructure for industries and tax concessions.
Between 2000 and 2002, the government sold nine public sector
firms to the private sector at undervalued prices and with gifts of
surplus land. Acquisition of land from farmers and giving it to
industry and real estate is yet another way of transferring scarce
resources away from agriculture. The introduction of Public Private
Partnerships (PPPs) in infrastructure development (airports, power
sector and ports) where the government keeps a provision for
financing in the name of ‘Viability Gap Funding’ is nothing but a
camouflage for subsidy to the private companies. Many of these
sectors were making profits even without the partnership of the
public sector. The expenditure on flyovers, bridges, elevated
corridors, express ways and golden quadrangle are much higher
compared to facilities like public irrigation, which benefit a much
larger proportion of the population. Last but not the least – the
large transfers and varieties of tax concessions given to the private
corporate sector. In 2007-08, concessions were given in the
corporation tax, excise duty and customs duty to the tune of Rs.
236,483 crores.
Even as the Indian government cuts its subsidies to agriculture
at the behest of international organisations like the World Bank,
IMF and WTO, the developed countries of the world continue to
give huge subsidies and direct cash transfers to their farmers and
agriculture. The total support given to agriculture in the OECD
countries12 increased by 9 per cent from 1986-88 to 1999-2001. In
the US alone, the increase in the same period was 39 per cent. For
Korea and Japan, the increase was 51 per cent and 11.36 per cent
respectively.13
RISING COSTS AND FLUCTUATING PRICES

Costs of cultivation
The cumulative impact of the input-intensive technology
employed and the domestic reforms in agriculture has been an
increase in the costs of cultivation for farmers. The technology
adopted after the Green Revolution requires seeds purchased from
the market and increasing quantities of chemical fertilisers and
pesticides. The withdrawal of subsidies from important spheres and
allowing multinationals to manufacture and distribute inputs has
further increased the costs incurred by cultivators. In addition to
this, the decline in public investment and expenditures on irrigation
and rural development has meant that farmers have had to fend
for themselves in this respect. The credit policy reforms have
brought back the moneylender to the countryside increasing the
interest costs of loans for the farmers.
A study14 of costs of cultivation of wheat from 1970-71 to 2004-
05 was conducted for Haryana, Madhya Pradesh, Punjab, Rajasthan
and Uttar Pradesh. These states together account for 80 per cent of
the area and 85 per cent of the output of wheat produced in the
country. The study shows that for these states, the average cost of
cultivation of wheat (measured in current prices) increased
moderately in the 1970s, picked up further in the 1980s and “started
galloping” in the 1990s and the first half of the current decade.
Agricultural costs can be decomposed into fixed costs and variable
or operational costs. The former reflects the value of land and fixed
assets owned by the cultivators. Operational costs are costs of

variable inputs and include wage costs, costs of chemical fertilisers
and pesticides, seeds, irrigation charges, machine labour cost and
interest costs on loans. Based on the above study, we can see how
the different components of costs have escalated due to economic
reforms. The fixed costs have tended to stagnate after the reforms
whereas the operational costs have risen sharply. According to the
study quoted above, the reason for the former lies in the decline in
value of land on account of decreasing agricultural prices and due
to decrease in private investment on fixed assets. However almost
all components of variable cost rose on account of removal of input
subsidies and the dependence of farmers on the open market for
most inputs. The average expenses (on hired human labour, hired
machine labour, chemical fertilisers, insecticides, irrigation charges
and interest on short term loans) in wheat cultivation were slightly
above Rs. 1,500 per hectare in the 1980s, rose to Rs. 4,500 per
hectare in the 1990s and jumped to Rs. 7,700 per hectare in 2004-
05. In other words, the costs have risen more than five times above
the level in the 1980s.15 The two technological changes that have
had the maximum impact on costs of cultivation are the adoption
of high yielding varieties (HYVs) of seeds, associated with access to
irrigation and increased use of chemicals; and mechanisation,
associated with reduced use of bullock and human labour. Although
the above study is limited to the costs of cultivating wheat, the
situation will not be very different for other crops which use HYV
seeds and/or a similar degree of mechanisation.
Changes in different components of costs
Wages and employment: The employment of manual workers in
the cultivation of wheat has been declining since the mid-1970s. In
the mid-1970s, the wheat crop required 72 person-days of manual
labour on an average. In 2004-05, this came down to 63 person-
days in Rajasthan, 56 in Uttar Pradesh, 37 in Haryana and 20 in
Punjab. Although wages comprise the largest segment of the
variable costs, share of wages (in total operational costs) has been
declining since the mid-1990s. This shows that average wages have
increased at a lower rate than all other costs taken together.
Chemical fertilisers and pesticides: After wages, fertiliser costs are
the second largest component of operational costs. HYV seeds
require large doses of chemical fertilisers in order to yield higher
output. But the application of chemical fertilisers has many other
consequences. They increase the incidence of weeds, pests and

nematodes which require the application of pesticides and
weedicides. Water also needs to be controlled carefully which in
turn requires sophisticated technology. Short duration HYV seeds
require inter-cultures in quick succession which makes
mechanization indispensable. All these factors increase the costs
of cultivation. The average fertiliser costs in the five states
considered in the study, were estimated at Rs. 228 per hectare in
the 1970s, rose to Rs. 534 in the 1980s, to Rs 1,339 in the 1990s and
to Rs. 1,755 per hectare in the first half of the present decade.
In June 2008, police stations in Vidarbha were assigned an additional duty, the
distribution of fertilisers. “It’s not an easy job,” says inspector Devidas Chaudhary,
officer-in-charge of the Washim police station. Well known journalist P. Sainath
observes, “Rarely has fertiliser been distributed under such tight security, by men
in uniform.” Fertiliser shortages sparked unrest across rural Maharashtra. Apart
from fertilisers, seeds also seemed to be in short supply.
With the emergence of private operators, costs on account of

insecticides, weedicides and herbicides have increased many times.
The all-state average expenses per hectare on insecticides was less
than a rupee in the 1970s, Rs. 25 in the 1980s, Rs. 90 in the 1990s
and has become Rs. 303 in 2004-05.
Machine Labour: With widespread mechanization of agricultural
operations, hiring of machines has become quite common and this
has led to an increase in the demand for machine labour. Apart
from this, frequent increases in the prices of petrol, diesel and
electricity have led to an increase in the operational costs of
agricultural equipments. Both these factors have contributed to a
sharp increase in machine labour charges. In the 1980s, on an
average, these charges were Rs. 435 per hectare; they rose to Rs.
1,280 in the 1990s and to Rs. 2,520 in 2004-05.
Seed Costs: With the onset of economic reforms, the seed
corporations of the states and the central government have become
redundant; and this has made the peasants largely dependent on
private seed companies for the commercial purchase of seeds. These
seeds are costlier and require repeated sowings; the cultivation cost
on this account has been rising. The rise may be higher than what
is shown by government statistics as these statistics do not factor
in bad quality or spurious seeds.
US multinational companies like Monsanto, through their
Indian subsidiaries, have been trying that the seed regulations laws
in India are changed in their favour. In 2007, cotton seeds were
surprisingly removed from the Essential Commodities Act, which
is the only weapon in the hands of the state governments to regulate
private seed trade and seed prices. As a result, the state
governments found it difficult to regulate the price of Bt cotton.
When some of the state governments reduced the price of Bt cotton
by promulgating ordinances, the US Department of Agriculture
referred to this and said “unwarranted interference by state
governments in seed pricing could act as a disincentive to introduce
new biotech traits/ events into India”.16
Irrigation Charges: The cost of irrigation depends on the source of
irrigation like surface water, wells, tube-wells, tanks or canal
irrigation. In Punjab, Haryana and Uttar Pradesh, the major source
of irrigation is water drawn from wells and tube-wells with
electricity and diesel pump sets. This kind of irrigation is much
more costly than flow irrigation i.e., canals, rivers and springs
(whose costs are practically insignificant). The average irrigation
charge in the five states for the cultivation of wheat was Rs. 298
per hectare in the 1980s, Rs. 832 in the 1990s and Rs. 1,725 in
2004-05.
It may be noted that while states like Punjab have been
subsidising water and electricity charges for irrigation, many other
states are being forced to raise the irrigation charges as they avail
credit under the Accelerated Irrigation Benefit Programme or Rural
Infrastructure Development Fund scheme, both initiated in the mid-
1990s.
Interest costs: The financial sector reforms of the 1990s have allowed
the banks to dilute the mandate of priority sector credit to
agriculture. Although banks are required to provide 18 per cent of
the net bank credit to agriculture even now, the definition of
agricultural credit has been modified to include loans extended to
business houses dealing in farm inputs, machinery, drip/sprinkler
irrigation systems, loans to the power sector to extend transmission
lines to rural areas, and credit to private companies and MNCs
engaged in construction and maintenance of cold storages, dairying,
food processing, and other agri-businesses. As far as cultivators

are concerned, only those with sufficient collateral are able to avail
of institutional credit, and that is also far short of the actual credit
requirements. The interest rates charged have shot up from 4.5
per cent in the 1970s and the 1980s to 15-18 per cent. In case of
default, banks could impose a penal interest of up to 24 per cent.
Due to the difficulties of procuring bank credit, in many cases,
peasants are forced to rely on moneylenders who charge exorbitant
interest rates. All this has escalated the cost of credit required for
cultivation.
From the farm to the market:
price policy, marketing and procurement
The life of an Indian farmer is full of uncertainty and hardship.
After incurring high costs and protecting the plant from various
kinds of pests, the crop represents hope. It is symbolic of successful
fruition of a season of back-breaking labour. Increasingly now, even
this does not guarantee survival, leave alone prosperity. With
growing commercialisation of agriculture, farmers are selling a
major share of their output in the market and keeping a very small
proportion of it for self-consumption. The passage from the farm to
the market is full of vagaries. The farmer can (or has to) sell his
crop to any one of the following – the government, private traders
at the local markets (mandis), or the input dealers and private
moneylenders. In all cases, he has virtually no control over the
prices that he gets.
Government procurement of crops is on the basis of prices fixed
by the Commission of Agricultural Costs and Prices (CACP). Prior
to the formation of the CACP in 1985, this work of fixing crop prices
was done by the Agriculture Prices Commission (APC).
In the 1980s questions started being raised about the methods
adopted in arriving at the Minimum Support Price (MSP) fixed by
the APC. The inclusion or exclusion of imputed costs of various
items of farm operations such as value of family labour, the imputed
rental value of owned land and the risk premium began to be
debated. Farmers’ organisations across the country began
emphasizing the ‘remunerative’ role that price policy ought to play
implying that MSP should be calculated after including some
remuneration for the farmers above the costs.
Following the recommendations of the S.R. Sen Committee, the
CACP came into existence and a policy document was issued in
1986 titled Agricultural Price Policy: A Long Term Perspective,

outlining the new objectives. Today, the MSP fixed by the CACP
takes into account the cost of production, changes in the costs of
inputs, domestic and international demand and supply conditions,
market prices for the crop, price parity between various crops and
inter-sectoral terms of trade. Presently, CACP recommends the
MSPs for twenty-four commodities. The stated objectives of the
CACP are to protect the interests of the producers as well as the
consumers and also to provide incentive for the use of appropriate
technology. Once the MSP is recommended by the CACP, the
government is supposed to procure the crops at that price. In the
case of food grain crops like rice and wheat, it is the Food
Corporation of India (or bodies of the state governments) which
does the procurement, itself or through commission agents. For
crops other than food grains, there are different bodies like the
Cotton Corporation of India.
In reality, this system has several flaws which act in tandem
against the interest of farmers. Firstly, there are many lacunae in
the methods followed by CACP to calculate the cost of cultivation
for different crops which underestimate the actual costs and hence
also suggest lower prices. The second problem is associated with
implementation of the CACP recommendations.
The cost of cultivation considered by the CACP is the all India
weighted average of costs which often results in MSPs being actually
lower than the cost of cultivation in some states. In case of crops
like jowar, ragi and cotton, even the costs paid out of farmers’
pockets were not covered in certain years.
Another serious problem is that labour employed in agriculture
is considered unskilled and the valuation of labour is done
accordingly.17 The average market wages paid to hired labour or
the stipulated minimum wages for unskilled labour, whichever is
higher, is used for valuation of labour. It should be noted that
stipulated wages for unskilled labour are lower than those for skilled
labour. It is not possible to undertake the entire exercise from
preparation of fields to sowing of seeds, protecting the seeds and
the plant from pests and insects without possessing requisite skills.
Had this labour been considered skilled, then valuation of costs
would have to go up and prices would have to be higher as well.
The costs tend to be underestimated due to variety of other
factors as well. For example, the rental value of land considered is
often depressed. Even today the recommendations of 1960s are in

force according to which the rent is considered to be merely one-
fourth or one-sixth of the gross value of the crop. Secondly, the
interest costs are based on interest rates charged by the banks even
though it is well known that a large number of farmers are
dependent on moneylenders who charge much higher rates of
interest. Similarly, the estimate of depreciation cost is also
inappropriate. To give an example of another kind of problem in
estimation, the cost of cultivation is underestimated for those
farmers in Punjab who use diesel pumps to irrigate their fields,
since the CACP assumes cost of irrigation to be zero because
electricity to the farmers is free in the state.
At the level of implementation, CACP’s decisions are often
influenced by bureaucrats and political exigencies. Very often there
is pressure to recommend low MSPs so that the government does
not have to dole out a large subsidy. Prices recommended by the
CACP are often modified by the government and therefore price
fixation is rendered a cosmetic exercise. Such changes by the
government are a rule rather than an exception. Even the time of
declaration of MSPs is rarely before the sowing season, so the
farmers do not know what prices to expect for their crop.
Once the MSPs are declared, there are serious problems in
procurement of crops by the governments of different states. For
example, the MSP of Rs. 3000 announced for cotton in 2008-09
reflects a correction of past mistakes in the methodology adopted
by the CACP but this is of no practical use. There were no
government procurement centres in the Vidarbha region to actually
buy the crop at this price till as late as end of October 2008.
Naturally, the farmers were being forced to sell to the private
traders at much lower prices of Rs. 2500-2600 per quintal.
The implementation of MSP has been a difficult task in most of
the states in the country (except some states like Punjab and
Haryana). There are instances of no government procurement even
when market prices rule below the MSP. During the harvest season,
often there are huge quantities of crops arriving in the local markets,
many times on a single day because the regulated markets function
on pre-decided days of the week. This results in a collapse of prices,
putting farmers at a disadvantage. In Punjab and Haryana, the
relative success of public procurement can largely be explained by
the pressure of the strong farmers’ lobbies. MSPs have become
irrelevant to the growers of oilseeds, pulses, onion, potato, cotton,

jute and copra, whatever be the levels at which they are fixed. This
is because there is no procurement by the central or state
governments at these prices.
With the beginning of the liberalisation process in the country,
objectives and the emphasis of price policy also witnessed a change.
Now there is a debate on the continuation of MSP itself. A committee
was set up under Abhijit Sen to look into the long term grain policy
of the country. The Report of the High Level Committee on Long
Term Grain Policy was brought out by the government in 2002.
Now it is being suggested that the role of CACP be expanded from
management of domestic prices to entering the trade related aspects
of policy for agricultural commodities. This report openly talks about
withdrawal of procurement agencies like the FCI from states like
Punjab and Haryana. It is being suggested that price policy should
encourage cropping of export oriented crops.
The procurement of crops has been steadily decreasing and the
reason is not hard to find. The above committee was informed by
the representatives of agri-business companies that they would only
invest in grain trading in India if “the potential threat posed by
high stock levels [of the FCI] is removed”. The removal of FCI from
procurement and storage of food grains will enable these companies
to make additional profits. And these multinationals have not been
unsuccessful. More and more states have made pro-corporate sector
changes in the Agricultural Produce Marketing Committee (APMC)
Acts, increasing the participation of the corporate sector in
marketing and reducing that of the government. The government
has been adopting a policy of keeping the MSPs low so that
procurement can be reduced. The Economic Survey of 2005-06
openly states that large government procurement hurt private
traders and discouraged them from expanding in the field of
agricultural marketing. Hence the government is keeping the MSPs
low so that private (read corporate) investment in agricultural
marketing can be encouraged! The procurement of wheat as a
percentage of total output of wheat crop became less than half (from
29.6 per cent to 13.3 per cent) from 2000-01 to 2004-05. 18
This steady decrease in procurement, initially of other crops
and now of food grains exposes both the cultivators and consumers
to the uncertainties of the market. Absence of assured procurement
means that the farmers are left with no option but to sell to private
Procurement Fiasco
The fiasco in wheat procurement in April-May 2006 is illustrative of the
government’s failure in this regard. The total public procurement of wheat was
9.2 million tonnes, only 13.3 per cent of the wheat output, a historic low. 19 This
was despite the fact that wheat production was higher than the previous year.
This failure of procurement was entirely predictable.
Private traders and the corporate sector had already started making direct
purchases from the farmers the previous year, affecting public procurement. The
pro-corporate changes introduced in the APMC Acts of different states further
displaced public procurement. The official minimum support price of wheat in
2006 was set just 1.6 per cent higher than the previous year, despite wholesale
prices rising 4.3 per cent in the previous year (and fuel prices rising at more than
twice that rate).20 Thus, the corporate sector was able to bid just slightly higher
than the MSP and buy up the grain. Speculators in grain were able to drive
market prices much above the MSP because of the previous year’s shortfall in
procurement and the low stocks with FCI (1.9 million tonnes on 1 April 2006). It
did not come as a surprise that farmers preferred to sell in the market rather than
to the government. Even though the government announced an incentive bonus
of Rs. 50 per quintal on 21 April 2006 to attract more wheat, it was too late as
many farmers with less holding power had already sold their output to the private
traders. Much of the grain was bought by private traders even before it reached
the market. Only 13.7 million tonnes of wheat reached the market in 2006, 2.3
million tonnes less than the previous year and 4.4 million tonnes less than the
year before that. 21 Sharad Pawar, Minister for Food and Agriculture, admitted
that “large purchases by private traders, including multinational corporations have
been a contributory factor for the low level of wheat procurement this year”.2 2
Perhaps for the first time since the creation of the FCI, private traders held far
more wheat than the government. The government was now much less able to
control open market prices and it urgently required food grains for PDS and its
welfare schemes.
Thus, a situation was deliberately created to import wheat from outside.
The government could have procured enough wheat in April-May 2006 by giving
remunerative MSPs to farmers, and preventing agri-businesses and private traders
from purchasing on such a large scale (as production was higher than last year).
But it did not do so, since then there would be no excuse for importing wheat.
Under-procurement was necessary to create the case for wheat imports. Wheat
was imported that year at prices higher than those offered to the farmers.
traders (and agri-business houses). Except for that tiny minority of

consumers who can access grains through TPDS, consumers have
no option but to buy in the open market at high prices (often from
the retail outlets of the very same agri-business houses). As part of
the preparations to shut down the FCI, various schemes are on the
anvil: provision of food stamps, making direct cash payments to
the targeted families, booking purchases on the ‘futures markets’
instead of physically procuring the grain and outsourcing all the
major operations of the FCI. The Food Ministry has hired McKinsey,
a US based consultancy, to make a plan for ‘re-structuring’ of the
FCI. This consultancy firm wants eight to ten thousand of the
employees of FCI to be retired ‘voluntarily’. Already private parties
are being engaged by the FCI in certain areas. For example,
National Collateral Management Services Limited was hired by
the FCI to procure rice from Balaghat in Madhya Pradesh and five
districts in Orissa in 2005. The operations were to be extended to
wheat procurement.
In reality, the government never had a consistent pro-farmer
policy of announcing remunerative procurement prices and
purchasing the crops of all farmers at those prices. Under the impact
of World Bank policies, even the skeletal mechanism of procurement
which existed is being scrapped step by step. The FCI is being
dismantled, the system of minimum support prices is being slowly
withdrawn, warehousing is being privatised, and multinational agri-
business corporations are being allowed to purchase directly from
the peasants.
The World Bank has been continuously arguing against high
domestic buffer stocks and pressurising India to enter the world
market in order to meet any shortfalls. And as restrictions on
imports of agricultural commodities are removed, imports have
virtually displaced domestic production in some crops. For example,
India was self-sufficient in the production of edible oils but now
imports 40 per cent of its requirements after trade liberalisation.
In other crops, threat of importing at lower prices is used to depress
the prices domestically. The government is consciously moving to a
regime where imports are being given precedence over domestic
procurement. This would become evident if we look at wheat imports
of 2007. On 4 September 2007, it was announced that the Indian
government is importing wheat at Rs. 16 per kg. Only a few months
prior to that, the procurement price of Rs. 8.50 was declared.
Incidentally this was a year when there was sufficient production
of wheat in the country. Often the imports are also of low quality
grain. On top of this, international grain traders are being given
repeated relaxations of the quality norms for wheat imports with
regard to pesticide levels, and the presence of pests, weeds and
diseases. An example of this is the very high levels of pesticide
found in the first shipment of Australian wheat in 2005. 23
With a steady scrapping of assured procurement by the
government, the farmer is now exposed to the fluctuations in
international prices where the rise in prices benefits the traders
and speculators and the fall in prices is passed on to the farmer.
Between 1997 and 2003, prices of many agricultural commodities
crashed in the international market which meant that the farmers
received very low prices for their crops. The private traders who
buy the crop from the farmer and then sell in the international
market naturally pass on the fall in prices to the farmers. The
absence of public storage facilities puts pressure on the farmers to
sell their produce immediately in the market. The market is a
buyer’s market or in other words, the sellers of the produce i.e., the
individual farmers do not have any say in the determination of the
prices. Not only is warehousing being privatised, multinational
grain firms are being allowed a free hand to purchase directly from
the farmers. Needless to say, this would only encourage speculation
and increase in profits of these firms.
In many areas of the country, the farmer is often not in a
position to take the produce to the market. Where loans have been
taken from the arhatiyas (commission agents) as in the case of
Punjab or seeds have been bought on credit from private traders,
the crop has to be taken to these agencies for repayment of loans.
The farmer may actually have no cash to take home at the end of
the long, arduous year!
FALSE SOLUTIONS, REAL PROFITS

Although policymakers have been forced to acknowledge the
agrarian crisis, the solutions they have offered are farcical, do not
address the root causes of the crisis, and serve the interests of large
business houses. Futures trading in agricultural commodities,
contract farming and corporate agriculture are solutions which will,
at best, benefit only the tiny minority of very large farmers in the
country. The Seed Bill in 2004 and the Patent Bill in 2005 favour
the seed companies against the farmers. In this section we will
discuss some of the proposed solutions.
Bleak future: “futures” market

Futures’ trading or trading in forward markets essentially refers
to an agreement to buy the commodity at some future date at pre-
determined prices. This form of agreement has started in
agricultural commodities as well. In fact it is being projected as a
solution to the marketing and storage risks which have to be borne
by the farmers.
In India, forward markets developed spontaneously in the later
part of the 19th century. This basically served the traders and the
financial interests with no role for the actual cultivator. By 1953,
regulated futures markets were established for some fifteen
commodities. Khusro Committee on Forward Markets had shown
quite clearly that it was not possible for the majority of farmers to
benefit from this (with the exception of large growers in the
Saurashtra region of Gujarat). Since then, there have been a number
of policy changes permitting or banning trading in some particular
commodity. In 1993, Kabra Committee on futures trade
liberalisation, recommended by a majority view to permit futures
only in 17 commodities. It unanimously recommended that
permission should not be granted for futures trading in wheat,
pulses, non basmati rice, tea, coffee, dry chillies, maize, vanaspati
and sugar.24 However in 2003, the ruling NDA government issued
a notification permitting futures trade in 103 commodities. Thus
the present revival of futures trade began in 2003. Forward Contract
(Amendment) Bill of 2006 has been changed to Forward Contract
(Regulation) Amendment Bill and was introduced on 13 March 2008.
The notification in 2006 was followed by twenty four commodity
exchanges—three national and the remaining regional. It is the
former which dominate the futures trade. These exchanges began
offering contracts in various commodities including essential
foodgrains, edible oil seeds, sugar and some spices. The National
Commodities and Derivatives Exchange (NCDEX), the second
largest national commodity exchange in 2006, largely deals with
agricultural commodities. According to UNCTAD, it is the third
largest exchange trading in agricultural futures in the world.
The organisation, structure and modus operandi of the futures
exchanges ensure that actual farmers have no role in the same.
For one, they are located in metropolitan cities and the trade is
conducted in English using computers. The large size of the contract
rules out the participation of small, medium and marginal farmers
who do not have the resources to produce in large quantities. They

are often net buyers of food and it is a travesty to expect them to
possess warehouse receipts.
This kind of trade is largely speculative in nature and enables
large agri-business firms to hoard agricultural produce and hike
its prices for their own profits. The hyper growth of futures trade
can be seen from the following illustrations. In October 2006, the
daily average trade in chana in just one exchange outdid the daily
turnover of a Reliance share. The annual estimate of volume of
futures trade in 2006-07 was estimated to be 90 per cent of the
estimated GDP for 2006-07 at current prices.25
Foreign Direct Investment

Foreign Direct Investment is now being permitted in a number of spheres
related to agriculture. FDI up to 100% is permitted under the automatic route
only in the following mentioned activities viz. Floriculture, Horticulture,
Development of Seeds, Animal Husbandry, Pisciculture, Aqua-culture and
Cultivation of Vegetables & Mushrooms, under controlled conditions and
services related to agro and allied sectors.
With prior government approval it is also permitted in tea plantation, coffee
and rubber processing and warehousing.
When Pepsi and Syngenta rule the roost:

corporate agriculture and contract farming
The advent of corporate agriculture and contract farming is a
step forward in the invasion of the private corporate sector in
agriculture. As the agricultural crisis stares the country in the face,
the government is endorsing these as solutions in the New
Agricultural Policy.
The practicing of agriculture by the private companies, both
domestic and foreign, is referred to as corporate agriculture.
Traditionally, agri-business companies involved in this have largely
been restricted to horticulture (which includes floriculture).
Recently, steps have been taken to expand their control beyond
horticulture. Contract farming on the other hand is when a private
firm signs a contract with a farmer. The farmer is told to produce a
crop with the company agreeing to buy the produce. The companies
may or may not supply the agricultural inputs as per the contract.
Many firms have entered contract farming and corporate agriculture

in recent years. Pepsi foods set up tomato processing plants in 1989
in Punjab. Hindustan Lever Limited, Rallis and ICICI together
entered contact farming for wheat in Madhya Pradesh. Other
companies either already present or to enter in the future are
Mahindra and Mahindra, Wal-Mart, Reliance Industries, Monsanto,
Cargill, Dow Agro besides others. Some of the states actively
promoting contract farming are Andhra Pradesh, Gujarat, Tamil
Nadu, Punjab and Karnataka.
Profitability is the driving force of the private corporate sector.
This would inevitably lead to corporates entering the production of
those commodities, where speculation and hoarding, and
consequentially large profits, exist. Driven by the profit motive,
companies do not have any concern for the local economy, livelihoods
of the people or the ecology of the region.
In contract farming, a single farmer or even a group of farmers
have no bargaining power against the might of the multinational
companies. There is an unequal relationship which will always lead
to unfair terms of business for the farmers. There is no legal
obligation on the firms to buy the produce. The produce may be
rejected by the company if it does not meet the required standards
or even if the company claims it does not. In the event that the
company does not buy the farmer’s produce, he has to sell it in the
open market at the prevailing low prices, thus incurring losses.
This has been experienced in Punjab for crops like maize, sunflower
and durum wheat. On the other hand, if the market price is higher
than the price offered by the corporates, the farmer does not have
the freedom to sell it in the market due to contractual obligations.
In those cases where inputs are not provided by the corporates, the
high input costs have to be borne by the farmers. Needless to say,
this kind of risk can only be borne by very large farmers.
There are cases of interlinking amongst companies selling
inputs, providing credit and buying the produce in a region. Madhya
Pradesh presents us with an example of such a tie up. Here, Rallis
provides inputs to the farmers, ICICI provides them credit and HLL
buys their produce. Such an alliance would be devastating for the
farmers, as she/he has no control over input costs, access to credit
or output price.
As the firms look to expand production and to fulfill their profit
motives, they will follow intensive farm practices that are likely to
be disastrous for the land and the soil. One of the gravest concerns
regarding corporate agriculture is growing corporate control over
agricultural land. This is one more way in which scarce and non-
renewable resources of the country are being transferred to
multinational corporations.
The Indo-US Knowledge Initiative on Agriculture, started in
2005, seeks to adapt the US system of contracts in Indian
agriculture. In the US, it is well known that as part of technology
and contract agreements with farmers, companies also enter into
marketing agreements which leave very little choice for the farmers
in terms of the inputs that they use, or prices for their output.26
Contract farming and corporate agriculture are not solutions
for the agrarian distress. If anything, they will worsen the crisis
and the farmers will be at the receiving end. The example of Mexico
comes to mind where the corporate sector monopolises corn, the
staple item of the Mexican diet. The consumers have to pay higher
prices than before and the farmers receive less than before. Mass
consumption has fallen and the corporations cater only to the elite
in the country.
The Indo-US Knowledge Initiative on Agriculture
(India’s) first Green Revolution benefited in substantial

measure from assistance provided by the U.S. We are
hopeful that the Knowledge Initiative on Agriculture
will become the harbinger of a second green revolution
in our country.
– Manmohan Singh
speech to the US Congress, July 2005
The ‘assistance’ provided by the US for our first Green

Revolution has been written about in the chapter on technology
(Science of Profit). There is now another agreement between India
and the US in the sphere of agriculture that merits our attention.
Prime Minister Manmohan Singh announced this bilateral deal,
known as the Indo-US Knowledge Initiative on Agriculture, during
his visit to the US in July 2005. A Joint Working Group was
established and a MoU was signed between the two governments
in the same month. The first Board meeting of the KIA was held in
December 2005 in Washington DC. Since then, six board meetings
have taken place till April 2008.
The Knowledge Initiative on Agriculture (KIA) during its first

three-year-phase worked in four areas, education, learning
resources, curriculum development and training; food processing,
use of byproducts and bio-fuels; water management; and
biotechnology. The Indian government had a budget outlay of Rs.
350 crores for this first phase. Out of this, 61 per cent was reserved
for biotechnology. The US did not commit any budget for this
initiative. 27
What is the KIA really about? It is the newest and the most
blatant attempt by the US to interfere in our domestic agricultural
policies in the interests of its own transnational corporations. Not
surprisingly, the three big US multinational companies – Monsanto,
Wal-Mart and Archer Daniels Midlands (ADM) – are on the board
of the KIA. The KIA is working out plans for facilitating the entry
of agri-business corporations in India. The entry of TNCs this time
round is being planned in those spheres of agriculture which are
most sensitive and which are likely to have long-term dangerous
consequences for the farmers of this country. For this purpose, the
KIA is seeking to change existing legal regulations in India in the
fields listed below.
1. REGULATION OF GENETICALLY MODIFIED O RGANISMS
Biotechnology is the largest area of intervention planned in
the KIA. According to a WTO document, the US has referred to
Indian GM regulation laws (of 1989) and environmental protection
acts as “vague” and “broader than any existing regulation in the
world”. US is the world’s largest cultivator of GM crops and is on
the lookout for markets for the same. Indian laws require food
importers to take permission from the GEAC (Genetic Engineering
Approval Committee) for any GM food imports. The effect of KIA
on this protective regulation was seen in September 2007, when
the GEAC suddenly issued a notification saying that no regulatory
approvals were needed any longer. This notification was
subsequently put on hold till February 2008.
Earlier in 2006 as well, US representatives on the board of KIA
had expressed concern over ‘regulatory and policy developments in
India’ which according to them would make it more difficult for
public and private sectors “to deliver beneficial biotechnology
products to farmers and markets”. It is clear that US is trying to
target the GM regulations in India through the KIA.
2. CONTRACT F ARMING
The second board meeting of KIA explicitly talked about
“drawing on the US experience with contract farming”. The third
board meeting said, “training on growing crops under contractual
agreements will be conducted in both the US and India and will
include legal mechanisms of contracts and adapting the US system
to India’s conditions”. This would require farmers to switch to plant
varieties which are more suitable for processing and food retail
industry. The potential dangers of contract farming for Indian
agriculture have been discussed in this section. US-style contract
farming US-style will certainly mean doom for our farmers and
huge profits for the multinational corporations.
3. INTELLECTUAL PROPERTY RIGHTS IN AGRICULTURE AND FOOD
The impact of KIA on intellectual property rights (IPR) in food
and agriculture is expected to be in two areas. Firstly, there is the
agenda of ‘harmonisation of regulatory regimes’. What this
essentially means is that the US IPR model is sought to be adopted
in India. In the US, even the publicly funded research in US
universities and institutes is patented and licensed out for
commercial development to companies such as Monsanto (Bayh-
Dole Act of 1980). Further, individual scientists from public sector
bodies can hold IPRs along with their private sector collaborators.
The Indian version of the Bayh-Dole Act has already entered the
Parliament as a bill. The sixth board meeting of KIA talks about
trainings in state agricultural universities in India about intellectual
property (IP) management and technology transfer issues, and for
the preparation to set up IP cells.
Second impact of KIA would be the ‘biopiracy’ of valuable
resource and knowledge in the name of collaborative research. The
Biological Diversity Act 2002 is meant for conserving biological
diversity, sustainable use of its components and fair and equitable
share of the benefits arising out of the use of biological resources
and knowledge. Under this Act, there are specific guidelines drawn
up for collaborative research projects like KIA. However, KIA has
been violating many of the notified guidelines of this Act. That
Indian law will be bypassed or violated in the efforts to import US
regulatory regimes is not surprising.
4. SEEDS REGULATION
The US agri-business corporations are trying to ensure that
legislative changes brought about in the Seed Bill 2004 are in favour
of private industry. The Indian face of Monsanto, Mahyco, has been
part of discussions relating to finalising the proposed seeds
regulation law. Although there is no explicit evidence that KIA is
being used to influence seeds regulation, the same can be expected
in future.
In two board meetings of the KIA, there were express points
made on how the private sector (read multinational corporations)
could provide more inputs for the regulatory process. The irony of
the private sector giving inputs for regulations, which are intended
to regulate the private sector in the first place, would have been
lost on our policymakers and government! The unfortunate truth
is that the KIA is trying to make knowledge in agriculture, like
knowledge is so many other spheres, a commodity produced by,
controlled by and used for the profits of the transnational
corporations. The Indian government’s complicity in such
‘initiatives’ reveals its own intentions and interests.
CONCLUSION
Whether it is declining public investment in agriculture, cut in
subsidies resulting in increased costs of cultivation, ineffective policy
of procurement of crops and finally the dismantling of institutions
like the FCI, all have worked towards starving the agricultural
sector. This sector is the lifeline of any society but is especially
important in our country as majority of our populace is dependent
on it for their livelihood. This kind of neglect and bias against the
agricultural sector reflects callousness towards the vast majority
of our people.
Notes
1. Agriculture’s contribution to Gross Domestic Product has been falling
and was 18.5 per cent in 2006-07. For an investment of 33 per cent or
one-third of its contribution to GDP, investment in agriculture would
need to be one-third of 18.5 i.e., at least 6 per cent.
2. Praveen Jha, ‘Some Aspects of well-being of India’s agricultural labour
in context of contemporary agrarian crisis’, 22 February 2007,
www.macroscan.org
3. Aspects of India’s Economy No. 43, R.U.P.E.
4. RBI, Handbook of Statistics on State Government Finances, 2004 as

quoted in Aspects of India’s Economy No. 43
5. The data recorded in October each year shows the post-monsoon to
post-monsoon changes in the water table.
6. Fall in Water Table in Central Punjab: How serious?, The Punjab
State Farmers Commission, Government of Punjab, 22 November
2006.
7. G. Narendranath, Uma Shankari and K. Rajendra Reddy, ‘To free or
not to free Power: Understanding the context of free power to
agriculture’, Economic Political Weekly 31 December 2005.
8. “Central Government Subsidies in India: A Report”, Ministry of
Finance, Department of Economic Affairs, December 2004.
9. The Hindu, 15 August 2008
10. “The myth of the ‘powerful’ farmer” Business Line, 12 November 2001
11. Ibid.
12. Organisation for Economic Cooperation and Development, a group of
the 30 richest nations in the world.
13. Parthapratim Pal “Implementation issues of the Agreement on
Agriculture and its implications for Developing Countries”,
9 September 2002, www.networkideas.org
14. M. Raghavan ‘Changing Pattern of Input Use and Cost of Cultivation’,
Economic and Political Weekly 28 June 2008
15. Ibid.
16. Kavitha Kuruganti, Targeting Regulations in Indian Agriculture,
Economic and Political Weekly, 29 November 2008
17. Skilled labourers are defined as those who acquire certain years of
training and for whose ‘skill’ there is a demand in the market
18. The wheat procurement is done in the marketing year following the
crop year, which means that procurement for the year 2000-01 would
have been carried out in 2001-02. And similarly, for 2004-05.
19. Aspects of India’s Economy No. 42 , R.U.P.E.
20. Ibid.
21. Ibid.
22. Business Standard, 23 June 2006
23. Aspects of India’s Economy No. 42. op. cit.
24. Kamal Nayan Kabra ‘Commodity Futures in India’ Economic and
Political Weekly 31 March 2007
25. Ibid.
26. Kavitha Kuruganti 2008 op. cit.
27. Kavitha Kuruganti, The Indo-US Knowledge Initiative on Agriculture
– an overview”, Centre for Sustainable Agriculture, www.csa-india.org
Appendix
Table 1 Table 2
Public Investment in Expenditures by all state
agriculture as government on major & medium
percentage of GDP irrigation and flood control
(at 1993-94 prices) (as a percentage of total budget
expenditures)
Period Percentage
Year Percentage
1980-84 4.08
1985-89 2.90 1990-91 7.80
1990-94 2.07 1991-92 7.40
1995-99 1.75
1992-93 7.60
2000-02 1.54
1993-94 7.70
Source: Ramesh Chand,
‘Domestic Policy Measures 1994-95 7.60
and Challenges in Indian
Agriculture’ in Reforming Indian 1995-96 7.73
Agriculture edited by Sankar
Kumar Bhaumik, Sage 1996-97 7.33
Publications 2008
1997-98 7.42
1998-99 6.90
1999-00 6.45
2000-01 5.89
2001-02 5.51
Source: Handbook of Statistics on state
government finances, RBI 2006 as
quoted in Praveen Jha 2007.
Table 3
Expenditure on Agriculture in various Five Year Plans
Plans % of agriculture Share of agriculture,
and allied irrigation and flood
sectors to total control as % of actual
plan outlay plan expenditure
First Plan (1951-56)* 14.9 37.0
Second Plan (1956-61)* 11.3 20.9
Third Plan (1961-66) 12.7 20.5
Annual Plans (1966-69)** 16.7 23.8
Fourth Plan (1969-74)** 14.7 23.3
Fifth Plan (1974-79) 12.3 22.1
Annual Plan (1979-80) 16.4 26.9
Sixth Plan (1980-85) 5.8 23.9
Seventh Plan (1985-90) 5.9 22.0
Annual Plan (1990-91) 5.8 —
Annual Plan (1991-92) 6.0 —
Eighth Plan (1992-97) 5.2 20.7
Ninth Plan (1997-2002) 4.9 19.8
Tenth Plan (2002-07) 5.2 16.5
* Includes Animal Husbandry, Special Area Program, Rural Development and

Forestry and Wildlife; ** Includes buffer stocks
Sources: for second column from the Tenth Five Year Plan Document,
Government of India; for third column from Praveen Jha, ‘Some Aspects of
well-being of India’s agricultural labour in context of contemporary agrarian
crisis’, 22nd February 2007, www.macroscan.org
Chapter IV Tightening the Noose 73
Tightening the Noose

Credit Policy and Reforms 1
What do farmers need… Do we need to create new

institutional structures such as SHGs, micro finance
institutions etc., to provide improved and reliable
access to credit? Or do we need to bring in
moneylenders under some form of regulation? It is
necessary that we find answers to these questions in
the near future.
– Manmohan Singh
Prime Minister of India
Address at the 2nd Agricultural Summit, 18.10.2006
Over the years credit, which in usual parlance had been seen
as an important requirement of industrial and business enterprise,
has become equally if not more critical in agriculture as well. With
increasing dependence on inputs which have to be purchased from
the market, credit requirements of the farmers have increased
simultaneously. The requirement of credit is met from two kinds of
sources – formal or institutional, and informal. Institutional sources
in our country have primarily been the Scheduled Commercial
Banks (including the Regional Rural Banks) and the cooperative
societies/banks. Informal sources on the other hand, comprise of
traditional moneylenders; and the new kind of moneylenders like
the input dealers or commission agents as in Punjab. In recent years,
microfinance institutions and self help groups have emerged as
other sources of credit, propagated by many as the “magic pill” to
alleviate rural poverty.
At an all-India level, source-wise distribution suggests that more
than half of the credit requirement (58 per cent) is met from the
formal sources [Government – 2.5 per cent, cooperatives – 19.6 per
cent and banks – 35.6 per cent]. More than one-fourth of the
outstanding debt is from the moneylenders and the rest from other
informal sources. Small and marginal farmers, who comprise 84
per cent of all farmer households, get three-fourths of their credit
requirements from moneylenders and informal sources.2 This of
course implies that the large farmers, landlords and the agri-
business corporations corner a major share of the formal credit

available to agriculture. With reforms in the credit policy, the
underlying basis of allocation of credit moved away from the needs
of the priority sectors to profitability (‘priority sector’ has been
explained subsequently). Hence the share of agriculture in total
bank credit declined from 19 per cent during 1990 to only 11 per
cent by March 2005.
Let us look at the history of credit to agriculture in our country
after independence.
COOPERATIVE CREDIT INSTITUTIONS (CCIs)
With the passage of the Cooperative Credit Societies Act, 1904,
cooperative finance gained recognition in India as the first ever
substitute initiated to counter the exploitation of usurious
moneylenders. Rural credit cooperatives in India were envisaged
as a mechanism for providing financial services to farmers,
especially small and marginal farmers. Increasing food security and
generating employment in the rural areas were some of the other
associated objectives of the cooperatives. After independence,
cooperatives were guided and supported heavily by the Reserve
Bank of India (RBI) which constituted specialised funds to ensure
long term loans to state governments.
Primary Agricultural Credit Societies (PACS) form the most
basic units of the cooperative structure. They often serve as outlets
for inputs and for the public distribution system for food and other
essential items. There were more than one lakh PACS in the country
in 2005, with thirteen crore members (including six crore
borrowers). However, cooperative societies are functional only in
some states like Maharashtra, and they are beset with problems
like poor loan recovery and shortage of funds. Despite
recommendations of many committees, no convincing steps have
been taken to get rid of the primary problems of the cooperative
sector, reflecting the callous attitude of the government. Most
importantly, the benefits of cooperatives are usually cornered by a
minority (that is, the rural elite) given the continuing inequalities
in rural society.
THE NEED FOR NATIONALISATION
In 1951, the All India Rural Credit Survey found that the share
of banks in rural credit was less than one per cent. Throughout the
1950s and 1960s, the role of private commercial banks in rural credit
Tightening the Noose 75
remained minimal and indirect. Rural branches of commercial

banks were few and far between despite a 1954 RBI directive for
them to open at least one branch in unbanked rural and semi-rural
areas for every branch opened in previously banked areas. The
Imperial Bank of India was nationalised in 1955 and the new State
Bank of India (SBI) was asked to open 400 branches in semi-urban
areas and start agricultural lending, even if at a loss. Even so, right
up to 1971, the share of banks in rural credit was no more than 2.4
per cent and most of these loans were given to plantations. Their
main activity was to finance agro-processing firms and purchase
bonds floated by land development banks. Until the end of the 1960s,
98 per cent of commercial bank credit went to industry, trade and
commerce.
Thus there was an urgent need to create public sector credit
institutions, which would reach out to the rural areas, and more
specifically, to the agricultural sector. Perhaps, the government
had also realised that access to bank credit was an important
prerequisite for its model of Green Revolution to be successful.
NATIONALISATION OF BANKS & OTHER POLICY MEASURES
The 1961 Census showed that only about 50 per cent of India’s
towns and almost none of its villages had bank branches.
Recognising the dissonance between the objectives of private banks
and the priorities of a developing country, the government
nationalised fourteen commercial banks in July 1969. In 1970, the
RBI formulated its first “socially coercive” licensing criterion – for
every new branch in an already banked area (with one or more
branches), each bank would have to open at least three branches in
unbanked rural or semi-urban areas. Seven more banks were
nationalised in 1980.
The RBI also identified certain sectors – agriculture and allied
activities and small-scale and cottage industries – as ‘priority
sectors’ in 1972 and introduced the concept of Priority Sector
Lending. In 1979, it directed all banks to lend 40 per cent of their
loans to these sectors. Differential rates of interest were introduced
in early 1972. For example, for the most deprived sections in the
rural areas, an interest rate of 4 per cent per annum was fixed.
Banks had to provide 1 per cent of their total loans within the
priority sector at this rate.
Along with this, it was felt that commercial banks including
both private and public sector banks as well as cooperatives were
not institutionally equipped to provide credit to certain sections of

the society. Thus the Regional Rural Banks (RRBs) Ordinance was
passed in 1975 and the first five RRBs were established. They were
to be funded in a pre-determined ratio by the Sponsor Banks, the
central government, and the state governments. Their target groups
were the weaker sections of the rural society comprising of small
and marginal farmers, agricultural labourers, and artisans besides
others. As many as 196 RRBs had been set up in the country by
December 1987 and most of them were sponsored by public sector
banks like the State Bank of India and Punjab National Bank. In
1978, the RBI directed commercial banks and RRBs to charge a
flat rate of 9 per cent on all priority sector loans, irrespective of
size. Down payments were not required to be mandatory for small
rural borrowers.
Another major impetus to rural credit was provided by the
establishment of the National Bank for Agriculture and Rural
Development (NABARD) in 1982. NABARD was set up as an apex
development bank with a mandate for facilitating credit flow for
agriculture, rural industries and all other allied economic activities
in rural areas. NABARD finances commercial banks, state
cooperative banks, state cooperative agriculture and rural
development banks, RRBs and other eligible financial institutions.
All the aforementioned measures had a definite positive impact
on the reach of credit to the rural areas. Even though the rural rich
still cornered a large share of formal credit, the entire agricultural
sector definitely benefited from bank nationalisation and the “social
coercion” mechanism of RBI. There is much evidence to show this.
The number of rural branches of banks (including RRBs)
increased from a mere 1443 in 1969 to around 35,000 in the early
1990s. Most of this increase was in unbanked areas. The number of
banked locations in this period rose from around 1,000 to over
25,000. The share of rural branches went up from 18 to 58 per cent
during the same period. Between 1961 and 2000, the average
population served by one bank branch fell from around 1,40,000 to
just under 15,000, thus indicating an increase in the number of
bank branches serving the population.
The share of priority sector loans in total credit of scheduled
commercial banks went up from 14 per cent in 1969 to around 40
per cent by the end of the 1980s. The share of agriculture had
reached 19 per cent by 1985 and remained around that figure until
1990. The number of agricultural loan accounts increased from

around 1 million in the early 1970s to nearly 30 million by the early
1990s. Within agricultural credit, 42 per cent of the credit went to
small and marginal farmers. The share of professional
moneylenders, landlords and agriculturist moneylenders in rural
credit fell from an average of over 75 per cent in 1951-1961 to less
Loan Waiver ?
The annual budget 2008-2009 announced by Finance Minister, P. Chidambaram,
is most famous for the Rs. 60,000 crore loan waiver. According to the original proposal
for the loan waiver scheme, it was the small and marginal farmers (those owning
less than 5 acres of land) who were eligible. However there were many protests
regarding the limited number of farmers that would benefit from this scheme. A few
changes were made and the Agricultural Debt Waiver and Debt Relief Scheme
2008, was approved by the Union Cabinet. It covers all direct agricultural loans by
banks to farmers disbursed between 31 March 1997 and 31 March 2007, which
were overdue as on 31 December 2007 and remained unpaid until 29 February
2008. The scheme was meant to be taken up by the banks by 30 June 2008.
The banks include Scheduled Commercial Banks, Regional Rural Banks, Co-
operative Credit Institutions and local area banks, while the loans cover crop loans
and investment credit for both agricultural and allied activities (dairy, poultry farming,
bee-keeping etc).
The scheme was expected to cost the exchequer a total of Rs. 71,680 crores
against Rs. 60,000 crores projected initially in the Budget. The beneficiary farmers
have, in turn, been clubbed under two broad categories of ‘marginal and small’ and
‘other’ farmers. The former have been identified as cultivating up to 2.5 acres
(marginal) or 5 acres (small) of land, whether as owners or tenants or sharecroppers
(and not solely as owners, going by the original Budget proposal).
The marginal and small farmers would be granted a complete waiver of the
eligible loan amounts due (together with the applicable interest). The other farmers,
however (cultivating as owner or tenant or share cropper above 5 acres) will be
entitled to a 25 per cent waiver. While the changes made to the originally proposed
scheme are an improvement, there are glaring problems in the formulation of the
scheme itself, not to mention the inadequacies in its implementation.
While the scheme does cover farmers with land over 5 acres, waiving off only
25 per cent of the loan is insufficient. In many regions with dry and un-irrigated lands,
productivity is low and hence the size of land holdings tends to be larger. In such
cases it is often farmers who hold up to 10 acres of land that
are in deep distress. Debt relief amounting to a mere 25 per cent is of no real
significance then. This is surprising since it was mainly the crisis in Vidarbha
that led to an outcry which resulted in the loan waiver. For instance, a farmer
owning 10 acres of land in Vidarbha will not qualify for the complete waiving of
his loans, which may be only Rs. 50,000, whereas a grape-growing farmer with
5 acres of irrigated land in Nasik can get his loan of even Rs. 2.5 lakhs waived
completely. In Vidarbha, a majority of the farmers who are facing the crisis, own
more than 5 acres of land.
The benefits of the loan waiver are highly skewed. More than 50 per cent
of the loans to be waived in Maharashtra will be of farmers of the prosperous
Marathwada region, a constituency of Sharad Pawar, the Union Minister for
Agriculture. The scheme also does not cover landless agricultural labourers
who are in distress as well. Since the scheme has no way of waiving the loans
taken from non-institutional sources, the loans taken from moneylenders will
not be affected by it. Farmers will have to repay the loans of moneylenders at
high rates of interest. As argued earlier in the chapter, the dependence on
moneylenders and input dealers is often higher than loans taken from banks
and cooperative societies.
than 25 per cent in 1991. The share of formal sector lending more
than doubled between 1971 and 1991.
CREDIT POLICY REFORMS – REVERSAL OF GAINS

The Committee on the Financial System (CFS) chaired by M.
Narsimhan was set up by the RBI in 1991. The report of the
Narsimhan Committee argued against the mandatory requirements
for lending and recommended the freeing up of private and public
sector banks from regulations (such as Priority Sector Lending) in
order to ensure their profitability. According to the committee, the
credit system could not be used for redistributive objectives and it
argued that “directed credit programmes” should be phased out.
The Narsimhan Committee recommendations were in line with the
broader processes of liberalisation going on in the economy.
The basis of credit policy underwent a fundamental change –
credit ought to go to those economic activities, sectors of the economy
and sections of the consumers, where it has the lowest risk of default
and highest profit earnings. This meant consciously starving the
agricultural sector, the lifeline of our economy and society. Credit
to agriculture would fetch lower returns than credit to sectors like
information technology, but this cannot be used as an argument to
deny credit to the agricultural sector because it is crucial for the
sustenance of the majority of our people. Profitability cannot be
the sole basis for allocating credit in an economy. Social priorities
must take precedence over the insatiable drive for profits.
The effect of credit policy reforms on rural credit and the credit
flow to agriculture were disastrous, to say the least. The impact of
reforms has been negative on the farm sector on various fronts.
There has been a major decline in terms of accessibility of small
and marginal farmers to credit. The banking sector has ignored
the increasing credit needs of farmers as a result of increased
commercialisation of agriculture and dependence on purchased
inputs. NABARD has been witnessing a decrease in funds supplied
to it by the government and the RBI. The shift of emphasis away
from rural credit institutions and the lack of sincere corrective
arrangements for problems affecting the financial health of
cooperatives and RRBs, has led to a failure in meeting the credit
demands of rural India. It is unambiguously clear that the state
consciously and deliberately made agriculture unviable through its
credit reform policies and precipitated the present agrarian crisis.
THE ATTACK ON RURAL CREDIT INSTITUTIONS
The recommendations of the Basel Committee of 1988 (known
as the Basel norms) were extended to all sectors (including
agriculture) by a RBI circular to commercial banks in 1992-93
without any consultation with NABARD. The strict implementation
of these instructions (which measure the risk value of assets and
loans given by banks) would have meant that agriculture would
not receive any credit from commercial banks at all. The RBI soon
realised its faux pas and partially mitigated the damages in a
clarificatory circular.3 But the policy of not lending to agriculture
(as it was perceived to be a high risk sector and banks had to reduce
lending to such sectors under the Basel norms) was continued by
commercial banks in practice. The RBI supported this practice by
hinting to the commercial banks that they could price agricultural
and other priority sector loans at higher levels. A 2004 circular of
the RBI said, “If a bank believes that loans to a certain sector are
unattractive from a portfolio perspective, it can raise the prices of

these loans to a level that will act as a disincentive to borrowers.”4
NABARD gradually stopped receiving funds from the
government and RBI during the period of economic reforms, and
now has to depend on borrowings from the market. Market
borrowings, which formed just 11.71 per cent of its loan portfolio at
its inception, have now risen to 63.66 per cent which is not
sustainable.5 The contribution of RBI to General Line of Credit
(GLC) limit of NABARD, which provides refinance to RRBs and
cooperatives was gradually curtailed from Rs. 66,000 crores in 2000-
01 and was stopped completely from 31 January 2007.
The number of RRBs stagnated at 196 from 1987 to 2002 and
thereafter declined to 133 in 2006. The government has now taken
a decision, without the ratification of the Parliament, to amalgamate
the 196 RRBs. The process of amalgamation commenced in
September 2005 and was expected to be completed by March 2008.
As a result of the amalgamation, 145 out of 196 RRBs were
amalgamated to form 45 new RRBs by 31 March 2007. 6
The recommendations of different committees (such as the
Capoor Committee, the Vikhe-Patil Committee and the
Vaidynathan Committee) to strengthen the functioning of the
cooperative system were never implemented and the promised flow
of funds to the Cooperative Credit Institutions was never ensured.
The outcome of this systematic atrophy was that the cooperatives
which had a share of 49.1 per cent of total credit to agriculture in
1990-91, witnessed a decline to 30.9 per cent in 2004-05. 7
The National Rural Credit (Long Term Operations) Fund was
established in 1982 in NABARD and RBI was a major contributor
to this fund. From1992-93, RBI stopped its contribution to the Long
term Operations Fund and the only source for the Fund has been
the surpluses of NABARD itself. This severely constrained the
growth of re-finance resources available for long-term lending to
agriculture. However, RBI realised that by stopping its contribution
altogether, it was violating certain sections of the NABARD Act
and therefore it has been contributing a token amount of Rs.1 crore
every year.
TRENDS IN BANKING
Serious attempts have been made in recent years by the RBI to
dilute the norms of priority sector lending, in order to avoid lending
to the agricultural sector. While the targets for Priority Sector

Lending have remained unchanged, the definition of what
constitutes the priority sector has been widened. It now includes
financing of distribution of inputs for agriculture and allied sectors
such as dairy, poultry and piggery and short-term advances to
traditional plantations including tea, coffee, rubber, and spices,
irrespective of the size of the holdings. These are totally new areas
under the umbrella of priority sector for the purpose of bank lending.
Public sector banks have been asked by the RBI to meet their
priority sector lending targets by contributing to the Rural
Infrastructural Development Fund (RIDF, formed in 1995-96 within
NABARD) and by contributing to the consortium fund of Khadi
and Village Industries Commission (KVIC). 8 These policy guidelines
ensured that banks which were defaulting in meeting the priority
sector sub-target of lending 18 per cent of net credit to agriculture,
could meet their shortfall by contributing to the RIDF and KVIC.
Another method to avoid channeling of credit to priority sectors
has been to ask banks to make investments in special bonds issued
by certain specialised institutions and treat such investments as
priority sector advances. In 1996, for example, the RBI asked the
banks to invest in State Financial Corporations (SFCs), State
Industrial Development Corporations (SIDCs), NABARD and the
National Housing Bank (NHB).9 These changes were obviously
meant to enable the banks to move away from the responsibility of
lending to the genuine priority sectors of the economy.
The deregulation of interest rates in the period of economic
reforms has meant that the cost of institutional credit has gone up
for farmers in the country. The interest rates on farm loans are
linked to the size of the loan, according to RBI policy. The interest
rates on loans up to Rs. 2 lakhs should not exceed the Prime Lending
Rate10 (PLR) of the commercial banks, but they are free to determine
their lending rates on loans above Rs. 2 lakhs. Till 2002-03, the
PLR of commercial banks ranged between 9 and 12.25 per cent.11
However, by the Union Finance Minister’s own admission, “the
interest rates on farm loans worked out to be as high as 16-18 per
cent”. 12 This is higher than the interest rates charged by the
commercial banks to consumers for home loans or automobile loans.
It was only in July 2003 that the government belatedly took
cognizance of the agrarian distress of small farmers and reduced
the interest rates on crop loans to 9 per cent for loans up to Rs.
50,000. However, such token gestures do little to repair the
irreversible damage done to the rural institutional credit system

over the period of reforms.
Along with an increase in costs of credit, there has been a
decrease in the access to institutional credit as well. There has been
a steady decline in the rural branches of commercial banks from
58.2 per cent in 1990 to 44.5 per cent in 2006. There has been a
decline in the percentage of outstanding credit and deposits in rural
areas in the period of economic reforms. All growth in rural banking
that had been achieved since 1969 has now been undone. Perhaps,
the most shocking indicator of this is the fact that from 1991 to
2006, the number of rural bank branches has fallen by almost 22
bank branches every month! (See Table 1 in the appendix) The
number of farm loan accounts with Scheduled Commercial Banks
has declined in absolute terms from 27.74 million in March 1992 to
20.84 million in March 2003. 13
The sponsor banks of RRBs were allowed to relocate RRB
branches that were unprofitable to profitable areas instead of
directly addressing the underlying causes for their long term losses.
Thus one can find growing number of “urban branches” of regional
rural banks. There has been relocation of 458 bank branches and
almost 6 per cent of outstanding credit from rural to semi-urban
and urban areas between 1996 and 2003 (see Table 2 in the
appendix). This implies a direct impact on the ability of farmers to
obtain credit since RRBs for many years had been an important
source in this respect.
TRENDS IN CREDIT FLOW TO AGRICULTURE

The proportion of credit to agriculture in the net bank credit
declined in the period after economic reforms, while the proportion
of credit to the non-agricultural sectors continuously increased
during the same period. The deliberate failure of successive
governments to implement the Priority Sector Lending obligation
of banks has meant that the target of 40 per cent has not been met
since 1990. Rather, share of priority sector advances in total credit
of commercial banks has been decreasing since 1987 (from 42.9 per
cent) and reached 36.7 per cent in 2005 (See Table 3 in the appendix).
The share of agriculture as a proportion of total bank credit (18
per cent is the set target under PSL) has fallen since the start of
the last decade. In 1991, this figure was 15 per cent and it declined
to 10.8 per cent in early 2005. A glance at the performance of private
banks displays their lax attitude towards priority sector lending

norms. Direct agricultural advances were only 6.3 per cent of net
private sector bank credit (against the 13.5 per cent target).
Similarly, their priority sector lending achievements have been
worse than public sector banks and most of their PSL has been to
export services, transport, small scale industry etc.
Cooperatives had traditionally played the role of the primary
institutional lenders and their outreach had been unparalleled for
many decades. However, the period of economic reforms has
witnessed a decline of their share in flow of credit to agriculture.
From 1992 onwards, RRBs expanded their business beyond the
conventional target groups of farmers and agriculture. They
diversified to non-priority sectors such as consumer loans and home
loans. Even within the priority sectors, there was a shift towards
areas with lower default rates. The Priority Sector Lending of RRBs
dipped from about 70 per cent in 1990 to 57 per cent in 2001. In
2002-03, the Parliamentary Estimates Committee expressed its
concern over this declining figure and advised the RBI to keep a
check so that it did not fall further.
The average annual growth rate of outstanding credit to
agriculture declined from 7.82 per cent in 1981-1991 to just 1.40
per cent during 1992-2000. The ratio of agricultural credit (long-
term and short-term agricultural credit from all financial
institutions) to agricultural GDP increased from 0.16 in 1983 to
0.22 in 1990, and then actually declined to 0.14 in 2000. 14
The Currency and Finance Report published by the RBI shows
that agriculture and small and medium enterprises (SMEs) are not
getting their due share of bank credit. As on 31 March 2007,
agriculture received only 12 per cent of total bank credit. In
comparison, industry received 38 per cent of the total credit while
22 per cent went in financing consumer durables and urban home
loans. Although both agriculture and industry have received lesser
credit over the years, the former has shown a steeper decline
compared to the latter (see the figure provided).
While much is made of the bad debts (loans which cannot be
recovered) and low recovery rates of the loans given to farmers, no
one talks of the huge loans given to large individual borrowers (and
companies) and their frequent defaults. This is yet another aspect
of the discrimination faced by our farmers. In the case of farmers,
banks often attach (confiscate) the entire property of the borrower
and may even have him arrested; the treatment meted out to the
corporate defaulters, on the other hand, is entirely different. In
their case, the banks not only lengthen the schedule of repayments
but also make provision for the bad debts out of banks’ profits earned
elsewhere. In 2001-02, Rs. 40,000 crores of the total bad debts of
commercial banks was on account of large individual borrowers.
For the public sector banks as well, Rs. 22,866 crores of the defaults
was accounted for by almost 1800 accounts of very large borrowers
(deposits of over Rs.5 crores each). 15 Hence the argument of lending
to sectors and individuals with lower risks is not adhered to when
extending loans to large borrowers and for speculative activity.
WHO GETS AGRICULTURAL LOANS?
There has been a decline in the share of borrowing by credit
size less than Rs. 25,000 (i.e. the class of borrowers whose total
bank loan is Rs. 25,000 or less), from almost 50 per cent in 1985 to
merely 13.3 per cent in 2006, whereas the large borrowings have
seen a greater share over the years (see Table 4 in the appendix).
The borrowings of smaller credit size are usually by small and
marginal farmers. The constant decline in their share indicates a
bias towards larger farmers and agri-business corporations who
have been the major beneficiaries of whatever credit has been
extended to agriculture. Over the years, an increasingly large share
of agricultural credit is going to farm sizes of more than five acres.
Also, the average amount of loans outstanding per account has
grown much more rapidly in the case of farm sizes of more than
five acres and above as compared with the credit accounts of small
and marginal landholdings. Needless to say, those without land or
other assets as collateral, remain excluded from institutional credit.
Apart from the bias in favour of cultivators with larger land
holdings, in recent times, there has been a remarkable increase in
agricultural credit which has gone to the corporate sector engaged
in agricultural activity. This has been accomplished by changing
the very definitions of finance to agriculture.
Since 2000, agricultural credit has grown by 20.5 per cent per
annum but it would be a mistake to view this as a favourable
development in agriculture. The recipients of agricultural credit
have undergone a definite change. About one-third of the increase
in total credit supply to agriculture between 2000 and 2006 was in
indirect finance. The share of indirect finance in total agriculture
finance increased from 15.5 per cent in 1990 to 25.9 per cent in
2002 and 27.9 per cent in 2006. 16
One of the main reasons for this phenomenal growth is that
the definition of indirect finance has been broadened. Indirect
finance traditionally included finance to the institutions that
support agricultural production in rural areas e.g. loans to
agriculture input dealers, loans to electricity boards. The new
additions include finance for distribution of inputs for allied
activities in agriculture such as loans upto Rs. 40 lakhs for cattle
feed and poultry feed, loans upto Rs. 30 lakhs to rural dealers in
drip irrigation, sprinkler irrigation systems and agriculture
machinery, loans for agriculture clinics and agri-business centres,
loans to NBFCs (Non-Bank Financial Corporations), loans for
construction and running of storage facilities, loans to food
processing and agro-based processing units and loans to power
distribution companies.
There has been a sharp increase in the number of loans with a
credit limit of Rs.10 crores and more. Furthermore the share of
advances with a credit limit of Rs.25000 in total advances fell from
35.2 per cent in 2000 to 13.3 per cent in 2006. Hence it can be safely
concluded that most of the recent increase in credit flow to
agriculture, after the decline of the 1990s, is because of increase in
indirect finance.
Rise in large credit limits is consistent with the changes in
official policy of favouring growth of capital intensive and export
oriented production pattern in agriculture. The changes in the
definition of indirect finance are also a reflection of this trend. There
have also been changes made in the definition of direct finance.
Presently direct finance also includes loans to plantations such as
tea, coffee, rubber, spices and horticulture as well as loans given to
corporates for activities such as bee keeping, piggery, poultry fishery
and dairy. Between 2000 and 2006 there has been a major increase
in the share of direct advances with a credit limit of more than Rs.
1 crore. The share of direct advances with credit limits between
Rs.10 crores and Rs. 25 crores as well as above Rs. 25 crores doubled
between 2000 and 2006. Most of the increase in the credit has gone
towards financing large agri-business enterprises and large
cultivators as is evident from the fact that the share of the number
of loans outstanding to big cultivators under direct finance increased
phenomenally since late 1990s.
Microfinance – the new pill?

Ever since Mohammed Yunus and Grameen Bank won the Nobel Peace
Prize in 2006, microfinance has become the new messiah for the rural poor,
especially poor women. Microfinance is defined by RBI and NABARD as the
“provision of thrift, credit and other financial services and products of very small
amounts to the poor enabling them to raise their income levels and improve
living standards”. There are two broad approaches in the microfinance sector
in India – the Self Help Group-Bank Linkage Program (SBLP) and the
microfinance institutions (MFIs).
Under the SBLP, a non-governmental organisation (NGO) helps women to
form groups to save money (from their insufficient incomes), which is placed in
a local bank account. The SHG itself functions like a small bank, with compulsory
savings by its members, fixed lending procedures (for its own members) and
penalties for default. After functioning for six months to a year, the SHG becomes
entitled to loans from the local bank. The SBLP model was started by NABARD
in 1992 and lending by banks to Self Help Groups was given the status of
“Priority Sector Lending” by the RBI in 1996.
The other approach is that of microfinance institutions (MFIs), which is
presently small (compared to the SBLP model), but is growing at a rapid pace,
owing to its propagation by international financial institutions. Microfinance
institutions provide short-term loans (which regular commercial banks are
unwilling to provide) at very high rates of interest. The interest rates of MFIs are
so high and its loan recovery practices so abusive, coercive and derogatory
that in some cases, borrowers have been forced to commit suicides (as in Andhra
Pradesh in 2007). The World Bank has actively funded and supported MFIs in
states like Andhra Pradesh. Andhra Pradesh had half the number of SHGs in
the country under the SBL program and headquarters of India’s four largest
MFIs in 2006.
Self help groups and microfinance institutions have grown rapidly in the
recent years, with state support. The proportion of rural bank credit disbursed
through SHGs was less than 1 per cent in 2001, but increased to 6 per cent in
the next four years. Microcredit is increasingly displacing direct credit to
agricultural activities, and is being posed as a solution to the present agrarian
crisis.
The concept of microfinance rests on several implicit and explicit
assumptions. The first and the foremost is that poverty is not the result of existing
socio-political and economic structures and state policies. Rather, it is an
inevitable feature of the growth process which can be corrected by simplistic measures
such as providing credit. This is an absolutely fallacious assumption,
especially in the context of the agrarian crisis. Cultivators require credit to
purchase inputs and most of the micro credit loans are given for self-employment
purposes. Thus micro credit does little to meet the credit requirements of the
farmers. In any case, as we shall see in the course of this book, the agrarian
crisis has deep roots in the present and past policies of the Indian state and
cannot be solved by “band-aid” solutions like microfinance.
Secondly, the reliance on self-employment as a way out of poverty ignores
the nature and causes of unemployment in our country. Self-employment can
never be an answer for a developing economy like India with a vast labour
force, especially when labour-displacing and growth-oriented policies of the
State and private capital continue to generate more unemployment. There is
no infrastructure or marketing support measures accompanying these self-
employment schemes which considerably reduce their chances of success.
Thirdly, the “cheap credit” being promised by microfinance schemes is not
really cheap. At 24 per cent per annum, the interest rates are lesser compared
only to the usurious moneylenders of the countryside. What is conveniently
forgotten is that it was the banking sector and credit policy reforms of the 1990s
which withdrew ‘Priority Sector Lending’ from the rural areas, and allowed the
moneylenders to return in the first place. The interest rates charged in Self
Help Groups are higher than the Priority Sector Lending Rates of the banks,
RRBs and Cooperative Societies, and even higher than the interest rates
charged for loans for personal consumption (of cars and homes) in the urban
areas.
The much hyped high loan recovery rates of the SHGs often have a dark
underbelly. They are based on informal coercive mechanisms and peer group
pressure. There have been many cases where women have been forced to
take loans from other sources in order to repay loans taken from SHGs and
save their izzat in the village.
It is alarming that commercial and cooperative banks have started
categorising loans to SHGs as part of their credit to the agricultural sector. In
Vidarbha, the Perspectives team found that one third of the total credit of SBI
Pandharkawada branch, Yavatmal district, to agriculture in 2007-08 was in the
form of loans to SHGs. It is doubtful what proportion of these loans would actually
go to agriculture and what proportion would be diverted for generating self-
employment.
vocal recommendations for this came from Bill Gates? What is the reason that global
financial institutions like Citigroup, ING and VISA were the official sponsors of the
International Year of Microcredit in 2005? Is it mere philanthropy and honest intentions
of removing poverty that are driving commercial banks and institutions like the World
Bank to advocate micro credit? Or is micro credit a way for these global financial
interests to tap the large number of small savings of the poorest and the most vulnerable
in the most backward regions of the world?
FARMERS IN DEBT
The Indian farmer is born in debt, lives in debt and

dies in debt.
– Malcolm Darling (1925)
Prominent administrator-scholar in colonial Punjab
The quote often used to describe the condition of the Indian

peasant has for long been a classic in Indian economic history.
Accumulated data from various sources only strengthens this
assertion. According to the Situation Assessment Survey of Farmers
(SASF) carried out by the National Sample Survey Organisation
during 2003, 48.6 per cent of all farmer households were in debt.
The outstanding debt per indebted farmer household stood at Rs.
25,902. The rate of indebtedness was highest in certain states which
follow an input intensive agriculture, such as Andhra Pradesh (82
per cent), Tamil Nadu (74.5 per cent), Punjab (65.4 per cent), Kerala
(64.4 per cent) and Karnataka (61.6 per cent). These are some of
the states that have witnessed a wave of debt related farmer
suicides.
NSS data further shows that altogether 65 per cent of the
amount of loan taken is directly used for production purposes, as
opposed to the general assumption that farmers are committing
suicide due to excessive expenditure on consumption and social-
religious ceremonies. Consumption expenditure would also include
education and medical expenses. However, more than 50 per cent
of the indebted farmers’ households had taken loans for the purpose
of capital or current expenditure in farm business. Such loans
accounted for 584 rupees out of every 1000 rupees of the outstanding
loan.
Altogether 57.7 per cent of credit taken by farmers was provided

by the formal/ institutional sources i.e. commercial banks,
cooperatives and the government. The remaining 42.3 per cent of
the credit market was run by informal players who are by and large
moneylenders. It has been shown in the earlier sections that
economic reforms resulted in a decline in the share of formal credit
in total agricultural credit. However after 2000, there was an
increase in the amount (not share ) of formal credit given to
agriculture. But why is the dependence on informal credit still so
high? It can only lead to one conclusion – a vast section of the
peasantry is unable to avail of the benefits coming from the disbursal
of institutional loans. The SASF states that out of the indebted
farmers’ households, 31.3 per cent were from the category of landless
and below marginal farmers, 29.8 per cent were marginal farmers
and another 18.8 per cent were from the small farmers’ category.
In total, a staggering 80 per cent of the indebted households were
from the poorest lot in terms of land in possession. Households with
2.5 acres (1 hectare) or less land holdings accounted for 66 per cent
of all farmer households and of them, 45 per cent were indebted.
The prevalent rate of indebtedness amongst landless labourers’
households in rural areas was as high as 45 per cent. This section
has virtually no access to formal bank credit since they have no
land records to show as collateral to banks, thus forcing them to
approach moneylenders for their credit needs. The same problem
is faced by the tenants as well. Without a clear land record it becomes
difficult to avail of institutional loans. This means that the
institutional loans have largely gone to the large farmers and agri-
business corporations.
Such evidence makes it obvious that it is largely the landless
labourer, marginal and small farmer that is bearing the brunt of
indebtedness.
A look at the caste composition of farmers in each land-size
category proves again that it is the socially depressed sections that
are likely to suffer to a greater extent from the burden of
indebtedness. STs, SCs, OBCs and other castes account for
approximately 11 per cent, 22 per cent, 42 per cent and 26 per cent
of the total rural households respectively.17 However the shares of
each social group in terms of land owned is not proportionate to
their percentage share in total rural households. For instance the
Scheduled Castes comprised almost 25 per cent of the landless and
only 8.97 per cent of rural SC households owned land. In contrast
about 45 per cent of the Other Castes belong to the category of

large farmers or those owning more than 10 acres (4 hectares) of
land. This caste analysis goes to prove that traditionally
disadvantaged social groups are liable to experience the burden of
indebtedness with greater intensity, for it is the amount of land
owned by a rural household, amongst other factors, that determines
access to formal sources of credit.
Data from the SASF clarifies that credit extended by
cooperatives and commercial banks is positively directed towards
increasing size of holdings whereas credit extended by moneylenders
generally goes towards smaller land holdings. Those with very small
landholdings took almost 50 per cent of their credit requirements
from moneylenders (see table 5 in appendix).
There have been increasing incidents of coercion used by
recovery agents of private banks. The tactics used by banks to
recover loans from defaulters are pushing some to commit suicide.
The use of threats and force has been reported from both urban
and rural areas. People’s Union for Civil Liberties brought out a
report on two separate cases of farmer suicides in Karnataka during
December 2007. Both farmers had availed of loans from ICICI Bank
for the purchase of tractors.
RETURN OF THE MONEYLENDER

What helps informal credit flourish in the rural economy? A
few of the answers could be its easy accessibility, lesser formalities
such as the requirement of collateral, the moneylender being able
to disburse loans quickly etc. However, the main reason why non-
institutional sources of credit have received a fresh lease of life in
the past one-and-a-half decades is the systematic retreat of
institutional credit. This coming back to eminence of informal credit
should not be studied in a simplistic manner, for it has taken on
new forms and is closely tied with every stage of agricultural
production.
As mentioned before, up to 42.3 per cent of farmers get their
credit from informal sources, who are by and large moneylenders.
The proportion of farmers taking loans from informal sources varies
from state to state. These moneylenders are not only the traditional
sahukars, but comprise of professional moneylenders, rich farmers,
input dealers, commission agents, government revenue officials,
persons of prominence in the region etc. There are other informal
sources as well. In Akola district of Maharashtra, for instance, a

chit-fund-like trend called ‘Bhisi’ was being promoted.
The NSSO survey conducted in 2003 brings out some interesting
facts. The survey found that at an all-India level, on an average, 29
out of 100 indebted households borrowed from professional
agricultural moneylenders. The highest incidence was in Andhra
Pradesh (57 out of 100 indebted households), followed by Tamil
Nadu (52 out of 100 indebted households). The characteristic feature
of lending from these sources is the usurious rates of interest
charged by the lender. These figures can range from 30 per cent to
100 per cent per annum.
The kind of moneylenders that have arisen now are very
different, in fact many call them a class of neo-moneylenders. In
Yavatmal district in Vidarbha, the Perspectives team found that
input dealers, government’s revenue officials and even school
teachers had emerged as moneylenders. Inadequacy of bank loans
also increases the dependence of the farmers on moneylenders and
other sources of informal credit. The case in Punjab while along
similar lines, is a little different where the commission agent is
even more deeply entrenched in the process of agricultural
production. Commission agents form one of the most unique features
of the financial market in the agricultural sector in Punjab. Their
role is distinguished from being mere moneylenders to being central
to the entire process of agricultural production. arhatiyas, as
commission agents are locally known, apart from lending are also
a legal institutional mechanism within agriculture. Their legal
mandate is to act as the procurement agency for the government.
But they also act as input dealers and provide credit to the farmers.
Commission agents therefore provide such vital services, which
makes this institution seem indispensable to agriculture.
The role of the arhatiya begins with the season when the farmer
prepares the land for sowing of the crop. Money is lent to the farmer
which is then utilized for various purposes, from hiring labour, to
leveling and watering of land. Later the capital for seeds, fertilisers,
pesticides etc. is provided by the same person. Loans are provided
and inputs are supplied on credit. Hence the farmers’ borrowings
are partially in cash and to a large extent in kind. In short, the
commission agent supplies inputs and finance for agriculture, and
the farmer borrows money in order to purchase these inputs from
the same person.
The function of the commission agent does not end here. Once
the produce is harvested, the farmer has to sell the produce either
in the mandi (market) to private traders or have it procured by the
government. The arhatiya in the mandi acts as the agent for the
buyer (government or private) and accumulates this produce to be
sold in bulk. The produce also needs to be weighed, cleaned and
packed in gunny bags, which involves extra costs and labour; for
which the arhatiyas earn a commission from the farmer and the
government. In Punjab an extra 4 per cent is earned over and above
the Minimum Support Price of the produce from the government,
for the procurement and processing of the produce. This is despite
the fact that a part of the cost is borne by the farmer, and the
arhatiya only acts as an agent between the farmer and the buyer.
The farmers get paid after the agent has sold the produce in
the market, from which the initial loan amount and the costs of
cleaning and packaging are deducted, leaving at best a marginal
profit for the farmer. Therefore the farmer is compelled to again
take a loan for the next crop. This also ensures that farmer returns
to the same commission agent each year for credit and other inputs,
since there is always some outstanding debt that remains.
Traditional moneylenders, traders and large farmers who had
surplus capital from other enterprises (Rs.60 lakhs and above)
entered this field. People have invested upto 20 crores individually
as the returns are attractive. There are potential investors as well,
who loan their money through commission agents since they charge
high rates of interest.
Who’s championing the cause of moneylending? The Reserve
Bank of India! An Expert Technical Group formed by RBI has
suggested in a report dated July 2007 that rural usury should be
legitimized by suitable legislations. The moneylenders will now
become ‘accredited loan providers’. According to this proposal, banks
will provide funds to the moneylenders rather than the cultivators.
It won’t be surprising if these advances become part of the Priority
Sector Lending targets. The arguments given in the report glorify
an institution which has exploited the Indian peasantry since time
immemorial. Now, suddenly the moneylender is the hero of “market
reforms” who’s ‘friendly to the borrower’, ‘has an informal approach’,
can provide the loans ‘any time, any where, any amount’. The report
forgets to mention the recovery procedures and the usurious rates
charged.
The demand for credit in the rural areas is undoubtedly a

lucrative market. The aforementioned proposal was hailed by
chairman and managing director of Vijaya Bank, who has welcomed
the proposed tie-up with the moneylenders. It is now the commercial
banks and global financial institutions who will squeeze the farmers
out of their last drop of blood, with the help of the ‘friendly’ village
moneylender.
CONCLUSION
Indebtedness of the farmers has to be seen as a symptom of a
much deeper malaise that has permeated the agricultural sector.
The nature of current rural indebtedness is a reflection of the kind
of policies being adopted by the state in general. The drive towards
a more capital intensive and export oriented agriculture shapes
credit policies, which determine who gets credit and at what rate.
Those who do not fit into the scheme of things have to fend for
themselves. It is not that institutional credit is absent, but it has
been made unavailable for agriculture.
The Narsimhan Committee recommendations, the
implementation of Basel norms, banking sector reforms after 1991
and the overall financial policy environment of the last two decades
have starved agriculture of the credit it needs so desperately. This
was done in different ways – reducing the flow of funds to finance
institutions like NABARD and RRBs, non-implementation of
Priority Sector Lending targets by commercial banks, dismantling
of rural credit institutions like cooperative societies and RRBs,
making it more difficult for the smaller farmers to access
institutional credit, and changing the definitions of agricultural
credit to favour export-oriented agriculture and agri-business
corporations. The result of all these changes has been that farmers’
indebtedness has increased steadily and their dependence on
informal credit sources has increased as well. The situation of lower
castes and small, marginal and landless cultivators has worsened
in this period. Credit policy reforms are an important reason why
agriculture is becoming more and more unviable today for the
farmer.
The period of credit policy reforms have taught us an important
lesson – there is a distinct trade-off between profitability being the
sole guiding policy of commercial banks and banks playing a positive
role in the economic development of the country (which necessarily
includes development of agriculture). We reiterate here that if
agriculture and the livelihoods of millions of farmers have to be

rescued from the present crisis, the credit policy for agriculture
needs to be completely reversed. Credit to a sector as crucial as
agriculture cannot be based on high profitability. Social priorities
need to be the guiding principle in this case.
Notes
1. This chapter “borrows heavily from / is indebted to (!)” the article by
Mihir Shah, Rangu Rao, P.S. Vijay Shankar “Rural Credit in the 20th
Century: Overview of History and Perspectives”, Economic and
Political Weekly, 14 April 2007
2. Srijit Mishra ‘Agrarian Crisis in Post-Reform India’ Alternative
Economic Survey, 2006-07
3. P. Satish ‘Agricultural Credit in the post-reform Era’ Economic and
Political Weekly, 30 June 2007
4. Ibid.
5. “NABARD union seeks PM’s intervention to regain lost glory”,
Financial Express, 13 November 2007
6. Vasam Anand Kumar ‘Case for De-Amalgamation of Regional Rural
Banks’ Economic and Political Weekly, 18 October 2008
7. P. Satish 2007 op. cit.
8. C.P. Chandrashekhar and Parthapratim Pal ‘Financial Liberalisation
in India: an assessment of its nature and outcomes’ Economic and
Political Weekly, 18 March 2006
9. Ibid.
10. Prime Lending Rate refers to the rate of interest at which banks lend
to their credit-worthy or favoured customers.
11. Report of the Advisory Committee on Flow of Credit to Agriculture,
Reserve Bank of India, 18 May 2004
12. Indian Express, 17 July 2003
13. Chandrashekhar and Pal 2006 op. cit.
14. Table 4 and Table 5, Gagan Bihari Sahu and D. Rajashekhar “Banking
Sector Reform and Credit Flow to Indian Agriculture” Economic and
Political Weekly, 31 December 2005
15. Independent Commission on Banking and Financial Policy, Interim

Report, April 2005 as quoted in Aspects of India’s Economy No. 45
16. Pallavi Chavan and R. Ramakumar “Revival of agricultural credit in
the 2000s: An Explanation” Economic and Political Weekly 29
December 2007
17. Report on Household Ownership Holdings in India, 2003, 59th round,
NSS Report No 491
18. “Private Corporate Sector-Led Growth and Exclusion” in Aspects of
India’s Economy No. 45 (R.U.P.E.)
Appendix
Table 1
Growth of Rural Banking India, 1969-2006
Year Number of Bank Outstanding Credit Deposits
Offices Rural
Rural % of total Rural % of total Rural % of total
Rs. crores Rs. crores
1969 1443 17.6 115 3.3 306 6.3
1972 5274 36.0 257 4.6 540 6.5
1978 12534 42.5 1530 8.4 2664 10.1

1984 25541 52.9 6589 13.5 9603 13.4
1990 34867 58.2 17352 14.2 28609 15.5
1996 32981 51.2 29012 11.4 61313 14.4
2002 32243 47.8 66682 10.2 159423 14.2
2006 30572 44.5 175816 8.4 226049 10.8

Source: RBI, Banking Services, Basic Statistical Returns, various issues, March
2006
Table 2
Relocation of RRBs’ Business
from Rural to Semi-Urban & Urban Areas
Location Number of Offices Distribution of Credit Outstanding (in %)
1996 2003 1996 2003
Rural 12448 11989 77.45 71.51
Semi-Urban 1844 2183 17.72 21.76
Urban 380 499 4.84 6.74
All-India 14672 14671 100.00 100.00
Source: RBI, Basic Statistical Returns, March 1996 and March 2003.
Chapter
100 Harvesting Despair: Agrarian CrisisVin India
Freedom to Trade and Freedom to Plunder

WTO and Indian Agriculture
India became a member of the World Trade Organisation (WTO)

in April 1994 and signed the Agreement on Agriculture (AoA). The
rulers of the country had already embarked upon the policies of
privatisation, liberalisation and globalisation, and the liberalisation
of agricultural trade was just another step in this ladder. There
were two assumptions underlying the process of trade liberalisation.
Firstly, that India must aggressively adopt the export-oriented
model of development if it was to travel on the high-growth
trajectory. Exports (and therefore, trade with other economies) must
be encouraged and India must look to increase its share in world
trade. It was assumed that economic growth inevitably reduced
poverty, and therefore export-oriented agriculture would reduce
rural poverty in our country.
This assumption ignores the present and past historical realities
of world trade. India does not benefit much from international trade
due to its small share in it (less than two per cent). Rather, the
volatility and price fluctuations of the international market are
imported into India through its engagement in world trade (for
examples of this, see sections below). The emphasis on trying to
capture a share of the external market is at the cost of neglecting
our domestic market, and ignoring the needs of the large majority
of our people. For example, the shift from cereal crops to commercial
crops, conforming to the norms of export-oriented agriculture, has
adversely affected our food availability and food security. Secondly,
the export surpluses of some countries must mean import surpluses
for other countries. Since most developing countries tend to produce
a similar range of exports, the competition among them is more
acute and there are likely to be many losers. This competition forces
all countries to adopt severe cost-cutting measures (such as reducing
wages, adopting capital-intensive technologies in labour-surplus
economies) and leads to a ‘race to the bottom’. Even if we are winners
now (at a high cost of course), we are certain to be losers at other
times.
Freedom to Trade and Freedom to Plunder 101
The second assumption is closely related to the first one. This

is the theory of free trade. It is argued that international trade, if
freed from the encumbrances of tariffs, regulations and other
quantitative restrictions and barriers, is most beneficial to all
participating economies and leads to the most efficient and optimum
outcomes.
However, reality seldom confirms to theory, especially economic
theory. The truth is that the ‘free trade’ argument has always been
mere rhetoric for the presently developed countries. It has rarely
been followed in practice, even by its staunchest advocates.
Countries like the USA, Britain, Japan and countries of European
Union (EU) had severely protectionist trade regimes during the
commencement phase of their own economic development. Not only
did they impose tariffs and quantitative restrictions to protect their
domestic products and markets, they also modified the trade
patterns, manufactures and agricultural products of their colonies
(like India) to suit their own needs. The forced change in cropping
patterns, restrictions imposed on the nature and quantum of
agricultural exports, and the expropriation of land and other natural
resources, greatly impeded the colonies’ own development, reduced
them to being exporters of raw materials and importers of finished
goods, and adversely impacted their food security.
Today, economists and governments of these same countries
argue in the name of ‘free trade’ and arm-twist developing countries
like ours to accept unfair trade agreements. Like in the colonial
period, these agreements are heavily biased towards the interests
of the developed countries, and at best, promise benefits to the
developing economies which are seldom realised. Our own
economists and policymakers are vociferous proponents of such
agreements (like the Agreement on Agriculture) ignoring their
deleterious impact on agriculture and our economy.
WTO AND THE URUGUAY ROUND

There were two important reasons why during the last decade
of the twentieth century, it became imperative for the developed
countries to introduce agricultural-trade related rules that would
be followed by nearly every country in the world economy.
Firstly, USA, Australia and countries of the European Union
lost huge export markets for food grains (which were used both for
direct consumption and for indirect consumption as animal feed)
after the economic collapse of Russia, Ukraine and other East

European countries in 1991. This loss had to be compensated and
hence the need to open new markets of the developing countries.
Secondly, the emergence of large transnational agri-business
corporations (like agro-chemical and seed companies, processing
companies, food manufacturers and food retailers) and their thirst
for profits also necessitated the opening up of potentially large
markets, like that of India. There was a need for an international
organisation which would open up world agricultural trade and
govern the conditions and rules of trade amongst countries. The
WTO and its constituent treaty, the Agreement on Agriculture (AoA)
fulfilled this purpose.
Before the emergence of the World Trade Organisation, the rules
of international trade were governed by the General Agreement on
Trade and Tariffs (GATT). This was a de facto international
organisation, based on an agreement reached initially by twenty
three countries in Geneva in October 1947. GATT was yet another
instrument similar to the International Monetary Fund and the
World Bank, whose objective was to widen economic cooperation
between the capitalist countries which were recovering after the
Second World War and to influence economic policies of the newly
independent third world countries. There were seven rounds of
negotiations under GATT, but they mostly dealt with trade in
manufactured goods. Important and sensitive areas like trade in
services, intellectual property rights and trade in agricultural goods
were left untouched.
The charter of the International Trade Organisation, a failed

predecessor of the WTO, was repeatedly rejected by the US
Congress from 1948 to 1950 because they worried that the new
organisation would interfere in the internal economic matters
of their country!
The eighth round of negotiations started in Uruguay in

September 1986 and continued till April 1994. This was known as
the Uruguay Round, and it dealt with all the aforementioned areas,
most importantly agriculture. The Dunkel Draft Text, for the first
time, brought agriculture within the ambit of the GATT discipline.
The conclusion of negotiations by most of the 123 participating
governments led to the creation of the WTO and its rules came into
force from 1 January 1995. The Agreement on Agriculture (AoA) is

a part of the WTO.
THE AGREEMENT ON AGRICULTURE
The commitments which members have to undertake under
the Agreement on Agriculture (AoA) fall under four main areas
related to the opening up of agricultural markets – domestic support,
market access, export subsidies; and other provisions which include
the Special and Differential Treatment for the developing countries
and Agreement on Sanitary and Phytosanitary measures. The
detailed provisions of the first two areas (domestic support and
market access) are listed in the appendix to the chapter.
Domestic Support
The GATT only concerned itself with trade measures, and kept
away from purely domestic production policies, except where these
had a trade impact. AoA overruled the provisions of GATT 1994 as
it also brought domestic support given by governments to
agricultural products under its purview. Domestic support refers
to those policies of the government which support agriculture and
farmers of a country. This support can be in a variety of ways, for
example, investing in agricultural extension services, research, and
irrigation, providing price support to farmers for different crops,
providing inputs or credit at subsidised rates.
Domestic support has been one of the most controversial and
contested aspects of the AoA. These measures provide farmers
incentive to grow certain crops (which may be in the larger interest
of the country), provides them assured incomes and livelihoods,
and allow for the possibility of the planned development of the
agricultural sector. According to WTO understanding, support
measures which distort markets and international trade in
agricultural commodities must be reduced and eventually
eliminated.
AoA divides domestic support measures into three categories.
Support measures classified as green box and blue box are exempted
from any reduction commitments because their trade-distorting
effects are believed to be minimum. However, support measures
classified as amber box – which include critical support measures
like market price support and subsidies on inputs – have to be
reduced under the Agreement on Agriculture. The various subsidies
under three boxes are given below.
Green Box Blue Box Amber Box

(exempt from reductions) (exempt from (subject to
reductions) reduction
commitments)
Agricultural research programs, Production Market price
Training programs, limiting support,
Research in pest and disease control, programs, Subsidies on
Extension services, Livestock Inputs,
Marketing and promotion services, payments made Direct
Infrastructure, on a fixed payments to
Food security stocks & domestic food aid, number of head farmers linked
Investment aids, of livestock. to production
Environmental programs,
Regional assistance programs.
Amber Box subsidies are measured in terms of “Total Aggregate

Measure of Support” (Total AMS). AMS is further divided into
product-specific support and non-product specific support i.e. those
support measures which are targeted at individual crops (for e.g.
minimum support price for wheat) and those support measures
which are for the agricultural sector as a whole (for e.g. the fertiliser
subsidy). The total AMS of a country is expressed as a percentage
of the total value of output of agriculture. This total AMS does not
have to be reduced if it is less than 5 per cent in case of developed
countries and 10 per cent in case of developing countries. Otherwise,
as per the AoA rules, developed countries have to reduce their AMS
by 20 per cent in equal annual installments over the implementation
period of six years and the developing countries have to reduce it
by 13.3 per cent over a period of ten years.
India’s product specific support is highly negative but its non-
product specific support was 8.6 per cent of value of agricultural
output in 1999-2000. This means that India at present does not
have any reduction commitments under domestic support, although
its non-product specific support is reaching close to the maximum
allowed level of 10 per cent.
THE HYPOCRISY OF SUPPORT
The developed countries have consistently tried to protect their
own rich farmers and agri-business corporations, while preaching
to the developing countries the benefits of ‘free trade’ and the need
to reduce their domestic support. While developing countries like

India, which have large populations dependent on agriculture,
provide very little support to their agriculture under pressure from
WTO, the developed countries (where only a small minority is
employed in agriculture) continue to give huge levels of support to
their own agricultural sectors – sometimes amounting to 90-100
per cent of their agricultural GDP. This can be seen from Table 1 in
the appendix.
Further, over a period of time, in order to avoid reducing their
subsidies and support measures, the developed countries have
shifted their subsidies from the amber box to the blue box and the
green box, since the latter two are exempt from reduction. For
example, in 2003, 60 per cent of cereals, oilseeds and pulses produced
by the US and EU was fed to animals and should have been treated
as input subsidy for the dairy and meat sectors. However, the same
year, the EU transferred 90 per cent of its direct payments for these
three commodities from the Blue Box to the Green Box.1 Almost 80
per cent of the subsidies in developed countries are now in the Green
and Blue boxes.
Developed countries like the EU and USA are paying huge
subsidies to their agricultural sector by way of green box and blue
box categories as well as de-coupled income support (income support
de-linked from agricultural production). The Organisation of
Economic Cooperation and Development (OECD), the group of 30
richest nations of the world, provided agricultural subsidies worth
$318 billion in 2002. The prices received by OECD farmers were on
an average 31 per cent above world prices (measured at border),
due to the subsidies and support provided to them. Total support
levels in the US and EU have actually risen compared to the pre-
Uruguay round support levels, as can be seen from Table 2 in the
appendix.
Who benefits from these subsidies given by the developed
countries? The recipients of the US agricultural subsidies in 2001
included millionaires Ted Turner (of CNN) and David Rockefeller
(of the Rockefeller Foundation, which has been instrumental in
shaping much of India’s agricultural policies after 1947). The richest
man in the United Kingdom, the Duke of Westminster, who owns
about 55,000 hectares of farm estates, receives an average subsidy
of 300,000 pound sterling as direct payments, and in addition gets
350,000 pounds a year for the 1,200 dairy cows he owns.2
The ‘White’ Truth

Milk and dairy products are one of the most heavily subsidised agricultural
products in almost all the developed countries. In the beginning of the new
millennium, support to agriculture in Japan added about 400 per cent to the
domestic price of milk, whereas in US and EU market price was inflated by 71
per cent and 76 per cent, respectively. 3
The dairy farmers of US, EU or Japan, who receive such large subsidies,
are not exactly poor or vulnerable. An average dairy farmer in the US in 2002
had more than 100 cows, assets over a million dollars and a net income of
$80,000!
In 1999-2000, India imported over 130,000 tonnes of EU’s highly
subsidised skimmed milk powder. This was the result of Euro 5 million export
subsidies that were provided by EU to its dairy industry. Ironically, India is the
biggest producer of milk in the world, and does not provide any subsidy for
the dairy sector.
It has been estimated that EU provided a daily subsidy of US $ 2.7 for
every cow, and Japan provided three times more at US $ 8 in 2003. 77 per
cent of India’s people survive on less than half a dollar a day. It would have
been funny if it were not criminal and tragic – cattle in the rich countries are
pampered at the cost of several hundred millions of farmers in the developing
world. This is the ‘white’ truth of free trade under global capitalism.
What do these huge subsidies mean for the developing

countries? They mean that developing countries cannot ever hope
to significantly increase their export of agricultural products to the
developed world, despite the fact that they can produce many
commodities at relatively cheaper costs. The huge subsidies given
to the rich farmers and agri-businesses in the developed countries
reduce the costs and risks associated with cultivation, processing
and distribution of agricultural products. This allows developed
country farmers and agri-businesses to control their domestic
markets as farmers of developing countries can only sell at higher
prices. In fact, subsidies also allow developed countries to dump
their surpluses in the markets of the developing countries. The
actual operation of ‘free market’ and ‘free trade’ principles would
have meant that many developed countries which are major
exporters of agricultural commodities would turn into importers of
these commodities. For example, it has been shown that Europe

would become a net importer of wheat and the Japanese imports of
rice would have increased dramatically, if there were no trade policy
distortions by these countries. This would have created major export
opportunities for India and Latin America. Similarly, although USA
is the largest exporter of wheat, it gives lavish support to its wheat
producers. It is permitted under AoA to provide $363 million in
export subsidies for wheat and wheat flour. Agricultural policies
actually add 91 per cent to wheat farmers’ income in USA! 4 These
countries are subsidising their large farmers and agri-business
corporations at a heavy cost to farmers of the developing countries.
In negotiation after negotiation, OECD and countries like the
US and EU have refused to reduce their agricultural subsidies.
Instead, they have asked for more and more of market access from
the developing countries. They have tried their best to manipulate
proceedings at the WTO so as to get away with high levels of
subsidies and support. At best, they have promised cosmetic
reductions and at the same time, have played around with the Green
Box-Blue Box-Amber Box categories so that they did not have to
reduce their support levels in reality. Market access has now become
the central theme of negotiations where huge concessions are being
demanded from developing countries.
Market Access
Market access refers to the extent to which the domestic
markets of other countries are accessible to countries which are
exporters of agricultural products. Before the WTO rules came into
force, most countries protected their own markets and producers
(farmers) with high tariffs5 and quantitative restrictions6 (QRs, also
known as non-tariff barriers, i.e., NTBs) on imports. These tariffs
and QRs were decided on their own by all the countries according
to their own needs and interests, and were regulated only by Free
Trade Agreements (FTAs) that existed between individual (or a
group of) countries.
Under the AoA, barriers to ‘free trade’ have to be gradually
removed i.e. access to the domestic markets of countries have to be
opened up to countries exporting agricultural products. This process
begins with converting all non-tariff barriers to tariffs. This is called
tariffication. It means that by using a formula, all countries had to
change the form of protection (given to different agricultural
commodities) from NTBs to tariffs, although the extent of protection
provided could remain the same in the initial phase. After this, the
second step for all countries was to decide their own bound tariff
rates for different commodities. Bound tariff rates refer to the
maximum possible rates that can be applied on a commodity at any
time. The actual tariff rates (known as the applied tariff rates) have
to be lower than or at most, equal to the bound tariff rates. The
third step was tariff reduction – to reduce all the tariffs (including
bound tariff rates as well as tariffs resulting from the tariffication
process) that had now been decided. Developed countries had to
reduce their tariffs by an average of 36 per cent over six years (from
1995) and developing countries had to reduce their tariffs by an
average of 24 per cent over ten years. A minimum reduction of 15
per cent had to be made on all tariff rates.
PROBLEMS WITH TARIFFICATION AND TARIFF REDUCTIONS
There were several reasons why the bound tariff rates continued
to be high, especially in the case of developed countries, even after
the AoA rules on market access were implemented. There were
several ways in which developed countries continued to deny to
the developing countries access to their own markets, even while
adhering to the AoA.
Firstly, the choice of 1986-89 as the base year period for
tariffication was flawed. Since market prices of agricultural
commodities were very low during this period, the bound tariff rates
were calculated to be very high. This was because the formula for
calculating bound tariff rates (see appendix) is based on the
difference between domestic and world prices, which turned out to
be very high for the base year period. When the developed countries
reduced 36 per cent from these high bound tariff rates, the final
bound rates by 2000 still remained quite high.
Developed countries also undertook dirty tariffication i.e., they
intentionally overestimated the tariff rates by inflating the gap
between domestic and international prices. This happened because
every country was allowed to decide its domestic price levels for
itself. Dirty tariffication was done particularly for high-value
agricultural commodities and for commodities produced in the
temperate zones (like cereals, dairy, meat and sugar) in which
developed countries would have faced stiff competition from
developing countries. Tariffs were kept low for tropical products
which were not produced by the developed countries, and whose
imports they required from the developing world.
Thirdly, the simple average formula for reduction of tariffs

decided in the Uruguay Round allowed countries to make smaller
cuts on sensitive items and larger cuts on others (e.g. tropical
products) in order to arrive at the simple average of 36 per cent.
For example, whereas the base year rates on tropical zone products
were cut by an average of 43 per cent, the reduction rate on
temperate zone products was much lower – for example 26 per cent
on dairy products. It has been noted that the policy of substantial
reduction in tariffs of less protected products with negligible cuts
in tariffs for the highly protected commodities has resulted in the
continuation of high protection for several high value agricultural
commodities by many developed countries. 7 Highly protected
commodities like sugar, meat, cereal flour and dairy products were
not liberalised at all, or to a negligible extent. On the other hand,
oil seeds, fruits and vegetables, which were less protected, were
further liberalised.
It has also been observed that tariff rates imposed by the
developed countries are higher for processed products than the
agricultural raw materials at the beginning of the processing chain.
This means that market access for more processed products
(embodying greater value added8) is more restricted. This is another
indication that the developed countries want the developing
countries to remain exporters of basic raw materials, so that most
of the processing and value added takes place in their own
economies. In Canada, tariffs on fully processed food products are
12 times higher than first stage processed products. The US tariff
on fresh tomatoes is 2.2 per cent, on dried tomatoes in a package
8.7 per cent, and 11.6 per cent if the tomatoes are in sauce.
The provisions of AoA related to market access essentially
allowed the developed countries to dump their agricultural products
(which are highly subsidised, as we have seen in the previous
section) in the markets of the developing world. The farmers of
countries like India now had to compete, without any state
protection, with farmers and farming corporations of the developed
world, who received extensive support from their own governments.
Export Subsidies
Export subsidies are prohibited in WTO in all sectors except
agriculture. Export subsidies refer to subsidies given to producers
and traders to encourage exports of agricultural commodities. The
cost of export subsidies have to be usually borne by tax-payers in
the subsidising country. Countries which do not subsidise their

exports get affected in several direct and indirect ways, as their
share of the international market decreases.
AoA required that both the expenditure on export subsidies
and the quantities receiving subsidies needed to be reduced over
the period of implementation (1995-2004). The developing countries
had to reduce export subsidies by 24 per cent over a period of ten
years and the quantity of exports that are subsidised had to decrease
by 14 per cent. The developed country members committed to reduce
their export subsidies by 36 per cent and the quantity of exports
that are subsidised had to decrease by 21 per cent. Since very few
developing countries give export subsidies, this provision for
differential treatment has little relevance for them.
Even in the case of export subsidies, it is the European Union
which is the major user of export subsidies. The export subsidy in
EU was USD 6,386 million in 1995 and decreased only to USD
5,968 million in 1998. 9
Special and Differential Treatment (SDT)
‘Special and differential treatment’ (SDT) refers to GATT rights
and privileges given to developing countries but not extended to
developed countries. Under AoA, developing countries enjoy SDT
in three main areas: market access, domestic support and export
subsidies. In all three areas, developing countries are allowed a
ten-year (1995-2004) implementation period as compared to five
years (1995-2000) for developed countries. The reduction
commitments of developing countries in these areas have been about
two-thirds that of developed countries.
In the area of domestic support, AoA provides some additional
latitude for developing countries. Their de minimus (maximum)
level of subsidies is fixed at 10 per cent of the value of agricultural
production, as compared to a de minimus level of 5 per cent for
developed countries. Besides, AoA provides exemption for input
subsidies to low-income or resource poor farmers in developing
countries. However, the term ‘low-income or resource-poor farmers’
is not defined in the AaA. Public stock of food grains and food
security measures that are targeted at the poor are also exempt
from reduction commitments.
Another SDT for the developing countries is the exemption from
reduction commitments of two types of support measures that are
sometimes referred to as “rural development measures”: investment

subsidies which are generally given to agriculture and agricultural
input subsidies generally given to low-income or resource-poor
producers. However, in most developing countries, due to fiscal
compulsions, the subsidy provided to the agricultural sector is much
lower than the de minimus level and only a few relatively prosperous
countries among them are likely to make effective use of this
exemption.
IMPACT ON INDIAN AGRICULTURE
The provisions of AoA must be looked at in conjunction with
other policies of the Indian state, which it has been following since
the 1980s in the name of “economic reforms”. These include policies
which reduce public investment in agriculture (in critical areas like
irrigation and extension services), withdrawal of institutional credit
and priority sector lending from agriculture, reduction of price
support to farmers, reduction in agricultural subsidies and in rural
development expenditures (RDEs). The contents and effects of these
policies have been described elsewhere in this book.
All these policies, along with trade liberalisation under the WTO
regime, acted together to precipitate the present crisis in
agriculture. Therefore, it is difficult to isolate individual causes for
the present crisis. On the contrary, all these policies combined
together and acted upon each other to aggravate the crisis in the
countryside and push the rural economy into a spiral of death and
despair.
Impact on food security
The first effect of trade liberalisation was a diversion of
agricultural land from food crops to commercial crops. There was a
substantial shift in the cropping pattern, while total sown area
remained unchanged. From an initial area of 127.8 million hectares
under food grains in 1991, 6 million hectares were diverted to the
cultivation of exportable crops by the mid-1990s, during which
period exports from agriculture grew fast.10 The main crops that
saw rapid area expansion or export thrust were cotton, soybean
and sugarcane, as well as horticulture, floriculture and prawn
fisheries, which displaced paddy production in some coastal areas.
Some land was reverted back to food crops in the mid-1990s due to
the global decline in prices (which will be discussed below). But in
2001, the net diversion of food grains area was over 8 million
hectares compared to 1991.
The diversion of land away from food crops along with the
decline in growth rates of food grain production lowered the
domestic food availability. The primary export thrust was at the
expense of declining nutritional levels for the mass of the population.
The per capita production of food grains for human consumption
declined by 4 kilograms from 1990 to 1999, while the per capita
availability of food declined by 14 kilograms in the same period
(the difference between foodgrain production and availability is on
account of imports, exports and stocks).
Impact on farmers
The period when most countries of the world began liberalising
their agricultural trade under WTO, coincided with a drastic decline
in world prices of agricultural products. There was a fall in the
prices of commercial crops grown in tropical regions (like tea, coffee,
rubber and cotton) as well as a fall in the prices of cereal food crops
grown both in tropical and temperate regions. Thus, the dollar prices
of wheat (Argentine and US RSW variety) fell by 46 per cent between
1995 and 2001. The price of maize in the same period fell by 50 per
cent. The price of palm oil fell by 88 per cent between 1995 and
1999, and the price of jute fell by 25 per cent in the same period.
For sugar and cotton, the decline in prices between 1995 and 2001,
was 30 per cent and 50 per cent respectively.11
Since agricultural trade was now liberalised and the farmers
of developing countries were no longer protected by tariff and non-
tariff barriers, the disastrous effects of the price decline was entirely
borne by them. As Utsa Patnaik put it, “By liberalising trade and
by opening up at this juncture, the depression in the global markets
is being imported into the Indian economy and into other liberalising
countries.”12
As a consequence of this price decline, the livelihood of food
grain producers in countries like India was affected due to the
imports of exceptionally low-priced foreign grain. In the case of
commercial crops, again, it was the developing country farmers who
mainly suffered because of the global depression in prices. The
situation was worse for the commercial crop farmers because they
had to take large loans for cultivation and engage in input-intensive
farming, at a time when the government was removing all forms of
support and institutional credit sources. Mostly dependent on
private moneylenders who charged usurious rates of interest, these

farmers had little option but to end their lives when they received
less than remunerative prices for their commercial crops.
The removal of quantitative restrictions and lowering of import
tariffs on agricultural commodities has also been disastrous for our
farmers (apart from the price fluctuations in the global market).
The case of Kerala is tragically illustrative in this regard.
Cultivation in the state mainly takes the form of commercial
cultivation of crops for exports, like spices, cashew, rubber, coffee
and tea. Food crops (cereals, pulses and tapioca) account for only
around 14 per cent of the gross cropped area while export-oriented
or exportable cash crops account for nearly 30 per cent. More than
80 per cent of the agricultural products produced in Kerala are
dependent on the domestic and/or international market situation.13
The cropping pattern in the state is tailored to the demands of the
domestic and world market. The cultivation undertaken requires
large quantities of inputs purchased from the market and thus large
amounts of credit.
Trade liberalisation under the WTO regime meant that the
farmers of Kerala were fully exposed to the stiff competition and
price fluctuations of the international market. Although export of
agricultural commodities recorded good growth rates till the end of
the 1990s, they began to decline in the present decade. The export
of spices (mainly pepper, cardamom, ginger) and coffee and tea from
the state declined in the period 2000-01 to 2005-06. While exports
of commodities from Kerala suffered a setback, there was a rise in
the import of commodities (into the country) which had been
traditionally produced and exported from the state. The removal of
quantitative restrictions and lowering of import tariffs resulted in
large-scale imports of products like rubber, pepper, cardamom,
coffee and tea in India. The average annual growth of imports was
88.6 per cent for cardamom, 44.5 per cent for coffee and 40.1 per
cent for natural rubber during 1996-97 to 2005-06. As a result,
imports as a percentage of domestic production increased
considerably. To give an example, almost one fourth of pepper and
three-fourths of cashew consumed in the country was imported in
2000-04 (the percentages were much lesser in the pre-trade
liberalisation period). 14
A manifestation of lower exports and higher imports was a
decline in domestic prices of most of the commodities. During the
1990s, till 1996-97, the farm prices of rice and non-food crops like
coconut, rubber and pepper were rising at a rate of above 10 per
cent a year. However, with trade liberalisation, the rise in price
was very low (for paddy and pepper) or negative (for cardamom
and coffee) during the period from 1997-98 to 2005-06. In general,
crops with high export intensity or facing import competition
experienced wider fluctuations in prices than the other crops.15
The opening up of the agricultural sector to international trade
made the farming community in Kerala vulnerable due to a surge
in imports, decline and high volatility in prices, as happened in the
case of many other developing economies. While the prices received
by farmers were either declining or rising at a lower rate, the prices
paid by them for inputs were increasing at a very high rate. This
affected the incomes of most farmers, and especially small and
marginal cultivators (who have lower yields and high costs of
cultivation). The indebtedness of farmers kept on rising and
eventually they were driven to suicide. More than 900 farmers
committed suicide from 2004 to February 2007. It should be noted
that farmer suicides occurred more in districts like Wayanad and
Idukki, which concentrated more on cultivation of export-oriented
commercial crops.16 This is the price that the farming community
of Kerala had to pay for India’s participation in the WTO regime.
Despite large-scale farmer suicides over the past ten years, the
Indian government has not learnt the basic lesson that international
agricultural markets are not level playing fields, they are extremely
volatile, and agricultural prices are prone to fluctuations. Opening
our economy to this volatility and removing all public support to
agriculture at the same time, has proved catastrophic for our
farmers. The need to protect our economy and farmers from the
vagaries of the international market is obvious. Yet our governments
carry on with the propaganda of ‘free trade’ and its imaginary
benefits to the economy and farmers.
Impact on agricultural trade
The liberalisation of agricultural trade under the aegis of WTO
was a part of the model of export-oriented agriculture that
policymakers adopted after 1991. Farmers were told to stop growing
food grains and grow export-oriented cash crops in order to increase
their incomes, as well as the foreign exchange earnings of the
country. The liberalisation of trade, it was believed, would provide
farmers with incentives to produce for the world market.
However, the liberalisation of trade in agriculture has worsened

the situation for farmers and for the country as a whole. The export
oriented agricultural policy has only made the country more
dependent on agricultural imports. Between 1990-91 and 2003-04,
the rate of growth of value of agricultural imports has been close to
double than that of value of agricultural exports (at 24.86 per cent
and 13.31 per cent respectively). The share of agricultural exports
in total exports has fallen in this period (from 15.53 per cent in
1990-91 to 9.68 in 2003-04), while the share of agricultural imports
in total imports has risen in this period (from 2.79 in 1990-91 to
5.26 in 2003-04). 17 It is not surprising that India has been unable to
profit from the much-announced benefits of trade liberalisation,
given the high subsidies and protection provided to the agricultural
commodities and markets of the developed countries (as has been
shown in the earlier sections).
The share of agricultural exports in agricultural GDP increased
from 3.47 per cent in 1990-91 to 5.41 in 2003-04. However, the share
of agricultural imports in agricultural GDP has increased at a much
rapid pace, from 0.83 per cent to 3.57 per cent in the same period. 18
Thus, the opening up of agriculture to international markets has
increased agricultural imports at a much more rapid pace than
agricultural exports (as percentage of agricultural GDP). This has
adversely affected the interests of farmers as well as consumers in
the country.
This is seen best in the case of edible oil.19 In the early eighties,
India imported 20-40 per cent of its edible oil requirements. The
Oilseeds Technology Mission launched by the government of India
in 1986 (and other support measures such as price stability and
restrictions on imports) had helped to increase domestic edible oil
production (from primary sources) to levels where imports become
negligible and the country became self-sufficient in edible oils by
1994-95. However, this was not liked by the World Bank – it claimed
that India did not have a comparative advantage in producing edible
oil and hence would be better off importing edible oil (because
imported edible oil would be available at a lower price for the
consumers).
In 1994, the government shifted its policy and placed certain
edible oil imports under the Open General License – which meant
that imports could be made freely after paying duty. From 1995
onwards, as part of its obligations under AoA, the government
removed quantitative restrictions on edible oil imports and replaced

them with import duties. In succeeding years, even the import duties
were lowered rapidly, from 65 per cent in 1994 to 20 per cent in
1996 and 15 per cent in 1998. This lowering of duties combined
with a sharp fall in international edible oil prices in 1999 led to a
flood of cheap oil being imported into the country, initially in far
greater quantity than the requirement. By 1998-99, imports reached
the level of 4.3 million tonnes, a ten-fold increase in four years.
The flood of cheap imported oil had a disastrous effect on India’s
edible oil farmers. Oilseed prices crashed and remained depressed
for the next three years. There were massive distress sales of
oilseeds by farmers at prices much below the Minimum Support
Price (MSP), since the government was not ready to buy at the
MSP. Over a period of time, farmers reduced the acreage under
oilseeds, and domestic edible oil production from primary sources
fell sharply in the period 1996-97 to 2002-03.
Now, we are completely dependent on edible oil imports again
– 40 per cent of our domestic requirements are met through imports.
India is now the world’s largest importer of edible oil. The recent
world food price inflation has meant that wholesale price of imported
oil (RBD Palmolein) was 60 per cent higher in July 2008 than
average prices in 2005. This is despite the fact that the government
has reduced the duty on edible oil imports to zero. Today, the food
security of the country – edible oil is an important part of our food
requirements – stands compromised and consumers have to bear
high prices because of World Bank-induced policy measures and
trade liberalisation under the AoA.
It must be remembered that India has not been the only victim
of the ill-effects of export-oriented agriculture, WTO-induced trade
liberalisation and IMF and World Bank-imposed Structural
Adjustment Programmes. Almost all countries of South Asia, Latin
America and Africa (especially sub-Saharan Africa) which were
forced to undertake such policies show similar results – decline in
food availability, falling mass nutritional levels, agrarian distress
and increases in rural poverty. Instead of learning from these
experiences, our government has continued to implement the same
policies with greater vigour with an ostrich-like blindness.
DIFFERENTIAL IMPACT ON FARMERS

OF THE DEVELOPING AND THE DEVELOPED WORLD
If developing country farmers suffered due to the fall in world
prices, why did the developed country farmers not share the same
fate? The answer lies in the huge amount of subsidies, income
support, cash transfers and bail-outs given to the rich farmers and
agri-business corporations of countries of the EU, Japan and the
US by their respective governments. The 24 countries of the OECD
group increased their transfers to the agricultural sector by nearly
60 per cent between 1996 and 1999. In absolute terms, these annual
transfers to a few million farmers by the United States or Japan
exceeded the entire gross national product (GNP) of the majority of
developing countries. Annual ad hoc increases in subsidies totaling
$30.8 billion were made in the US in the four years up to 2002. In
November 2002, the US Congress approved a farm bill giving a
total of another $57 billion over the next six years.20
The case of cotton is a good example of how differently farmers
in the developing and developed countries fare in the “free market”
of international trade. World cotton prices declined by more than
60 per cent from 1995 to 2003, resulting in thousands of farmers
suicides in India. To protect its 25,000 cotton farmers, the US
doubled its subsidies to 3.9 billion dollars from 1992 to 2001-02. 21
The value of subsidies provided by American taxpayers to the cotton
barons in 2001 exceeded the market value of output of cotton by
around 30 per cent. In addition, this subsidy was provided to only
the richest 10 per cent of US farmers who received 73 per cent of
the total cotton subsidies. These subsidies acted as an incentive for
the US cotton farmers to grow more cotton, much in excess of
domestic demand. This surplus produce was then dumped by the
US in the international market using subsidies disguised as export
promotion programmes. This further contributed to the decline in
world cotton prices. Meanwhile, the US increased its share in
international cotton exports from 18 per cent in 1998-99 to 39 per
cent in 2002-03. 22
The refusal to reduce cotton subsidies by the US has adversely
affected the condition in many developing and least developed
countries, which are exporters of cotton. The government of India
puts its losses at $ 1.3 billion, Argentina at over $ 1 billion, and
Brazil at $ 640 million in 2001-02. However, countries located in
Africa, especially Benin, Burkina Faso, Chad and Mali, which
depend heavily on cotton exports, have been hit the hardest by the
secular decline in prices. And this is despite the fact that costs of
production for one pound of cotton are three times higher in the US
than in Burkina Faso (Oxfam report of 2001)! 23
The situation is ironical – a less protected international
agricultural market, and the removal of subsidies by the developed
countries was supposed to improve cotton prices and therefore
improve the lot of poor farmers in poorer countries. However, the
logic and results of ‘free trade’ have turned out to be different in a
world politically, economically and militarily dominated by the US.
Thus, in the period of declining world prices, the developed
countries increased the subsidies and support to their farmers,
under the pressure of the farm lobbies. This encouraged the farmers
to produce even more, resulting in overproduction. This
overproduction by the developed country farmers is then sought to
be offloaded in the markets of the developing world. Therefore,
during this period, there was even more pressure on developing
countries to remove protective barriers and open up their markets.
As a specific example, US took India to the court of dispute
settlements at the WTO and forced it to remove all its quantitative
restrictions on imports in 2001.
CONCLUSION
It is abundantly clear by now that the rules of the game in
WTO negotiating rounds are heavily biased in favour of the
developed countries. It is also obvious that the developed countries
have always tried to, and will continue to try to, protect their own
markets, rich corporate farmers, and agri-business corporations
from the imports of developing countries like India. How much
countries like India can wrangle out of the WTO for themselves
depends on their bargaining prowess on the negotiating table. For
this, India and other developing countries have grouped themselves
into blocs and alliances (like the G-20 and G-33) to negotiate with
the OECD countries, US and the European Union.
However, these blocs are not stable as the interests of
constituent countries like Brazil, Russia and China differ with
respect to different commodities. For example, for a particular
commodity, one member of G-33 might be an importer and another
member might be an exporter. In that case, their interests would
be diametrically opposite at the negotiating table. The alliances
are borne out of common economic interests, and they can be easily
broken or compromised if a country’s interests are better served
elsewhere (like, by directly negotiating with US or the EU).
Much of the gains from trade will also depend on who are
presently India’s political, economic and military (now nuclear?)
friends and who are the foes. Increased agricultural trade may come
at the cost of India having to give concessions on other spheres of
foreign or economic policy. The same is true for intra-WTO
negotiations as well. If the US and EU actually agree to larger cuts
on their farm subsidies, India and other developing countries will
have to agree to larger concessions in the areas of Non-Agricultural
Market Access (NAMA) and Trade Related Intellectual Property
Rights (TRIPS). There can be no benefit to India’s agricultural
exports, without our economy having to give concessions in some
other area related to trade, services, foreign investment and
intellectual property rights.
In return for dubious gains and promised benefits, India has
ended all possibilities of planned development of its domestic
agricultural sector by joining the Agreement on Agriculture. The
sector has now become so sensitive to the price fluctuations and
volatility of the international market that it has become impossible
to protect the livelihoods of our farmers or the food security needs
of our country. Rather, the liberalisation of agricultural trade has
thrown many more farmers into the clutches of despair and finally,
suicide.
While the alleged benefits of ‘free trade’ under the WTO regime
remain elusive, and are likely to remain unclear for a long while,
its high costs for our farmers and our economy is explicitly visible.
In such a scenario, the well-advertised bravado of our Minister for
Commerce and Industry at the different rounds of WTO Ministerial
Conferences and negotiations, matters little. The question that has
to be asked is whose interests our governments are actually serving
by continuing to be a part of the WTO and agreeing to this regime
of unequal and unfair trade agreements.
Notes
1. Bhaskar Goswami “Doha Round: Mercantilist not Developmental for
Agriculture”, 10 October 2008 , http://bhaskargoswami.wordpress.com/
2. Devinder Sharma “The Great Trade Robbery” September 2003,
www.indiatogether.org
3. G.S. Bhalla “Globalisation and Indian Agriculture”, Volume 19 in

State of the Indian Farmer: A Millennium Study, Ministry of
Agriculture, Government of India, January 2004.
4. G.S. Bhalla 2004 op. cit.
5. Tariffs are taxes imposed on imports from other countries. Because
of tariffs, the price of the imports increases in the importing country.
Thus, tariffs discourage imports and therefore protect domestic
producers of those goods from the competition.
6. Quantitative restrictions, especially import quotas, imply that imports
of certain goods are not allowed beyond specified quantities. This is
different from tariffs, since goods for which there are tariffs, can be
imported up to any amount provided that the tariffs are paid.
7. In the European Union, for instance, products like meat, edible offal
of animal origin, milk and cream, some cheese, rice, wheat flour and
bran carry tariffs of over 120 per cent. Japan has a duty of 700 per
cent on their rice. Similar examples can be found in milk powder,
sugar and even cereals.
8. Value added is the difference between the value of output and the
cost of raw materials. Value added increases as a commodity is
processed further and further.
9. Parthapratim Pal “Implementation Issues in Agreement on
Agriculture and its implications for Developing Countries”, 9
September 2002, www.networkideas.org
10. Utsa Patnaik “Global Capitalism, Deflation and Agrarian Crisis in
Developing Countries” Social Policy and Development Programme
Paper Number 15, United Nations Research Institute for Social
Development, October 2003.
11. Ibid.
12. Ibid.
13. P.D. Jeromi “Farmers’ Indebtedness and Suicides: Impact of
Agricultural Trade Liberalisation in Kerala” Economic and Political
Weekly, 4 August 2007
14. Ibid.
15. Ibid.
16. Ibid.
17. Dhanmanjari Sathe and R.S. Deshpande “Sustaining Agricultural
Trade: Policy and Impact” Economic and Political Weekly, 30
December 2006
18. Ibid.
19. Kannan Kasturi “Edible oil policy on the boil”, 10 August 2008,
www.indiatogether.org
20. Ibid.
21. Ranja Sengupta “Cotton and International Trade: Unfair Prices for
the Developing World” 29 September 2003, www.networkideas.org
22. Ibid.
23. Ibid.
Appendix
Table 1
Total Aggregate Measure of Support (AMS) in Selected
Countries: Actual Estimated by WTO Secretariat
Country Value of AMS in Percentage share Value of AMS in
the Base Period of AMS in 1998
(1986-88) agricultural GDP (in US$ billion)
(in US$ billion) in 1986-88
European Union 116.54 79.97 114.61
Japan 69.61 99.11 47.75

USA 60.93 68.89 58.30
Switzerland 5.92 102.07 4.45
Norway 3.32 118.76 3.00

Source: G.S. Bhalla “Globalisation and Indian Agriculture”, Volume 19 in State
of the Indian Farmer: A Millennium Study, Ministry of Agriculture, Government
of India, January 2004
Table 2
Total Support Estimate of Select OECD countries
(in million US$)
Country 1986-88 1999-2001 Percentage
change
Australia 1,674 1,376 – 17.82

European Union 109,654 112,628 2.71
Japan 58,165 64,775 11.36

Korea 14,204 21,489 51.29
USA 68,540 95,455 39.27

OECD 302,078 329,564 9.10
Source: Parthapratim Pal “Implementation Issues in Agreement on Agriculture

and its implications for Developing Countries”, 9th September 2002,
www.networkideas.org
Market Access
WTO sought to homogenise the rules for tariff and non-tariff barriers for all
the countries, differentiating only between developed and developing countries.
It recognised the needs of the latter to have a higher degree of protection of
domestic markets compared to the developed countries. Market access can be
divided into four elements – tariffs, bound and applied tariff rates, tariff quotas
and special safeguards.
1. Tariffs
According to the AoA, market access for agricultural products is to be
governed by a ‘tariffs only’ regime. The agreement states that there can be no
restrictions on farm trade except through tariffs. This meant that all the non-tariff
barriers (NTBs) had to be converted to tariffs by using a formula (i.e. the extent of
protection provided to a commodity remained the same, but the form of protection
had to be changed from NTBs to tariffs). This was known as the process of
tariffication. The formula for tarrification is given below.
Tariffication formula: Tariffication meant the conversion of the full extent of
protection given to a product through both tariffs and NTBs to an ordinary tariff
rate. The tariff equivalent was calculated as follows:
T = (Pd – Pw)/ P w X 100,
where T = ad valorem tariff equivalent
Pd = domestic price (e.g. wholesale price)
Pw = world reference price (import or export parity price)
Base year – the average of three years, 1986, 1987 and 1988
After this, the second step for all countries was to decide their own bound
tariff rates for different commodities. Bound tariff rates refer to the maximum
possible rates that can be applied on a commodity at any time. The actual tariff
rates (known as the applied tariff rates) have to be lower than or at most, equal to
the bound tariff rates.
The third step was tariff reduction – to reduce all the tariffs (including bound
tariff rates as well as tariffs resulting from the tariffication process) that had now
been decided. Developed countries had to reduce their tariffs by an average of
36 per cent over six years (from 1995) and developing countries had to reduce
their tariffs by an average of 24 per cent over ten years. A minimum reduction of
15 per cent had to be made on all tariff rates.
The fourth condition was that current market access had to be maintained
by all countries and minimum access opportunities had to be provided in cases
where they did not exist before. Current market access referred to the quantity of
imports in the 1986-88 period (imports of commodities could not be banned up to

these levels at least). Minimum access commitments were allowing imports up to
3 per cent of domestic consumption (at a reduced tariff rate) in the first year
(1995), which had to increase to 5 per cent by end of the implementation period
(2001 or 2004).
GATT 1994 has a provision titled ‘Balance of Payment (BoP)’ under which
members can impose or maintain quantitative restrictions over and above the
tariffication measures, in case they have a Balance of Payments crisis. India
used this provision for many years to continue with QRs after 1995.
2. Tariff Rate Quotas (TRQs)
Under the AoA, Tariff Rate Quotas are quotas, allocated by members to
different partners, which attract low tariff rates up to the quota limit but much
higher rates after the quota limit has reached. For example, a country may allow
imports of a commodity up to 3 per cent of its domestic consumption with a tariff
of 25 per cent, and thereafter increase the tariff rate to 150 per cent to discourage
further imports. In this case, 3 per cent of domestic consumption becomes the
quota limit for that particular commodity.
Thirty-six WTO members have tariff quota commitments and the total number
of individual quotas introduced by them was 1370. Out of these 36 members, 19
are from developing countries. The developed countries accounted for bulk (67
per cent) of the TRQs, Norway with 232 quotas ranking first and alone accounting
for 17 per cent of the total. Other members with high tariff quotas are Poland (109
commodities), Iceland (90), the EU (87), Bulgaria (73) and Hungary (70).
3. Safeguard Measures
Under the AoA, in theory, members cannot adversely affect the interests of
other members by using subsidies to protect their own markets or to exploit the
markets of other countries. The Agreement provides remedies, or safeguard
measures, to affected countries in the event of harm caused by such subsidies.
For example, members can consider imposing countervailing duties (taxes) on
imports to neutralise the effects of injurious subsidies given by other members.
Safeguard measures were present under GATT (like anti-dumping provision and
protection for infant industries) and some have been introduced under WTO as
well.
There was a peace clause in the WTO for nine years (from 1995 to 2003),
under which countries were to restrain from undertaking remedial actions against
subsidies and other forms of domestic support. This was the same period when
countries were implementing their commitments to reduce agricultural subsidies
(both export subsidies and domestic support, which we will study later). The peace
clause meant that no country could question the subsidies given by the developed
countries (about which, we shall study below) for nine years.
The Special Safeguard (SSG) Provision of the AoA
The AoA states that for products whose NTBs have been converted to tariffs,
governments can impose additional tariffs if the volume of imports of that product
increases above a certain threshold, or if the price of imports of that product falls
below a trigger price. Both conditions indicate situations where imports could
flood the domestic market, and greatly harm the domestic producers. This provision
cannot be invoked for products which were protected only by tariffs before 1995,
or for products for which bound tariff rates were declared after 1995.
The agricultural SSG is the simplest of all WTO safeguards. The right to
make use of the SSG provision has been reserved by 36 developed countries
(for a limited number of products). Since majority of the developing countries
chose to declare bound tariff rates for their commodities instead of undertaking
tariffication, they do not have access to this provision.
Domestic Support
The main complaint against domestic support measures is that they
encourage over-production and are trade-distorting in nature. For example, if the
government buys wheat at a support price higher than the market price of wheat,
it acts as an incentive for more and more farmers in the country to grow wheat. It
is alleged that this overproduction increases supplies in world markets (by reducing
demand for imports or increasing the supply of exports) and depresses world
prices. Domestic support measures often undermine (nullify) commitments in the
areas of market access and export competition; this was another reason for
disciplining them.
A key objective of the Uruguay Round was to discipline and reduce domestic
support while at the same time leaving some scope for governments to design
domestic agriculture policies, to suit the state and needs of agriculture in individual
countries. Thus, all domestic support measures were divided into two categories
– those that could be exempted from reduction commitments, and those which
necessarily had to be reduced.
Exempt Measures
Support measures which are exempt from reduction commitments are
classified as Green Box measures, development measures, Blue Box measures,
and de-minimus exemptions.
1. Green Box subsidies

Green Box subsidies refer to all those subsidies that have no or minimal
trade distorting effect on production and trade. They must be provided through a
publicly funded government programme not involving transfers from the consumers
(meaning that the finance for these subsidies should not be obtained by levying a
tax on consumers of the country) and they should not provide, or have the effect
of providing, price support to producers. The expenditure on green box subsidies
can be increased without any financial limitation under WTO rules. Direct payments
to farmers can be placed in the Green Box (i.e. they can be exempted from
reduction commitments), if the amount of such payments is “decoupled” from
production, prices or factors of production. This means that these payments should
not be linked to the price of the product or the amount produced by the farmer.
Examples are decoupled income support measures, income insurance and safety
net programmes.
2. Developmental measures
The exemptions under developmental measures (Special and Differential
Treatment for Developing countries ‘SDT’) include all direct and indirect measures
that fit into the development programmes of the developing countries and are
designed to encourage agricultural and rural development.
3. Blue Box subsidies
Direct payments under production limiting programmes, called Blue Box
measures, are also exempt from reduction commitments. These are especially
used by the developed countries of EU and the US to make payments to their
farmers for not undertaking cultivation – leaving the fields fallow – for specified
periods of time (or limiting cultivation to a specific area and yield).
4. De minimus exemptions
The de minimus exemptions allow any support for a particular product to be
excluded from the reduction commitment if the support is not greater than 5 per
cent of the total value of production in a year for that agricultural product. In
addition, non-product specific support (i.e. support for all products) that is less
than 5 per cent of the value of total agricultural production is also exempt from
reduction. The 5 per cent threshold applies to the developed countries whereas
in the case of developing countries the de minimus ceiling is 10 per cent.
Non-exempt Measures
All domestic support measures in favour of agricultural producers that do
not fit into any of the above exempt categories are called amber box measures
and are subject to reduction commitments. Amber Box subsidies are measured
in terms of “Total Aggregate Measure of Support” (Total AMS).
Total Aggregate Measure of Support is the sum of the annual values of
§ Product-specific AMS (the total level of support provided for each basic
agricultural product through price support, direct payment etc.)
§ Non-product-specific AMS (the total level of support provided by policies that
are directed at the agricultural sector as a whole for e.g. input subsidies)
§ Equivalent Measurement of Support (product-specific support for which it is
impractical to use the AMS methodology).
Total AMS is expressed as a percentage of the total value of output of
agriculture. It does not have to be reduced if it is less than 5 per cent in case of
the developed countries and 10 per cent in case of developing countries.
Otherwise, as per the AoA, developed countries have to reduce their AMS by 20
per cent in equal annual installments over the implementation period of six years
and the developing countries have to reduce it by 13.3 per cent over a period of
ten years.
The initial AMS calculations were to be based on the levels of support that
existed during 1986-88. Product-specific AMS (or market price support) was
calculated using the gap between the applied administrative price and the fixed
external reference (world) price.
Chapter VI Science of Profit 127
Science of Profit
Technological Changes in Agriculture
There is no doubt that Indian agriculture had reached a stage

of crisis by the decade of the sixties. Stagnation, food crisis and the
widespread peasant unrest were some of the warning signals.
Instead of undertaking changes in the institutional structure of
agriculture, the state adopted a technological solution to the
situation that confronted it. The technology of Green Revolution
was introduced in the late sixties. It definitely improved yields and
productivity of certain crops in certain regions. But the question
that the proponents of Green Revolution fail to answer is – if this
technology was so munificent for the farmers of our country, then
why are large numbers of them committing suicides in those very
parts where Green Revolution was introduced in the first place?
This chapter has been divided into two sections. The first section
deals with the genesis, history and politics of Green Revolution,
and the violence it wreaked on the ecosystem and soil and water
resources of our country. The second section of the chapter deals
with another technology which is gaining credence amongst
policymakers as the solution to the crisis facing Indian agriculture
today – genetically modified seeds. Both the sections illustrate the
fact that technology in agriculture has always been imposed in the
interests of forces that only seek to maximise profits.
GREEN REVOLUTION
Green Revolution refers to the transformation of agriculture
that began in 1943 in the developing world which led to increases
in agricultural production in some regions. This transformation took
place as the result of programmes of agricultural research,
extension, and infrastructural development, initiated and largely
funded by the Rockefeller Foundation, Ford Foundation and other
research agencies. In India, the Green Revolution strategy was
adopted in 1967-68 under considerable pressure from the US
government and corporations, as the foremost technique for
combating the food crisis of the fifties and sixties. Agriculture in
Punjab is often cited as the most successful outcome of the Green
Revolution techniques. A closer inspection reveals an altogether
different story. On the one hand, the application of high yielding

varieties of seeds, fertilisers and pesticides increased the
agricultural production, however, on the other hand, in the coming
years, all countries including India, witnessed its negative impacts
on their environment, economies and the societies; so there is
definitely more to Green Revolution than meets the eye.
A brief history
In 1889, Dr. John Voelcker was appointed by the Secretary of
State to India to advise the imperial government on the application
of agricultural chemistry to Indian agriculture. In his report to the
Royal Agricultural Society of England he stated: - “I explain that I
do not share the opinions which have been expressed as to Indian
agriculture being, as a whole, primitive and backward...Whilst
where agriculture is manifestly inferior, it is more generally the
result of absence of facilities which exist in the better districts than
from inherent bad systems of cultivation. I make bold to say that it
is a much easier task to propose improvements in English
agriculture than make really valuable suggestions for that of India.
Certain it is that I at least, have never seen a more perfect picture
of careful cultivation combined with hard labour, perseverance and
fertility of resource.”1
Under British rule, Indian peasants had been forced to shift
from food grains cultivation to cultivation of commercial crops (like
indigo and cotton). This added to their misery and pushed them
into the clutches of landlords and moneylenders. Moreover, the
partition of 1947 threw the country into disarray. The upheavals
during this period left India facing a huge food crisis.
India’s first agriculture minister, K.M. Munshi, devised a
meticulous strategy in 1951 to rebuild the ecological base of
productivity in agriculture. It was clearly understood that the wide
diversity of India’s soils, crops and climates had to be taken into
account, a fact that was overlooked when the government adopted
the famed Green Revolution. This strategy of consideration of every
village and sometimes every individual field was regarded essential
to the programme called ‘land transformation’. Again, we see a stark
difference between the land transformation programme and the
Green Revolution, in that the latter focused only on the
infrastructurally-abled states.
The Community Development Programme (CDP) was
undertaken with help provided by the US in the early fifties. In
Science of Profit 129
1952, fifteen community development projects, each spanning about

ten villages, were undertaken with the Ford Foundation’s financial
assistance. It aimed at changing the face of Indian villages and
improving the quality of village life. This step reflected the political
need of the Congress to do something to improve the socio-political
conditions prevailing in rural areas, so the growing menace of
peasant movements could be curtailed. Nehru expected it to serve
“as a model for meeting the revolutionary threats from left-wing
and communist peasant movements demanding basic social reforms
in agriculture.”2 It was claimed that the Community Development
Programme would bring about a holistic development of the villages
through mutual co-operation and self-help of the villagers
themselves. The programme focused not only on intensive
agricultural development, but also on the improvement of health
and education, social welfare, road-building and so on. While the
“community projects budgeted only one-third of the costs of land
reclamation, drainage, and irrigation and road-building schemes”
they depended for the rest on “village contributions in labour and
money”. Thus the entire face of rural India was expected to be
transformed – peacefully. Nehru discovered “a sense of almost
family kinship” among the inhabitants of a village — between the
landlords and their tenants, the usurers and their victims, the upper
castes and the serving castes. The masses of the peasantry, cruelly
oppressed and exploited for centuries, were expected not to attack
the property structure and change it, but to be enthused enough to
contribute voluntary free labour and donations.3
The CDP was abandoned in 1959 when a Ford Foundation
delegation of agronomists visited India. They argued that it was
practically impossible to make simultaneous headway in all of
India’s 550,000 villages. Their recommendations for a selective and
intensive approach amongst farmers and amongst districts led to
the demise of the Community Development Programme and the
launching of the Intensive Agricultural Development Programme
(IADP) in 1960-61. The IADP methodology was a top-down,
chemically intensive one; industrial inputs like fertilisers were to
be employed at a massive scale, helping Indian agriculture break
out of the “shackles of the past”.4 Under this Ford Foundation
programme, agriculture was transformed from being based on
internal inputs to being dependent on external purchased inputs
for which credits became necessary; this, of course, ensured the
dependence of the Indian farmer on the transnational corporations
(TNCs). The IADP created special pockets for agricultural

development to which material and financial resources of the
country were diverted, which would further deepen the socio-
economic disparity already existing between the different regions
in the nation.
The IADP was the precursor of the Green Revolution in India.
It paved the way for the penetration and control of Indian
agriculture by USA and a number of TNCs. The ‘Report on India’s
Food Crisis and Steps to meet it’ by the Ford Foundation in 1959
implicitly criticised the entire approach of institutional change (i.e.
change in the property structure) as the cornerstone of agricultural
strategy and recommended the adoption of an intensive and
selective development strategy, involving the concentration of a
combination of modern practices – improved seeds, chemical
fertilisers, and pesticides in “irrigated areas of the country” – in
about twenty five districts of Punjab (which then included Haryana)
and parts of Uttar Pradesh, Madhya Pradesh and Bihar. It stressed
heavily on the use of chemical fertilisers, stating: “If food goals are
to be reached, fertilisers must have greater emphasis and a top
priority in both agricultural planning and allocations of foreign
exchange, both for the fertiliser materials and for any machines
needed for constructing new plants.”
The policy was to ensure imports of chemical fertilisers from
the Western countries as well as the import of capital goods and
technology for building chemical fertiliser plants in India, which
were to be set up by transnational corporations, either by themselves
or with Indian collaboration. India was poised to become a captive
market for fertilisers, pesticides and farm machinery manufactured
by these firms.
The food crisis of the 1960s best exemplified this dependence
and the mood among our policymakers. Devinder Sharma, a
researcher on food and trade policy, described the situation thus:
“Agriculture Minister C. Subramanian sat huddled with his senior
staff. There was tension in the air. Depending on imported food
grains coming from 12,000 miles away, particularly when it came
in driblets following US President Lyndon Johnson’s directive to
“teach India a lesson” was humiliating enough. What worried him
was that food stocks had reached such a precarious low that they
were only sufficient for another two weeks. Still worse, there was
nothing in transit. Recalls Subramaniam, ‘As a last resort, I told
my officials and experts to identify the nearest food-carrying ships

on the ocean throughout the world. I said we would identify those
carrying wheat to other countries and appeal to the US President
to divert them to India if other countries could wait for another six
to eight weeks.’ This was in 1966-67, the critical year of drought
when India imported 11 million tonnes of foodgrain. A year earlier,
India had imported 10 million tonnes of foodgrain. The production
of food grains fell steeply from 89 million tonnes in 1964-65 to an
annual average of only 73 million tonnes in the next two years.
Around this time, the Paddock brothers, often referred to as
‘prophets of doom’, concluded in their book, Famine 1975, that by
the mid-’70s at least half of India would be led to a slaughter house.”5
In 1960, Norman Borlaug, the world’s foremost research
scientist working on development of modern techniques in
agriculture, addressing scientists and UN officials, proposed setting
up a programme in CIMMYT, Mexico (which had been set up under
the auspices of the Ford Foundation) for training agronomists from
different countries. These scientists were schooled in genetics,
agronomy, soils and plant breeding for a year and returned to their
respective nations to put the knowledge to practical application.
This model was called as the ‘Practical School of Wheat Apostles’.
Dr. M.S. Swaminathan, considered India’s premier agriculture
research scientist at that time and one of Borlaug’s wheat apostles,
arranged for him to visit India in 1963 and make recommendations
towards the betterment of agriculture in the country. Borlaug
concluded “There is the prospect of a spectacular breakthrough in
grain production for India. The New Mexican varieties will do well
and grow beautifully in India if the quantities of fertiliser and other
vital necessities are made available.”
It was in the interests of American advisors and experts to shift
India’s agricultural research and policy from an indigenous and
ecological model to an exogenous input-intensive one. Lal Bahadur
Shastri, the Prime Minister in 1965, had cautioned against rushing
into a new form of agriculture that had been developed without
considering the environmental and economic conditions in India,
and which had also not been subjected to any rigorous field-testing.
The Planning Commission, which approves all large investment in
India, was also bypassed as it was viewed as a bottleneck.
According to Felix Greene “At about this time several American
oil companies were negotiating to establish fertiliser plants in India.
The Indian government wished to keep the distribution and the

selling of the fertiliser in its own hands. This did not at all suit the
oil companies. While countless Indians were starving, food
shipments were ordered to be held to force the Indian government
to capitulate to the demands of the oil companies. The US
government refused to sign a fresh long-term agreement with India
under the Public Law 480 scheme (PL 480)6 when the existing
agreement expired in August 1965.”7 On 15 May 1965, New York
Times reported that the US government and the International Bank
for Reconstruction and Development [World Bank] had insisted that
India provide easier terms for foreign private investment in fertiliser
plants as one of the conditions for resumption of economic aid.
They also asked the Indian government to take measures to
curb the population growth and devalue the rupee. In November
1965 the Union Food Minister Subramaniam went on a tour to
Washington and submitted his ministry’s programme for comment
to the US Department for Agriculture. He came back with
assurances that the new agricultural strategy would satisfy the
basic conditions for a resumption of American food shipments. In
December in another meeting between Subramaniam and US
Secretary of Agriculture Orville Freeman, the specific policy
proposals were reviewed item by item, including the plans for
incentives to foreign private investment, especially in fertilisers.
US President Johnson insisted that these proposals should be put
in a written agreement, which was duly signed by the Indian
government. The central government announced a new policy of
concessions to foreign private companies willing to invest in the
fertiliser industry; foreign companies were free to set their own
prices and establish their own distribution apparatuses for a period
of seven years. As directed by the World Bank, devaluation of the
rupee was carried out by 36.5 per cent in 1966. India succumbed to
the mounting pressure of the US government and the World Bank,
which were actively promoting the interests of the corporate
businesses; as a New York Times article put it: “India simply has
nowhere to turn.”
Taking advantage of the famine conditions prevalent in several
regions of the country, by the mid-1960s Indian agricultural policies
had been adjusted to utilise and promote the new seeds. The
programme came to be known as the New Agricultural Strategy. It
concentrated on one-tenth of the cultivable land, and initially, only
on one crop—wheat. By the summer of 1965, India with Pakistan,
had ordered 600 tonnes of wheat seed from Mexico. In the fall of
1966, India spent $2.5 million for 18,000 tonnes of Mexican wheat
seed. By 1968, nearly half the wheat planted came from Borlaug’s
dwarf varieties. By 1972-73, 16.8 million hectares were planted with
dwarf wheat and 15.7 million hectares with dwarf rice across the
third world. Up to 94 per cent of the hybrid rice area was in Asia,
with half of it in India.
What did Green Revolution do?
Technically speaking, there were three basic elements in the
Green Revolution approach:
§ The quantitative expansion of area under cultivation, which was
being done since 1947, continued.
§ Double-cropping of existing farmland: Instead of one crop season
per year, the decision was made to have two. The one-season-
per-year practice was based on the fact that there is only one
natural monsoon per year; so the increase in demand for water
for the two cropping seasons needed to be met with. Dams were
built to arrest large volumes of monsoon water which was earlier
being wasted. Simple irrigation techniques were also adopted.
§ The most important aspect of Green Revolution was the use of
high yielding varieties (HYVs) of seeds. Initially these seeds were
used for wheat and rice cultivation, but later HYV millets and
corn were also developed. These HYVs were in reality high
responsive seeds, HRVs; this meant that high yields could only
be attained under intensive application of fertilisers and water.
The Green Revolution resulted in a record grain output of 131
million tonnes in 1978-79, establishing India as one of the world’s
biggest agricultural producers. India also became an exporter of
food grains around that time. Yield per unit of farmland improved
by more than 30 per cent between 1947 and 1979. The crop area
under HYV varieties grew from 7 per cent to 22 per cent of the total
cultivated area during the 10 years of the Green Revolution. More
than 70 per cent of the wheat crop area, 35 per cent of the rice crop
area and 20 per cent of the millet and corn crop area used the HYV
seeds. The document ‘Towards a New Green Revolution’ produced
in 1996 at the World Food summit claimed that the gains in
production were in fact as dramatic as anticipated and that over
the past 30 years the volume of agricultural production had doubled
with world agricultural trade having increased threefold. The same
report also recorded that between 1970 and 1990, fertiliser

applications in developing countries shot up by 360 per cent while
pesticide use increased by 7 to 8 per cent per year.
The Green Revolution was heralded to be a success, and viewed
as a harbinger of socio-economic prosperity. Undoubtedly the yield
of crops did increase for a number of years, but the Green Revolution
had a wide range of negative impacts which became apparent only
later. Apart from increasing the disparities amongst farmers and
regions, Green Revolution meant the introduction of new hybrids
at the expense of locally adapted indigenous varieties, forced
changes in practice and an accentuated dependence on pesticides,
fertilisers, machinery and the manufacturers of these inputs. The
costs of farming increased manifold. Water resources were depleted.
The quality of water, land and people’s health declined due to an
increased exposure to chemicals. Nutrient levels in soils and crops
decreased. Moreover pests and diseases, far from being eliminated,
adapted and became more lethal than before.
The promised yields also were not always forthcoming. In order
to achieve high yields the farmers tried to emulate field-test
conditions, meaning that large quantities of fertilisers and pesticides
were put to use. But even this did not always result in the expected
yields. For example, in Asia where the International Rice Research
Institute, Philippines (IRRI), claimed that the Green Revolution
rice varieties could achieve yields of 10 metric tonnes per hectare
at research stations, most farmers could get only 3-6 metric tonnes
per hectare, depending on the country.
Maintaining a vast pool of genetic diversity had been a central
principle of indigenous breeding strategies. Diversity contributed
to ecological stability and hence to ecosystem productivity. The
Green Revolution, on the other hand, focused on increasing genetic
uniformity on farms as it became imperative both from the view of
centralised production of seeds as well as centralised provisioning
of inputs like water and fertilisers.
Under Green Revolution, mixtures and rotation of diverse crops
were replaced by monocultures of wheat and rice. Since this had to
be reproduced over large scale, the genetic base became very narrow
and hence susceptible to pest attacks, turning minor diseases like
karnal bunt, alternaria leaf blight, glume blotch, foot-rot and
seedling blight disease into epidemics. In 1973-74 the Philippines
rice crop was almost wiped out by tungro, a disease (virus) carried
by the brown plant-hopper – an insect pest which keeps developing

new biotypes resistant to the latest crop strain’s immunity to it. In
1975, Indonesian farmers lost half a million acres of rice to tungro.
When HYV seeds replaced native cropping systems, the
diversity was lost irreplaceably. For example in Andhra Pradesh,
one study found that the incursion of Green Revolution led to a loss
of 95 per cent of traditional rice varieties in the absence of collection
or documentation. Unlike the traditional high yielding varieties
which have evolved along with the local ecosystems, the Green
Revolution HYVs need to be replaced frequently. Seeds, a renewable
resource, are thus converted into a non-renewable resource, with
each variety usable for only one or two years before it gets overtaken
by pests, with crop loss varying between 30 to 100 per cent.
Obsolescence replaced sustainability.
Cropping systems based on diversity have a built-in protection.
Indigenous varieties are resistant to locally occurring pests and
diseases. Even if certain diseases occur, some of the strains may be
susceptible while others will have the resistance to survive. Crop
rotations also help in pest control. Since many pests are specific to
particular plants, planting crops in different seasons and different
years causes large reductions in pest populations. On the other
hand, planting the same crop over large areas year after year
encourages pest build-ups.
Pesticides also kill ‘friendly insects’ – crucial predators of pests
or disease vectors. Massive use of pesticides helps pest resistance
to develop rapidly as pest resistance is an ecological state, not an
engineered one. The unwarranted pesticide use also affects soil
productivity and is detrimental to human health. Fertilisers too
have a very harmful effect on vital soil organisms.
One of the most serious long term impacts of the so-called
modern techniques has been on the soil and water resources. The
Green Revolution technology omits the importance of the complex
life of soil and does little for its preservation or replenishment. To
retain the natural fertility of the soil and to get high yields, farmers
end up using more and more fertilisers, getting caught in a vicious
cycle.
The introduction of Green Revolution irrigation methods
marked a significant departure from any notion of sustainable water
use. The canals, let alone solely rainfall, could no longer provide
the much heavier irrigation needed for the Green Revolution seeds
The International Rice Research Institute (IRRI) was set up in 1960 by the
Ford and Rockefeller foundations, nine years after the establishment of a premier
Indian institute, the Central Rice Research Institute (CRRI) in Cuttack. CRRI
was working on rice research, based on indigenous knowledge and genetic
resources, a strategy clearly in conflict with the American controlled strategy of
the IRRI. The director of CRRI, Dr. R. H. Richharia was removed, under
international pressure, when he resisted handing over his collection of rice
germplasm to IRRI and asked for restraint in the hurried introduction of the
HYV varieties. Reluctant to compromise even a little on his principles, Richharia
went to the Orissa High Court, where for three years, he fought a legal battle
that ruined his family, disrupted the education of his children, and brought
tremendous strains on his wife’s health. The legal battle was successful, for in
1970 the Court ordered his reinstatement as director of the CRRI.
Meanwhile, the Madhya Pradesh government had appointed Dr Richharia
as an agricultural advisor, and he set about his disrupted work once again. By
1976, he had built up the infrastructure of a new rice research institute at Raipur
(then in Madhya Pradesh, now in Chhattisgarh) where he maintained over 19,000
varieties of rice in situ on a shoestring budget of Rs.20,000 per annum, with not
even a microscope in his office-cum-laboratory, situated in the neighbourhood
of cooperative rice mills. His assistants included two agricultural graduates and
six village level workers. Richharia had created, practically out of nothing, one
of the most extraordinary living gene banks in the world.
With regards to the IRRI hybrid rice variety introduced in Asia, all of
Richharia’s predictions had come true: the narrow genetic base created alarming
uniformity, causing vulnerability to diseases and pests, with crop losses ranging
from 30 to 100 per cent. Most of the released varieties were not suitable for
typical uplands and lowlands which together constitute about 75 per cent of the
total rice area of the country.
The IRRI counter-strategy involved breeding of varieties with genes
resistant to such pests, taken from traditional cultivators of rice. This gene
incorporation strategy made it imperative to collect vast germplasm resources,
most of which were to be found in India. The recruitment of Dr M.S. Swaminathan
would be instrumental in the task of collection.
IRRI looked towards Richharia’s 19,000 varieties at the Madhya Pradesh
Rice Research Institute (MPRRI) set up in Raipur. Richharia had uncovered a
fascinating world of traditional rice varieties, some of which produced between
8-9 tonnes per hectare (better than the IRRI varieties); he had also discovered
the susceptible dwarfing gene of the IRRI varieties. His extension work among the
farmers would soon begin to pose a direct challenge to IRRI itself.
IRRI staff members journeyed to Raipur and asked for his material. He refused
because he had not studied the material himself. So IRRI did the next best thing: it got
the MPRRI to shut down.
The Indian Council for Agricultural Research (ICAR) floated a scheme for
agricultural development in Madhya Pradesh, particularly for rice. The World
Bank contributed Rs.4 crores. The condition laid down was: close down the
MPRRI, since it would lead to a ‘duplication of work.’ At a special meeting of the
MPRRI Board, Madhya Pradesh’s Chief Secretary was present, who was not a
trustee and was earlier connected with the Ford Foundation. A resolution was
passed closing down the Institute, and the rice germplasm passed over to the
Jawaharlal Nehru Krishi Vishwa Vidyalaya (JNKVV)s. Scientists were sent to
IRRI for training in germplasm transfer, and Richharia’s team was disbanded.
This time too, they locked Dr. Richharia’s rooms and took away all his research
papers.
It is also relevant to point out here that Dr. Richharia’s collection of 19,000
rice varieties is today in the hands of the Indira Gandhi Agricultural University
(IGAU), Raipur, which has since then added (only) another 5,000 varieties. The
official number of samples existing with IGAU is therefore 24,000. In 2002,
IGAU signed a MoU with Syngenta, for a collaborative “research” agreement
that would have entailed the transfer of this rice germplasm collection from the
University to the corporation’s laboratories. Syngenta was to have marketed
new rice varieties developed by it using this gene stock and paid royalties to
the University. A local newspaper “leaked” the story and the resultant outcry in
the local media forced the University to cancel the agreement.
Source: Vandana Shiva, The Violence of the Green Revolution
and technologies. The new hybrid wheat of the 1960s used three
times more water than the traditional varieties. There was a huge
increase in the number of wells to meet the growing needs. Many
wells were made possible only through the installation of tube wells.
The usage of water for irrigation fast exceeded the rate of recharge
of groundwater creating “black zones” in many parts where Green
Revolution was introduced. Water tables threatened to go down so
deep that soon lifting water to the surface would require very heavy
capital investment in the form of high-power electric motors or

submersible pumps, option only large farmers could avail. Water
tables have fallen in 264 of the country’s 596 districts. As a result
of its worsening condition, the soil’s response to inputs has been
decreasing, necessitating larger and larger doses of chemicals and
fertilisers. According to the Department of Land Resources in the
Ministry of Rural Development, nearly two-thirds of India’s
agricultural land is degraded or sick.
In lowland areas, where the water table is relatively shallow
but inaccessible through tube wells, intensive canal irrigation has
waterlogged significant stretches of cultivated land. This in turn is
the cause of “salt poisoning” or salination of land, which
permanently destroys the ability of land to effectively grow crops.
As the water table rises due to water logging, not only does salt
leech into the soil but pesticides and chemicals that had previously
sunk into aquifers are drawn back up into ground level drinking
water as well.
Modern plant breeding concepts under the Green Revolution
reduced farming systems to individual crops and parts of crops.
Traditional farming systems are based on mixed and rotational
cropping systems of cereals, pulses, oilseeds with diverse varieties
of each crop, while the Green Revolution package is based on
genetically uniform monocultures. Usually the yield of a single crop
like wheat or maize from traditional farms is singled out and
compared to yields of new varieties. Even if the yields of all the
crops were included, it is difficult to compare a measure of pulses
into an equivalent measure of say, wheat because in the diet and in
the ecosystem they have different functions. Similarly, the nitrogen-
fixing capacity of pulses and other legumes is an invisible ecological
contribution to the yield of associated cereals. The traditional
cropping systems are diverse and complex and hence it is unfair to
compare them to the simplified monocultures of HYV seeds.
The indigenous cropping systems are based only on organic
inputs from the farm – seeds come from the farm, soil fertility comes
from the farm and pest control is built into crop mixtures. In the
Green Revolution package, yields are intimately tied to purchased
inputs of seeds, fertilisers, pesticides and to intensive irrigation.
High yield is not an inherent quality of the seed itself, but is a
result of the application of required inputs such as specific amounts
of water and fertilisers. These in turn have severe ecologically
destructive impacts. In fact, in the absence of external inputs of

fertilisers and irrigation the HYV seeds perform worse than
indigenous varieties. The measurement of output is also biased by
restricting it to the marketable part of crops. However, in India,
crops have traditionally been cultivated to produce not just grain
for man but also fodder for animals, and organic fertiliser for soils.
In fact as an important fodder, the quantity of straw obtained per
acre is important in India.
The Green Revolution has been blamed for causing reduced
levels of essential micro nutrients in food crops. This is due to a
number of reasons such as the methods and inputs which have
degraded the soil and killed off many micro-organisms that make
those nutrients available. Communities also lost traditional sources
of essential micro-nutrients and vitamins in the form of plants that
were considered weeds under the new regime and were hence
eliminated.
There is no dispute when one states that chemical fertilisers
are no substitute for organic matter and cannot replace these vital
interrelationships or the essential nutrients in either the soil or
the plant. The run for bulk varieties rather than ones with
nutritional values has had serious impact on food quality and human
physical and mental health. More than two million people today
consume diets less diverse than 30 years ago, leading to deficiencies
in micronutrients, like iron, vitamin A, iodine etc. Surprisingly the
Green Revolution is said to have contributed to micronutrient
malnutrition afflicting more than 40 per cent of the world
population, and it continues to take its toll in the developing
countries. The FAO has confirmed that these micronutrient
deficiencies have a serious impact on human health, learning ability
and productivity, which can be seen as high costs in terms of lost
human potential and well being with serious socio-economic
consequences.
Also a widely acknowledged trend that this revolution brought
about was the exponential increase in the costs of farming, which
naturally had serious impact on smaller farmers. The need for
expensive equipments and machinery gave larger farmers an
advantage, since they found it easier to secure credit. This led to a
rise in income disparities in the Indian villages. The reduction in
economic viability of agriculture forced many farmers to migrate
to cities in search of new means of livelihood.
The most daunting feature of the Green Revolution was the

transformation of agriculture into agribusiness, which paved the
way for the entry of avaricious corporations, whose sole motive was
profit maximisation. The major family foundations – Kellogg,
Rockefeller, and Ford – have played an active role in exporting the
Green Revolution to India and other underdeveloped countries. It
is worthwhile to note that out of all the international crop research
stations, there is only one that has not come up through any of the
‘foundations’. With their control over the ‘seed end’, a few
transnational corporations based in the West have acquired
enormous economic and political power over developing countries.
Burbach and Flynn write: “[T]hey (the transnational
corporations) have foisted agricultural technologies on the Third
World that have had devastating consequences. In the 1960s the
fertiliser companies numbered among the main propagators of the
myth that the hunger and malnutrition problems could be solved
by applying the technologies of the Green Revolution. The
corporations’ motive for pushing this approach was not based on a
concern for world hunger, but on the need to get rid of the supplies
of excess fertiliser that were depressing world market prices.
Questions of adverse social and economic effects were not even
considered as the fertiliser companies pressured the Agency for
International Development (USAID), the World Bank, and other
agencies to finance the use of Green Revolution technologies
throughout the Third World.”8
The Cultivation of Profits

Transnational corporations are corporations that function in more than one
country at a time. Today they are some of the most powerful political and
economical entities of the world, some even more powerful than the nations
across whose borders they operate. Out of the hundred largest economic entities
in the world, 51 are corporations, not countries. Needless to say, interests of
the most powerful governments in the world are often intimately intertwined
with the expanding pursuits of the TNCs that they charter. Along with their host
governments, the TNCs are re-organising the world economic structures and
thus the balance of political power through a series of inter-governmental trade
and investment accords. Many of these TNCs operate in the field of agricultural
commodities.
Cargill Incorporated is an international marketer, processor and distributor
of agricultural, food, financial and industrial products and services. In 1997, its
global revenue was $56 billion, generating net earnings of $814 million, making
it wealthier than many developing nations. Cargill controls about one-fourth of
the world’s grain production. This gives the company unparalleled power to
control prices around the world. It does this by either flooding the markets with
grain or by keeping its grain transportation ships at high seas for months. The
company’s control over the market goes to the extent of owning satellites, which
predict future drought prone or bountiful areas across the world. It is also the
second largest phosphate fertiliser producer in the world.
Monsanto, another US based company deals in genetically modified crops,
agro-chemicals, seeds and bovine growth hormones. The company operates
in 52 countries and is the largest seller of GM crops in the world. 80 per cent of
the world’s farmlands planted with GM crops in 1999 were Monsanto products.
It is the second largest seed company in the world with global sales of $ 1,700
million. A major chunk of Monsanto’s income comes from its Roundup Ready
(brand name for glyphosate- resistant crop) GM crops and Roundup herbicides.
Being the biggest seller of GM crops in the world, its major sales are in US,
Canada and Argentina and smaller sales in India and South Africa. Monsanto
has been unsuccessful in Europe as its campaign to commercialise GM crop
misfired evoking a moratorium.
DuPont’s acquisition of Pioneer Hi-Bred in 1999 has made it the largest
seed company in the world. Dupont recorded a turnover of $ 247 billion in
2001, agriculture accounting for 16 per cent of that. Dupont’s acquisition is a
step in its effort to shift in a direction of self-development of GE crops, resistant
to its herbicides and pesticides. Dupont’s share in the seed market will facilitate
the sale of these GM products directly to the farmers.
The top twenty corporations of the world are responsible for a quarter of
the world’s economic activity while employing less than one per cent of the
population. Three companies – Cargill, Archer Daniels Midlands and Bunge –
control nearly 90 per cent of global grain trade while DuPont and Monsanto
dominate the global seed market. Eleven firms account for about half the world
sales of seeds, of which about a quarter are sales of genetically engineered
seeds. Syngenta, Bayer, Monsanto, BASF, Dow and DuPont together control
85 per cent of the annual pesticide market valued at 30 billion US dollars.
Corporate takeover of agriculture has been achieved through a process of
‘vertical integration’ which means taking over of the entire food production cycle,
from the development of proprietary strains of crop species and the sale of
seeds to farmers right down to the distribution and retail sales of food products
in supermarkets.
Farm input suppliers have merged with, acquired or forged partnerships

with other input suppliers and so have the food processors and food
manufacturers. This implies that in the wheat market for instance, with the
presence of a few large input suppliers and buyers, the wheat farmer has only
a few suppliers of inputs or purchasers of final products to choose from and is
forced to accept the offered prices in the absence of holding power. The
companies, on the other hand, have access not only to the entire domestic
market through their wide network of transportation facilities, but also to the
international market. So they are under no compulsion to buy from farmers
demanding higher prices. By integrating all the stages of the food system the
companies have come to own the products from the farm to the shelf,
consolidating their economic power.
Cargill, for example, has been involved in agriculture right from supplying
seeds, fertiliser and other farm inputs; to the procurement and processing of
food grains and other farm produce. In 1998 Cargill embarked on a joint venture
with the GE giant Monsanto. With this it now has access to biotechnology and
the genetically engineered products, which it would market through its extensive
worldwide network. Joint ventures and mergers of this type are fast becoming
the norm and are not restricted to just two companies but involve more than
two companies leading to the emergence of what are termed as ‘food chain
clusters’. With new advances in gene research, such as the ‘terminator seed’
technologies developed by Monsanto, the farmers would end up depending on
the companies at each stage of the production process.
According to US laws, private companies like Cargill, Monsanto are not
even required to publish or make public any information about their activities.
Thus information on company details, test results and the like are very hard to
come by. It is no wonder then that governments, public institutions and the
public have such a foggy idea of new technologies being dished out to them
every day. Biotech corporations use every trick in the book to create a positive
image of their products in the public eye. They have been known to engage key
scientists to speak about their proposed technology. Many vocal and visible
scientists who speak in favour of GM reflect a strong pro-corporate bias. These
corporations have a very strong lobby in the government and international
institutions, working directly and indirectly through trade associations.
Source: Amit Thorat ‘Rising Market Control of Transnational Agribusiness’,
December 2003, www.networkideas.org
FROM GREEN REVOLUTION TO GENETIC MODIFICATION

India’s first experience with Green Revolution has been termed
successful because it increased yields and productivity of certain
crops in certain regions. Now, several nations, including India are
experimenting with a new technological revolution-that of genetic
engineering and farming genetically modified crops. This is being
termed as the next ‘great Green Revolution’.
Genetically modified crops (GM) or more accurately genetically
engineered crops, refer to crops that have had their DNA altered
through the techniques of genetic engineering. GM crops are usually
crop plants created for human and animal consumption using the
latest techniques in molecular biology. The genetic material of these
plants, that is their DNA, is altered in research laboratories to
enhance certain desired traits in them such as an increased
resistance to herbicides or an improved nutritional content. The
technology of genetic engineering (GE), wielded by transnational
“life science” corporations (such as Monsanto) is the practice of
altering or disrupting the genetic blueprints of living organisms –
plants, animals, humans, microorganisms – patenting them, then
selling resultant gene-foods, seeds or other products for profit. “Life
science” corporations proclaim, with great fanfare, that their new
products will make agriculture sustainable, eliminate world hunger,
cure diseases, and vastly improve public health.
A sequence of scientific breakthroughs such as the discovery of
DNA by Crick and Watson in 1953 and the creation of the first
recombinant bacteria in 1973 i.e. Escherich coli (E. coli) expressing
a salmonella gene, can be held responsible for setting in motion the
revolution of genetic engineering and genetically modified
organisms (GMOs). Herbert Boyer founded ‘Genetech’ the first
company to use recombinant DNA technology. In 1978, the company
had created an E. coli strain producing the human protein insulin.
Around 1986, Advanced Genetic Sciences of Oakland, California
and Monsanto were ready to hold field trials of bacteria genetically
engineered to protect crops from frost damage (ice-minus bacteria)
and microbes developed to incorporate pest resistance proteins
respectively. Precise engineering of genetically modified plants first
took place in 1982. In 1992, Calgene, in the USA obtained a patent
for FlavrSavr, a tomato modified to delay ripening and thus enhance
its shelf life. Since the first commercial cultivation of GM plants in
1996, GM plants tolerant to the herbicides Glufosinate and
Glyphosate and producing the Bt. Toxin, an insecticide, have

dominated the agricultural seed market for corn and other crops.
In 1998, Delta & Pine Land Company received a US patent on a
method for producing plants with seeds, which are sterile when
replanted – the ‘Terminator technology’.
GM crops have been widely adopted in the United States. They
have also been extensively planted in several other countries like
Argentina, Brazil, South Africa, India and China. At least 64 GM
crop varieties have been approved in the USA and Canada, 20 in
Japan and 8 in Europe. The world market for agricultural seed is
worth an estimated USD 45 billion a year, of which one third is
commercial proprietary seed i.e. seed uniformly produced in bulk
by commercial companies, one third is produced by governments
or publicly funded institutions and one third is the value of seed
saved by farmers for their own use in future crops.
The commercial development of genetically modified crops is
dominated by Monsanto and a few other major agro-chemical
companies, including DuPont, Dow Elanco, Novartis, AgrEvo
(jointly owned by Hoechst and Schering) and Zeneca. The efforts of
these companies have so far been concentrated in high-volume crops
that offer the most opportunity for sales large enough to recoup
research costs and generate profits. The main targets have been
soybeans, maize, cotton, oilseed rape (canola), potatoes and
tomatoes.
Between 1995 and 2005, the total surface area of land cultivated
with GMOs had increased by a factor of 50. In 2003, countries that
grew 99 per cent of the global transgenic crops were the United
States (63 per cent), Argentina (21 per cent), Canada (6 per cent),
Brazil (4 per cent), China (4 per cent) and South Africa (1 per cent).
The Grocery Manufacturers of America estimate that 75 per cent
of all processed foods in the US contain a GM ingredient. There has
been rapid and continuing expansion of GM cotton varieties in India
since 2002.
Since its introduction, genetically modified food items and their
safety as well as ethical acceptability has been one of the most hotly
debated issues. There is a clear divide between those who endorse
the new technology as the miracle answer to the hunger problems
of the world and those who are concerned about messing with
natural processes and the environmental apocalypse it could
unleash. Many in the higher echelons of power and authority feel
that with the current availability of land, water resources, labour,

finance and crop production technologies it will be quite difficult to
increase crop production to solve all of India’s food problems. GM
technology is being looked upon as yet another technical fix to our
problems.
GM technology is supposed to have several benefits and
mindboggling possibilities. It is claimed that GM technology can be
used to develop pest resistance, herbicide resistance, disease
resistance and drought, salinity and cold tolerance in different crops
and vegetables. The propagators of GM claim that pest and herbicide
resistance traits of GM plants have been designed keeping in mind
the needs of the farming community; these are meant to increase
yields and also bring down expenses on chemical inputs.
However, the truth of these claims has been contested. In the
case of the most cultivated GM crop, soybean, there is evidence to
Claims of GM Technology
Likely future developments in Genetically Modified seeds technology includes:
q Continued development of herbicide-tolerant, virus- and pest-resistant crops.
q Methods to speed up traditional plant breeding.
q Further development of fruit and vegetables in which the production of ethylene is
suppressed so as to delay ripening.
q Modification of oils, fats and starches to improve processing or dietary
characteristics.
q Improvement of flavour, texture, bio-absorbability, nutritional content and
elimination of genes for toxic substances and allergens.
q Identification of genes controlling salt tolerance, resistance to drought, flood,
and extreme temperatures, and response to day length.
q GM crops that fix nitrogen with greater efficiency, thereby reducing the need
for fertilisers.
q GM plants that produce vaccines or therapeutic agents.
q GM bio-degradable plastics grown in plants such as rapeseed which could
begin to replace plastics from fossil fuels within a decade.
q GM plants for bio-remediation, i.e. removing toxic chemicals and agro-
chemical residues from the soil.
show that the yields have suffered. In India, excluding Gujarat, most
states have had fluctuating yields with Bt cotton. In the very first
year of commercial Bt Cotton cultivation in India (2002-03), the largest
survey on performance was done in Andhra Pradesh, by the
Department of Agriculture which covered 53 per cent of all Bt cotton
farmers in the state. In the survey 71 per cent farmers reported low
yields when compared to local hybrids. In 2004, the Andhra Pradesh
government officially ordered Monsanto Mahyco Biotechnology Limited
(MMBL) to pay compensation to the tune of Rs. 4 crores to Bt Cotton
farmers who lost their crop, which the company refused to do.
Though widespread scientific research has been going on for quite
some time to study possible uses of the GM technique such as those
mentioned above, there have been no large-scale successful field tests
as yet. The potential risks of GM crops are many. First, we cannot
know the exact content of these crops. It takes heavy finance to get
this analysis done in laboratories. Most of the developing countries do
not possess analytical techniques to compare GM with non-GM foods.
Most results that are reported to the public simply quote
laboratory results. Needless to say that the probability of these
crops failing to show promised results once planted in the natural
environment with less than perfect soil, water, and sunlight and
nutrient conditions is quite high. Official data and documentation
of test results is unavailable. Very few companies have participated
in public debate regarding GM crops and not many are in the process
of developing tools, which responsibly manage the potential risks
and uncertainties with GM crops.
GM technology also claims to solve nutrition problems. It was
for this reason that ‘golden rice (I)’ was released in India. It is a
strain of rice with an unusually high content of beta-carotene
(vitamin A), which was supposed to address the vitamin A deficiency,
common in India. This again is an overrated claim. India’s
experiment with golden rice (I) and Bt crops has been discussed in
detail later. For the nutritional benefits of GM crops such as golden
rice (I) to be actually realised, one would need to consume abnormal
quantities of the crop – this and the potential side effects are facts
that are very conveniently kept out of public discussions by TNCs.
It should be kept in mind that the technique of genetic engineering
is not natural and its harmful effects cannot be reversed. It is a
field of research where the scientific community needs to proceed
with extreme caution.
Most of these patents are held by large MNCs of the US such as

Bayer, Monsanto, Dupont, Novartis etc. So once we adopt this
technology we would have to depend on the MNCs for getting the
seeds. This is a potential way of endangering the food sovereignty
of the developing countries.
Genetically engineered products have the potential to be toxic
and a threat to human health. In 1989, a genetically engineered
brand of L-tryptophan, a common dietary supplement, killed 37
Americans and permanently disabled or afflicted more than 5,000
others with a potentially fatal and painful blood disorder,
Eosinophilia Myalgia Syndrome (EMS), before it was recalled by
the Food and Drug Administration. The manufacturer, Showa
Denko, Japan’s third largest chemical company, had for the first
time in 1988-89 used GE bacteria to produce the over-the-counter
food supplement. It is believed that the bacteria somehow became
contaminated during the recombinant DNA process. In 1999, front-
page headline stories in the British press revealed Rowett Institute
scientist Dr. Arpad Pusztai’s research findings that GE potatoes,
spliced with DNA from the snowdrop plant and a commonly used
viral promoter, the Cauliflower Mosaic Virus (CaMv) is poisonous
to mammals. GE-snowdrop potatoes, found to be significantly
different in chemical composition from regular potatoes, damaged
the vital organs and immune systems of laboratory rats which were
fed the GE potatoes. Dr. Pusztai’s research work unfortunately
remains incomplete (government funding was cut off and he was
fired after he spoke to the media). In 1994, the FDA approved the
sale of Monsanto’s controversial GE recombinant Bovine Growth
Hormone (rBGH) — injected into dairy cows to force them to produce
more milk. This was despite warnings by scientists that significantly
higher levels (400-500 per cent or more) of a potent chemical
hormone, Insulin-Like Growth Factor (IGF-1), in the milk and dairy
products of injected cows, could cause breast, prostate, and colon
cancer.
Mandatory labeling is also necessary so that those suffering
from food allergies can avoid hazardous GE foods and so that public
health officials can trace allergens back to their source when GE-
induced food allergies break out. There is no known way to
accurately predict the allergenic potential of GE foods.
Any decision regarding the soil, water and plant resources must
be taken with utmost care and scrutiny, in fact we need a good deal of
skepticism as the decisions affect not just the current generation of

farmers but their subsequent generations as well.
‘Genetic pollution’ and collateral damage from GE field crops
already have begun to wreak environmental havoc. Wind, rain,
birds, bees, and insect pollinators carry genetically altered pollen
into adjoining fields, polluting the DNA of crops of organic and non-
GE farmers. European Union (EU) regulators are considering
setting an “allowable limit” for genetic contamination of non-GE
foods, because they believe genetic pollution cannot be controlled.
Because they are alive, gene-altered crops are inherently more
unpredictable than chemical pollutants – they can reproduce,
migrate, and mutate. Once released, it is virtually impossible to
recall genetically engineered organisms back to the laboratory or
the field. Cornell University researchers in a startling discovery
found that pollen from genetically engineered Bt corn was poisonous
to Monarch butterflies. Pests and weeds will inevitably emerge that
are pesticide or herbicide-resistant, which means that stronger,
more toxic chemicals will be needed to get rid of the pests. We are
already seeing the emergence of the first “superweeds” as GE
herbicide-resistant crops such as rapeseed (canola) spread their
herbicide-resistance traits to related weeds such as wild mustard
plants. Laboratory and field tests also indicate that common plant
pests such as cotton boll worms, living under constant pressure
from GE crops, will soon evolve into “superpests” completely
immune to Bt sprays and other environmentally sustainable
biopesticides.
GE patents such as the Terminator Technology could render
seeds infertile and force millions of farmers to universal “bio
serfdom”, where the farmers will be entirely dependant on a handful
of global biotech companies for each and every one of their inputs
for farming, paying hefty amounts in form of royalties and
‘technology fees’. Indigenous farmers will be driven off the land
and consumers’ food choices will be dictated by a cartel of companies.
Hundreds of millions of farmers and agricultural workers worldwide
will lose their livelihoods.
Despite an increasing number of scientists warning that current
gene-splicing techniques are crude, inexact, and unpredictable to a
large extent – therefore inherently dangerous – pro-biotech
governments and regulatory agencies, spearheaded by the US, actively
argue that GM foods and crops are “substantially equivalent” to
conventional foods, and therefore require neither mandatory labeling

nor pre-market safety-testing.
In June 1998 Monsanto launched a USD 1.8 million advertising
campaign to persuade European consumers of the benefits of GM
foods. One advertisement was planned to include endorsements
from some leading African academics and politicians, promoting
the role of biotechnology in increasing the food supply and protecting
the environment in Africa, Asia, Latin America and Central Europe
under the banner ‘Let the Harvest Begin’.9 However, this plan
attracted hostile comment in the European press and a rebuke from
delegates of African countries at the FAO Commission on Genetic
Resources meeting in Rome: “[We] strongly object that the image
of the poor and hungry from our countries is being used by giant
multinational corporations to push a technology that is neither safe,
environmentally friendly, nor economically beneficial to us.”10
That same year Monsanto announced sponsorship of USD
150,000 for the Grameen Bank, launching the Grameen Monsanto
Center for Environmentally Friendly Technologies which was aimed
at providing access to new sustainable technologies including seed
varieties, and to evaluate their usefulness for the people of
Bangladesh, especially the poor farmers. However, the Grameen
Bank, facing strong criticism both at home and abroad, withdrew
from the deal in July 1998.
In 2002 Zambia refused GM maize in food aid despite the threat
of famine in the country and in 2003 India sent back a consignment
of 10,000 tonnes of GM corn soy blend imported by CARE-India
and Catholic Relief Services.
Genetically modified crops in India
The Indian government first issued rules and procedures for
handling GM organisms in December 1989, and the Department of
Biotechnology inside the Ministry of Science and Technology
published these rules and procedures in January 1990. These were
slightly modified in 1994 describing bio-safety measures, and later
in 1998 elaborate procedures were issued for screening of transgenic
plants. India has two committees which decide on the issues related
to GM crops. The Review Committee on Genetic Manipulation
(RCGM), under Department of Biotechnology, which consists of
scientists from Council for Scientific and Industrial Research
(CSIR), Indian Council of Medical Research (ICMR), Indian
Agricultural Research Institute (IARI) and various experts from
universities which approves small-scale research on GM crops. The

other committee is the Genetic Engineering Approval Committee
(GEAC), functioning under Ministry of Environment and Forests
(MoEF). This is the apex body to approve any GM crops in India.
The GEAC was set up in 1998 to see the potential applications of
GM crops in India. It is chaired by additional secretary of MoEF
and co-chaired by expert nominees from various departments and
ministries. The GEAC is designed to perform more than just a
technical function. The GEAC can authorise or prohibit,
conditionally or unconditionally, the import, export, transport,
manufacture, processing, use or sale of any GM organism.
Commercial plantation of Bt cotton was approved by GEAC on the
26 March 2002, after five years of field trials. A detailed examination
of GEAC norms reveals glaring shortcomings in its regulatory
procedures. Its policies clearly lack dynamism and do not seem to
encompass social and economic aspects of the proposed technology.
In fact now there are proposals of single window clearance for GM
technology, which would do away with any hurdles that GM crops
have to face and thereby, flood our markets with GM crops before
we even have a chance to question their safety.
The debate about GM has its thrust in the cost-benefit analysis
of this technology. Some say that the benefits outweigh the costs
while some say the exact opposite. GM technology was not actually
invented for eradicating hunger and poverty, the reason now being
given to increase its marketability. It was developed for the specific
agricultural needs of countries such as USA, Argentina, China and
Canada. These countries were the first target markets of the TNCs.
Bt cotton in India
Bt crops (Bt stands for Bacillus thuringiensis) are designed to
be resistant to attack by the American Bollworm pest; the sap
produced in the plant is toxic and fatal (as a result of the genetic
modification in the plant) to the pest, thus reducing the amount of
pesticide that needs to be applied during cultivation. This, as
companies like Monsanto who produce and sell Bt crop seed claim,
will increase profits for the farmers and reduce environmental
damage caused by pesticide use. In India, Bt cotton is the only Bt
crop that is cultivated till now. 64 varieties of Bt cotton seed are
available in different states such as Andhra Pradesh, Maharashtra
and Karnataka, and most of these have been patented by a joint
venture Monsanto-Mahyco. Even though contrary claims are many,
fact is that the introduction of Bt cotton in India has been a massive

failure and a major cause of the agrarian crisis in the Vidarbha
region of Maharashtra. The failure of the crop in Andhra Pradesh
was conclusively depicted in a study conducted by the Andhra
Pradesh Coalition in Defense of Diversity (APCIDD) in 2003-04, a
year with plentiful rain in the state. The study was conducted in
Warangal, Adilabad and Kurnool districts covering 28 villages with
a sample size of 164 farmers.
The results of the study show, in particular, that even in such a
favourable year, the actual reduction in pesticide consumption by
Bt farmers and the 2 per cent marginal improvement in yield, were
not enough to offset the fact that Bt seeds cost 230 per cent more
than Non-Bt hybrids. This means that total expenditures for Bt
were 8 per cent higher than those for cultivation of non-Bt cotton,
while net profits from Bt were 9 per cent lower than profits from
Non-Bt hybrids. The benefit/cost ratio was clearly in favour of Non-
Bt hybrids. On the other hand, the Monsanto AC Nielsen study,
quoted as proof of the Bt cotton’s widespread success in India, paints
an extremely rosy picture for Bt cotton in India.
The following comparison highlights the stark differences
between the two studies:
Monsanto Study APCIDD Study
Bollworm Pesticide Reduction 58 per cent 14 per cent
Yield increase 24 per cent 2 per cent
Increase in Net Profit + 92 per cent - 9 per cent
When the results of the APCIDD study for 2002-2003 conducted

in the Warangal district of Andhra Pradesh came out and unmasked
the disaster that Bt cotton had brought upon the farmers, there
was a great outcry by the media which made the government sit up
and take notice of the tragedy it had let loose on the farmers. This
made the government institute its own survey which clearly came
out with the finding that cost of cultivation for Bt crop was more
and net returns too low in comparison with non-Bt. Later, the then
State Minister for Agriculture Mr Shobhanadrishwara Rao made a
public statement asking farmers to stay away from cultivation of Bt
The Indo-US Knowledge Initiative in Agriculture (KIA) is yet another attempt

by the US to facilitate the speedy and unhindered introduction of GM crops in
India. US, being the largest cultivator of GM crops in the world, has great
difficulty in peddling its GM produce in the world markets and needs to find
more acceptance for such produce. The KIA initiative has been discussed in
detail in the third section of Chapter III.
Cotton. But within a month or so the government retracted on its

statement.
Needless to say, the cultivation of Bt cotton continues unchecked
in India, pushing lakhs of farmers closer to poverty and suicide
with every cropping season. In fact, the cultivation of Bt brinjal
has been on the GEAC table for long now and it will soon be that a
Bt food crop will find its way into the Indian markets and
households, unlabelled and “equivalent to conventional” crops.
The Golden Rice (I) Myth

The reason there is vitamin A deficiency in India in spite of the rich
biodiversity and indigenous knowledge base is because the Green Revolution
technologies wiped out bio-diversity by converting mixed cropping systems to
monocultures of wheat and rice and by spreading the use of herbicides which
destroy field greens.
Vitamin A rice [also called ‘Golden rice (I)’] is a hoax which has introduced
untested, unproven and unnecessary technology. It is not even known how
much vitamin A the genetically engineered rice will produce. The goal is 33.3
micrograms per 100 grams of rice. Even if this goal is reached after a few
years, it will be totally ineffective in removing Vitamin A deficiency.
As pointed out by Vandana Shiva, in order to meet the full needs of 750
micrograms of vitamin A from rice, an adult would have to consume 2.272
kilograms of rice per day. This implies that one family member would consume
the entire family ration of 10 kgs from the Public Distribution System in four
days to meet Vitamin A needs through ‘Golden rice (I)’. This is a recipe for
creating hunger and malnutrition, not solving it. Superior alternatives such as
mangoes, spinach, coriander etc. exist and are effective.
Thus a far more efficient route to removing vitamin A deficiency is biodiversity
conservation and propagation of nature plants that are naturally rich in vitamin A in
agriculture and diets.
Soon after its invention, Golden rice (I) was hailed as a saviour for the masses
dying of Vitamin A deficiency, especially the children in poverty-stricken African
nations. But the myth was soon busted and behind all the positive advertisement and
fanfare by the agribusiness houses, their true motives were exposed. Golden rice (I)
was found to be a failed weapon in the face of world hunger, a fact that the TNCs quite
conveniently hid from public eye. All it would do was increase the stronghold of these
TNCs on the developing nations, and promote US political domination. Once this
was understood and brought out in the open by researchers worldwide, the exuberance
surrounding Golden rice (I) died down.
According to the World Bank, global food prices have risen 83 per cent over the
past three years. The UN and World Bank have conducted a broad scientific
assessment of world agriculture, the International Assessment of Agricultural
Knowledge, Science and Technology for Development (IAASTD) in 2002. It concluded
that biotech crops have very little potential to alleviate poverty and hunger. This four-
year effort, which engaged some 400 experts from multiple disciplines, originally
included industry representatives. Just three months before the final report was
released, however, Monsanto, Syngenta and chemical giant BASF pulled out of the
process. This is merely a reiteration of the fact that genetically-modified crops
propagated by the TNCs are not the answer to the problem of world hunger.
The long-term impacts of GM crops are not yet known – not enough research
has been done to evaluate the environmental and health risks of transgenic crops.
Such knowledge is crucial before biotechnological innovations are implemented.
There is a clear need to further assess the severity, magnitude and scope of risks
associated with the massive field deployment of transgenic crops. Much of the
evaluation of risks must move beyond comparing GM crop fields and conventionally
managed systems to include alternative cropping systems featuring crop diversity
and low-external input approaches. Unquestioned expansion of this technology into
developing countries may not be wise or desirable.
Source: Vandana Shiva ‘The ‘Golden rice (I)’ Hoax: When Public Relations replaces
Science’ http://online.sfsu.edu/~rone/GEessays/goldenricehoax.html
CONCLUSION
In the context of discussing appropriate technology in agriculture,
the experiments with organic farming are worth mentioning. Organic
farming is a form of agriculture that relies on crop rotation, green
manure, compost and biological pest control to maintain soil
productivity and control pests, excluding or strictly limiting the use
of synthetic fertilisers and pesticides and genetically modified
organisms. The experiments with organic farming in India are on a
small scale, and mostly controlled by Non Government Organisations
(NGOs), which in turn are funded by the same transnational
corporations. The option of organic farming needs to be examined
closely, but with state initiatives and state support.
The technological fixes hitherto adopted in agriculture were
implemented to avoid the much-needed structural changes in the
countryside. One thing which can be said conclusively about both
the Green Revolution as well as genetically Modified crop technology
is that they firstly and foremostly, serve interests of developed
countries and the transnational corporations. In the case of Green
Revolution, the adverse impact on the environment, soil and water
resources have become evident now. It has exacerbated the
inequalities across different classes of farmers and different regions
and states. In the case of genetically modified crop technology, the
evidence remains inconclusive either way as yet. In such a scenario,
to give permission for the commercial application of this technology
(as has been done in the case of Bt cotton) is criminal and
tantamount to using human beings as guinea pigs. Its possible
benefits notwithstanding, it serves to increase the profits of those
transnational corporations who are looking to control food and
agricultural markets of the world. What is most dangerous is that
any negative impact of genetic modification is/ would be irreversible.
Hence, utmost caution is required in the adoption and propagation
of this technology.
The immediate need of the hour is to stop the ecological
devastation being caused by the mindless application of chemicals,
rejuvenate the degraded soil and preserve our land and water
resources. Soil mapping needs to be done for the entire country
and a judicious mix of organic and chemical fertilisers planned for
different regions of the country. The question of appropriate
technology cannot be divorced from the social priorities of a labour
surplus country like ours. Finally and most importantly, no
technological change can be a substitute for policy and institutional

changes required in agriculture.
Notes
1. John Augustus Voelcker, Report on the Improvement of Indian
Agriculture, Eyre and Spothswoode, London, 1893 as quoted in
Vandana Shiva, The Violence of the Green Revolution: Third World
Agriculture, ecology and politics, Third World Network, 1991.
2. George Rosen, Western Economists and Eastern Societies: Agents of
Change in South Asia, 1950-1970, The Johns Hopkins University
Press, April 1985
3. Suniti Kumar Ghosh, Imperialism’s tightening grip on Indian
Agriculture
4. Vandana Shiva 1991 op. cit.
5. Agriculture And Food Security: Background & Perspective, Devinder
Sharma, www.infochangeindia.org
6. PL 480: Public Law 480-Public Law 480 also known as Food for Peace
(and commonly abbreviated PL 480) is a funding avenue by which US
food can be used for overseas aid.
7. Felix Greene, The Enemy, Vintage Publishers, March 1971
8. Roger Burbach and Patricia Flynn, Agribusiness in the Americas,
Monthly Review Press, New York, 1980
9. Dr Donald B Easum, Global Business Access Ltd, May 1998: letter
seeking endorsement from African leaders
10. Selling Suicide: farming, false promises and genetic engineering in
developing countries. Christian Aid, http://www.saynotogmos.org/
global_south2.htm
Appendix
Letter by ‘Doctors for Food & Bio- Safety’ to the Union Health Minister
4 December 2008
Dr Anbumani Ramadoss,
Hon’ble Minister for Health & Family Welfare,
Government of India,
Nirman Bhavan, New Delhi.
Dear Dr Anbumani Ramadoss,
Sub: Stopping GM foods from entering into India
We, a group of doctors working as “Doctors for Food & Bio-Safety”,
approach you for your urgent intervention with regard to serious concerns
related to the impending deluge of GM foods into India.
Bt Brinjal is a first-of-its-kind food, with the Bt gene inside it, allowed
nowhere else in the world and reports indicate that we are just a few months
away from Bt Brinjal coming onto our plates, if the biotech industry has its way.
You are also aware of the fact that some illegal GM foods in the form of
imported products have already been discovered on Indian supermarket
shelves.
We seek your intervention in the matter on the following grounds:
1. GM crops are a product of an imprecise technology which changes
the genetic structure of the plant irreversibly by adding or deleting a gene
or a string of genes, usually from a completely unrelated organism. The
technology is imprecise and induces instability at the genomic level,
resulting in many changes at the cellular, organ, organism and eco-system
levels. It is for this reason that the regulation of genetic engineering has to
have a precautionary approach, since each genetically engineered
organism is a biohazard and has the capacity to multiply uncontrollably
and irreversibly. The implications of the deployment of this technology in
our food and farming are very different from its contained use elsewhere.
2. GM crops have been proven to be unsafe – they should not be
permitted without any long term and inter-generational tests. Today, the
regulation prescribes at the most a 90-day feeding test on rats and goats.
Even this is sought to be changed through the recently-issued ICMR
guidelines which have been drafted based on the principle of substantial
equivalence, which has been shown for its shortcomings again and again.
This is inadequate to assess the full impact of a GM crop as food. Long
term tests have always showed the adverse effects of GM foods. In 2005,
after a decade of research, a field trial of genetically engineered (GE)

peas was stopped in Australia because a study found serious health
impacts in mice that were given the GE peas to eat. Two weeks back, on
November 12, 2008, the Austrian government released findings from a
study of a 20-month-long, multi-generational study conducted by the
health department of the government of Austria. This GM Maize
incidentally was permitted by the European Food Safety Authority (EFSA).
Prof. Dr. Jürgen Zentek, Professor for Veterinary Medicine at the
University of Vienna and lead author of the study, summarized the findings
as: ‘Mice fed with GE maize had less offspring in the third and fourth
generations and these differences were statistically significant. Mice fed
with non-GE maize reproduced more efficiently. This effect could be
attributed to the difference in the food source”.
3. Supreme Court’s appointee to the GEAC has serious objections
about current regulatory regime in India: Special Invitee of the
Supreme Court in the GEAC and eminent molecular biologist and founder
of Centre for Cellular & Molecular Biology (CCMB), Dr Pushpa Bhargava,
pointed out to the GEAC that there are many problems with Indian
regulation and said that unless there is an overhauling of the regulatory
testing, including setting up of testing facilities and unless there is a
comprehensive review of Bt Cotton in the past seven years in the country,
no further approvals should be undertaken.
4. Bio-safety Tests on GM crops should be conducted by independent,
accredited laboratories and should undergo public scientific
scrutiny: Today, the regulatory regime in India with regard to GM crops/
foods allows all biosafety data to be produced by the crop developer itself.
For example, with Bt Brinjal, all decision-making so far was on the basis of
the data submitted by Mahyco through studies done by it or commissioned
by it. The company obviously has a conflict of interest in such
assessments. Since the outcomes of Genetic Engineering could be
anything from a missing or unexpected/unintended protein to serious
malfunction of the normal activities of an organism, all the tests that are
conducted on GM crops must be allowed for a free and fair re-assessment
by civil society experts and put out for public scientific scrutiny. Sufficient
time must be given for this and the suggestions received must be
considered and acted upon. In the case of Bt Brinjal, the first level tests
were submitted to the government in June 2006 - for more than 30
months, the data was not put out for independent public scrutiny. It is only
after the Supreme Court’s intervention, that data has been put in the public
domain but no review has been called for. Even the health ministry, which
has a mandate of assessing foods from food safety perspective, did not
undertake any biosafety tests on Bt Brinjal nor has asked for independent
analysis of the biosafety data of the crop developer.
5. Bt Cotton’s emerging health effects from the ground to be
investigated: Even though cotton was brought in by terming it a non-food
crop, the past few years of cultivation of Bt Cotton have brought to the fore
many health-related problems. It is now officially acknowledged by the
Animal Husbandry Department of Andhra Pradesh that there have been
animal deaths and illnesses after open, uncontrolled grazing on Bt Cotton
fields; further, the department has also written to the GEAC about the
shortcomings in the biosafety assessment of Bt Cotton and requested for
comprehensive biosafety tests which were not undertaken to this day. The
department has also put out an advisory to farmers not to graze their
animals on Bt Cotton. Further, human allergies are being reported from
different parts of the country when agricultural workers go into Bt Cotton
fields to harvest cotton. These reports have not been acknowledged by the
Health Ministry nor have scientific investigations been commissioned.
6. Consumers’ and farmers’ right to be GM-Free to be upheld:
Consumers have a basic right to choose their food based on their ethical,
cultural, health and moral choices and on informed choices. Farmers on
the other hand must be given a choice to choose non GM seed based on
their markets as well as moral and ethical choices. Present regulation in
India does not uphold consumers’ and farmers’ rights over remaining non-
GM. This amounts to denying a right of a consumer and farmer. In the
current context, entry of GM foods will also violate the consumers’ right to
know what they are eating.
7. No genetic engineering should be permitted on medicinal plants:
Recent media reports have revealed that four medicinal herbs - Jivanti
Holostemma adakodien; Brahmi Bacopa monniera; Ashwagandha
Withania somnifera and Creat, kariyat or Indian chinacea Andrographis
paniculata are being genetically engineered by institutes in Kerala after
acquiring the consent of Review Committee of Genetic Manipulation
(RCGM) under the Ministry of Science and Technology. This must be
immediately stopped and health ministry under AYUSH must release a list
of medicinal herbs that are never to be genetically engineered. Medicinal
plants identified under the National Medicinal Plants Board must be
declared as cultural and medicinal heritage of India. No genetic
engineering should be permitted on them.
Further, the implications for ayurveda (which uses plants of the Solanum
species) of the release of a crop like Bt Brinjal have not been assessed.
This once again reflects the inadequacies and serious shortcomings of the
current impact assessment regime with regard to GM crops/foods in India.
8. Health concerns not addressed in the regulatory bodies: Through Right
to Information, information has been obtained about the representatives
who have attended various meetings of the Genetic Engineering Approval
Committee (GEAC), the apex regulatory body in India, which has been
scored as the regulatory body for decision-making by the Supreme Court.
We have information that the health ministry representatives have not
attended GEAC meetings regularly; one of them has not attended any
meetings in 16 meetings in a row! Health concerns therefore have not
been addressed in decision-making.
WHAT SHOULD THE HEALTH MINISTRY DO?
Befitting the stand of Pattali Makkal Katchi (PMK) as the first political party
in India to have recognised and understood the adverse implications of GM
crops/foods on India’s health and environment, the Ministry of Health and
Family Welfare should immediately announce its recommendations against GM
crops/foods and get the regulatory bodies in India to adopt a precautionary
approach.
The Health Ministry should highlight the known risks from all published
evidence so far and announce that the Ministry is in favour of a precautionary
approach and for a moratorium, as is being recommended by Dr Pushpa
Bhargava.
We urge you to instruct your officials to reflect this stand in their regulatory
roles and that the Ministry should write to the GEAC, FSSA, RCGM and other
ministries concerned in this regard. The grounds mentioned above should be
used by the Health Ministry to ensure that no GM foods are allowed into India
and by doing so, protect the health of all Indians.
Sincerely
Dr G P I Singh, Convenor, Environmental Health Action Group
Dr. Mira Shiva Director, Initiative for Health, Equity & Society
Dr R N Dutta, President, Orissa Homeopathic Druggists Association
Dr. G.S. Kabra, Environmental Epidemiologist/Lawyer
Dr Sivaraman, Member, National Siddha Pharmacopeia Committee
Dr V G Udayakumar, President, Ayurvedic Medical Association of India
vQykl t+nk ngdkuksa ds

gy&cSy fcds] [kfygku fcds
thus dh reék ds gkFkksa
thus gh ds lc lkeku fcds
& lkfgj yq/;kuoh
And of the poverty driven peasants

ox ’n plough got sold, fields got sold
for the very sake of living on
the means of living too got sold
– Sahir Ludhianvi
Chapter
Harvesting Despair: VII is becoming Unviable 161
Agriculture
Harvesting Despair
Agriculture is becoming Unviable
The dictionary meaning of viability is to be capable of living or

having the ability to grow, expand and develop. The viability of
agriculture, from the point of view of the farmer, is affected by
several factors. The cost of cultivation of crops, the price that the
farmer receives by selling his crop (the value of output and therefore,
his income), his expenditures and standards of living, and also
comparatively the general standards of living in society – all
cumulatively determine whether agriculture is viable for a farmer
and whether he or she is satisfied with his/her occupation. Earlier
there was at least some reverence for the farmer as the producer of
food for the country. Now the farmer has become a non-entity and
the only time we hear of him is when he ends his own life or before
an election. The domestic media houses are going agog over the
global financial crisis, but there is no concern about the crisis that
affects two-thirds of the country’s population. Should we be
surprised if many want to quit this profession? Forty per cent of
farmers told the National Sample Survey in 2005 that they would
prefer to leave agriculture, if they had a choice. Clearly, something
has gone seriously wrong.
The question before us is why do so many people desire to quit
their profession?
Agricultural work at all times consists of hard toil. The rigorous
and back-breaking labour starts from ploughing the field for sowing
and carries on till the time of harvest. A high degree of skill is
required in preparing the fields, knowing which kind of seeds suit
the soil, attending to the crop everyday and ensuring its protection
from pests and diseases, identifying the right time for harvest and
also responding to weather patterns. This kind of skill only comes
through years of training which the farmer acquires from practical
experience. Despite the importance of agricultural work as the
lifeline of our society and economy, such labour has been bereft of
any dignity. Farming is not considered a skilled activity, which
tacitly implies that farmers are not liable to earn higher incomes
which may raise their standard of living as in some other sectors of
the economy. After all these problems, the farmer still has to face
many uncertainties at the end of the year – the crop may fail due to
pests or bad weather, the price that he would get for the crop is
uncertain, even when the price crashes in the market he has no
option but to sell at the depressed prices and he is not even sure
whether the year’s work will cover his costs of cultivation, leave
alone bring in a surplus.
The harvest, rather than signaling prosperity, brings with it
accumulated debt and despair. The farmer is left with unfulfilled
aspirations and also the realisation that they may never be fulfilled;
a realisation that he may never be able to send his children outside
in some other profession, that his profession has lost its dignity,
and that his relatives and peers outside agriculture have a living
standard which he cannot match. It is ironic that those who feed
the rest of the country have insufficient means to properly feed,
clothe and educate their families. Only as an exception and that
too with great difficulty, do children of farmers manage to move
out of agriculture. There are also no opportunities to acquire
requisite skills to move outside agriculture as the state does not
provide them the education or skills which would enable them to
get employment outside agriculture. The withdrawal of the state
from its responsibilities in the social sector and the privatisation of
even basic education and health have turned these basic amenities
into privileges rather than rights.
In a period when the economic growth rate has touched dizzying
heights, a significant section of the population has been left behind
in the process. This growth has been accompanied by unbridled
consumerism but has largely restricted itself to the sector of the
urban rich and middle classes. The growing prosperity of urban
India has generated aspirations amongst farmers in the rural areas,
which are entirely understandable. For example a large farmer
compares himself with the urban middle-class and realises that he
is unable to purchase the same assets with his income, while a
smaller farmer might look at his relative working as a clerk in a
small town and find that his children can’t get the same kind of
education and opportunities. There is no reason why farmers should
practice austerity while the urban areas ride high on a cocktail of
corporate salaries, Sixth Pay Commission, media glitz and luxury
imports. While we do not subscribe to this economic growth based
on wasteful consumption expenditures and personal debt, it is
ridiculous to take the moral high ground and blame farmers for the
Harvesting Despair: Agriculture is becoming Unviable 163
crisis and for “consuming too much and beyond their means”. If we
look at the actual consumption expenditures of farmers, i.e. their
spending on food, clothes, education, health, or marriages, these
are extremely low, but they still remain higher than their incomes.
The table given below shows that farmers owning up to 10 acres
of land (4 hectares) have a monthly consumption expenditure
exceeding their monthly incomes. It should also be noted that these
consumption expenditures by themselves are not very high and
are for the entire family. These incomes are average incomes of
households from all sources including net receipts from cultivation,
wages, farming of animals and non-farm business. The average also
hides the variations within a certain land-class and also amongst
regions and states.
Average monthly income and consumption (in Rs) per farmer

household, all India, for the agricultural year 2002-03
Size class of land in acres Total Income from Total Consumption
all sources expenditure
Less than 0.025 1,380 2,297
0.025 to 1 1,633 2,390
1.01 to 2.50 1,809 2,672
2.51 to 5 2,493 3,148
5.01 to 10 3,598 3,685
10.01 to 25 5,681 4,626
Above 25 9,667 6,418
All Sizes 2,115 2,770
Note: We have converted the hectares in the original NSS table to acres
using the approximate : 1 hectare = 2.5 acres.
Source: From the Statements 10 and 11 of NSS Report no. 497 ‘Income,
Expenditure, Productive Assets of Farmer Households’ 2003, NSS 59th
Round
The table shows that at an all India level, farmer households

earned (on an average) Rs. 2,115 per month from all sources i.e.
wages, farm income and non-farm income. The average consumption
was Rs. 2,770 showing that on an average, farmer households were
running a monthly deficit of Rs. 665.
Only farmers with more than 4 hectares or 10 acres of land (at
an all-India level) could earn enough to meet their consumption
requirements. These farmers actually constitute a small proportion
of all farmer households at only 5 per cent (5.2 per cent)! This means
that the majority of farmers (94.8 per cent) were running a deficit
during 2003. In effect it means that at an all-India level a farmer
household must possess more than 10 acres of land in order to meet
their consumption expenditures. It should be underlined that the
year 2003 was not a good crop year but this not withstanding it is
clear that a large proportion of farmers are unable to make both
ends meet.
If one were to look at the inter-state variations we would see
that in as many as 14 out of 18 states considered in the survey,
land holding upto 5 acres was insufficient to meet consumption
expenditure leave alone expenditure on capital assets (like tractors,
borewells etc.). The only states where income from all sources was
greater than consumption were Assam, Jammu and Kashmir,
Jharkhand and Punjab. Incidentally both income and consumption
levels were quite low in Jharkhand. In Karnataka farmers were
just about breaking even. If one looks at the income patterns, J&K
had the highest average income of Rs. 5488 per month followed by
Punjab with Rs. 4960. The lowest income of Rs. 1062 was recorded
in Orissa. Consumption expenditures also varied between Rs. 1697
in Orissa to Rs. 4840 in Punjab. 1 Even the higher end income and
consumption expenditures are quite low when compared to urban
middle and upper class incomes and expenditures.
Today the expenditures in rural areas on ordinary needs and
basic amenities are abysmally low. For example a person in the
rural area on an average spends only Rs. 304 per year on all types
of clothing and bedding (clothes, pillows, quilts, mattresses,
mosquito nets, rugs, blankets, curtains, towels, mats etc.) and only
Rs. 51 on footwear for the year. One struggles to imagine how these
suffice for a human being. These are averages and 70 per cent of
the people in rural areas live below this level.2
Even as farmers in the rural areas of the country are facing an

acute crisis, particularly after the economic reforms, the urban areas
(specifically, the organised corporate sector) never had it better.
The average monthly per capita consumer expenditure (MPCE) in
the urban areas at an all-India level in 2004-05 was nearly double
compared to that of the rural areas (for rural areas it was Rs. 559
and for the urban areas it was Rs. 1052). In seven major states out
of seventeen, average urban MPCE was 180-210 per cent higher
than average rural MPCE. 3 It does not require statistics to perceive
that the rural-urban divide in our country is growing. While
standards of living have gone up tremendously in the recent years
for the urban rich, they have largely stagnated in the rural areas.
According to one estimate, between 1994-95 and 2003-04, per capita
real income of agriculture-dependent population was virtually
stagnant when per capita real income for the country as a whole
increased at a rate of more than 4 per cent on an average.
The reason for the growing rural-urban disparity is not hard to
find. The economics of efficiency dictates that capital (in the form
of investment in industry and infrastructure) will go to those areas/
sectors of the economy where the rates of return are the highest.
Since the urban areas already have the required infrastructure, it
is but natural that capital will direct itself to the urban areas. And
since it is the urban consumers who have the purchasing power,
industry will cater to their needs and mainly produce luxury goods
required for their satisfaction (not the goods demanded by the
majority of the population living in the rural areas because they do
not have the purchasing power). This determines the nature of
investment and production in the economy. Even the government
spends its money predominantly in the urban areas in building
roads, flyovers, and metro rail and gives subsidies to the corporate
sector. When urban-centric growth becomes the principal obsession
of the government, rural development and the needs of farmers
and the rural poor are necessary casualties.
If in this scenario farmers are increasingly finding agriculture
unviable and insufficient to meet their consumption requirements,
it is inevitable that they would want to shift away from agriculture,
but find no avenues are available elsewhere. Sometimes, an
argument is raised that if agriculture is becoming unviable, then
farmers should leave agriculture and seek employment elsewhere.
What is overlooked is that there are no alternative employment
opportunities for those dependent on agriculture. For one, they do
not have the skills or education which would make them employable
in other sectors of the economy. Secondly, the pattern of
industrialisation being followed in the country today is labour-
displacing or capital-intensive in its character. This kind of
industrialisation is incapable of absorbing the large numbers of
people who are presently employed in agriculture. It should be noted
here that 92 per cent of India’s workforce is a part of the ‘informal’
sector, so called because of the uncertain nature of employment,
low and irregular wages, and absence of any labour rights for the
workers.
The fault in the present situation does not lie with the farmers,
it unarguably lies with the state’s policies and its continuous neglect
of agriculture, which is making it an increasingly unviable activity.
DISTRESS OF AGRICULTURAL LABOURERS
Village community is not a homogeneous entity. It is divided
on both caste and class lines. Apart from the cultivators of land,
the ongoing agrarian crisis has impacted another section of rural
population namely the section of agricultural labourers who are
either owners of very small pieces of land or are completely landless.
Agricultural labourers constitute around one third of total persons
engaged in agricultural activity.
This is the class which has always suffered the worst forms of
class exploitation and caste oppression. They are predominantly
from the socially marginalised groups – the Scheduled Castes (SCs),
Scheduled Tribes (STs) and Other Backward Castes (OBCs). Even
physically, the dalits and the tribals live in marginalised clusters
or tolas on the fringes of the villages and have a limited social contact
with rest of the village. The relationship that exists is that of
employer-labourer or that of master-bonded labourer or creditor-
debtor in cases where the big farmers also emerge as the only source
of credit (i.e. moneylenders). This antagonistic power relationship
also explains the socio-economic backwardness of the agricultural
labourers. Despite toiling the hardest, their condition is probably
the worst and they have always suffered abject poverty. Many a
time even small or marginal farmers or their family members work
as agricultural labourers on others’ fields their subsistence. At an
all–India level, for holdings less than one-fourth of an acre, wages
constitute the main source of income. Of late, many are turning to
some kind of self-employment or are migrating to the towns in
absence of agricultural work.
It is only to be expected that in a period of agrarian distress,

agricultural labourers are likely to be the worst hit, through adverse
impact on wages and employment opportunities in agriculture.
There is a contradiction between the interests of cultivators and
agricultural labourers, which gets accentuated in times of acute
agrarian distress. When the farmer is in a state of distress, due to
rising costs of cultivation and increasing indebtedness, he attempts
to reduce wage costs and often perceives the wages that he has to
pay, as part of his problems.
Agricultural labourers themselves are affected by the crisis in
different ways.
Firstly, with agriculture becoming more and more unviable,
many small farmers have had to sell off their land (or their land
may have been confiscated in the case of non-payment of loans)
and join the ranks of agricultural labourers. As per the NSS data,
during 1990s, the share of agricultural labourers in officially defined
total rural poor increased from 41 to 47 per cent. The proportion of
households without any access to land in the total rural households
has increased from 38.7 per cent in 1993-94 to 40.9 per cent in
1999-2000 and further to 43.1 per cent during 2004-05. 4
Secondly, the condition of agricultural labourers has worsened
in terms of availability of work, real wages received, consumption
and access to basic amenities like health, education and growing
indebtedness. As it is, the agricultural labourer had no control over
the number of days he could be employed. Each day is marked by
uncertainty.
The growth rate of employment in agricultural sector has
stagnated at 0.2 per cent per annum during 1994-2000. In the last
two decades, the number of employment days for an agricultural
labourer has decreased from 224 to 209. One study5 shows that in
the mid-1970s, wheat crop required on an average 72 person-days
of manual labour, ranging from 55-60 days in Punjab and Haryana
to 85 days in Uttar Pradesh (UP) and Rajasthan. By 2004-05, this
came down to 63 person-days in Rajasthan, 56 in UP, 37 in Haryana
and 20 in Punjab. According to the NSS data, during the second
half of the 1990s, there was a decline in work days for households
of agricultural labourers. The data suggests recovery of employment
generation in the rural areas from the beginning of 2000 but this is
due to increase in self-employment especially by women (for
example, bidi making) and not due to any rise in wage employment.
The wages received by agricultural labourers have always been

meager and uncertain. More often than not, they depend on the
whims of the employer. The government has failed to implement
the only available law ensuring minimum wages to this section of
workers. The Minimum Wages Act, 1948 has failed to maintain
any minimum standards in daily wage rates. Average daily earnings
of an agricultural labourer were as low as Rs. 43 per man-day in
2004-05, which are much lower than the national minimum wage
of Rs. 66 per day. The agrarian crisis has worsened this situation.
The rate of growth of wages in agricultural operations (for the male
farmer) during the period 1983-1987 was a little over 60 per cent,
which came down to about 28 per cent during 1987-88 to 1993-94,
it further fell to 16 per cent for the period 1993-94 to1999-2000,
and was only 8 per cent for the period 1999-99 to 2004-05. The fall
in the growth rate of real wages shows the serious impact of the
agrarian crisis. In case of male field labourers, 96 per cent of the
districts all over India had experienced a positive growth rate of
real wages during 1980s but during the 1990s, only 50 per cent of
the districts experienced a positive growth of real wages. The decline
is sharpest in Maharashtra where as many as 23 out of 29 districts
experienced a decline in absolute wages.6 Similar downward trend
is noticeable for the female and child workers in agricultural
operations. The disparity in wages between men and women persists
till date. Sometimes women are not even entitled to wages separate
from their family.
Not surprisingly, the daily consumption levels are starkly low.
In fact, real daily per capita consumption (at 1986-87 prices), was
as low as Rs. 3.3 to Rs. 4.27 between 1983 and 1999-00. If it could
fall any lower, it certainly did with withdrawal of the state from
the arenas of health and education. The dismantling of universal
Public Distribution System had added insult to injury.7 Obviously
to keep afloat, a substantial number of labour households have to
depend on loans. Banks and other formal credit institutions are
reluctant to give loans to those without land so agricultural
labourers certainly do not stand any chance. By 1999-00,
moneylenders had emerged as the single most important source of
debt for these households. The share of banks in the total debt to
such households has nearly halved from 1983 to 1999-2000 (30 per
cent to 16.6 per cent). The landowner-moneylenders who may give
loans charge usurious rates of interest and impose harsh conditions
on the repayment of loans. In case of non-payment, they sometimes
force the labourer to enter into bondage. It is hardly surprising

that most of the loans need to be spent on sheer survival
requirements.
In a scenario where prosperous landowning farmers are being
forced to commit suicide, the plight of the impoverished landless
classes can only be imagined. Landlessness, dependence on
agriculture, lack of education and training, unavailability of other
employment opportunities, absence of formal credit and
indebtedness have become a vicious cycle from which they can
seldom emerge.
Notes
1. G.S. Bhalla, ‘Income, Consumption and Expenditure of Farmers’,
Reforming Indian Agriculture by Sankar Kumar Bhaumik (ed), Sage
India Publications Pvt. Limited, 2008
2. NSS Report no. 508 as quoted in Aspects of India’s Economy, No. 46
(RUPE).
3. Report No. 508, Level and Pattern of Consumption Expenditure 2004-
05, NSS 61st Round, National Sample Survey Organisation.
4. Praveen Jha, ‘Some Aspects of well–being of India’s agricultural
labourer in context of contemporary agrarian crisis’ 22 February 2007,
www.macroscan.org
5. M Raghavan ‘Changing Pattern of Input Use and Cost of Cultivation’,
Economic and Political Weekly 28 June 2008
6. Praveen Jha 2007 op. cit.
7. See Chapter VIII on Food Security
Chapter
170 Harvesting Despair: Agrarian VIII
Crisis in India
Of Hunger and Greed

Issues in Food Security and Sovereignty
I asked the men, “What are you carrying wrapped

in that Hammock, brothers?” And they answered,
“We carry a dead body brother”.
So I asked, “Was he killed or did he die a natural
death?” “That is difficult to answer, brother. It seems
more to have been a murder”.
“How was the man killed? With a knife or a bullet,
brothers?” I asked. “It was neither a knife nor a
bullet; it was a much more perfect crime. One that
leaves no sign”.
“Then how did they kill this man?” I asked, and they
calmly answered: “This man was killed by hunger
brother”.
– Josue de Castro
Brazilian geographer and activist against hunger
INTRODUCTION
In the five months from May to September 2008, at least 80
infants suffering from severe malnutrition succumbed to different
diseases in two districts of Satna and Khandwa in Madhya Pradesh.
This is only the most recent statistics of recorded malnutrition-
related deaths in our country. From April to July 2005, 2,675
children died of malnutrition in five tribal-dominated districts –
Thane, Nandurbar, Nashik, Amravati and Gadchiroli – in
Maharashtra. 1 Maharashtra is one of the more prosperous states
of India, whose state capital is the financial centre of the country.
The list goes on and on, endlessly repeating the tragedy of starvation
amidst wasteful abundance in our country. Can the state still claim
that we are a food secure nation?
The issue of food security is somewhat independent of the
agrarian crisis discussed in this book. However there are two
important linkages. Firstly, the same policies which have brought
about the agrarian crisis are responsible for accentuating the food
crisis facing the economy. Secondly, food is the most important
Of Hunger and Greed 171
product of agriculture and the present crisis in agriculture adversely

impacts food security in many ways.
For these reasons, we must understand how and why the food
security of our country is threatened today. Contrary to the widely
held belief that India became self-sufficient in food after the Green
Revolution, and that food is no longer a problem for majority of our
population, here are some sobering statistics:
According to the National Institute of Nutrition (NIN), the
normative cereal requirement is 157 kilograms per person per year.
The National Sample Survey of January to June 2004 shows that
the average rural consumption of cereals in our country is just 149
kilograms per person per year while the average all-India
consumption is 142 kilograms per person per year.2 Nearly half (47
per cent) of India’s children under the age of five years are
underweight (low weight for age, indicating both chronic and acute
malnutrition), worse than Latin America and Africa. 3 States like
Punjab, Haryana, Karnataka and Maharashtra have 27 per cent,
42 per cent, 41 per cent and 40 per cent children (under the age of
three years) underweight, to say nothing about Chhattisgarh,
Jharkhand or Orissa.
The situation has particularly worsened during the period of
economic reforms. The net availability of food grains (pulses and
cereals) declined from 177 kilograms per capita per year in 1991-
92 to 158.37 kilograms in 2001-02. 4 The availability or absorption
of food grains is defined as net output plus net imports minus net
addition to public stocks in a year.5 Many economists claim that
the falling absorption of food grains is proof of the rising prosperity
of the economy, since more and more people are diversifying their
diets and eating eggs, milk, meat and consuming other non-food
products. Nothing could be further from the truth. The figures of
availability of food grains include the absorption of food grains for
all purposes – whether directly or indirectly (when it is used to
produce milk, eggs and meat). According to Utsa Patnaik, in 2000-
01, the average Indian family of four members was absorbing 93
kilograms less of food grains (whether in the form of chapattis and
rice, or in the form of milk, eggs and meat) compared to a mere four
years earlier – a massive and unprecedented drop, entailing a fall
in average daily intake by 64 grams per head. 6
All the aforementioned figures are averages, they hide the
worsening of the situation for majority of the population because
the consumption (absorption of food grains) of the urban rich has

increased massively in the last two decades. When we consider that
77 per cent of our population has a per capita expenditure of less
than Rs. 20 a day, the majority of which is spent on food, it boggles
the mind to imagine the extent of deprivation and hunger. The
question of food security remains an unsolved one for most people
in our country. We now turn to an explanation of this food insecurity
and large-scale malnutrition.
The chapter is divided into three sections. The first section looks
at what has happened to domestic and international production of
food grains in the recent years. The second section is devoted to the
public procurement and distribution system of the Indian
government and how both have been impacted by economic reforms.
The last section puts forward the argument of food sovereignty, in
the context of past historical experiences and the recent world food
crisis.
PRODUCTION OF FOOD GRAINS
Domestic production
Government policy in the last seven-eight years (before the
recent food inflation and world food crisis) has been to discourage
the production of rice and wheat. Former Prime Minister Atal Bihari
Vajpayee told peasants of Haryana to “look beyond paddy and wheat
and to switch to horticulture, floriculture, oilseeds and vegetable
production” in a meeting in March 2001. The present Food and
Agriculture Minister, Sharad Pawar said in February 2005, “I want
Punjab and Haryana to reduce their production of rice and wheat,
which is in abundance” and announced the Rs. 15,000-crore National
Horticulture Mission.
Indeed, the government of this country believes that consumers
have abundant food to eat and there is a “problem of plenty” when
it comes to cereals! The insistence on reducing wheat and rice
production was despite the fact that per capita food grain output
has stagnated in the decade of 1990s.7 The yield growth rate of
wheat declined from 2.61 per cent during the period 1985-86 to
1995-96 to 0.56 per cent during 1995-96 to 2004-05. 8 The total wheat
production in the country has stagnated at around 69 million tonnes
between 1996-97 and 2005-06 with increases in some years and
declines in some. 9
The reasons for this stagnation are not far to seek. The state,
in the period of economic liberalisation and globalisation, has been
steadily discouraging farmers to stop growing food grains and switch
to export-oriented cultivation of high-value crops. This has been
done through explicit announcements of the kind mentioned above,
in different policy documents (such as Economic Surveys) and
through price signals and procurement policy.
Eight million hectares of land under food grains cultivation has
been shifted to exportable crops between 1991 and 2001.10 The
policies of state which have encouraged cultivation of commercial
crops for export have come at a time when majority of the people
are suffering from chronic hunger and malnutrition.
International production
The reduced emphasis on food grains production is based on
the premise that we can import food grains to fulfill domestic
requirements in times of need. However, the international supply
of food grains is seriously threatened by a new menace – the growing
demand for biofuels. The US and European Union have diverted a
major part of their production of food crops towards producing
ethanol and biodiesel, a factor which is held responsible for the
recent inflation in food prices across the world.
The US, which was not a major producer of biofuels until a few
years ago, has overtaken Brazil as the topmost producer of ethanol
in the world with a share of 39 per cent of total world ethanol output.
Further, EU has become the largest producer of biodiesel in the
world with a share of 66 per cent of world biodiesel output.11 As a
result, there has been a phenomenal increase in the usage of corn,
soybean, rapeseed-mustard and even wheat, barley and palm oil
for making biofuels. The US now uses a quarter of its total corn
output to produce ethanol.12 If we consider the fact that US has a
share of 43 per cent in the world’s corn output, it is evident that a
large proportion of total corn production in the world has already
been diverted for producing biofuels.13 The US government is giving
large subsidies to its farmers to grow corn for producing ethanol. If
the US and EU have to meet their domestic targets for biofuel
production, the diversion of cereals to produce biofuels would
increase even more.
The pattern of global demand for cereals for different uses shows
the grim reality. From 2006-07 to 2008-09, the demand of cereals
for food and animal feed purposes grew at only 1.5 per cent and 0.2
per cent respectively, while the demand for industrial use grew at
more than 8 per cent.14 Clearly, this shift towards biofuels is and
will remain one of the major factors threatening global, and
consequentially, Indian food security. It is ironical that the ‘hunger’
for fuel to run cars and industries has gained precedence over
human hunger and under nutrition in the priorities of global
capitalism.
DISTRIBUTION: PDS AND THE TRAGEDY OF WHEAT
IMPORTS AND EXPORTS
Winding down the Public Distribution System
The procurement (from farmers), storage, transportation and
management of food grains are mainly the responsibility of the Food
Corporation of India (FCI). Food grains are distributed to the food-
insecure households all over the country at subsidised rates through
fair price shops of the Public Distribution System (PDS). Let us see
the changes brought about in this system of distribution during
the period of economic reforms.
The PDS, despite all its lacunae (uneven performance across
states, corruption and bad administration leading to leakages),
performed several useful functions. For example, it succeeded in
transferring grains from regions of surplus production (like Punjab
and Haryana) to regions of deficit food grains production (like
Kerala, Karnataka and the North-Eastern states). It also did
manage to provide food at lower (and more stable) prices to poor
consumers throughout the country, especially in states like Kerala
where PDS administration was better.
Universal PDS was reduced to Targeted PDS in 1997. This
meant that henceforth, only households below the official poverty
line would be ‘targeted’ by PDS. The change was brought about in
line with conditions imposed by the Structural Adjustment
Programme of the World Bank and IMF, and the reasons given
were – the state had to bear heavy subsidies, PDS was distorting
market prices and private trade, and it was incompatible with the
WTO regime. The thrust of official policy was to dismantle PDS
and rely on food grains imports, if necessary.
In March 2000, the prices of grain for above poverty line (APL)
ration card holders were increased, and the gap between prices for
below poverty line (BPL) and Above Poverty Line (APL) households
widened. 15 In many states, APL prices of grain were close to market
prices and as a result, households with APL cards stopped buying

grain from the PDS. The Antyodaya programme introduced a new
category, the ‘poorest of the poor’, for whom rice and wheat are
available at even lower prices than for BPL households. In the
present situation, a person who belongs to a household that has
neither a BPL nor an Antyodaya card is effectively excluded from
the PDS. 16
The dubiousness and irrelevance of the official poverty line does
not need to be discussed here, since much has been written about it
elsewhere. By relying on the poverty line, TPDS achieved what it
had set out to achieve: large-scale exclusion of the poor and the
needy from the public distribution system. The recent report of the
National Sample Survey ‘Public Distribution System and Other
Sources of Household Consumption 2004-05’ gives us an insight
into the magnitude and nature of this exclusion from the PDS.
At the all-India level, 70.5 per cent of rural households either
possessed no card or held an APL card. Since households with APL
cards are effectively excluded from the PDS, the majority of rural
households in India are excluded from the PDS. In states like Bihar,
Assam, Uttar Pradesh, Himachal Pradesh and Rajasthan, over 80
per cent of the households held an APL card or no card. The most
vulnerable occupations and the most oppressed sections are well-
represented in this picture of exclusion. In all states, except four,
at least two thirds of agricultural labour households were excluded
from the PDS (i.e. they did not hold a BPL or Antyodaya ration
card). Similar is the story with Scheduled Castes as well as
Scheduled Tribes. The farce of the poverty line and the errors of
targeting can be judged by this fact: in Dharavi, Mumbai, Asia’s
largest slum with a population of half a million persons, only 151
families were issued BPL ration cards.
The fair price shops are now increasingly becoming unviable
and unprofitable because of the large-scale exclusion of APL
households, and the resultant lower sale of food grains.17 According
to an official estimate by the Government of Kerala, the earnings
per fair price shop in the state fell from Rs. 3,711 before March
2000 to Rs. 1,493 in August 2001. 18
The basis of allocation of grains to the states has been changed
with TPDS. Earlier, the central government gave grains to the states
according to their demands, past utilisation and requirements of
statutory rationing. With TPDS, size of the BPL population and
entitlements for BPL families is decided by the central government.

Earlier, cereals through PDS went most to those states which had
lower cereal production, low cereal consumption and high cereal
prices (Tamil Nadu, Kerala, Maharashtra and Gujarat). Now, the
policy of targeting and allocation of grain on the basis of poverty
line has worked against the objective of price stabilisation, which
was earlier achieved through grain movements from cereal surplus
to cereal deficit regions.
There has been a sharp fall in the purchase of grain by
consumers from PDS, at a time when nutritional deprivation and
malnourishment are rising. The distribution of grains through PDS
fell from 21 million tonnes in 1991 to 11 million tonnes in 2001.
This decline has been mainly due to reduced purchases by all those
who have been left out as APL consumers.19
Food grain stocks – ‘problem’ of abundance20
The decline in offtake of food grains from PDS was accompanied
by an accumulation of stocks with FCI. Food grain stocks with FCI
increased from 24 million tonnes in 1997 to 63.1 million tonnes by
the end of July 2002 (nearly 40 million tonnes in excess of buffer
norms). 21 This accumulation of stocks was taking place at a time
when per capita food grains availability/absorption was declining.
According to Utsa Patnaik, the decline in absorption of food grains
was the result of an unprecedented decline in purchasing power in
rural areas. This occurred because of two factors – domestic policies
of the state and the sharp fall in international prices of exportable
crops (which meant a fall in the incomes of the farmers).
On the one hand, state’s policies and actions decreased the
ability of the rural population to buy food grains, and on the other
hand, the state excluded a large section of the population from PDS.
Both these actions pushed many more in the country into hunger
and starvation and at the same time, accumulated vast stocks of
food with FCI.
What did the government do with these food grains stocks? A
study estimates that these stocks would be worth Rs. 37,800 crores,
if they were to be valued conservatively at only Rs. 6 per kilogram.
Much of this huge capital could have been used as wages in food-
for-work schemes to create rural assets – thus increasing the
country’s productive base, its storage of farm products, its rural
roads, and its education and health infrastructure. 22 Instead, the
government did the following:
Between 2000-01 and 2004-05, 29.9 million tonnes of FCI’s food

grains stocks were exported at a heavy subsidy. During November
2000 to February 2004, FCI subsidised wheat and rice exports by
Rs. 14,135 crores. From 2000-01 to 2003-04, the grains were
exported at considerably below the Minimum Support Price paid
to the farmers. The beneficiaries were giant multinational
agricultural traders such as Cargill and domestic trading firms who
bought the grain for export. Further, 18.7 million tonnes of wheat
and rice were sold, largely at subsidised prices, to domestic traders
under the open market sales scheme (OMSS) between 1999-2000
and 2003-04. 23
The Government of India was selling subsidised food grains to
foreigners and their cattle at a time when millions of Indians starved
and slept on empty stomachs, all the time benefiting private traders
and multinational agri-business companies. In some instances, the
price at which government exported food grains was lower than
the domestic BPL price i.e. lesser than the price at which it gave
subsidised food to the officially recognised poor of the country.24
Some democracy!
From abundance, how did we get to wheat imports in 2006?
The story becomes even uglier here onwards. For all the
conscious policy-driven reasons mentioned above (and due to some
other reasons, like the disappearance of 14.7 million tonnes of food
grains from FCI’s stocks and increased food stocks required for rural
employment guarantee and welfare schemes), the excess food stocks
of FCI declined rapidly. Wheat stocks as on 1 April (i.e. before public
procurement every year) fell from 26 million tonnes in 2002 to 15.6
million tonnes in 2003 and to 4 million tonnes in 2005 – below the
required norm for buffer stocks.
The government of India was well aware in April 2005 that it
required at least 18.5 million tonnes of wheat for distribution
through the welfare schemes and food-for-work schemes in the
following year. Despite this, it deliberately procured only 14.7
million tonnes in the 2005-06 marketing season. The government
told the FCI not to procure in Uttar Pradesh, the largest producer
of wheat crop that year.25 This was admitted by the Union Secretary
for Agriculture, Radha Singh. The decision by the government to
procure less left the field open for multinational corporations and
other grain speculators, at the expense of both farmers and
consumers. According to Radha Singh, private players including
multinationals, purchased around 4-5 million tonnes of wheat in

Uttar Pradesh that year.26
There was a fiasco in wheat procurement again in April-May
2006. The total public procurement of wheat that year was 9.2
million tonnes, only 13.3 per cent of the wheat output – a historic
low. The way in which the government intentionally did not procure
wheat has been described in a box in the chapter on economic policy
reforms. In both these years, the government could have procured
enough to meet its domestic requirements, but chose not to do so.
This was done so that there could be an excuse for importing wheat
from outside. As we have said in the aforementioned box, under-
procurement was necessary to create the case for wheat imports.
In 2006, the government imported 5.5 million tonnes of wheat
at an estimated cost of $1.13 billion, or over Rs. 5000 crores.27 The
government preferred to buy wheat from the Australian Wheat
Board, Glencore, Toepfer and Cargill but did not offer a higher
Minimum Support Price (MSP) to the farmers.28 It preferred to pay
multinational agri-businesses rather than the farmers of the
country. The inferior quality red wheat imported from Australia
was fed to the poor through ration shops and mid day meal schemes
in government schools. The quality of wheat was so poor that it
was fed to cattle in many parts of the country.
In March 2007, despite predictions of a bumper harvest in the
country, US Wheat Associates (a trade body funded by the US
federal government and wheat producers) predicted that India
would import 3 million tonnes of wheat in 2007. The government of
India exceeded the expectations of US Wheat Associates and even
before May (when peak procurement is done), announced that it
wished to import 5 million tonnes of wheat. In June 2007, the
government imported 0.51 million tonnes of wheat at Rs. 13,349
per tonne. On 3 September 2007, it again decided to import 0.79
million tonnes of wheat from three multinational companies at an
even higher price of Rs. 15,967 per tonne. 29 The government was
paying farmers only Rs. 850 per quintal of wheat in 2007, but it
imported wheat at prices as high as Rs. 1,334 per quintal and Rs.
1,596 per quintal respectively. The message to farmers was clear:
the government will not undertake procurement from the farmers
even if it has to import at a higher cost from multinational agri-
businesses.
In these two years, India became the world’s second largest

importer of wheat after Egypt. Its purchases had a contributory
effect of increasing grain prices on the world market. Even the
Central Vigilance Commission has been forced to take cognizance
of this loot. It has asked the Union Ministry of Consumer Affairs,
Food and Public Distribution whether wheat imports of 2006 and
2007 could have been avoided if government agencies were sincere
in procuring enough wheat for the buffer stock, by adequately
raising the MSP for farmers. It has also questioned as to why wheat
imports were planned and announced before the harvest.30
What justifies this loot and plunder? Who is answerable for
this transfer of wealth from millions of farmers and the poor to
multinational grain trading corporations? The game that the Indian
state has played with food security requirements of our country
has had brutal consequences.
SOVEREIGNTY, NOT JUST SECURITY
Food self-sufficiency is a peculiarly obtuse way of
thinking about food security. There is no particular
problem, even without self-sufficiency, in achieving
nutritional security through the elimination of
poverty (so that people can buy food) and through
the availability of food in the world market (so that
countries can import food if there is not an adequate
stock at home)…
The focus has to be on income and entitlement, and
the ability to command food rather than on any
fetishist concern about food self-sufficiency.
The real issue is whether a country can provide
enough food for its citizens – either from domestic
production or imports or both… [Emphasis added]
– Amartya Sen
The Observer,London, 16 June 2002
April 2008 was a significant month for all those who are
concerned with global hunger and food security. There were food
riots in three countries in three continents. At least five people
were killed in the Caribbean nation of Haiti in food riots and the
national government fell as an after effect. There were riots in Egypt
(Africa) for two days over the doubling of prices of basic foods in a
year. Thousands of textile workers protested against rising food

prices and clashed with the police in Dhaka, Bangladesh (Asia).
These are not isolated incidents. People burnt government
buildings and looted stores in three cities of Burkina Faso over
rising food prices in January 2008. A taxi drivers’ strike over fuel
prices in Cameroon in the same month turned into a massive protest
about food prices, leaving around 20 people dead. There were similar
protests in Senegal and Mauritania in 2007. Food riots have been
reported from Indonesia, Philippines, Namibia, Zimbabwe, Morocco,
Uzbekistan, Austria, Hungary and Mexico. In countries such as
Pakistan and Thailand, military troops have been deployed to guard
food stocks and prevent seizure of grain from warehouses. The food
crisis is one of the major crises affecting the world today. In terms
of its effects, the food crisis is likely to have the most devastating
impact on the world’s hungry and poor population, a major part of
which resides in India.
What is the extent of the recent rise in food prices? According
to UN’s Food and Agriculture Organisation (FAO), worldwide cereal
prices grew by 88 per cent, oils and fats by 106 per cent and dairy
products by 48 per cent between March 2007 and March 2008.
According to the World Bank, in the 36 months ending February
2008, world wheat prices rose by 181 per cent, and overall world
food prices increased by 83 per cent.31 The impact of the food crisis
has been felt most acutely in those developing countries in which
majority of the people spend 50-60 per cent of their incomes in
purchasing food. It should be noted here that there is no shortage of
food in the world. The growth in food production has been more
than the growth in world population, and the FAO estimates that
enough food exists in the world to provide over 2800 calories a day
to everyone in the entire world. 32 The present food crisis is explained
by different factors. The reasons for the recent food price inflation
point to the necessity of a country like India producing sufficient
food grains domestically to meet its own requirements.
One of the most important reasons for the rise in world food
prices has been mentioned above – the diversion of food crops for
industrial use in US, EU and other countries since 2006, for
producing biofuels. Secondly, the rapid increases in the price of oil
(till before the ongoing financial crisis) is also responsible for rising
food prices. Petroleum is required to manufacture fertilisers and
pesticides and to operate agricultural equipments. It is estimated
that it takes ten calories of fossil fuel energy to produce one calorie
of food energy. In addition to this, an increasing proportion of world’s
food production is traded internationally, which means that the
freight (transportation) costs of food rise directly with any increase
in the price of fuel. The third significant factor behind the rise in
food prices is the irregular weather brought about by climate change.
Australia and Ukraine, major wheat exporters in the world, have
had a succession of bad harvests. Floods last year in places such as
Bangladesh and North Korea and years of low rainfall in the western
United States have also adversely affected food grain production.
Former US President George Bush has also suggested that India
and China are responsible for the present food price inflation since
“they are consuming more”. This is a ridiculous claim and only serves
to show the ignorant approach of US policymakers. However, the
growing demand for food and meat in the world (including India
and China) is likely to have contributed to the recent surge in food
prices as well.
The above factors have been listed to show that all the factors
responsible for the rise in world food prices are beyond India’s
control. All these factors are likely to worsen in the future, and
hence the rise in food prices is not a temporary or short-term
phenomenon. It is no secret that the five major-rice producing
nations of Asia (Thailand, Vietnam, Cambodia, Myanmar and Laos)
are planning to form a cartel in order to control world rice prices.33
It is thus of utmost importance that India becomes self-sufficient
in food grains production.
The need for self-sufficiency, contrary to what Prof. Amartya
Sen says, becomes even more apparent when we consider the role
of multinational agri-business corporations. Multinational
corporations dominate the global food industry today. They control
the storage, processing, distribution, trade and retail sale of large
proportions of the food consumed in the world. These agri-businesses
have had a major role to play in precipitating the present food crisis.
The speculation by these companies in the international grain
market and the hoarding of agricultural commodities has also
significantly contributed to the rise in food grains prices. Only three
companies control the world’s grain trade: Cargill, Archer Daniels
Midland and Bunge. The profits made by these three companies
(and some others) in 2007 are given in the table below. 34
Company Profits 2007 Increase from 2006

(USD million) (in per cent)
Cargill (US) 2,340 36
Archer Daniels Midland (US) 2,200 67

ConAgra (US) 764 30
Bunge (US) 738 49
Noble Group (Singapore) 258 92

Marubeni (Japan) 90* 43
Source: Compiled from corporate reports.

*Data is for Marubeni’s Agri-Marine division only. Absent from this list is Louis
Dreyfus (France), a private agricultural commodities trader with annual sales in
excess of USD 22 billion, which does not report its profits.
Needless to say, these companies have made huge profits from

the present food crisis. On 14 April 2008, Cargill announced that
its profits from commodity trading for the first quarter of 2008 were
86 per cent higher than the same period in 2007. Cargill’s chairman
and CEO boasted that “Prices are setting new highs and markets
are extraordinarily volatile. In this environment, Cargill’s team has
done an exceptional job measuring and assessing price risk, and
managing the large volume of grains, oilseeds and other
commodities moving through our supply chains for customers
globally.”35
The food crisis also presents immense opportunities to
multinational agri-businesses, especially seed and agrochemical
companies. It gives them an opportunity to sell more fertilisers,
pesticides and genetically modified seeds to farmers and countries
which are looking to increase agricultural production. For example,
the pressure by World Bank and FAO on countries to accept GM
foods as a “solution” to the present food crisis will naturally help
Monsanto, which controls around 60 per cent of global seed
production. Monsanto reported a 44 per cent increase in overall
profits in 2007. Syngenta, the top pesticide manufacturer and third-

largest company for seeds, saw profits rise 28 per cent in the first
quarter of 2008. 36 The world’s big food processors (like Nestle and
Unilever), some of whom are also agricultural commodity traders,
are also making huge profits from the crisis. Multinational
corporations, aided by the policies of their respective governments
and institutions like the World Bank and IMF, seek to control the
entire food chains of the developing nations – from inputs,
production, storage, processing, retail and distribution. In this
scenario, initiatives of the Indian government to allow the entry of
transnational corporations in more and more spheres of our
agriculture and food economy, clearly show where its loyalties lie.
CONCLUSION
The chapter on technology (Science of Profits) illustrates in
detail the ways in which the US and its multinational corporations
pressurized and arm-twisted the Indian state to accept policies
which suited their interests during the food crisis of 1960s. It seems
that the Indian state has not learnt (or has forgotten) the bitter
lesson of that period: food aid can be used as a weapon of political
control.
It is in the context of this lesson that we must reiterate the
need for food sovereignty, not just food security. The need of the
hour is to give adequate incentives and support to the country’s
farmers to produce more food grains, to universalise the public
distribution system, follow policies which provide purchasing power
in the hands of the majority of our people, and above all, to retain
our independence from the avaricious interests of the developed
countries and their transnational corporations. When the Indian
state fails to do any and all of the above, it is time to realise the
interests and institutions it is actually working for.
Haiti: Riots perpetrated by the US and IMF

The present food riots in Haiti have a history. Rice is the staple crop of
Haiti and till late 1980s, Haitian farmers were able to produce enough rice to
satisfy 95 per cent of the country’s domestic consumption requirements.
Although Haitian rice farmers received no government subsidies, the domestic
rice market of Haiti was protected by import tariffs. In 1995, Haiti had to take
a loan from the IMF to meet its foreign-payments crisis. One of the
conditionalities of the IMF loan was that the country should reduce its tariff on
imported rice from 35 per cent to 3 per cent, the lowest in the Caribbean. The
result was predictable: a massive import of US rice at half the price of
domestically grown rice. Thousands of rice farmers in Haiti lost their lands
and livelihoods. Today 75 per cent of the rice eaten in Haiti comes from the
US. It is important to note that US rice-growers were not necessarily more
efficient than Haitian rice farmers. Rather, rice exports were being heavily
subsidised by the US government. In 2003, US rice growers received USD
1.7 billion in government subsidies, an average of $232 per hectare of rice
grown. That money allowed US exporters (mostly, large landowners and agri-
business corporations) to sell rice at 30-50 per cent below its actual production
cost.
Haiti was coerced to abandon its domestic protection to rice production,
while US rice growers used government subsidies to take over the Haitian
rice market. Today, the Caribbean nation, once self-sufficient in rice, is
witnessing food riots.
Source: “The failed harvest of food policy” by Aseem Srivastava, Himal South
Asian, 8 June 2008
Notes
1. Kalpana Sharma, ‘The Sensex, Sania and Starvation’, The Hindu, 18
September 2005
2. “Wheat Imports: A Tool for Reshaping India’s Agriculture” Aspects of
India’s Economy (AIE) No. 42, RUPE.
3. Ibid.
4. Table 4 of Utsa Patnaik “Republic of Hunger” Social Scientist, Vol.
32, No. 9/10 (September-October 2004).
5. For example, if the output of a country is 100 kgs of grains in a year,
it imports 30 kgs and exports 10 kgs that year, 25 kgs get consumed
from the public stocks (of organisations like FCI) and 35 kgs are added
to the public stocks – then net availability of food in the country will
be 110 kgs [100 + (30 – 10) – (35 – 25)] that year.
6. Utsa Patnaik 2004 op. cit.

7. The per capita output of food grains was 178.77 kgs in the three year
period ending in 1991-92 and 177.71 kgs in the three year period
ending in 2000-01. (Utsa Patnaik 2004 op. cit.)
8. Bihar and Madhya Pradesh witnessed a fall in output (negative growth
rate) and Uttar Pradesh witnessed a sharp decline in the growth rate
of wheat yield between these two periods. The three states account
for 60 per cent of the area under wheat in the country.
9. Tables 7 and 8 of AIE No. 42 op. cit.
11. Anil Sharma “Is Higher Demand for Biofuels Fuelling Food Prices?”
Economic and Political Weekly, 9 August 2008.
12. It was using only 11 per cent of its corn output to produce ethanol in
2004.
13. 81 million tonnes of corn was being used to manufacture ethanol in
2007. The total world trade in coarse cereals was 114 million tonnes
in 2007-08.
14. Anil Sharma 2008 op. cit.
15. It was announced in the budget of 2000-01 that central issue prices
(the prices at which FCI sells food grains to state governments for
PDS) would be set at half the “economic cost” incurred by the FCI for
BPL households and at the full “economic cost” for APL households.
In effect, there was to be no subsidy component for APL consumers.
16. Madhura Swaminathan “Public Distribution System and social
exclusion”, The Hindu, 7 May 2008
17. Economies of costs due to distribution of smaller quantities, such as
in the case of transport, are also likely to make many shops unviable.
18. Madhura Swaminathan “Liberalisation and Policies of Food Security:
The Indian Experience” a background note for presentation at the
Meeting of the Ethiopian Economic Association, 3-5 January 2003
19. Ibid.
20. Title of a section in the Economic Survey 2001-02, Government of
India.
21. The food subsidy bill increased from 0.4 per cent of GDP in 1990-91
to almost one per cent in 2002-03. According to the Committee on
Long Term Grains Policy, about half the food subsidy bill was being
spent on holding stocks in excess of the buffer stock levels necessary
for food security (Aspect’s of India’s Economy Nos. 36 and 37, RUPE,
March 2004)
22. AIE No. 42 op. cit.
23. Ibid.
25. A possible reason why U.P. was targeted could be the absence of strong
peasant organisations in the state, unlike in Punjab and Haryana
(where the government is forced to procure from the farmers).
26. Business Standard, 17 June 2005
27. AIE No. 42 op cit
28. Bhaskar Goswami “Wheat imports: subverting procurement” 21 May
2007, www.indiatogether.org
29. Sunil “Genhu Aayat ka gorakhdhanda avam bharatiya kheti va khadya
suraksha ki vinash yojna”, Samajwadi Jan Parishad
30. “CVC squeezes government on wheat imports” The Financial Express,
30 September 2007.
31. Aseem Srivastava, “The failed harvest of food policy” Himal South
Asian, 8 June 2008
32. Ian Angus “Capitalism, agri-business and the food sovereignty
alternative”, 11 May 2008, www.globalreserch.ca
33. The Hindu, 2 May 2008
34. “Making a killing from Hunger”, www.grain.org, April 2008
35. Ibid.
36. Ibid.
Chapter IX Flaming Fields 187
Flaming Fields
Agrarian Crisis and Farmers’ Movements
Here we are, the dead of all times,

Dying once again, but now in order to live
– From the Chiapas’ movement, Mexico
Our visit to Vidarbha gave us the feeling that every farmer of

the region was fighting a lonely battle. The individual struggle of
every farmer has perhaps accentuated the despair so tangible in
the region. The need for a collective struggle against a common
enemy was evident. The absence of any strong movement in
Vidarbha today, however, is an aberration if one looks at the legacy
of peasant movements in our country.
Throughout history, farmers and agricultural labourers in India
have organised themselves to agitate for their demands. Different
kinds of struggles with different demands and modes of protests
have been recorded in many parts of our country. Some regions
like Bengal, Bihar, Andhra Pradesh and Punjab have had a stronger
tradition of peasant mobilisation than others. All sections of the
peasantry – landless labourers, tenants, sharecroppers, small and
marginal farmers, middle and even rich farmers – have fought for
immediate economic demands, as well as more political demands,
such as the struggle for independence.
At the risk of simplification, we can divide the farmers’
movements into two categories – those that mobilise the poorest
sections of the peasantry i.e. landless and agricultural labourers
and tribals, and those whose base is amongst the middle and the
rich farmers. The first kind of movements is centered on the issue
of land reforms. They have been led by organisations of varying
ideological persuasions, Lohiaites, Gandhians, socialists and
communists. The second type of movement i.e., the movements of
the rich and middle farmers raised issues such as remunerative
prices for agricultural products, especially since the 1980s.
Some important struggles during the early period of British
rule were the Indigo revolt of 1860, Pabna uprising of 1873, Moplah
rebellion in Malabar, and Wahabi and Faraidi uprisings in Bengal

in the 1930s. These movements were not as organised and mass-
based as movements of the later period, such as Kaira uprising,
Kheda Satyagraha, Champaran Satyagraha, Bardoli uprising and
Oudh movement. Movements in both the periods also differed in
terms of their demands and modes of protests.
In the 1920s, kisan unions started forming at regional levels in
Bengal, United Provinces and Punjab. The All India Kisan Sabha
(AIKS) evolved from these regional groups in 1936. The demands
of AIKS did not remain as localised and the movement became more
organised and participatory in nature. After the 1940s, the
leadership of the AIKS was provided by the Communist Party of
India. The peak of the Indian freedom struggle coincided with
militant peasant movements in Bengal and the Telengana region
of Andhra Pradesh. The Tebhaga movement in Bengal (1946-47)
was for a greater share of the produce for the sharecroppers. The
Telangana movement (1946-51) was against the oppressive rule of
the Nizam of Hyderabad. The Naxalbari struggle started in Bengal
in 1967-68 and spread to other parts of the country. This was
organised around the slogan of radical land reforms and seizure of
political power. Land reforms undertaken after Independence were
partly due to the pressures generated by these movements.
However, the half hearted and incomplete nature of these reforms
has meant that the issue of thoroughgoing redistribution of land
remains pending. Not surprisingly, movements around this issue
continue till date.
The introduction of Green Revolution technology in the late
sixties brought about significant changes in the rural areas.
Cultivation became more dependent on inputs purchased from the
market, and farmers began to sell a greater share of the crop in the
market. A section of farmers in states like Punjab, Haryana, western
Uttar Pradesh, Karnataka, Tamil Nadu, Maharashtra and Gujarat
benefited from this new technology. However, there were problems
associated with Green Revolution which soon resulted in newer
kinds of farmers’ movements in the country. With the passage of
time, farmers in Green Revolution areas faced a paradoxical
situation: their yields were increasing but their incomes remained
stagnant or were not rising proportionately. The rising costs of
cultivation and uncertain prices in the market were the factors
responsible for this. The new farmers’ movements across the country
addressed these issues. The farmers’ organisations in Punjab and
Flaming Fields 189
UP in the 1970s, such as Khetibari Union and Zamidara Union,

were of the rich farmers and did not represent the interests of the
middle and small farmers. Their initial demands even included the
repeal of land ceiling laws.
Other organisations of the new farmers’ movements were:
Shetkari Sangathan in Maharashtra led by Sharad Joshi; the
Bhartiya Kisan Union (BKU) led by Mahinder Singh Tikait in UP,
and by Ajmer Singh Lakhowal, Balbir Singh Rajwal and Bhupinder
Singh Mann in Punjab; the Bhartiya Kisan Sangh in Gujarat; the
Tamil Nadu Agriculturalists’ Association (Tamilaga Vyavasavayigal
Sangham or TVS) led by Narayanswami Naidu; and the Karnataka
State Farmers’ Association (Karnataka Rajya Raiyat Sangh or
KRRS) led by M.D. Nanjundaswamy, Puttannaiah, Basavaraj and
M.S. Shankarikoppa. In the next paragraphs, we will look at some
of the organisations, their demands and their struggles.
The Bhartiya Kisan Union in Punjab mobilised ten thousand
farmers and gheraoed the Governor House in Chandigarh in 1987.
The farmers were demanding supply of free electricity and
withdrawal of the chungi that was levied on their crop when they
brought it to the market. In 1990s, BKU led a struggle against
increase in electricity tariffs imposed by the government. Farmers
rallied behind BKU and withheld payment of electricity bills for
eighteen months. The government could not take any action against
the farmers for non-payment of bills. Some of the other demands of
BKU included higher remunerative prices for wheat and sugarcane,
reduction of input prices like water rates, electricity tariffs, rates
of fertilisers and for replacing defective tractors etc.
There was widespread discontent amongst the cotton growers
of Karnataka due to the rising prices of fertilisers and other inputs,
and the indifference of the state government. The Karnataka Rajya
Raiyat Sangh (KRRS) emerged in the 1980s and raised demands
for increasing minimum support prices, crop insurance, government
procurement, availability of credit, lowering interest rates and
waiving of farm loans. Another set of demands concerned the
distribution, availability and user charges of water.
The Shetkari Sangathan in Maharashtra raised demands of
the shetkars – those who work on land, owner or non-owner. It
launched its first agitation in 1979-80. The farmers responded to
the organisation’s call for raasta roko (road blockade) in Nasik region
during September-November 1980. They were demanding
remunerative prices. The tobacco growers of Nipani also launched

their agitation under Shetkari Sangathan to draw the government’s
attention to their grievances. In 1982, Shetkari Sangathan launched
its struggle against the government’s milk pricing policy. Milk
producers were being denied remunerative prices for the milk that
they supplied to the dairies. The demand for higher cotton prices
was taken up by the organisation in 1985-86. According to Sharad
Joshi, the real contradiction lay not within the village between big
and small farmers and the landless, but between the agrarian
society and the rest of the urban-industrial society. His slogan of
‘Bharat against India’ symbolised this. In the 1990s, Shetkari
Sangathan underwent a split. Sharad Joshi became an advocate of
the policies of globalisation.
From time to time, efforts have been made by these movements
to come together at the national level and lead a united struggle
based on a common minimum agenda. So far, these efforts have
not been very successful. The leading organisations of these
movements remain divided on many issues, significantly their
approach towards the World Trade Organisation. Of late, some of
these organisations are making an effort to reach out to agricultural
labourers and landless peasants. These efforts are reflected in the
new demands such as parity between wages of agricultural labour
and urban workers. But these efforts are inadequate. These
organisations still represent largely the rich and the middle farmers.
Apart from these farmers’ organisations, the movement which
emerged from the Naxalbari struggle, known as the Naxalite
movement, has also raised issues concerning the middle and rich
sections of the peasantry. Remunerative prices, subsidies on inputs
and scrapping of WTO agreements are some of the demands.
However, the base of the Naxalite movement is primarily the poor
peasants, landless labourers and tribals.
Today, another kind of movement waged by those who are
dependent on agriculture has gained prominence. This is the anti-
displacement movement by farmers against the forcible acquisition
of their lands for the corporate sector. Whether it is Mukesh
Ambani’s SEZ in Raigad (Maharashtra), the Salim group’s SEZ in
Nandigram, the Tata car factory in Singur or the Posco steel project
in Orissa, farmers all over the country are fighting a bitter struggle
against the state and private companies in order to protect their
livelihoods. Objectively, anti-displacement movements are also
Flaming Fields 191
against the same processes and policies which are responsible for
the agrarian crisis today. The policies of the Indian state which are
in the interests of imperialism and big capital are on the one hand,
unfavourable to the agricultural sector and on the other hand,
transfer scarce and valuable resources like land to the private
corporate sector.
In conclusion, we wish to stress the importance of collective
struggle against problems which are social and structural in nature,
like the agrarian crisis. The lack of organised opposition to state
policies is perhaps responsible for the extreme hopelessness
amongst the farmers today. Weak, scattered or disunited as they
may be, the peasant movements that exist today are the only hope
for farmers and agricultural labourers getting back their dignity
and due share in the country’s growth. All alternatives to the present
crisis in agriculture have to begin with strong movements to usher
in the same.
Appendix
Demands by some peasant organisations

related to the present agrarian crisis
Charter of Demands by eight organisations from Punjab

1. All government and private debts of common peasants and agricultural
labourers should be written off. A compensation of Rs 10,00,000 to be given
to the families of suicide victims.
2. A census should be undertaken to determine the actual number of suicide
deaths on account of debts.
3. Compulsory license for moneylending. Debts and documents of unlicensed
moneylenders to be cancelled. Even in case of loans by the former, the
debt should be recovered in easy installments over a long period of time.
4. The lands of the farmers, sold-mortgaged, attached-auctioned, ten to fifteen
years prior to the phenomenon of suicides should be returned and all relevant
documents nullified.
5. Co-operative societies and agricultural banks should be strengthened so
as to prevent the farmer from going to the moneylenders.
6. A permanent natural calamity fund should be created and the losses on this
account should be fully compensated.
7. Proposals for a new debt law:
§ Rate of interest should be 4 per cent per annum (for loans by government,
cooperative, agricultural banks, financial companies or moneylenders)
and crop loans should be given interest free.
§ Interest over interest and recovering more interest than the principal
should become punishable.
§ The credit limit of the banks should be half of the minimum selling price
of the land as fixed by the District Collector. Agricultural loans should be
outside the purview of Company Act.
§ In case of default by helpless peasants, there should be complete ban
on attachment-auction of the land, residential house or agricultural
implements.
Flaming Fields 193
§ Laws, which allow warrants, arrests, declaration of proclaimed offenders

at the time of recovery of loans, should be annulled. Methods which
defame and humiliate the peasants should be declared as punishable
crime.
§ In case of death of the indebted peasant, recovery of debt from the next
of kin should be banned.
§ Police and courts should not interfere in case of recovery of unlicensed
loans.
§ Non-government loans should be in accordance with the bank rules. Pass-
books should be issued and official records should be maintained on a
monthly basis.
§ Restrictions should be imposed on purchase of agricultural land by rich
persons outside agriculture.
Issued by: Bharatiya Kisan Union (Ekta-Ugrahan), Kisan Sangharsh Committee,
Punjab, Jamhoori Kisan Sabha, Kul Hind Kirti Kisan Sabha, Punjab Kisan Sabha,
Bhartiya Kisan Union (Ekta-Sidhupur), Punjab Kisan Union, Zameen Bachao
Committee (Barnala)
Source: People’s Democratic Front of India Bulletin Year 1, Volume 2, August 2008
Other Demands by BKU (Ekta) of Punjab

1. Commission of Agricultural Costs and Prices should fix the price of the
produce before the sowing of the crop.
2. Every peasant should have a pass book attested by the tehsildar and it
should be given legal recognition. Details of the commission agents should
be there as well as the details of the ownership of farmers’ land.
3. Industries should be established in the rural areas to reduce dependence
of rural areas on agriculture and 75 per cent of jobs in those industries
should be reserved for the people from that particular village alone where
the industry is established.
4. Farmers with less than 10 acres of land should have 50% (direct) subsidy
on inputs.
Charter of Demands by Kisan Coordination Committee

led by Vijay Jawandiya
1. Remunerative prices to be declared and assured procurement by the
government at these prices.
2. All loans should be written off at least once.
3. Crop insurance should be extended to village level. There should be
insurance of consumption expenditures as well.
4. Protective irrigation through tanks, canals, wells should be increased.
5. Direct subsidies should be given to the farmers with unirrigated land.
6. Agriculture is a state subject as per the constitution. It should be included
in the concurrent list.
7. Farm labour (wages) should be decided by the Sixth Pay Commission and
the entire work from sowing to harvesting should be brought under NREGA.
Source: Interview with Vijay Jawandiya
Demands Raised by Marxist-Leninists on Agrarian Issues

1. Land redistribution should start on the basis that in every village every
family should have minimum land irrespective of what the Land Ceiling Act
may say. In case where the big peasants possess land above their family
needs or in case any family has other sources of income, that land should
be seized and distributed among the landless poor. This distribution in a
village should start with the dalit and weaker sections. In particular, temple
lands should be distributed among the dalits. The family should be taken
as the unit and the land deed should be given in the name of the woman as
the owner. No compensation should be paid to the landlords.
2. The records of the common lands and government lands of the village
should be found and land must be seized from illegal occupiers and it
should be distributed.
3. The peasants should be given the land they acquired through struggle.
4. The government must ban corporate and contract farming.
5. Agricultural expansion services that emphasise food grain crops should
be established. Desist from encouraging export oriented crops.
Flaming Fields 195
6. Proper marketing facilities must be provided for agricultural produce and

remunerative prices must be guaranteed.
7. The ‘free electricity to peasants’ scheme [in the context of Andhra Pradesh]
should be expanded and care should be taken to se that it reaches the
poor, marginal and middle peasants.
8. The government must extend at cheap rates all the agricultural inputs –
cattle, seeds, fertilisers, pesticides, crop protection, facilities for the
evaluation of land fertility, credits – to the small peasants who get land
through land distribution. The government’s help should continue for at
least three years until the new peasants are able to sustain by themselves.
Employment opportunities should be provided along with the land.
9. Agro based industries should be set up either in the public sector or in the
small scale private sector – at least one in each mandal [block]. It should
be ensured that they take up production using local resources, providing
employment to the locals and utilising indigenous machinery.
10. Concrete plans should be drawn to provide irrigation facilities and to make
additional land fit for cultivation. Emphasis should be on small scale irrigation
projects. Tanks and ponds should be repaired.
11. The peasants with small holdings should be encouraged, and all kinds
loan and credit facilities should be extended after establishing agricultural
co-operatives. The Reserve Bank’s credit policy should be implemented in
favor of the small peasants.
12. The agricultural lands on which activities unrelated to agriculture are
undertaken, like film studios, industries, news papers, education, hospitals,
entertainment, real estate, farm houses etc. should be seized and distributed
to the poor. The land the government gave away in the urban areas to
various institutions in excess of their requirement and the agricultural land
which can possibly turn into real estate should be taken back and distributed
to the poor.
Source: A document brought out by CPI(ML) People’s War during the 2004
talks with the Andhra Pradesh government and quoted in ‘Veekshanam’,
September 2007
Chapter
196 Harvesting Despair: Agrarian CrisisXin India
Towards an Alternative
Agriculture is a unique occupation in many ways and more so

in a developing country like India. Growing crops involves certain
risks which are absent in most other economic activities – the risk
of bad weather; more, less or untimely rainfall; pest attack – all
carry with them the possibility of a lower yield or crop failure. Even
as we write this concluding chapter, we have received news from
Vidarbha that the Bt cotton crop, resistant to the American
bollworm, has been hit this year by another pest – the laliya. The
farmer has no control over these factors. Moreover, he does not
even have control over the prices that he will receive for his output.
In the event of a significant price decline in the market, his (and
his family’s) entire season’s hard labour maybe rendered worthless.
In India, agriculture is the lifeline of the economy and our
society. Two thirds of our population is dependent on agriculture.
The present neglect of agriculture is therefore, a neglect of the vast
majority of our country’s population. Perhaps, no other country
metes out such step-motherly treatment to the agricultural
occupation. The developed countries of the world are notorious for
providing extensive support to their agriculture in the form of
subsidies, income insurance and protective import tariffs.
The discrimination against agriculture is unjustifiable given
its importance to our economy – in terms of livelihoods, food
sovereignty and for a sustainable and equitable model of economic
development. Rather than being treated as a ‘residual’ sector,
agriculture needs to be hauled out of its present stagnation and
crisis and made the basis for the country’s development. If the
agrarian distress has to be ended, and suicides stopped, a holistic
solution to the problem is required and not patch-work measures
like the Prime Minister’s relief package. This would entail
thoroughgoing land reforms, massive doses of public investment,
support to agriculture in the spheres of inputs, credit and output,
reversal of the skewed terms of trade between the rural and urban
sector through subsidies to agriculture and above all a pattern of
industrialisation which accords priority to social needs.
Towards an Alternative 197
LAND REFORMS
“Land to the tiller” has been a long cherished dream of the
Indian peasantry. When this is actually realised, it is bound to
unleash the productive potential of the people. Today, the bulk of
peasantry is seeped in poverty and does not have control and (or)
ownership over land. This is largely responsible for the persisting
stagnation in the countryside. When modernisation is conceived
only in terms of technological advances, it does not address the
root cause of agrarian distress. Moreover, this modernisation is
introduced primarily in the interests of transnational corporations,
and very often works to the detriment of the farmer. Such
modernisation has certainly meant devastation for our ecology and
environment.
Thus, a key aspect for alleviating agrarian distress is
thoroughgoing land reforms and transforming the ways in which
production is organised in agriculture. Land redistribution by itself
cannot be sustainable; it must be accompanied by state support in
critical areas. Wherever fragmentation of land makes small or
marginal landholdings unviable, cooperative agriculture should be
encouraged. This also requires the advancement of human
consciousness and replacing the feudal mode of thinking with
modern and scientific ideas.
This, however, is a long drawn process. Even in the immediate
future, there are several measures that need to be taken in order
to provide support to agriculture.
SUPPORT TO AGRICULTURE
Public investment
Public investment in agriculture needs to be increased
massively. Not only should the current trend of reduction in public
investment in agriculture be reversed, but heavy investment is
required to build the rural infrastructure. Investment is required
for rural electrification, repairing the damaged soil and forestation,
leveling of soil, canal irrigation systems, water harvesting,
watershed development and rainwater management. The latter set
of measures will ensure that farmers are not only dependent on
groundwater extraction, thus conserving this important and fast
depleting natural resource. Agricultural universities set up and
funded by the state should be carrying out research in the
development of appropriate seeds and technology. Multinational
corporations should not be allowed to make profits from ecologically

destructive and unsustainable technologies at the cost of farmers.
Agricultural universities also have the responsibility of mapping
the soil in different geographical regions of the country, and
disseminating information about the optimum and judicious usage
of fertilisers in accordance with the needs of the soil.
As we have argued earlier, there will be an incentive for private
investment only when there is public investment and infrastructural
support. However, private investment does not mean investment
by the corporate sector. In fact, multinational corporations should
be barred from entering any domain of agricultural activities.
Inputs
Inputs required for cultivation, especially agricultural
equipments, seeds, fertilisers and pesticides should not be under
the control of private corporate interests which are seeking to make
profits out of these. Industrial units should be set up in rural areas
to manufacture these inputs. This would, on the one hand generate
rural non-agricultural employment, and on the other hand, keep a
strict check on the price and quality of these inputs. Spurious seeds
and escalating costs of inputs have been major reasons for the
present distress faced by farmers. These inputs should be provided
at cost price to the farmers through a network of distribution centers
so that all classes of farmers can avail them easily. The low price
and good quality of the inputs needs to be guaranteed.
Credit
Cultivation, like any other economic activity, requires credit in
adequate amount, at the appropriate time, and without undue
harassment. The rural credit system in our economy needs to be
completely overhauled. It needs to be rescued from its present
dysfunctional state and stagnation. The most important argument
to remember is that profitability can never be the sole criterion
when it comes to providing credit to a sector as important as
agriculture.
The cost of credit i.e., interest rates must be decreased and the
access to formal credit for all sections of the farmers must increase.
This means that the government must strictly impose priority sector
lending regulations on commercial banks. Banks should provide
credit to agriculture at concessional rates, much below the rates at
which credit is given to the urban consumer to satisfy his luxury
consumption. The definition of agricultural credit should not include

credit to agri-business corporations and multinational food
processing units. Public sector banks like NABARD, Regional Rural
Banks and cooperative societies should be revitalised with fresh
infusion of funds and the area of their operation should be greatly
expanded. Many more bank branches need to be opened in the rural
areas in order to compensate for the withdrawal of formal credit
that occurred over the last two decades. The credit needs of small
and marginal farmers with lesser landholdings (therefore, lower
collateral) should be the prime focus of the formal credit institutions.
The present credit limits available to farmers are ridiculously
low. For example, a farmer in Vidarbha could have received a
maximum loan of Rs. 4,200 per acre of land mortgaged, much lesser
than the value of his land or his actual costs of cultivation. This
deliberate under financing of agricultural operations is an important
reason why farmers have to resort to loans from private
moneylenders. The normal credit limit must be equal to at least
half the value of land mortgaged by the farmer. This is quite
reasonable for the banks as well, since they have the right to sell
the land mortgaged in case of a default. Special measures should
be introduced in areas of acute agrarian distress like Vidarbha,
and parts of Punjab and Andhra Pradesh. For example, commercial
banks should write off the (production and consumption) loans of
families of all suicide victims, and provide interest-free loans to
their families for continuing agricultural operations. Strong arm
tactics of banks and moneylenders to recover loans (often with the
help of the police) must be stopped immediately.
An important indicator of a vibrant and functional rural credit
system is a decline in the dependence on informal credit. Till date,
the majority of farmers are forced to depend on moneylenders and
make exorbitant interest payments. The humiliation and insult that
a farmer faces at the hands of moneylenders when he is unable to
repay his loans only compounds his distress. With the advance and
growth of rural institutional credit, private moneylenders should
ultimately be made irrelevant in the rural economy.
Output
There are two kinds of risks a farmer faces when he is ready to
harvest his crop and sell it in the market – the risk of crop failure
(due to drought or pest attacks) or a price crash in the market.
These risks have increased with the introduction of new variety of
seeds which are heavily dependent on water and with the opening
of agriculture to international markets. It is important that farmers
should be insured against both risks. For the former, there should
be a government sponsored insurance scheme covering all farmers
in the eventuality of crop failure in a region or district.
A system of government procurement at minimum support
prices should be in place for all regions and all crops, so that the
farmer does not have to engage in distress sale and suffer drastic
income losses in particular years. The costs of cultivation, on which
MSPs are based, should include imputed costs such as the rental
cost of owned land, and family labour. Agricultural labour should
be considered as skilled labour, and its valuation should be done
accordingly. Other anomalies in calculating the costs of cultivation
should be eliminated. The minimum support price declared by the
government, calculated as a margin over the costs of cultivation,
should act as a real floor price. For this, it is important that the
government actually undertakes procurement (through institutions
like the FCI and CCI) if market prices fall below the MSP in any
region. It is important that the government should announce MSPs
for different crops before every sowing season, so that the farmer is
able to take an informed decision about the crop he will sow in that
season.
The government must prohibit multinational corporations and
private traders from hoarding food grains and speculating in the
grain trade. Futures trading in agricultural commodities must be
banned as this increases the volatility of agricultural prices without
any benefit to the farmers.
ADDITIONAL STEPS
The Agreement on Agriculture (AoA) signed by India as part of
the WTO agreements has meant adverse consequences for the
agricultural sector with few real benefits, if any. India must
withdraw from the AoA and all other agreements which have
negative implications for our agriculture. Agricultural trade with
other countries can be carried out without entering into multilateral
agreements which are biased towards developed countries and their
farmers.
Food sovereignty for the country must be ensured. The
government must take steps to encourage the production of cereals,
pulses and edible oils and stop the diversion of agricultural land
from food grains to export-oriented cash crops. Food sovereignty

must be accompanied with a universalisation of the Public
Distribution System, so that the rural and urban poor have access
to adequate food and nutrition.
In order to address the increasing rural urban disparities in
the economy, agriculture should be subsidised. Instead of pampering
the urban corporate sector with infrastructure, tax concessions and
subsidies, the government must focus on indigenous
industrialization and infrastructure development in the rural areas.
The massive subsidies (direct and indirect) given to the big corporate
sector must be diverted to the rural economy on which the bulk of
our population depends.
In the final analysis, the present crisis in agriculture has
expressed itself in two ways – the widespread debt, distress and
suicide in the countryside, and the absence of a structural shift in
the economy, wherein the population dependent on agriculture
remains trapped within this sector with little possibilities of moving
out. There is much talk of the need to shift people out of agriculture,
but there is little discussion on where they would actually find
dignified alternative employment. We now turn to an alternative
model of industrialization, which suggests a possible way forward
for our people and the country.
WHAT SHOULD BE THE ALTERNATIVE MODEL OF
INDUSTRIALIZATION?
There is little doubt that economic development necessitates a
structural shift in the economy. However, the present model of
industrialization has failed to bring about this shift. Presently, there
exists a perverse pattern of development – the services sector
contributes the highest share to the output of economy (more than
half) while the agricultural sector has the majority of the population
dependent on it.
The population dependent on agriculture does not have either
the skills or the opportunities to move out. The present pattern of
industrialization also does not and cannot provide employment to
vast numbers who can be potentially released from agriculture.
This is because the techniques employed are not meant to create
jobs but to maximise profits. These also produce goods which are
not required by the majority of people.
First and foremost, if there has to be industrialization of the

rural economy, the purchasing power of the people must develop.
With the bulk of the masses of rural India immersed in poverty
and backward land relations, no market for local industry can
develop. A pre-requisite for developing the home market for
industrial commodities is thoroughgoing and genuine land reforms.
Along with this, it is only with development of agro-processing
industries and indigenous industrialization that the crisis of rural
India can be addressed. Public investment in rural infrastructure
and a large number of industries geared to make goods like bicycles,
footwear, and myriad other things needed for mass consumption
can offer a solution. The employment potential of such industries
can be assessed from the fact that in 2005, all organised private
sector manufacturing employed only 4.5 million people in contrast
to 29.5 million people employed by small scale industries alone.
This would also generate rural non-farm employment and increase
the purchasing power of the masses. This in turn will reduce the
pressure on agriculture and also create an impetus for growth of
the economy.
This however will happen only when the direction of investment
and choice of technology is based on social needs rather than to
serve the profit-generating interests of the private corporate sector.
WHAT KIND OF TECHNOLOGY SHOULD BE ADOPTED FOR
AGRICULTURE?
The devastation of non-renewable resources like soil and water
is proceeding at such a rapid pace that it now threatens not only
cultivation as we know it, but the future of humanity itself. The
technological changes brought about in agriculture till now, have
largely been in the interests of the transnational corporations –
giant grain traders, agro-chemical companies and food processing
multinationals. It has led to widespread ecological devastation, soil
degradation, and depletion of water tables, destroyed the bio-
diversity and increased the incidents of pest and insect attacks. At
this stage, it is important to pause and carefully assess the
conditions of soil and water availability in different agro-climatic
zones of the country. There should be soil mapping and water
resource checks in every region, so as to suggest the techniques
better suited to the local requirements and ecosystem. This would
indicate the appropriate mix of fertilisers to be used and cropping
patterns that should be adopted in different agricultural regions.
An immediate attempt should be to replenish the soil and arrest

any further damage to its fertility. A combination of organic and
chemical fertilisers needs to be used in agriculture, with the
objective of gradually reducing the dependence on the latter.
Experiments of this kind are being carried out in some pockets of
the country, although they are small in scale. The example of Cuban
agriculture is noteworthy in this regard. The country was forced to
experiment with organic farming due to trade embargoes by the
US in the 1970s, but chose to continue with it at a countrywide
level even after import of fertilisers became possible. State owned
regulatory bodies should focus on preservation and application of
indigenous varieties of seeds.
In all decision making bodies relating to technology, the
presence of farmers’ representatives should be mandatory.
Agricultural universities ought to be the centers of technological
research in agriculture. Funding to them should be increased so as
to encourage autonomous decisions, regarding the research
initiatives, whose objective is to benefit the farmers. These
universities should also take the responsibility of disseminating
proper information about the technology and its possible impacts
to the farmers. There should be much greater scrutiny while
considering the application of new technology. No new technology
should be introduced without adequate number of field trials whose
results should be available in the public domain. Above all, the
technology used in agriculture should preserve the bio-diversity of
the environment, be geared to meet the needs of a labour surplus
economy like ours and be ecologically sustainable.
TOWARDS A NEW SOCIETY
The steps needed to bring agriculture and population dependent
on it out of current distress requires a strong political will. For
this, far-reaching changes are needed at socio-economic and political
levels. The developments of past sixty years have shown that no
government is willing to bring about these changes. These can come
about only in a system where there is both economic and political
democracy. Economic democracy entails that economic resources
and their benefits should be equitably distributed. Political
democracy means that people themselves should be involved in
major decisions regarding their lives. Today it is the nexus of big
corporate sector-rural elite-bureaucrats-politicians which dominates
all decision making in our country. Genuine democracy entails that
this stranglehold is replaced by people’s decision making bodies.

On this democratic base, higher structures can be built at the block,
district and the central levels. This, of course, is not possible until
the present nexus is broken.
Thus, it is meaningless to talk about eliminating the agrarian
crisis unless the very path of development followed up till now is
questioned and a new path can be chartered. The crisis in
agriculture is a result of conscious and deliberate state policies.
Unless these are reversed and there is a state-system which restores
to agriculture the dignity and priority it deserves, no piecemeal
measures can avert the crisis and stop its most horrible
manifestation, farmer suicides. This can only happen when the
transition to a new society begins.
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Harvesting Dispair: Agrarian Crisis in India

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HARVESTING

Agrarian Crisis in India

The Perspectives Team

[ksrh ds dksuksa] [kqnjksa esa

fQj vxyh #r dh fQØ djks

Q+St vgen ^Q+St*

In every nook and corner of the field

Agonize, yet again over the season to come

Faiz Ahmed 'Faiz'

taking the form of a public statement accusing the state of betrayal.

off castes like Brahmins and Rajputs began acquiring ownership

growing credit requirements of the farmers. The area still depends

VJAS (Vidarbha Jan Andolan Samiti), is of the opinion that the

FROM CRISIS TO SUICIDE

situation. There is evident economic distress, unfulfilled aspirations

even greater pace. Given this, availability of adequate credit

inputs, this essentially means that there is no possibility of sowing

In this situation of complete helplessness and despair, presence

approximately Rs. 7,000 to

conditions) and the same is five to

used to be added on to the

Committee (APMC) takes the initiative to conduct auctions for the

per cent in order to get immediate payment. Of late, krishi kendras

credit limit (NCL) determined by the District Technical Committee,

Everyone we spoke to, whether farmers or bank officials,

Soybean: The New Killer

As this book goes to print, we have received disturbing news.

8. A Narayanmoorthy, SS Kalamkar ‘Is Bt Cotton Cultivation

Crops, Credit and Cotton Yield by Landholding Size

Above Cotton (double Bt Cooperative banks, Rs. 10

communities. Even farmers who had land up to 3 acres worked as agricultural

I. (a) Name/ Age/ Caste/ Number of members in the household (M/F)

II (a) What crops are grown (changes from jowar to cotton)

III (a) Degree of mechanisation of the agriculture

(c) Are green cards still applicable?

(f) Local support systems—panchayat/political parties/peasant organisations

VIII Questions for agricultural labour families

We owe respect to the living

Backdrop to the Crisis

The situation in Vidarbha described in the previous chapter is

The crisis in agriculture is evident in a variety of other ways.

place. The increasing dependence on inputs which have to be

foreign experts might be set up to work with an Indian group to

“dominant families”, as reported by the Planning Commission’s

In our own country, even as the process of getting Independence

Seeds, fertilisers, pesticides, agricultural equipment, all have

The domestic agricultural market was opened to international trade

Economic Policy Reforms and their Impact

The agrarian crisis of today has been precipitated by a steady

NEGLECT AND DISCRIMINATION

In other words, public investment in agriculture cannot be

area in the first half of the 1970s (1970-71 to 1974-75) to only 31

Borewell Technology: The Modern ‘Bhasmasura’?

of large landowners and organised industry. Even the major share

except urea. Now, the fertiliser subsidy is due to the continuation

mission and distribution (T&D) losses of the state were

RISING COSTS AND FLUCTUATING PRICES

assets owned by the cultivators. Operational costs are costs of

consequences. They increase the incidence of weeds, pests and

With the emergence of private operators, costs on account of

food processing, and other agri-businesses. As far as cultivators

1986 titled Agricultural Price Policy: A Long Term Perspective,

often depressed. Even today the recommendations of 1960s are in