An Attack on India's Sovereignty


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Rural Stagnation

               (i) History

               (ii) Globalisation and Agriculture

               (iii) Impact of Globalisation on Rural Sector

                       (a) Flood of Imports

                       (b) Low Agricultural Investment

                       (c) Dismantling of The PDS


In semi-feudal India it was imperialism that retarded progress and the development of a modern economy. Prior to the arrival of the British, many parts of the country and aspects of its economy, were in the process of bourgeois transformation. It was the British colonialists who crushed the nascent transformation, and propped up a new zamindari (forcibly conquering the Rajas that resisted) servile to its interests.

Though the imperialists can extend their market in backward countries by ushering in capitalist development in agriculture, they fear the growth of a nascent bourgeoisie, pitted against them, once the power of the landlords is destroyed. Caught in this contradiction of its need for a market and the necessity of maintaining its social prop, in feudal and/or semi-feudal authority, it initiates some reforms that try to balance both. This results in a highly distorted, decadent and putrefied agrarian economy, semi-feudal in character, seeking to maintain feudal authority and relations while developing the commodity market.

This is seen in India, particularly since 1947. The imperialists have always shown big interest in the agrarian economy, as it comprises 70% of the population. Whether it were the early US attempts through the PL-480, or the later ‘green revolution’ or the present-day vast foreign-funded NGO network in the countryside, all have been geared in a single direction — seeking to maintain the status quo, while trying to extend the commodity market.

Let us briefly look at the history of these policies, before coming to the globalisation period.

i) History

Nehru, from the very inception, allowed virtual subversion of the country by US imperialism in supposed ‘assistance’ to the rural economy. When the Congress saw the British weakening, Nehru established contact with the US from 1945 itself, through the good offices of none other than Chiang Kai Sheik, who had visited the country as an American emissary.

In 1948 Nehru allowed the US State Department to establish an ‘Agricultural Mission’ in India. In 1952, the Ford Foundation, one of the main funding agencies of the US, started a so-called Community Development Programme in the countryside, to ward off agrarian unrest. And most notorious of all was the decision to take the PL-480 loans from 1954. These humiliating ‘food loans’ were virtually blackmail of the country to accept US policy or starve. The PL-480 was like a ‘food for work’ programme, where the US dumped its surplus grain in India, which was used to pay labour for building, roads, canals and other infrastructural development. The bait was that the PL-480 loans were to be repaid in rupees. In actuality these funds accumulated in India, and by the early 1960s such vast amounts had accumulated that the US owned one-fifth of India’s currency. Finally, when there was a worldwide outburst against these loans, the scheme was scrapped. But the vast funds accumulated in India were used for ‘education’, buying up bureaucrats and politicians and various other covert operations including those of the CIA. It was during this time that Nehru struck a secret deal with the CIA to plant a nuclear powered ‘SNAP Generator’ in the Himalayas in order to spy on then Communist China. And with the PL-480 the Indian farmer got an added gift — the highly destructive ‘Congress Grass’ weed. These weeds came mixed with the PL-480 grains.

But no sooner was the PL-480 stopped that Nehru invited the Rockfeller Foundation to introduce their newly experimented High Yielding Variety (HYV) seeds in India. And thereby, in the mid-1960s was launched the World Bank sponsored ‘Green Revolution’ to pry open the rural markets of the underdeveloped countries for American agri-business. All these various American bodies operating in rural India, never once suggested land reforms, and were in fact totally against it. Even with their ‘green revolution’, their aim was to penetrate the rural markets, with the least disturbance of the existing land relations. In order to promote the green revolution the government gave huge subsidies and cheap credit facilities to the surplus producing farmers, mostly from among the landlords and rich peasants. With this, pockets of distorted capitalist development evolved within the overall semi-feudal rural economy.

The Congress’s much promised ‘land reforms’, ceiling, etc. was finally introduced, but only sparingly. In fact, till 1977, out of the total of 360 million acres of cultivable land only four million had been declared surplus and only 1.3 million (or 0.5% of the total) distributed.

So Nehruvian policy in agriculture was to increase production through imported technology, rather than through land reforms.

With the introduction of the ‘Green Revolution’, the areas under HYV seeds quickly increased from 1.2% in 1966-67 to 20% in just ten years. While ‘self-reliance’ in foodgrains was achieved, dependence on imported fertiliser, pesticides, etc. increased. But the growth in foodgrain production was insignificant compared to the growth in consumption of inputs. So, while foodgrain production increased less than 3 fold from 55 million tons in 1951 to 130 million tons in 1981, the consumption of fertilisers increased by 55,000% from 29,000 tons in 1951 to 55 lakh tons in 1980-81. In addition the prices of fertilisers skyrocketed by 150% in the first ten years of the green revolution giving windfall profits to the fertiliser industry.

Those who gained from the ‘Green Revolution’ were only the landlords and a section of the rich peasantry. But the green revolution has not only devastated the poor and middle peasant it has also destroyed our land — with large areas virtually being desertified. The Congress government could spend crores on subsidising the imported HYV seeds and fertilisers to please American agri-business, but they were not willing to spend sufficiently on irrigation. With the result, till today, only 35% of the cultivable land is irrigated. The combined effect of poor irrigation and high dose of fertilizers/pesticides, resulted in a drop in growth rate of agricultural production after the first two decades of the so-called ‘green revolution’ due to soil degradation.

The full impact of the Green Revolution will be fully reached when vast tracts of land, millions of acres, will be made useless — then, of course, the Americans will come with their ‘gene’ revolution. For the present, the WTO has come with its Agreement on Agriculture (AoA), which, in essence, allows for the continuation of the massive agricultural subsidies for the developed countries, while seeking to remove all concessions and controls on agricultural production in the underdevelopment countries.

ii) Globalisation and Agriculture

Soon after Vajpayee took power the World Bank issued its directives. It stated:

(1) Those crops that do not give much profit should be reduced. It is necessary to increase the production of export-oriented crops, and the import of foodgrains.

(2) Indian agriculture should compete with foreign countries.

(3) Government subsidies should be reduced to a minimum on fertilisers, water, seeds and in loan allotments; and should be lifted totally in due course.

(4) There should be no restrictions on indigenous agricultural exports.

(5) There should be no restrictions on the import of foreign agricultural products.

(6) Should remove the FCI’s (Food Corporation of India’s) responsibility in purchasing, transporting and preserving paddy, wheat and rice; entrusting it to private enterprises.

Fully in line with these directives the government, in 2000, announced its much-trumpeted National Agricultural Policy (NAP), the first ever since 1947. The 15-page document promised to usher in a ‘rainbow revolution’ and to make India the largest exporter of agricultural products. Some other important aspects of the NAP are:

(1) The agricultural sector to develop at 4% per year. When in fact its growth rate has dropped from 3.5% annually in the 1980s to a mere 1.5% in the 1990s, such statements are obviously only for propaganda purposes. In fact, the aggregate production of foodgrains increased by only 26 million tons (mt) in the 1990s, compared to 52 mt in the 1980s. So, all talk of a 4% growth is mere kite-flying, and fools no one.

(2) A major aspect of this new policy is to promote private participation "through contract farming and land leasing arrangements to allow accelerated technology transfer, capital inflows and assured markets for crop production, especially oil seeds, cotton and horticultural crops .... Lease markets will be developed for increasing the size of holdings, and legal provisions will be made for giving private land on lease for cultivation and agro-business."

This amounts to nothing but opening out agriculture to foreign agri-business, either by capturing vast fertile lands or by turning farmers into agents of TNCs, to produce on their behalf.

(3) "Developing agriculture through effectively using the resources and technology in accordance with geo-climatic-indigenous conditions... New plant varieties will be protected through a legislation to encourage research and breeding of new varieties, particularly in the private sector."

This clause appears as if it may have been dictated word for word by Monsanto, which is aggressively pushing its Genetic Engineered (GE) seeds in India, and conducting research on the same through its Indian agent, MAHYCO.

This has been followed up by a high profile campaign for GE foods, which have been banned in the EU countries. In fact, even at the very 88th Indian Science Congress held earlier this year in Delhi, promotion of GE foods was made the central theme. Vajpayee, who inaugurated the meeting, sounded more like an agent of the US GE industry, rather than the PM of India, when he said "formation of Genome Valley, unshackling governance of research and higher education from bureaucratic controls, enhancing farm research investment to 2% of GDP," was the government’s goal.

Inspite of vehement opposition to GE foods and Monsanto-MAHYCO operations in India, it is obvious that the government is all set to push through the ‘Gene Revolution’ in India. In fact, it had earlier been shown that GE foods worth $4.5 million had sneaked into the country as ‘aid’ for the cyclone-affected in Orissa.

(4) Extension of market facilities to counter fluctuations in prices and calamities. But, everyone knows that by throwing open agriculture to the vagaries of the market, price fluctuations have devastated lakhs of peasants.

In addition to the above policies, the Central Agricultural Reforms Committee proposed that, within three years, all food subsidies should be removed, minimum remunerative prices should be maintained and food imports should be increased to substitute food scarcity.

Besides these, the already mentioned changes in the Indian Patent Act has had a devastating impact of local agriculture, particularly on the market for seeds (including the transgenic varieties) and the related impact. A host of TNCs have entered into the seed market in a big way either directly, or in collaboration with local compradors, like Hindustan Lever (U.K.), Cargyll (U.S.A.), Hi-bred International (U.S.A.), Seedtech International (U.S.A.), Sandoz (Switzerland), etc. Seeds are usually sold as part of a package — together with fertilizers and pesticides. Cargyll has already entered Punjab in the purchase and sale of wheat. And a number of food-processing units, like Pepsico, are contracting farmers to grow for them.

In July 2000, the Union environment ministry finally made public its decision to permit large-scale field trials of transgenic (genetically engineered) cotton. The decision had been kept secret till then. Maharashtra Hybrid Seed Company (Mahyco), controlled by the giant U.S. multinational Monsanto, was allowed to carry out field trials of the seed Bt cotton on 85 hectares of land and seed production on 150 hectares. This despite the fact that there is still a petition pending in the Supreme Court asking for intervention to check violation of environmental regulations by such companies. In its defence, the government has claimed that transgenic crops are enormously significant" in improving crop productivity, and nutritional quality.

Countries in Europe have banned the use of transgenic seeds. In a Third World country, where data gathering itself is scanty and unsystematic, the scope for monitoring ill-effects is less and the potential for environmental disaster greater. In July itself; seven academies of science around the world, including five from Third World countries, warned that public health regulatory systems need to be put in place in every country in order to monitor potential adverse health effects of transgenic plants. This technology introduces genes from diverse organisms, some of which have little history in food supply. Antibiotic resistance genes used in such crops could increase the antibiotic resistance of humans. Transgenic crops carry genes from non-plant sources as well, and there is little knowledge about their long-term effect. It should he recalled that BSE, the "mad cow disease", broke out in Britain as a result of many years of feeding cattle special "nutritionally enhanced" feeds. Beef from BSE-affected cattle was fatal to humans, and the British government was compelled to order the mass destruction of cattle. Transgenic crops have only come into use over the past decade, so there exists no solid base of data as to their long-term effects even in the imperialist countries, where extensive monitoring is easier. Europeans have recently resisted the entry of American food products made from genetically modified crops.

In September 2000, Karnataka gave Mahyco permission to carry out field trials at 14 places in five districts of the state, Bellary, Davangere, Koppal, Raichur, and Shimoga. The press reports that "similar field trials [are] already in progress in Maharashtra, Andhra Pradesh, Tamil Nadu, and Madhya Pradesh."

The Union ministry’s permission for large-scale trials has been given on the basis of the small-scale trials carried out by Mahyco. However, the results of the small-scale trials have been kept secret!

The TNCs are not even sparing India’s forests. In the culmination of an exercise which began in 1989, the Union environment ministry has finalised a note for the cabinet on amending the 73-year old Indian Forest Act. First, the new Act would consolidate forest and related laws in various states, so as to centralise decision-making regarding forests in the hands of an apex body headed by the Prime Minister. The note goes on to say that tree plantation on private land will be actively encouraged; a land-owner who carries out such plantation could register himself as a tree grower, and plantation forests would -not be included in agricultural land-holding for the purpose of ceiling laws. Evidently the Government ministry envisions large private holdings with forest land to be used for commercial plantation State governments will be empowered to relax curbs, especially on felling and transport of certain species from private land.

On the other hand, there are increased powers to turn on the actual rightful owners of the forest, the tribals. It is reported that shifting cultivation (typically resorted to by tribals) will be checked, and "Protective measures are to be made more effective and penal provisions uniformly more stringent. Encroachment would become a non-bailable offence. Forest officials would be able to confiscate forest produce.

What this portends is (i) intensified plunder of the forests in the name of private plantation (grabbing the land of adivasis is simple, as they usually have no pattas); (ii) penal measures against the adivasis are to be fiercer; and (iii) a small section of adivasis will be corrupted and co-opted into some village committees whose purported job will be to protect the forest, and whose actual job will be to ensure commercial loot of the forest. By generating a small splinter group among the adivasis them-selves whose interests are closely linked with the loot, the authorities hope to widen their support-base and split the resistance to the plunder. Such efforts are already going on in the forest areas in A.P and Orissa. These policies are devised in close association with the World Bank, and foreign-funded non-governmental organisations are involved in their actual implementation.

The TNCs are moving in to take control of such innocuous industries like flourmills, and dairy products — most of which were dominated by the local bourgeoisie. Cargyll India Ltd has plans to takeover ‘sick’ flourmills all over the country, with a planned investment of $25 million (Rs 100 crores) over a four-year period. In Dairy products, the National Dairy Development Board (NDDB) in its 1996 annual report has castigated the government for dismantling the integral policy for oil seeds and edible oils.... It also noted that "TNCs had set up dairy product plants in some of the nation’s best milk sheds, which had been nurtured by cooperatives under ‘operation flood’...." And in another case of arm-twisting the government sided with the TNC Tetrapak to buy out the 80% equity share of NDDB in the joint venture, Hindustan Packaging.

It is a pincer movement by the imperialists to destroy Indian agriculture. On the one hand they are setting up to control the production and distribution of agricultural/forest commodities, on the other hand they are flooding the country with cheap agricultural imports crushing local commodity prices. With the imperialists giving huge subsidies to their farmers, and with the Indian government servilely removing all subsidies and benefits to the peasantry, the local producer is at a major disadvantage and is finding it difficult to survive the onslaught.

What is more, in the period of globalisation government emphasis is away from agriculture and totally focused on industry, more particularly the service sector, adding to rural stagnation.

iii) Impact of Globalisation on Rural Sector

The damage to Indian agriculture is occurring and will deepen as a result of: (a) a forced opening up of the Indian market to agricultural imports; (b) a further reduction in the already abysmally low investment in agriculture; (c) the wrecking of what little ‘food security’ approach in agricultural production has existed since the seventies, and the dismantling of public sector procurement and price support operations and public distribution. These all comprise the chief aspects of globalisation in Indian agriculture.

Let us now look at all these three points separately.

(a) Flood Of Imports

Having removed all QRs and reduced tariffs on all agricultural imports as per the dictates of the WTO, the flood of imports have severely hit agricultural commodity prices pushing thousands of peasantry to suicide.

There are two reasons for the crash in international agricultural commodity prices, which is pushing the Indian peasant to the wall. The first is the gigantic subsidies given by the imperialist governments to their farmers. The second is a major fall in prices due to world recessionary conditions. A similar fall was witnessed in agricultural commodity prices during the 1929 stock market crash.

Regarding the subsidies in the imperialist countries, the OECD countries (i.e. the 24 developed countries taken together) spent a huge $327 billion on agricultural subsidies in 2001.(Aspects of India’s Economy; No.32; Jan. 2002) Aspects further states that for a commodity like rice, the support is 80% of the gross price in the OECD countries. Much is the same with items like wheat, corn, Soya, sugar, etc. In the USA, the average subsidy per farmer was $30,655 — per hectare it amounted to $550 (Rs 23,650). Totally, $97.3 billion or Rs 4,18,400 crores were paid as subsidy. This is well over the total value of all farm products in India taken together. On top of this the Bush administration recently further hiked the subsidy by as much as 80% (or an extra $175 billion over the next few years) which will result in a further downward push in the prices in the international markets.

The recessionary conditions and the crash in world commodity prices in agriculture, is a reason for the added subsidies. The question of the trade in agricultural commodities is the single most important sphere of contention between the US and the EU. It is so intense, that twice it nearly resulted in the bust up of the WTO. Even at present in the on going discussion in Japan on the Doha round a stalemate has been reached with neither willing to give in to the other. The massive drop in world prices, reminiscent of the 1929 crash, is the reason for the intense quarrel, and also the reason for the imperialists to aggressively push to dump their surplus in the backward countries like India. A look at only some of these commodities will indicate the seriousness of the state of affairs.

World Bank data indicate that in several products prices have declined by half between 1999 and 2001. So, for example, coconut oil prices fell from $737 per ton in 1999 to $318 per ton in 2001; copra from $462 to $202; palm oil from $436 to $286; rice from $248 to $173; coffee from $2,2912 to $1,373; and tea from $2,068 to $1,661. In many cases such falls came after steep declines during 1997-99. The price of wheat has dropped from $208 per ton in 1996 to $127 per ton in 2001(Aspects of India’s Economy; 32; Jan.2002).

It is within this scenario of falling international prices coupled with the globalisation of Indian agriculture, that agricultural commodity prices within the country have collapsed.

There is a strong opinion amongst a section of the middle classes that such a big drop in the prices of agricultural commodities is good, as they will be able to get to buy things cheap. Unconcerned about the fact that this destroys the bulk of India’s population, who reside in the countryside, such people only take a narrow, selfish view to the situation. But even this is not true, as retail prices hardly ever drop; the major gains go to the middle-man, traders and the manufacturers/processors who buy up the product at throw-away prices. The sufferers are both the peasantry and the consumer. Take for example the virtual collapse in coffee prices this year. Lakhs of the Indian peasantry and labour employed on coffee plantations have been devastated by the glut in world markets, but the price to the consumer remains high. Not only the Coffee Board (Government) and other traders, but Nestle, Tatas and other such manufacturers, are set to make windfall profits this year. While the West subsidises their agriculturists, India and the WTO regime make sure that they are ruined here. For consumers, prices only rise.

The liberalisation of the edible oils regime, at the dictates of the WTO has virtually destroyed the agriculturist over the years. Production of oil seeds has dropped form 24.4 million tons in 1996/97 to 21.7 million tons in 1998/99 and dropped as low as 19 million tons in 2001. Besides effecting lakhs of growers, the drop in production has had a disastrous impact on the oil extraction industry. For example, in Karnataka 60% of the units have closed down. Thus in 1993/94 while India produced 95.5% of its edible oil consumption, in 1998/99 it had sunk to 61%. In 1999/2000 it dropped further to just 57%. India has become the biggest importer of edible oil in the world.

The price of coconut oil has dropped to its lowest ever due to the flood of imported palmolein. From a price of Rs 6,825 per quintal in 1997, it dropped to a mere Rs 2,825 per quintal in September 2000. The crisis affects 35 lakh coconut growers in Kerala alone.

With the open import policy and the monopoly held by the big consortiums and tea estates the small growers (mostly with one to two acres) are being crushed out of existence. With the market being manipulated by the big dealers and tea factories, the prices have crashed. The average price of black tea in the South Indian Auction has dropped from Rs 76.4 per kg in 1998 to Rs 72.8 per kg in 1999. More significantly, the prices have been crashing since January 2000. By June 2000 the price had fallen to Rs 34.7 per kg. The plight of the green leaf was even worse. The price paid by a "representative factory" in the Nilgiris fell from Rs 10.4 per kg in 1998/99 to about Rs 7.7 per kg in 1999-2000. By June last year the price had crashed to Rs 5.1 per kg.

In 1997, the government reduced the duty to zero per cent and placed SMP (skimmed milk powder) imports on Open General License. The servility of the Indian rulers can be seen from the fact that the import duty for SMP in 43 countries is 144%. SMP imports rose from 126 tons in 1997/98 to over 25,000 tons in 1999/2000. Also, in the same year 40,000 tons of butter-oil have been imported. This glut has led to a fall in market prices. This is killing the dairy industry of Punjab affecting the livelihood of over 4 lakh people. The impact of free imports has led to the crash in the price of desi ghee from Rs 160 per kg to Rs 100 per kg; and that of milk powder from Rs 100 per kg to Rs 60 per kg, in the last two years. The milk-producers cooperative’s Milkfed, in Punjab, earnings dropped by Rs 16.5 crores in just the one-year 1998/99.

Now the WTO regime is also destroying the lakhs of sugarcane growers and the sugar industry. With international prices at just Rs 7.6 per kg and the government imposing a mere 40% duty on sugar, cheap imports have flooded the country. India’s sugar season of 2001/02 started with a record carry-forward stock of 12 million tons and production for that year was 18 million tons. Thus the supply would amount to 30 million tons — near double the domestic consumption of 16 million tons. With the low international prices, exports are impossible. So, with massive stock accumulating the sugar mills have been refusing to pay the cane farmers, pushing hundreds to suicide. Cane arrears in U.P. alone were projected to have reached Rs 1,000 crores by Feb. this year. Neither will they reduce the market price to increase consumption.

Though India (mostly Kerala) is one of the world’s leading producers of rubber, with the government putting rubber on the OGL (Open General License) in 1994, imports began to flood the market. This depressed domestic prices which fell to as low as Rs 25.3 per kg (compared to Rs 52 per kg in 1996). Following protests the government has temporarily curbed imports; but with QRs on natural rubber imports lifted in April 2001, the flood of imports is likely to continue. With international prices being the lowest in 25 years ($0.6 per kg) domestic growers can expect to be wiped out. The crash in prices is destroying the lives of nine lakh farmers in Kerala.

While cotton growers are committing suicide due to big debts and crop failures, the government is allowing vast imports of cotton. Imports of cotton have grown sharply from 4.3 lakh bales (one bale=170 kg) in 1998/99 to 22lakh bales in 2000/01. World cotton prices have crashed by 40% in just the one year from 2000 to 2001, from $1.40 (Rs 67) per kg to 87 cents (Rs 42) per kg. When, in April 2001 all quantitative restrictions were removed, the govt. promised to raise tariffs on agricultural commodities to prevent a flood of imports. But the duty on raw cotton was fixed at just 5%. India’s cotton production was roughly 16.5 million bales in 2001/02, 2.5 million higher than the previous year, resulting in a domestic glut. So, in Maharashtra, which has a monopoly procurement scheme, the government is refusing to pay the growers, as it already has a stock of 6 lakh bales from the previous year. Under pressure to clear their debts (at interest rates of upto 10% per month) peasants are resorting to distress sales to private traders. A minimum of 35 peasants from Vidarbha committed suicide last year.

In August 1998 the government allowed the Open General License (OGL) import of wheat directly by the roller flourmills. This was done inspite of the fact that the government had 3½ million tons (mt) over-and-above the minimum buffer stock. No sooner was this policy announced, that millers began importing wheat, which then cost Rs 675 a quintal at southern ports as against Rs 730 per quintal for FCI wheat. In 1999, even though wheat stocks grew further to 21.6 mt, wheat imports continued, at an even lower rate of $135 per ton (compared to the government equivalent rupee rate of $173 per ton). Within the one-year after wheat was put under OGL, 2.5 million tons of wheat was imported at a cost of Rs 1,300 crores. Simultaneously, wheat stocks grew even further to 24.6 mt — i.e., 10 million tons in excess of the buffer stock norms. Today the stockpile in government godowns is a huge 64 million tons.

The list can go on and on, where nearly all marketed agricultural commodities have been badly hit. These include tobacco, eggs, fish, onions, potatoes, silk, amongst others. With the imperialist countries having bumper harvests and getting increased subsidies, we can expect that in the coming years they will aggressively dump their agricultural commodities in India and other backward countries of the world. Indian agriculture is therefore heading for further disaster.

(b) Low Agricultural Investment

In the period of globalisation agriculture has got the least priority, with major government attention (and funds) being geared for the service sector. So, the governments at both the State and Centre, can allocate huge funds for developing the telecom network or super-highways but has no funds for irrigation. And private investment goes where returns are the maximum. So we find a continuous decline in investment in agriculture in the decade of globalisation.

Investment in agriculture today is nearly half of what it was in the 1980s. The Table VI.1 gives a picture of the declining trend in investment in Indian agriculture by both government and private sources:

Table VI.1

Investment in Agriculture as a percentage of GDP





















Public capital outlays — in irrigation, agricultural research, land development, etc. — has fallen as the Centre and States claim they do not have the funds. While they are able to find endless resources to assist setting up the infrastructure for the telecom industry, they find nothing for agriculture.

So, for example, in Rajasthan development expenditure on agriculture declined 20% between 1995/96 and 1997/98. Neglecting development, the ruler’s obsession with elitist schemes was reflected in the quixotic decisions of the Gehlot government last year to build golf courses in each district, as part of its ‘relief work’. Last year it decided to build airstrips in each district! Instead of using relief work for water storage schemes, it plans golf courses, where one course consumes water equivalent to a village of 9,000.

Also, last year the Maharashtra government abandoned 2,600 schemes for water projects due to "inadequate funds". Yet the government can spend Rs 100 crores each year to supply water by tankers. This satisfies the powerful tanker mafia, which has links with the top politicians of the state. Besides, only 15% of the cultivable land in Maharashtra is under irrigation, which is half the national average, the bulk of which is cornered by the sugar lobby. So, a state that generates the largest revenues (due to industrial/finance concentration in the Mumbai-Pune belt) cannot find any funds for irrigation !!

Regarding private investments, farmers have not been able to invest more, because credit investment — not to mention working capital — has dried up. Organised rural credit was in a state of collapse in the 1990s. This got intensified by: (i) the trend towards privatisation of banking and the government’s instructions to public sector banks to end special loans to the primary sector (ii) the lack of surplus generated in agriculture, due to falling returns.

Finally, if we turn to rural employment, the 1990s witnessed the lowest rate of growth in post-1947 history. Rural non-farm employment almost doubled between 1977 to 1989. It has declined since then. In the last seven years of the 1990s the official growth rate was a mere 0.7%.

Over all we find that both, the rate of growth in production and yields in agriculture have drastically fallen in the 1990s compared to the 1980s. While the growth of agricultural production of all crops in the 1980s was 3.2% in the 1980s, this fell to 1.7% in the 1990s. Similarly for yield rates the growth in the 1980s was 2.6 %, while in the 1990s it was a mere 1%.

(c) Dismantling of The PDS

The World Bank has time-and-again stated the need for winding up the FCI (Food Corporation of India). Once again, in its report titled, India : Foodgrain Marketing Policies — Reforms to Meet Food Security Needs (August 99), the Bank maintained that "India’s food grain procurement, distribution and buffer-stocking policies have repressed the private food grain marketing, under-cutting its potential contribution to long-term food security."

In another WB report, titled, India: 1998 Macroeconomic Update, the Bank dictates to the government to "Allow agricultural ... prices to increase by linking them more closely with world prices by eliminating controls....".

The essence of all such statements is a clear ultimatum to the government to wind up public procurement and allow traders to take control of the market mechanism. But to take such an open step, which would hit at, not only the farmers and the PDS system, but also the large number of employees of the FCI, it would result in an upsurge of the masses against the government. So the BJP-led government devised a two-pronged attack on how to kill the FCI surreptitiously.

First, it flooded the media with articles, talk-shows etc., on the uselessness of the FCI — the corruption, the high salary costs, the inefficiency, the huge storage costs. Second, it created a crisis within the FCI itself by a deliberate piling up of stocks.

Over the last two years the government has continuously hiked procurement prices, ensuring high procurement even in years of relatively poor crops, while hiking the issue price in ration shops, ensuring low off take. It is obvious that high procurement plus low off take equals burgeoning stocks.

By January 1999 excess stocks, over the buffer requirements, already amounted to 7.6 million tons (mt). To dispose of stocks the government ought to have reduced the PDS rates. But it did not; it in fact increased it in April ’99. The off take therefore dropped further. The stocks therefore continued to rise. By January 2000 the excess stock increased to 14.7 million tons, over the buffer-stock required (of 13 mt) reaching 27 mt.

But, yet again the government raised the PDS prices in the Budget of the year 2000. This time the hike was substantial and also included the BPL category. Result : the PDS off take declined even further. By end September 2000, food grain stocks crossed a gigantic 42 mt. With the FCI having a capacity to store 27 mt, private storage had to be resorted to at high cost. Just storage charges were amounting to Rs 14 crore per day.

Though 3.5 mt of grain (worth Rs 1,750) in FCI godowns was rotting and had been declared as unfit for human consumption (as early as December ’99) the government was not willing to either reduce PDS rates (it was, on the contrary hiked in March 2000) nor distribute the grain to the drought affected which hit crores of people in the summer of 2000; nor introduce food-for-work schemes.

With such massive stocks, an atmosphere was created through the media, that it would be impossible for the FCI to intervene in purchases of the Kharif paddy crop expected in the third week of September 2000. By August itself the Union Minister of Food, Shanta Kumar, stated that the FCI would prefer the "levy route" for procurement of rice from the millers, who in turn "should be forced" to purchase at least 50% of the paddy that arrives in the grain market. This was an open declaration to hand over procurement to the private traders. The government, in fact, plans to put a 75% levy on the rice millers and purchase their entire stock from them.

By September 2000 itself, thousands of tons of paddy began reaching the grain market in Punjab. But the FCI was not to be seen (in the previous year they had begun purchases from that date). The FCI began stalling and issuing contradictory statements. By end September the FCI issued instructions not to purchase rice with broken quantity above 25%. Farmers at the mandis became desperate. Many resorted to distress sales as low as Rs 300 per quintal (MSP Rs 540).

Besides Punjab, similar reports of distress sales came in from all parts of the country where the FCI dragged its feet. For example, in Karnataka the prices of paddy in 2001 crashed to Rs 400-500 per quintal compared to Rs 730-800 in 2000. The situation of course grains was even worse: Maize prices dropped to Rs 300-350 per quintal in 2001 compared to Rs 750-950 in the previous year and Jowar fell to Rs 350-400 per quintal in 2001 compared to Rs 1200-1300 in 2000.

On the one hand it has thus sought to make the FCI irrelevant, on the other the government has virtually buried the PDS — i.e. the only form of a limited food security that existed in this country.

The government first divided the PDS ration cardholders into two — the BPL (Below Poverty Line) variety and the APL (Above Poverty Line) variety. It then hiked the prices of APL to above market prices, making purchases in this category meaningless. As, of the total PDS, roughly 60% went to the APL category, this meant, defacto, disbanding PDS for the 60% consumers. As for the balance, BPL category, in most states they have not been, as yet, properly categorised. Moreover, with the rates being increased to such high levels in the budget of 2000, the poorest sections could not afford this. In other words, it also remove this poorest section of the people from the PDS. Even though stocks were rotting in government godowns, and drought struck large parts of the country, the government was not prepared to reduce rates, as their aim was to create such conditions that would lead to the winding up of the PDS system.

And that was exactly what happened. The off take from PDS fell drastically. Off take of wheat, for example dropped form 8 million tons in 1998/99 to 5 million tons in 1999/2000. After the March 2000 PDS hike, in the first quarter of 2000 (April-June), the off take was 70% down from the previous year. So, the off take in 2001 was minimal.

An example, of the present fate of the PDS can be seen from what was happening at Delhi, the capital of the country. The city has 36 lakh ration cardholders; yet the bulk was only lifting sugar. The difference in rates between APL rates and open market rates will explain why (there is NO BPL categorisation in Delhi).

Table VI.2


PDS Rate

Open Market Rate


Rs 11.8 per kg

Rs 9.5 per kg


Rs 8.8 per kg

Rs 6 per kg


Rs 13 per kg

Rs 18 per kg

As against the monthly quota of 42,640 tons of wheat, the Delhi govt. did not lift a single grain. In the case of rice, where the quota was 13,610 tons, the government lifted only 6 tons. It lifted the entire quota of sugar. No wonder, the FCI godowns are overflowing with stocks!

Besides, the BPL categorisation, was a brilliant scheme by which to sabotage the PDS. According to the CAG (Controller and Auditor General) Report (reported on Jan. 1, 2001), of the 31 states and Union Territories, 18 have not been able to identify the number of people on BPL. Among the 13 states, which have "identified" the BPL population, several states had failed to supply ration cards to the BPL families. So, in effect, vast sections of the population below the poverty line are not categorised thus, and are therefore forced to buy at APL rates.

Also, there are enormous differences in the method of identification of the BPL population. The official estimates place it at a mere 15 crores or 17% of the population. But, the Planning Commissions estimates put the figure at over double that — 32 crore people, which is 36% of the country’s population (both based on the 1993-94 survey). This variation in the states was given in Table VI.3

Table VI.3


BPL Population as per

Official Estimates

BPL Population as per

Planning Commission Estimates



















Thereby, through statistical manipulation 17 crore people have been virtually struck off the (BPL) PDS lists, though they live in grinding poverty.

In other words, with less than half the BPL people being categorised, and of this, with a small fraction being "identified" as BPL, barely 10-15% of the actual below poverty line people would be eligible for BPL grain — i.e., just 3 to 4 crore out of the total 32 crore. Not being categorised as BPL, they would come under the APL category, thereby, defacto, writing them off from the PDS system.

Added to all this, are the big frauds in the PDS system. The CAG Report says that in 1999 as much as 31% of the total PDS foodgrains, and 23% of the sugar were diverted from the PDS to the open market. Moreover, the CAG report said that the PDS was "overcharging" consumers defeating the purpose of providing cheap grains at uniform rates. It said "consumers were charged Rs 436 crores in excess due to passing on extra expenditure to them instead of absorbing from state budgets."

So, through fraud, through BPL identification/categorisation manipulations, and through massive hikes in PDS rates, the government has already, in essence, killed the PDS system, without saying so. This is exactly what the imperialists have been demanding.

The situation reached such farcical proportions, that, when the government was desperate to dispose of stocks, and unable to export wheat due to lower international prices, it decided to sell 5 million tons of wheat in the open market. It decided to sell it at Rs 6.5 per kg to the traders while the PDS rate was Rs 8.3 per kg (the so-called economic cost). In other words, it was now going to sell to the traders at a rate 38% below what it sells to the poor in the PDS (APL). In the name of cutting the subsidies, the PDS price was hiked; now, by selling it at 38% below the ‘economic cost’, the government was defacto transferring the subsidy from the poor to the traders.Since Nov.2000 the government has exported a much as 150 lakh (15 million) tons of foodgrains at such throw-away prices.

Today, with the PDS being virtually dismantled, the stocks with the FCI have reached the unmanageable amount of approximately 64 mt. This will give it a strong pretext not to intervene in the purchases of foodgrains. This will result in the collapse of the MSP (Minimum Support Price) system and the fleecing of the farmers by the traders. Thereby, both procurement and distribution will be privatised.

With the privatisation of procurement and public distribution, the situation is ripe to be handed over to TNCs like Cargyll, who have been waiting to swoop down on the country. In due course the monopoly of the public sector will be turned into the monopoly of the TNC. Instead of FCI there will be Cargyll. Already, in 1999, Cargyll India Pvt. Ltd has now set up two procurement centers at Sahnewal and Abohar in Punjab, and, in that year procured 10,000 tons of wheat. In the next year it procured 25,000 tone of wheat and 20,000 tons of rice for export. In 1998 itself Cargyll entered in to a 3-year extension procurement service agreement with the Punjab Agri Export Corporation Ltd. (Pagrexco). In consultation with Pagrexco it identified places where new centers could be set up. Also, in cooperation with Pagrexco it planned to set up an integrated flourmill in Punjab on the lines of the sick Noida flourmill bought by Cargyll, which has now expanded its capacity to 500 tons per day.

It has also begun contracting directly with the farmer. Cargyll would control seeds and fertilisers, it would provide credit and buy back the entire produce. The contracts stipulate that the farmer cannot sell their produce to anyone else. Such bonded systems of farming are the essence of the ‘contract system’ spoken of in the New Agricultural Policy. Besides Cargyll, the comprador giant, Reliance, plans to buy 2 lakh acres of agricultural land in Karnataka. The path for this too is cleared by the NAP’s corporate farming policy.

The agrarian economy is destroyed; the farmer is devastated; the poverty stricken are further starved; and the TNCs/compradors enter with their ‘corporate farming’ and monopoly control over the agrarian market — that is the essence of the BJP-led government’s New Agricultural Policy. Globalisation has devastated India’s rural economy!!



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