Trade: A Free for all?

While farmers in developed countries, constituting less than three per cent of the population, enjoy huge subsidies, India actually taxes its farmers. With substantive cuts in subsidies for power and fertilizer, and a fall in the selling price of agricultural produce due to dumping by developed countries, farmers face a crisis that needs to be addressed immediately.


He stood defiantly as the truck hurtled straight towards him. And he refused to budge. The truck did not relent either. While participating in the boycott of British cotton imports, Babu Genu was mowed down by a truck carrying foreign cotton. He died instantly.

Babu Genu’s fight is as relevant today as it was 70 years ago when he was killed on December 12, 1930. He died fighting against the colonial government’s free trade policy, which gave British textile imports an unfair advantage over the Indian textile industry and affected the livelihoods of thousands of workers and weavers. In memory of Babu Genu’s fight against imperialism, the Maharashtra Kisan Sabha held state-wide protests on his death anniversary last month to highlight the adverse effects of trade and power sector liberalisation.

At a Kisan Sabha rally in Dindori, Nashik district last month, farmers said that their livelihoods are being destroyed by the new economic policies. Trade liberalisation, cuts in fertiliser subsidies, reduced infrastructure investment and privatisation of the power sector have adversely affected the profitability of agriculture. While costs of inputs like fertilisers and electricity have risen steeply due to cuts in subsidies and privatisation, the prices at which farmers sell their produce have declined due to the glut of imported products in the market.

“Prices have fallen substantially. I used to sell a tonne of sugarcane for Rs 1,000 last year, but this year, the price is only Rs 500. The price of garlic has decreased by around 70 per cent. We are not able to recover the costs. Debts keep accumulating every year,” said Pandit Gangorde, a small farmer from Shendvad village in Nasik.

Pressurised by the US government to “free trade”, the central government agreed to lift quantitative restrictions (QRs) on the import of 1,200-odd items by April 2001, many of which are agricultural products. During his recent visit to the sub-continent, Bill Clinton managed to persuade India to free QRs two years prior to the April 2003 deadline agreed to by OECD countries.

“Foreign countries give their farmers many benefits. They get huge subsidies. But our government has lifted even the most basic protection for her farmers. Imported products are being allowed to enter India at cheap prices. We cannot compete, and will be totally destroyed.,” said Ambalal Sonvane, a farmer from Varkheda village. He added that small farmers have suffered heavy losses due to the government’s liberalisation policies. “We are being hit from all sides. Our costs have risen because the government has reduced fertiliser subsidies and electricity rates have doubled due to privatisation and deals like the Enron project. At the same time, output prices are falling due to imports.”

Agriculture has borne the brunt of liberalisation on many fronts. Cuts in government spending have resulted in reduced public investment in agriculture as well as smaller subsidies. Dismantling of procurement agencies, greater imports and falling world commodity prices have also reduced profitability. The central government’s Report of the Commission for Agricultural Cost and Prices for Crops Growth for the 1995-96 and 1996-97 season warns that wholesale price indices have not risen commensurate to the considerable increases in the prices of important farm inputs.

Moreover, imports have also reduced market prices. “If milk from Denmark (where farming is highly subsidised) enters our market at Rs 7 per litre, when the current price is Rs 13 per litre, do we stand a chance?” asked Chintaman Gavit, Kisan Sabha Nashik district president in Maharashtra. “At first, the consumer may benefit. But once our domestic production has been totally wiped out, they will be at the mercy of foreign producers.”

Surprisingly, the government can do something to prevent the dumping of agricultural imports, but has chosen not to. Says S.R.Pillai, national president of the Kisan Sabha, “Even the WTO rules allow the government to impose tariffs of up to 300 per cent. But despite this crisis, the government has only imposed tariffs ranging from 15 to 40 per cent. In addition, it can impose anti-dumping tariffs. But it chooses not to exercise these powers.”

India actually taxes its farmers rather than subsidising them, according to an article written by Binu Thomas of ActionAid India. “Each farmer in the developed countries gets on average a subsidy of US$ 29,000 a year. The US domestic support for its farmers was US$25.5 billion in 1996, while for the EU it was US$ 85 billion. In both the US and the EU, farmers constitute less than 3 per cent of the population. In contrast, India’s domestic support to its farmers worked out to a negative US$ 23.7 billion in 1995-96 even after providing for fertiliser, electricity, irrigation and seed subsidies.”

Moreover, trade liberalisation has resulted in bizarre situations where India is exporting wheat at a price cheaper than what most Indians are paying. Wheat from Food Corporation of India godowns can now be exported at the same price at which it is sold to people classified as living ‘below the poverty line’, says economist Madhura Swaminathan. “Millions of undernourished and vulnerable people, who are still classified as being ‘above the poverty line’ have been told to pay a higher price for wheat than the price at which the government is willing to sell the same wheat to foreign countries,” Dr Swaminathan points out.

Concern about the Indian farmer’s survival has sparked quite a few protests of late. Last month, farmers from Punjab held a massive rally outside parliament to protest against the reduction of procurement prices offered to farmers by the Food Corporation of India. The Telegu Desam Party recently stalled proceedings in Parliament, objecting to the central government’s failure to ensure that paddy farmers were getting the minimum support price for their produce. In a recent interview, TDP leader Chandrababu Naidu said that farmers need adequate protection from the adverse effects of free trade and the World Trade Organisation.

The themes underlying farmer’s struggles today ring familiar to those fought by freedom fighters like Babu Genu. From colonialism to globalisation. We’ve come a long way. Or is it full circle?

The Hindu Sunday Magazine,
11 February 2001.

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