Understanding the debate about Land Acquisition Bill

The PM Modi has promised houses for all by 2022. Is there no government in the past that has not promised building homes for homeless? Every state and central governments be it headed by Congress or BJP or otherwise has promised this and the promise is far from reality. Every one knows it.

To build these houses one requires land. To build highways, expressways, bullet trains we need land. To kick start manufacturing we need land. The Land act that was being followed by the Govt until UPA's Land Acquisition Act of 2013 came in was the British version of 1894 Land Act. Even though this act was devilish in nature it is the one that has led to urbanization we have seen in 60 years. Had it been not for this act we would not have seen modern airports in Delhi, Mumbai, Bangalore and we would not have seen the beautiful Golden Quadrilateral national highway system. No one can argue that the benefits of these highways, ports and airports has reached different sects of life - laborers, real estate developers, construction companies, power companies, water companies, skilled labors involved and many more in the evolution and maintenance of such projects. Imagine if these projects had not taken place we would still be the land of the villages with only villages everywhere. There would not have been good roads and so the transportation boom would have never taken place. This sort of boom also enabled people to travel across country making life and communication easier. The farmers who are at the center of the storm called Land Acquistion Bill Amdendment of 2014 have also benefited. There are of course several projects where farmers did not benefit because land was taken forcibly both by private companies and the government gave inadequate or no compensation to all or most of them. This resulted in large violent protests in different parts of the country. Between 2004-2010 there were several cases of farmers losing their lands and not getting anything at all.

The UPA government in 2013 passed an act that all together changed the terms of compensation for the affected and restricted the usage of lands for several purposes. I had debated the pros and cons of this bill in the article listed here. The Act was Congress's only chance to capture power in 2014 and they went to market it to farmers telling them no land of theirs can be taken by anyone including the Government leave alone private companies.  The clause added was that 80% of land owners must agree to give up their land; then there would be a SOCIAL IMPACT STUDY and then the land would be given to the buyer. The compensation fixed was 4 times the market value in rural and 2 times in urban areas. While the act itself was good in intent it was flawed. In the name of social impact assessment no project was allowed to start from 2013 till now. The bill is right in terms of compensation because that was what farmers wanted and the act does satisfy it.

Social Impact Assessment merely means government will study who would be impacted by the land if acquired and then compensate everyone accordingly. This is ridiculous since there is no impartial way of doing this and this simply delays the process to years. Several buyers who wanted to acquire the land lost interest and walked away. The real way farmers are going to get value of their own lands is when a) either technology is improved on their agricultural lands b) The land value increases which means they get a very high compensation in return for giving up their land so they can lead a different life.  a) doesn't happen and b) will not happen unless there is a demand for that land and a transparent way of getting the land for the buyer.  The existing act makes the whole process 4-5 years which makes any project unviable (Source)

Well known economist Amartya Sen once said right after passing the act - "Even though the land may be very fertile, industrial production could generate many times more than the value of the product produced by agriculture. The locations of great industry, be it Manchester or Lancashire, these were all on heavily fertile land. Industry has always competed against agriculture because the shared land was convenient for industry for trade and transportation," (source)

It is true that India cannot be an agrarian economy because it can never lift people out of poverty. The poverty that was more than 50% in 1947 drastically reduced to 30% because of economic reforms. If we continued to be agrarian we would have not come even this far. All educated Indians never even think of agriculture. Very few do. Rest all move to industries. Can one explain why this happens? Industries pay higher and returns is more predictable and secure. In the case of agriculture if land is not  maintained or there are crop failures they are doomed. The sons and daughters of most farmers don't want their kids on the land but do something else. Take any fresh graduate. They will prefer hi tech companies, multi national companies, manufacturing companies, construction companies because these are the jobs that can give monetary satisfaction. 

Several state governments have written detailed letters to the PM asking him to help in starting several projects that have been stalled because of this act. Congress states themselves have written such letters (another source). Several politicians love the fact that the land acquisition has become tougher because several rural politicians are land lords with vested interests. The middlemen involved in Social impact study will make the study harder to pass.

The total list of stalled projects is over 100 and they are worth 10 lakh crore. With these many stalled projects no state government has been able to start any industry. All the highway projects that were announced in 2014 and 2015 haven't even taken off. There are several companies who want to start their own manufacturing units so they can create jobs but the existing law makes it impossible to get the land. Just today the economictimes published that projects worth Rs.90,000 crore related to power projects haven't been started because of unavailability of land. It is this scary situation that the Government is seeking to change.

So, what does NDA amendment (source of the exact clauses) to the act do?

1) It has retained all clauses of the bill except that the process of acquisition has been made fast if it involves acquiring land for purposes of housing, rural electrification, defence, highways and industrial corridors. Which means there is no way the process can take 5 years, but instead the compensation will be made quick and fast. 

2) Private educational institutes and private hospitals can be built by acquiring land but not private hotels.

3) The existing law states that if a project is not done within 5 years the unused land has to be given back to the owner. This existing clause has been now made been more specific - "a period specified for setting up of any project or for five years, whichever is later."

4) Instead of applying different formula the existing law has one while evaluating compensation, but now 13 acts are included in the amendment which implies the compensation rates will vary and will be higher if the land is acquired for the larger causes such as electrification, highways and defense related purposes. The farmers tend to benefit from this.

5) It also does away with Social Impact study if the projects are small and involves rural electrification, highways, defense, housing for the poor. This is required because if government has to build houses it needs land. The other day Delhi CM Kejriwal met Mr. Modi and asked his help in fulfilling the dream of housing for all since land ownership is under Center in Delhi. Apparently, the PM informed him that the numbers are not in his favor to modify the existing land act and that makes it impossible for giving any land to Kejriwal for fulfilling the dream (Source of these details). All political parties including the BJP are hypocratic on many aspects. I wondered if Kejriwal can be different, but he too has proved he is the same. It is nothing but hypocrisy on the part of Kejriwal that he decided to join Anna Hazare's protest against this bill. He should have supported the PM instead. Anna Hazare is blinded by the fact that farmers will prosper only if they remain farmers and India will grow only if it continues to be a hopeless agrarian economy. How long can you stop preventing farmer suicides if you don't give them a happy path to their lives? Industrialization is not the answer to farmer suicides but will surely help them if they are quickly compensated with a huge amount instead of giving them loan waivers or keeping them in debt cycles one after another. 

My Problems with the NDA Amendment:

The act has two problems according to me. First, it dilutes the act to the extent that even farm lands where agricultural output is very high can be taken for this purpose. If the existing land produces more output it should be allowed to do so. After all it is these tracts of fertile land that has made us self sufficient in our food production. This is a clause that must be amended. Second, it is very well known that in the name of Special Economic Zone (SEZ) huge tracts of land were misused and the unused land is left as is. This should not happen and the fact that on the pretext of industrial corridors land can be acquired must be amended.

Mr. Modi has a big problem on this legislation. He has no numbers in the Rajya Sabha and he is in no mood to bend. The entire opposition and the allies want his blood and they feel this can bring his downfall for sure as the farmers vote banks is the way of winning any elections. This fight for his blood has only made matters worse for him.

When China reached this cross road two decades ago it decided to make farmers part of any factory that would come up on their land. Labor and training was given so that they can benefit in the long run. Similar provisions must be made.

In my view the PM is committing two major blunders:

1) Allowing this act to be the center piece of the Parliament session when he can get several acts passed and then tackle this act later. He can use his majority in Lok Sabha to pass more legislations that every party and the people have dreamt of since 1984. Examples include acts to modernize education, health, police stations and other legal and social sector reforms. These acts are far more powerful and significant.

2) Not been communicating to the people like the way he communicates every day. He should get down to radio, TV, newspapers, media highlighting the good intent of this act. This has clearly not happened and the opposition has increased their voice of dissent and suppressed all the good intentions.

Mr. Modi is very right that he needs to tackle this problem. It is the foundation on which the economy can grow. With good changes or amendments that the government has done the opposition will simply will not co-operate. The PM now has a very tough walk to do. If he succeeds the economy will turn around like nothing, but if he fails it will be his downfall. The downfall is mainly because the themes -" Make in India", "Bullet trains","Smart cities","24 hour electricity promise" - all will fail as it requires land. He would have wasted a landslide opportunity and will never get elected back.

What do you think the PM must do? Should be bend and make amendments or give up the fight for now and concentrate on a lot more pressing issues?

Why vegetable prices are soaring?

These days one of the statements commonly heard on the streets of India is - "Oh..God..Prices of tomatoes, potatoes etc have increased...Can't help it...but shell more and buy". How many of you ever wondered what and why this is happening?

The AAM AADMI Govt has become KHAAS AADMI. Looks like we have to see vegetables in show cases and not in reality in few years from now if prices keep escalating. Prices will increase ,but not exponentially and certainly not all the time. The quantum jumps all of a sudden as happening today in the market is alarming and uncalled for.

Even when inflation was negative, vegetable prices reached the skies. From and inflation of 20% we have come down to 17%, but that's not checking the prices. Families have to begun to reduce their intake in daily meals.

First of all, let us get some facts straight.

1. If food prices are increasing, it means that demand is more. India is growing. People now have more money than ever before. This is more true w.r.t cities where income levels are increasing and more products are available to eat. It is also true wr.t rural India as the revolutionary National Rural Employment Guarantee Program is giving sufficient money to a large people for working 100 days.
   
2. Subsequently, our agricultural production has not grown and that is the most unfortunate. Our per hectare yield productivity is abysmally low compared to China (already reflected long back in my blog). Agriculture in many parts still lies on old, conventional, traditional method of farming and are unaware what crop must be grown on what soil and at what time.
3. People in cities esp have begun to eat more pulses, vegetables, milk, meat eggs than the traditional cereals whose production has gone abysmally low. Pulses are not heavily grown in India, but more in the Middle East which we import.
   
4. We no longer live in "Green Revolution" era. The fertile Punjab is no longer as fertile as it used to be. The excess water, pesticide usage has rendered land useless thereby more productivity is impossible.
5. There is a huge shortage of water and electricity in different parts. Gujarat is a standing example of how it has been able to overcome this deficit in numerous ways that media never wants to highlight. Media is more interested in projecting only negative news.
   
6. The already fragmented supply chain has become more and more complicated because of 2 factors - (i)Essential Commodities Act (2002) and the (ii) growing number of organized retails like Reliance Agro, Godrej Foods, Sunil Mittal's Field Fresh (with Rothschild), ITC, Cargill, Dabur, HLL Amalgam Foods, Radhakrishna, DCM Shriram, Tata group and many others.

Let's understand how these factors come into play and how prices are going northwards.

PS: The prices are just a number not reflecting accurately on ground and neither is the difference. The price numbers are used just to show that how randomly prices are fixed without any calculations/formulae involved making matters even worse for me as a blogger or for a consumer buying these.

Let's take ONION as the product as it is a very common and a daily item on the dining table.

1) Farmer at his farm calculates (based on his input costs of fertilizers, pesticides, water, electricity etc) Rs. 5/ kg

2) Goes to mandi (vegetable marts where all farmers come to sell) and plans to sell for Rs.6/kg

3) The mandiwala says he will buy for Rs.5.50/kg and not Rs.6/kg.

The farmer desperate to get money (as his land, equipment everything could be under mortgage) agrees to do so.

Now, the mandiwala has 2 scenarios to consider:

4) Scenario 1: The supply is sure.

• There is adequate supply of onions. So, decides to sell at Rs.6.50/kg i.e Rupee 1 as profit per kg.
• The retailers buy from these mandis and sell at Rs.8/kg.
• The retail chain stores buy, package them and sell at Rs.10/kg (making huge profits and sell explaining that packaging and processing costs must be borne)

So, the end customer pays the whole amount either Rs.8 or Rs.10 and farmers don't get any benefit. They go under losses so is the customer

Scenario 2:
The supply is unsure because of rotten crop, low production etc.

• Now, mandiwala sells at Rs.1o/kg.
• The retailers buy from these mandi's and sell at Rs. 12/kg.
• The retail chain stores buy, package them and sell at Rs.15/kg.
• This difference may even double and there is no control on this price.

Today, dals are being sold at Rs.100/kg or even more while the farmer gets Rs.20/ or more. The remaining 80 is being eaten up by middlemen or mandiwala.

5) Following Scenario 2 as in Step 4, really there are black marketeers, hoarders, speculators, rice millers, agents, traders who buy in huge quantity and don't let the products come into market creating further supply scarcity and prices now go double or triple. So, say a hoarder buys at Rs.10/kg and accumulates huge amount, supply is affected and prices begin at Rs.20/kg and that's when hoarders release and make money.

Now coming to the problem:

The APMC Act - Agriculture Produce Marketing Committee makes it mandatory for farmers to sell at these Marts. But why this obsolete mechanism?

In 2002, the then NDA government led by Vajpayee passed ESSENTIAL COMMODITES ACT by which the essential commodities could be traded like shares in a stock market and farmers would get price on levels with international ones so that it benefits farmers. However, this was true and good when supply was assured. The rule also was this had to be done only after the Government fills its godowns (to be distributed later through Public Distributed System - PDS) to everyone.

In 2004, when NDA govt fell and UPA came to power, the shallow, narrow and money minded corrupt Sharad Pawar took over this agricultural ministry and ruined the farmers, markets and the economy. Instead of amending the act when food production went low, he allowed it to be speculated in the markets increasing the prices even further when already supply was low. (Productivity had hit a new low and bad monsoons continued to wreck havoc in the supply chain)

Under consistent Left Pressure, forward trading of essential commodities was banned. Now, still hoarders continue to play a role because Government is least bothered to fill its godowns before allowing hoarders to acquire them. Every time state governments have been asked to arrest such people, but in a system where law and order is the worst and a nightmare, it will never happen.

Let's get some statistics:

This is what BJP and Mayawati along with Left parties are quoting:

According to government figures, the years 2007, 2008 and 2009 taken together saw the production of 2348 lakh tonnes of wheat. The government boasted that the FCI(Food Corporations of India) godowns are overflowing. Despite this, the government imported wheat at the rate Rs 19 per kg in 2007. Now the same wheat is being made available to the consumers at Rs 24 per kg. SO, WHO IS EATING THE MONEY IN BETWEEN IF WHEAT IS IMPORTED ON ZERO DUTY??

Government records say that there was a record production of 991 lakh tonnes of rice in 2009, but the farmer’s share was only Rs 10 per kg out of the market prices of Rs 48 per kg. Who’s pocketing the remaining Rs 38?

Because of shortage of sugar, Mr. Pawar imported sugar at zero duty. They imported at Rs. 30/kg, but the consumer is paying Rs.45/kg...So, how come a difference of Rs.15??

Here's a detailed piece of news explaining how Sharad Pawar is helping sugar mills and agri-businesses and not helping farmers or end consumers. The report infuriates me even further.

SHARAD PAWAR MAY NOT BE AN ASTROLOGER BUT HAS BECOME A SPECULATOR:

Sharad Pawar said - "I am not an astrologer to predict prices". Then how is it he can say MILK Prices are going to increase...

Remarks like this only helps hoarders and milk supply gets affected.

SHARAD PAWAR MUST ANSWER AS TO WHY HE HAS BECOME SO PASSIVE, UNAACOUNTABLE AND WHY HE HAS MONEY AND TIME FOR BCCI MEETINGS AND MATCHES? HE IS NOT FIT TO REIN IN PRICES AND TALKS OF BEING PRIME MINISTER ONE DAY. Mr. PAWAR IS UNFIT AND ABSOLUTELY PATHETIC IN HANDLING MATTERS.

Food is the most essential commodity and if one can't manage or control the supply management chain, at least attempt. If you sit passive, is this what one has elected this govt for?

Solution:

There is nothing innovative. Already, Gujarat has implemented so many things which have improved efficiency in agriculture w.r.t TECHNICALITIES NOT LOAN WAIVERS which don't help farmers. Here's what the Parliamentary Standing Committee under UPA Govt came up with and govt has no time to implement it. This is not a state govt issue, but central govt issue which impacts the states. So, the Central govt must pass the following recommendations made both by - M.S Swaminathan (Father of Green Revolution) and Parliamentary Committee consisting of experts from both parties Congress and BJP.

In the short-term, some of the measures suggested by the Parliamentary Standing Committee on Finance could be implemented forthwith. These include: a comprehensive food pricing and management policy; stern enforcement measures to curb hoarding and speculation; ban on diversion of cultivable/agricultural land for industrial purposes, including SEZs; and creation of adequate buffer stocks of essential commodities.

Among other measures, serious efforts would be needed to ensure: (a) eased contract farming rules and retail reform aimed at giving farmers a direct access to markets by eliminating the middlemen wherever possible; (b) greater official encouragement for setting up of cold storage facilities and agro-processing units; (c) promoting local markets and integrated food value chains connecting farmers to processing units and big retailers; and (d) amending the Essential Commodities Act to effectively check hoarding and speculation.

Further References:

http://www.outlookindia.com/article.aspx?262839
http://www.outlookindia.com/article.aspx?263369
http://www.theindiastreet.com/vegetable-prices

Green Revolution to Red(Blood) Revolution - Part II

None of the solutions given below are my proposals. It is a consolidation or aggregation of proposals from all reports I collected whose links are given at the beginning of the first article. I have tried to separate the scattered ideas and given below. Also in between I have added my own ideas as to how we can fruitfully implement.

We don’t need more ideas to solve, but we do need more ideas on how we can implement effectively. 6 committees set up to study Vidharba crisis, Planning Commission, National Commission of Farmers, Indira Gandhi Institute of Development Research, Gokhale Institute of Development Studies – all have solutions good enough to solve the problem across the country.

Scientific:

1) Knowledge about amount of pesticide and fertilizer required – Can best be served by Soil Health Card. Follow Gujarat Model

2) Knowledge on what crops must be grown depending upon soil condition and market demand – best served by agricultural scientists.

3) Personal advise by agricultural scientists per village so that planning is done before venturing into new types of crops – Follow Gujarat Model. According to a field study being conducted by A. Janaiah of the National Centre for Agricultural Economics and Policy Research (NCAP), Pusa, 4.9 million farmers in Andhra, or 83 per cent of the community, are in debt mostly due to unplanned commercialization. In Punjab, it was the unplanned and unprepared shift to horticulture (growing lucrative vegetables like tomatoes, brinjal or lady's fingers) along with high spending in marriages (dowries) and usurious moneylenders (often charging 36 per cent) that pushed farmers to desperation.

4) Spread awareness about rain water harvesting and build check dams so that water is stored and underground water tables can be replenished – Follow Gujarat model.

5) More scientific ways to store procured food grains.

6) More emphasis on indigenous research to develop high yield seeds like how Thailand did the same recently

Policy/Political:

1) Government must regulate MNCs who supply seeds. They should be properly tested.

2) Government prohibits MNC’s whose seeds do not bring in expected results.

3) Reduce the prices of such seeds so that the amount of loan needed to grow crops will also decrease – Good example is when YSR Reddy’s govt’s agriculture minister took MOSANTO to court in Andhra Pradesh and consequently MOSANTO reduced the seed prices by half.

4) Make it mandatory to test seeds before given on a large scale

5) Set up more agricultural universities or research and testing labs at places close to farming lands so that personalized study can be done and directly help farmers there.

6) Set up Special Agricultural Zones (SAZ) like in Gujarat to process and store food grains or crops at specific places where they are grown in bulk. Follow Gujarat Model. This is the best-decentralized way to tackle the crisis. Choose a place where crisis exists and set up a center with all scientists, irrigation experts, agribusiness people and many others to jointly work and ensure good yield, good output price to farmers.

7) Implement many of the recommendations of National Commission of Farmers (NCF) of which one of the interesting recommendations include rural non-farm livelihood initiative in the form of agri-business centres, food parks and other rural non-farm employment programmes by restructuring agencies.

8) M.S. Swaminathan said, “Land reform has been implemented with seriousness in West Bengal and Kerala. The other states also should complete the process of redistributing the ceiling surplus land to the landless poor. We also need aquarian reform which will help the poor to take to aquaculture in inland ponds and reservoirs. Since land is limited our approach has to be one of asset reform dealing comprehensively with land, water, livestock, fish pond, forestry and non-farm livelihoods, so that every individual has an opportunity for earning the minimum amount needed for a healthy and productive life.” This must be followed.

9) Rethink by the government on what import duties must be put on imported items such as cotton. When proper prices are not given to home grown cotton it should also not reduce import duty on imported cotton. If government reduces import duty, then farmers won’t get proper price. The cotton industries are making good profits, but cotton farmer is committing suicide. If government is forced to reduce import duty, it must give subsidies to farmers like that given in US and UK. This of course is a little difficult, but reducing import duty will help. At least more subsidies must be given for pesticides and fertilizers as this incurs as a major cost.

10) Revive seed banks and start community seed banks

11) Hold MNC’s liable to contempt to court in case of seed failure or soil contamination

12) The insurance policies must be set up against crop failure (due to weather, natural calamities or shortage of water) and this must be a part of banks rather than government agencies. Government agencies will never give insurance money to farmers. Banks should compensate in terms of deducting outstanding loan amount so that accountability and corrupt free system exists. Gujarat government must follow the latter as already insurance policies exist.

13) More Self Help Groups (SHG) must be set up so that NGO’s, cooperatives and other entities are involved in distribution of loans or other monetary mesures

14) More encouragement to private companies to own villages to transform. The best example being ITC and the way it transformed the lives of several farmers growing soya beans in Madhya Pradesh who are getting right prices for their produce.

15) Introduce Contract Farming across the country wherever suitable where farmer is bound to a particular buyer for a particular produce at a particular price (with a little subject to market volatility). If there are too many contenders to buy farmers produce, it will bring competition and eliminate intermediaries.

16) Encourage Direct Farming wherein farmers directly sell through their own markets rather than intermediaries or commission agents. These middlemen are one of the root causes of farmers not getting right prices. But no government will make changes as the middlemen form a considerable chunk of vote bank. So there should be a competition established between the two so that farmer will immensely benefit. One way to do this is to have physical connectivity and infrastructure to eliminate geographical isolation of markets and the other is contract farming as explained in previous point.

References:

http://www.outlookindia.com/dossiersind.asp?id=703
http://www.yashada.org/organisation/FarmersSuicideExcerpts.pdf
http://www.youtube.com/watch?v=erpEmumEtAo
http://www.dnaindia.com/report.asp?NewsID=1049554

http://www.hinduonnet.com/2007/11/12/stories/2007111253911100.htm
http://www.thehindu.com/2007/11/12/stories/2007111257790100.htm
http://www.thehindu.com/2007/09/07/stories/2007090761771500.htm

http://www.aaanet.org/press/an/0205StoneIndia.htm
http://pmindia.nic.in/nac/concept%20papers/ncf.pdf
National Report on Agricultural Indebtedness published in Hindu newspaper

Green Revolution to Red (Blood) Revolution - Part I

Part -1 : The Crisis

In 1968 and up till 1991 of pre liberalization era if there was one sector, which benefited immensely – it was Agriculture. Nobody denies. I am sure every reader of this article would have studied in History books about Famines and Droughts in British India. The World famous Bengal famine of 1770 where 3 million died and 1943 where 2 million died is a ghastly reality. The famines were so frequent that practically India went bankrupt in terms of food production. Committees after Committees were set up by the British Govt and despite some measures it did not stop. Post Independence we experienced famines only once in 1966. In 1968 there was a proper synchronization amongst research, public policy and services that led to Green Revolution. Since 1968, we have never had a famine and we began to be self sufficient in food grains and never were farmers unhappy, the fact though being that poverty has not been eliminated so far.

However, being concealed, insulated from outside world, liberalization and globalization was our farming sector that ushered in continuous food production and thereby a relatively good Public Distribution System.

The Indian agricultural research system is the largest in the world. It has successfully produced over 3,500 varieties of crops. We are the world's largest milk producer and rank second in food grains, fruit and vegetable production. One of the most interesting aspects of our agricultural research has been indigenous study of adaptation of high yielding seeds.

In 1961, when International Maize and Wheat Improvement Cente (popularly known as CIMMYT) gave high yielding wheat seeds to India it was tested on small village farm lands in Punjab. Later, our agricultural scientists independently studied the new seeds considering various agro-climatic zones and appropriate changes were made to those seeds and were manufactured in bulk by National Seed Corporation. When it was properly tested it was distributed to the whole farming community and success was achieved. At the same time even high yielding variety of rice IR8 given by International Rice Research Institute they were suitably changed to match Indian soil and then distributed. Punjab, Haryana, Andhra Pradesh, Maharashtra, Karnataka and Kerala, Uttar Pradesh and many more states started producing rice and wheat and there was never a food shortage again.

What changed post 91 is a huge issue and the debate will take its own article. In short, opening up of our markets proved very constructive to all sectors, but equally detrimental to agriculture.

The very current PM Manmohan Singh as the then Finance Minister in 1991 opened up the market even in agriculture by which multinational companies (MNC) began to invest in India and started selling high yielding Bt Cotton Seeds, high yielding wheat and rice seeds. The most important “check” of such seed adaptation to Indian soil was not done and farmers were lured into buying it in return for higher yield. These seeds were not tested to Indian soil conditions. Some places seeds succeeded and some miserably failed. The worst part was spurious seeds began to spread in the market and many farmers chose without any inspection done on them.

Subsequently the government also started spending less in agricultural credit, seed research and public spending in agriculture. The shocking statistics are given in my blog article. This coupled with rising input costs to buy such seeds (as against subsidized rates of pre liberalization era seeds) forced them to borrow more. Input costs also included very expensive pesticides, as existing ones did not suffice the new seed variety. Which means high yielding seed also needed high quantity of pesticide. When crops failed, banks failed to lend more. With no other option left farmers starting borrowing money from moneylenders. While banks charged anywhere between 14-17% interest, private moneylenders charged whopping 120%. The farmers also took money from moneylenders for their daughters’ marriages.

In the late 1990’s after the formation of World Trade Organization, the prices of rice and wheat fell sharply and it had impact even on Indian farmers. The price they got was also reduced. So, input costs rose sharply, output price got reduced and consumers benefited while farmers wept in distress with unbearable financial burden. At the same time the decreasing prices meant importing them to the country and farmers could not match such low prices of imports. So, the domestic farmer lost in the competition (imported cotton now sells at Rs 17,000 a bale compared to Rs 19,000 for Indian cotton). Post 2000 cheap cotton was imported heavily and this hit cotton belts of Gujarat, Maharasthra, Andhra Pradesh severely. The prices became cheaper because developed countries gave huge subsidies to their farmers and so they sold at cheaper rates in world markets. Vidharbha crisis started in 1994-95. Amravati, Wardha, Yavatmal, Akola, Washim and Buldhana – 6 villages in Vidharba has seen over 2000 suicides. The total between 1997-2008 is over 1.5 lakh. Much more than the number killed in Godhra riots and 1984 riots or even the famous Biwandi Riots of 1970.

Some of them even attempted to diversify their crop production and jumped into high yielding cash crops like spices (Kerala), coffee (Karnataka) and horticulture (Punjab). These also included higher input costs. They went ahead with the risk. There was utter failure and the cycle of debt began to loom large over farmers. The main reason why farmers opted for such high yielding crops was higher prices in the global market. Also, the marketing of such produce needed superior ones and good technical knowledge. With no support from the scientists’ side and no financial help from banks – a double blow hit the farmers. In depth studies have concluded that those farmers who had cattle, more lands were the ones who went into cash crops not subsistence farmers and ultimately lost everything as mortgage. Sometimes farmers sold their good yield for lower prices just to avoid taking money from private moneylenders.

From the other side the state governments collapsed state procurement federations and delayed payments to farmers forcing them to turn towards dishonest traders and spurious seeds.

We had unstable governments in the Center between 1996 and 1999 and no one was interested to make changes in agricultural reforms to protect farmers from global prices. The situation got only worse post 2000 with a spate of farmer suicides began to make headlines from all Green belt regions.

Due to good monsoons, we had surplus food growth in 2002, 2003 and the market was opened to private people to take the produce directly from farmers. This helped them in one way as farmers began to get better price from private retailers, and companies than in the government mandi’s where middlemen were eating away all the money and give very low price for the farmer. In turn mandi’s sold to consumer at a higher price making more money.

The Father of Green Revolution, MS Swaminathan questioned once: "We are importing pulses from countries where the genetic material in crops like pigeon pea (arhar) went from India. We should ask ourselves why pulses, which are native to India, are unhappy in their homeland, and are happy in adopted homes in foreign countries."

PM Manmohan Singh once said – There are 4 deficits that continue the growing agrarian crisis. These four deficits are (i) the public investment and credit deficit; (ii) the infrastructure deficit; (iii) the market economy deficit; and (iv) the knowledge deficit. Taken together they are responsible for the development deficit in the agrarian and rural economy.

In 2006, first time since Green Revolution we imported wheat.

---

The sad and touching tales of the suicides are so grave that surpasses all bloody riots ever taken place in our country. This is a case of slow poison given to farmers despite knowing what’s causing the problem and its solution.

We know both the problem and solutions. All we need is the will to implement on political part as sadly the political fraternity has to do quite a lot compared to anyone.

We badly need a second Green Revolution. It is possible. We need a leader like Indira Gandhi or Narendra Modi because political will can bring in a dramatic change in agriculture than smaller changes we see in many parts of India.

PART -2 : Solution:

News Article only confirming the futility of Farm Loan Waiver

The Hindu article clearly expresses the sad state of agrarian crisis and explains why loan waivers won't help and already 125 farmers have committed suicides ever since the announcement of loan waiver was done by the UPA government. This confirms an earlier article I posted on my blog

Particularly read the last statement about agrarian crisis:

"Relief packages and ad hoc administrative measures are incapable of achieving that."

Farm Loan Waiver: Worst agricultural policy from the best brains in the Indian Finance Ministry

I,as an enlightened, educated citizen did not expect the worst policy to solve agricultural problem from the best brain of the Finance Ministry - P.Chidambaram. The scheme is totally flawed and solely is a populist approach to solve the problem. Instead of understanding the concern of the aam aadmi, he has fooled them and everyone as well. In typical Hindi style - "Chutiya banadiya". There are so many solutions to solve the agrarian crisis. Instead of attempting to do the same, a scheme that is full of loopholes has been presented merely to win elections.

It is a futile exercise. On the top of it, anybody who condemns is "anti-farmer" party. Big news channels want people to clap for BJP's opposition to the semantics of the scheme. When you say "no" to something, there is another reason (not just dislike) - not satisfied with the answer. This is precisely what BJP and Left parties are saying - but the govt propaganda is any party which opposes loan waiver is "Kisan Virodhi party". Sonia Gandhi is shouting on the top of her voice proclaiming it as a historic step - yes,historic - because such a nonsense policy has come out from the very team of Indian economy reformists - Manmohan Singh, Chidambaram and Montek singh Ahulwalia.

Let's analyze how the waiver doesn't help and will bear no fruit. Note that loan waiver targets defaulters w.r.t Bank loan and not private money lenders and also that waiver is given to farmers having only less than or equal to 2 hectares of land.

Punjab:
20.65 lakh farmers in total. Average size of land holdings is 4.03 hectares. Only 2% of these farmers have 2 hectares or less. Which means 98% of farmers will not get the waiver.
Also 80% is the recovery rate of loans taken from banks. It implies that the scheme is of no use even in this sense as for all evidences a large portion is borrowed from money lenders (private) and so scheme will not applicable to them

Haryana:
17.28 lakh farmers. Average size of land holding is 3.7 hectares => not applicable. Very few farmers have less than 2 hectares.
90% of the money is borrowed from private persons and 10% is what is borrowed from banks and have a very high recovery rate.

Himachal Pradesh:
4.70 lakh farmers. 68% of the farmers have less than 1 hectare but 90% recovery from co-operative banks. So, not going to benefit.

Maharashtra:
Vidharba region,specially has the highest number of suicides.
1.21 crore farmers and average size is 1.5 hectares. Good. However, 30 lakh farmers take money from outside sources as they are completely refused by banks for loans.
Marathwada, Vidharba - average size is 15 hectares. So, no use whatsoever.

Gujarat:
42 lakh farmers. Average size is 1.66 hectares. Good. However, banks and the govt do not have enough info on how much farmers have borrowed from banks and government.

Bihar-Jharkhand:
No assessment made at all by the Govt. Bank records indicate only 10% of the total farmers even afford to get loans as the remaining 90% don't qualify. So, who is going to get it?

Karnataka:
48.20% of farmers have less than 1 hectare and 26.60% have 1-2 hectares. But small farmers work under big farmers. The big farmers themselves reeling under loans will not give it to smaller ones. So, who is going to get and who is not is murky. Karnataka State Farmers Association has outrightly rejected the scheme and is requesting the government to include everyone.

Andhra Pradesh:
More than 50% of farmers get the benefit as the average size is 1.4 hectares. Will surely help.

Kerala:
85% of farmers have less than 2 hectares. But government is not sure how it will help the banks here.

TamilNadu:
No assessment made, but 70 lakh farmers have less than 1 hectare.

Uttar Pradesh:
Has the highest number of farmers - 2.2 Crore and all have less than 2 hectares. But, government is still working.

Madhya Pradesh:
66.37 lakh farmers and average size is 2.5 hectares => not applicable
(The statistics taken from leading magazines)

Conclusion and Analysis:

1)If nearly 85% of farmers have a very good recovery rate w.r.t bank loans, how is this waiver going to help the farmers who have taken from money lenders? Chidambaram himself says he or any government doesn't keep a record of how much money and when a farmer takes from private money lenders. So, who is going to benefit this?? How are those farmers helped who have taken from private people??

2) What is the government going to give to banks so as to clear their balance sheets? Securities, hard cash or what? There is no answer as of now (i.e As of April 9th, 2008)

3) From where does this money come from? Definitely, there is no answer for this. Just to escape they have put the blame on NDA government. Absurd!!!
It will definitely come from honest tax payers money

4) Why the ceiling of 1or 2 hectares and not above? This is because 86% of farmers have this size holding. Good- but comes back to point 1). How will even this 86% going to benefit when nearly 90% of them have very good recovery rates.

5) What happens to a farmer who has already repaid the loan? He will not get the waiver

6) What about addressing the other causes of agricultural crisis? No idea. Hence it is historic and directionless scheme

7) How will money be disbursed? Through bureaucrats - forget it...It will never reach farmers.

8) Can't direct cash be deposited? How, most farmers don't even have bank account and even if they have, how will they get it. Some do have Kisan Credit Card, but that is not going to help

9) Why did the government not listen to Radhakrishna Commission which clearly stated that Government should avoid any such waiver

10) Is this what I expect from the brainy Singh and Chidambaram?? When asked about how one can track of private moneylenders, he clearly stated that he has no method and questioned everyone - if they have one, let them propose and the government will be very happy to accept.
He is very true, then why not consider that in the package and make it sound sensible.

I am pretty sure Sonia must have insisted on this as she knew she has disappointed the aam aadmi. There is nothing else to offer...So why not sound good to people.

Further, below is the list of articles for further reading which confirms my analysis from statistics taken from India Today

http://timesofindia.indiatimes.com/Opinion/Columnists/Swaminathan_A_Aiyar/Swaminomics/Loan_waiver_Not_an_election_winner/articleshow/2848567.cms
//Leading economist Swaminathan Aiyar says the excercise is futile
http://timesofindia.indiatimes.com/Farm_loan_waiver_runs_into_trouble/articleshow/2835046.cms
http://economictimes.indiatimes.com/News/Economy/Policy/Farm_loan_waiver_triggers_state_wars/rssarticleshow/2848983.cms
//Why farm loan waiver has caused troubles between states as each state asks for its portion
http://economictimes.indiatimes.com/Opinion/Debate/Will_loan_waiver_address_farm_distress/rssarticleshow/2832004.cms
//Why farm loan waiver doesn't address the real problem
http://www.thehindubusinessline.com/2008/03/04/stories/2008030450660900.htm
//What's gone wrong with the loan waiver
http://www.hindu.com/2008/03/03/stories/2008030370271000.htm
//Leading expert M.S. Swamninathan comments
http://indiatoday.digitaltoday.in/index.php?option=com_content&Itemid=1&task=view&id=5483&sectionid=30&issueid=44&page=archieve
//Bad politics, Bad economics from a panel of economists by India Today

Agriculture Statistics at a Glance in India

Statistics taken from "The Hindu".

As per 2004-05,

Total Population:	1092 million
Total Population in rural areas	819 million
Total (%) in rural areas:	71.4%
Total labor force in India:	467 million (i.e 42%)
Of these, total directly in agriculture(farmers)	247 million (i.e 72.5%)

So wide is the spread of agriculture as an occupation is evident from above.

Let's now see the agricultural area:

Total area under cultivation	142 million hectares
Of these, area dependent on monsoons	100 million hectares
Total (%) area rain fed is	70%

Average area under operational holding	<2>
% of farmers having this area	86%

If India is the largest producer of several crops, it is also the country that has lowest yield per hectare for all crops:

Per hectare yield in paddy

USA	6.2 Tonnes
India	2.9 Tonnes

Per hectare yield in wheat

China	3.9 Tonnes
India	2.5 Tonnes

With respect to Economy,

Agricultural contribution to the total GDP

1970-73	40% of GDP
2005-06	19.7% of GDP

Agricultural growth as against GDP:

Year	Agri-culture	Indu-stry	Services	GDP at factor cost	Per capita NNP at factor cost
1980-81 to 1990-91	3.08	5.79	6.54	5.15	2.82
1992-93 to 2002-03	2.61	5.82	7.65	5.85	3.89
1992-93 to 2005-06	2.57	6.05	7.72	6.00	4.10
1950-51 to 2005-06	2.54	5.19	5.40	4.26	1.94

In other words, from 3.5% in 1980-90, it is 1.7% from 1997-2001, what a sharp decline !!!

Agricultural subsidies : Rs.72,000 Crores >= 2* Annual Outlay in crores

Investment in Irrigation:
1951: 22.6%
2005: 5.6%
Very sharp fall

Investment in Agricultural research should be 6% of GDP atleast. In reality, only 1.3% of GDP is done.

Pending Projects since 60's: 400 worth Rs.79,000 Crores that would have irrigates 21 million hectares.
Agricultural credit given to farmers: 11.1% of the total credit

Another shocking statistics:

Every year 16 million tonnes of food grains and 40 million tonnes of fruits and vegetables rot simply because of no proper infrastructure to store, process and market the produce. All are government dependent.