CSE News Bulletin:It can be said that Union budget, 2007 is high on symbolism & intent:March 28,2007
By Sunita Narain
It can be said that Union budget, 2007, is high on symbolism and intent.
Most people in and close to power acknowledge that something is spoiling
booming India’s party: price rise, agricultural decay, poverty, mainly.
This budget, says finance minister P Chidambaram, is the government’s
way to fix these problems so that growth is inclusive. But will the
words and allocated funds add up to coherence and content?
I suspect not. The problem is primarily conceptual. For instance, while
everybody agrees that agriculture in India is in a mess and needs reform
desperately, the prescriptions are widely divergent. Till we understand
this, change will be meaningless. Currently, the dialogue on agriculture
is as deaf as it is dumb.
On one side are people who write economic policies. Their missionary
zeal tells them that the economic crisis stems from the preponderance of
the state; its corruption and its inefficient delivery of services.
Because they also accept that unshackled private growth will lead to
widening inequities, their answer is to provide measures for social
security. In this worldview, schemes for rural employment, however
useless, are vital because they put a floor to poverty. They will say
the ‘Washington Consensus’-the broadly accepted reform package for the
developing world-includes these measures, with an emphasis on education
and health.
In the agriculture reform deal, the accent, again, is on opening up the
market-that is encouraging private players and reducing the role of the
state, especially through current and futures commodities market
institutions. They are also concerned about the inefficiency of
present-day agriculture, attributing poor productivity to small
landholders and marginal farmers. There are too many people engaged in
it; and the returns are too meagre, they say. They are also concerned
about the land on which farming is practised, since, in their view, it
can be put to much more valuable and efficient uses. Remember that the
West Bengal chief minister justified the displacement of farmers for the
Tatas’ small car project in Singur arguing that industry would be far
more economically productive. As far as food to eat is concerned, their
worldview is global. The vast foreign exchange reserves we have can be
used to buy food, already subsidised and made cheaper by rich countries.
But this cold logic of efficiency and growth is poor on substance.
Take just one instance: wheat. Last year, the logic of the market meant
we allowed private procurement by large companies. But my colleagues who
visited Punjab and Haryana reported that farmers big and small did not
benefit. The large traders paid marginally more than the government’s
minimum support price. In fact, in most cases, all they did was to evade
the mandi (market) tax and pay it to the farmers instead. This meant
that government had a smaller stock of wheat. Prices went up. We started
importing food. But prices in the international market had also
hardened: partly because of droughts and partly because rich governments
were subsidising crops that would be used to produce biofuel for cars.
We even permitted private traders to import wheat without paying duties
and slackened quarantine regulations because we needed to import at any
cost. No wonder the government did not make public the laboratory tests
done on such wheat.
The bottom line is we ended up paying more for foreign wheat than we
paid our own farmers, by waiving import duties we lost more money.
Moreover, our farmers had to comply with food safety regulations,
foreign traders did not. But we still have inflation, widely attributed
to the rising price of wheat and pulses.
Again, we import large quantities of oilseeds palm, soya, sunflower and
pulses. As agricultural scientist and chairperson of the National
Commission on Farmers, M S Swaminathan will tell you our neglect of the
drylands has seriously undermined the crops and people of rainfed areas,
which constitutes the bulk of our agriculture. His prescription is to
invest in these lands; to practise land and water management with a
difference; to include these neglected crops of neglected lands in our
food procurement system. Most importantly, he says, we need to give
farmers the price they need, not the price government thinks they should
get. His commission has asked for food procurement to be based on the
market price, not at an arbitrary minimum support price.
But in this budget even as Chidambaram has called for investment in
oilseeds, he has announced further duty cuts on crude and refined edible
oils, “to make them more affordable”. In other words, farmers are being
asked to compete with distorted and much subsidised markets of the rich
world. They obviously can not and lose again.
This is exactly the case with cotton, the killer crop of farmers of
Vidarbha. The problem is that input costs for farmers are increasing
from the cost of new-fangled seeds, to pesticides, to fertilisers and
water but the price of cotton is ‘fixed’ or falling. The us, for
instance, pays roughly us $4.7 billion in subsidies to its farmers,
which keeps the price of cotton roughly half of what the production
costs should be. The double whammy for our farmers is that not only are
they competing with these ridiculous, backbreaking subsidies but that we
are not investing in land or water for agriculture to prosper. Remember,
the biggest investment in water comes not from the public sector, but
from private farmers, digging 19 million wells to irrigate their fields.
This is the economics that the finance minister discounts in his
prescription. This is why we are hungrier today and will be famished
tomorrow. It’s a pity we cannot eat words.
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