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Crash in Prices of Agricultural Commodities
Liberalisation of the agrarian economy has wrecked havoc with commodity prices
over the last two years. Previously, there were seasonal fluctuations; now most
prices are in a perpetual state of depression. A flood of imports has been a
major factor for the crash in prices and the devastation of the farmer. Another
factor is the privatisation of distribution whereby the trader is able to fleece
the peasant.
The imperialists say, and our government and media repeat, that Indian
agriculture must be globalised and compete with commodities abroad. They condemn
the peasants for demanding a minimum support price and government intervention.
They are for a totally free market and equal competition for all.
Yes! Equal competition amongst unequals ! A farmer in India is expected to
compete, on equal terms, with the giant agri-business of the USA! With poor soil
conditions, lack of irrigation, irregular power supply and lack of storage
facilities, they are supposed to compete with the highly mechanised thousand
acre farms of America ! Such talk is foolish and ridiculous even if we ignore
the massive subsidies that the western farmers get from their governments.
While the imperialists go on shouting against subsidies to agriculture in
India, they conveniently forget that in their own country agriculture is heavily
subsidised. What is particularly revolting, though, is that the Indian
government, economists and media repeat this same mantra. As though they are
unaware of the massive Subsidies given abroad. 'The Economist’ points
out that all developed countries heavily subsidises their agricultural sector,
irrespective of the WTO conditionalities which are imposed only on the
underdeveloped countries. For example, 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. Besides, the US farmer
gets their inputs, like fertilisers and fad oils, at prices cheaper than the
Indian farmer. It is then no wonder that they can dump their produce in third
world countries, including India.
Besides, the world economy is once again facing a crisis of over-production.
This crisis can particularly be seen in the slump in international prices of
agricultural commodities. With such a slump, the competition for markets gets
excessively ruthless, wherein the big dominate, and the weak are pushed out.
Aggressive marketing worldwide by US agri-business, will hit Indian markets for
agricultural commodities, both at home and in exports.
In the year 2000, besides drought and floods, two factors dominated the rural
scene. The first was a crash in prices of nearly all agricultural commodities.
The second was the reaction of the peasants/farmers, seen in the growth of
movements during the last year, at the local level. Let 'is look at both these
factors:
I
Crash in Prices
Here we shall look at the impact on each commodity separately
(1) Edible Oils
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 tonnes in 1996197 to 21.7 million tonnes in
1998/99 and is expected to drop as low as 19 million tonnes in the current year.
Besides effecting lakhs of growers, the drop in production has had a disasterous
impact on the oil extraction industry. For example, in Karnataka 60% of the
units have closed down.
After the government slashed import duty from 65% in 1993/94 to a mere 16.5% in
1998/99 there has been a flood of imports. After the decision to liberalise
imports of edible oil, it grew form 0.2 million tonnes in 1993/94 to 2.1 million
tonnes in 1997/98, to a massive 4.4 million tonnes in 1998/99. The cost of these
imports for 1998/99 was a huge Rs. 9,000 crores or over $2 billion. In the
current year edible oil imports is expected to reach 5 million tonnes. Thus in
1993/94 white India produced 95.5% of its edible oil consumption, in 1998/99 it
had sunk to 61%. In 1999/2000 it will drop further to just 57%. India has become
the biggest importer of edible oil in the world.
Edible oil is a necessity of life for every family in this country. With
indigenous production being crushed and the country becoming dependent on
imports, soon the imperialists will be dictating terms here as well.
Simultaneous to the drop in government support, the drop in international prices
and the slashing of import duties, the government is all set to kill indigenous
oil seed production. What is astounding is that even under its present WTO
commitments, India can impose upto 300V'0 duty on edible oils - but
it chooses to maintain it at a mere 16.5% (later increased to 70%).
In addition, America's, huge surpluses of Soya Oil, are being damped in India.
at prices subsidised by the US government, and mostly used in India for
adulteration of other oils. Most of this oil is produced from genetically
modified soya. and has been banned in Europe.
(2) Coconut Oil
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 effects 35 lakh
coconut growers in Kerala alone.
The total imports of palm oil into Kerala was two lakh tonnes annually. It has
been estimated that Kerala's edible oil need was just 2.4 lakh tonnes. Quite
naturally, such huge imports is leilling not only the coconut grower but also
the oil making industry in Kerala, wlijch has some 600 units. Despite protests,
the government, in fact, lowered the import tariff on coconut oil from 50.8% to
45%.
(3) Tea
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 last year.
By June 2000 the price had fallen 10 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.
The tea growers are demanding a Minimum Support Price (MSP) for Tea, which the
government is refusing. They are demanding an MSP for green leaf of Rs. 15 per
kg. In response the government has announced a series of tax etc. incentives.
But the growers claim that all these benefits will only go to the tea factories,
brokers and large companies, not to the growers. For this an MSP is necessary.
If not conceded, the agitation of the tea growers is threatening to take a
serious turn.
In Assam, the plight of the 30,000 small tea growers is even more pitiable. The
falling prices have compelled the small growers to dump around 1.5 lakh kg of
green leaf into the Brahmaputra river as the companies were not willing to pay
mote than Rs. 5 per kg (Rs. 12.5 just one month earlier). The main villain here
is the transnational company, Hindustan Lever, as it controls over 50% of the
tea market auction.
(4) Milk
In Punjab they face a double attack from both the Centre and the State
governments.
The Centre, by bowing to the dictates of the WTO regime has reduced duties on
milk products, which has resulted in the massive dumping of butter oil, milk
powder; etc., in India, from Europe and America. These countries which produce
large surpluses of milk and have been throwing much of it into the sea, are now
being allowed to flood the country with their cheap stocks. Till 1997, the
import duty on skimmed milk powder (SMP) was between 15% and 35%, with
quantitative restrictions on its imports. Then in 1997, the government reduced
the duty to zero per cent and placed SMP imports on Open General Licence. The
servility of the Indian rulers can be seen from the fact that the import duty
for SMP in 43 countries is 144%. SMIP imports rose from 126 tonnes in 1997/98 to
over 25,000 tonnes in 199912000. Also, in the last year 40,000 tonnes of
butter-oil have been imported. This glut has led to a fall in market prices.
In addition, the Badal government's privatisation policies have hit the milk
producers/distributors hard. The Badal government planned the setting up of a
Dairy Board to control the entire purchasing, processing and sale of milk, by
dividing Punjab into 22 zones. This would have destroyed the livelihood of 2½
lakh milk distributors in Punjab, and the existence of a monopoly would have
resulted in the fleecing of milk producers. The plan was to gradually hand over
this board to a TNC.
This double blow 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 Rts. 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, and is expected to drop another Rs. 10
crores in the next year.
After agitations and protests the government, in a mock concession raised import
duty on skimmed milk powder to 60%, but with a provision that a huge amount —
upto 10,000 tonnes annually — could be imported at a mere 15%. Compare this,
even with much smaller countries like Bangladesh who have a duty of 200% on milk
products and Pakistan a duty of 100%. But our servile government, is willing to
capitulate totally to imperialist dictates. This flood of imported milk affects
not only the milk producers of Punjab, but throughout the country. The Indian
Dairy Association has 90 lakh members. That means, the livelihood of five crore
people are being threatened by the government's open door policy on milk
products.
(5)
Sugar
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. Though domestic production of sugar in 1998-99 increased to 155 lakh
tonnes, and there already existed a surplus stock of 57.7 lakh tonnes. India
imported as much as 11 lakh tonnes that year. Ever since sugar has been put on
the OGL (Open General Licence) imported sugar has been flooding the Indian
market. Earliet; even though imports swamped the country, India could not export
more than a meagre amount of 22,000 tonnes of sugar, due to mandatory quotas
imposed by the EU and USA. Now, these restrictions have been lifted only because
of the crash in international prices. With the international prices of sugar
being $280 per tonne it is 25% cheaper than the domestic price at $355 per tonne.
So the flood of imports will continue, though India had a bumper crop last year
of 180 lakh tonnes.
Incidentally; the European Union (EU), which accounts for 60% of white sugar
exports worldwide, was providing an export subsidy' of about 150% while itself
imposing import duties of 300%. The US too imposes duties of 200% on sugar
imports. While the servile Indian government had an import duty of just 5% till
1998, and increased this nominally to 40% today.
And added to all this, with the government hiking the PDS prices of sugar,
leading to a drop in offtake, it has reduced its levy purchases by a huge 10%.
In the coming year it plans to totally stop purchases of levy sugar. With
burgeoning stocks, farmers are facing not only growing payment arrears, but the
refusal of sugar cooperatives/industries to cut their crop. With high quantities
of inputs required for sugarcane growing, farmers are accumulating big debts,
leading to large numbers of suicides. Besides, for the consumer, prices never
drop.
(6) Eggs
The small egg/chicken producers have been swamped by the TNCs and big houses
entering this sector in a big way. Producing laklis of eggs/chicks per day they
are able to undercut the small producers and squeeze them out of the market. The
egg glut has resulted in the dropping of egg prices, coupled with increasing
cost of chicken feed. For example, between 1997 and today while the price of
eggs have remained static (for the producer) the price of feed has gone up by
22% from Rs. 4.500 per tonne to Rs. 5,500 per tonne. As AP produces 3.5 crore
eggs a day, out of India's total of 11 crores, the demonstration in Hyderabad
was an indication of the anger brewing amongst the small producers.
(7)
Fish
The government's plans to import cheap fish will affect the livelihood of 3
crore people in India who live off fishing. With a huge 6,000 km coast. India
has the largest fishing population in the world. Not only has the government,
bowing to WTO pressure, opened up the country for the import of cheap fish: it
also plans to review the deep-sea fishing policy to open up the waters to big
foreign trawlers. These big trawlers destroy the catch of the small fishermen.
Also the fishermen are agitated by the "rape and run" approach of the
TNCs to shrimp fanning. The fishermen are demanding that the Aquaculture
Authority Bill be withdrawn, as it seeks to treat aquaculture as an
'agricultural activity" and not as an industrial activity, allowing all
sorts of tax and other exemptions to "industrial shrimp aquaculture." The
TNCs have had no qualms in acquiring prime agricultural lands, which were
converted into intensive shrimp ponds, with a maximum life of 5 to 10 years.
Abandoned shrimp farms can no longer be used for shrimp or for agriculture. The
shrimp industries then move on to other areas, continually leaving behind them
people and lands devastated, due to salination of land and ground water.
(8)
Onions
During the last season, 6 lakh tonnes of onions lay perishing at the Maharashtra
State Cooperative Marketing Federation - with an expected loss of Rs. 100 crores
due to rotting onions. Due to a bumper crop traders were unwilling to lift
stocks, even free of cost. With farmers taking to the agitational path, the
government quickly intervened to lift part of the onions at prices ranging from
Rs. 300 to Rs. 350 per quintal — when market prices were Rs. 250 per quintal.
The situation was tragic, while crores starve, the onions were rotting in the
APMC godowns, who later considered disposing of them to the private company,
Leaf Biotech, at next-to-nothing — to be converted into organic manure.
(9)
Cotton and Silk
While cotton growers are committing suicide for the non-payment of their
crop, the government is allowing vast imports of cotton.
In 1999-2000, inspite of a huge stock of 3.7 million bales (each bale is 170 kg)
imports in that year rose 70% to 1.2 million bales. The Maharaslitra government,
which acquires cotton under a monopoly procurement scheme, not only failed to
make payments to peasants, but even handed out dud cheques. Seven suicides by
cotton growers last year was the result of late payments by the government.
In the year 2000-2001, though the stock has gone up to 4.3 million bales, the
estimated imports would be over 2 million bales. Like in other agricultural
commodities such huge (and growing) imports, inspite of large stocks will only
result in a big drop in prices (estimated to have fallen 15% in 1999) and
increasing surpluses with the agriculturists.
With the government allowing imports of raw silk since October 30, 1998, prices
immediately fell from Rs. 1500 per kg in December '98 to Rs. 1300 per kg in
January '99 - affecting 3.5 lakh sericulture fanners, generally small peasants
from Karnataka.
(10) Rubber
Though India (mostly Kerala) is one of the world's leading producers of rubber,
with die government putting rubber on the OGL (Open General Licence) 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, file 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.
(11)
Tobacco
Tobacco sales and prices have crashed so badly that the AP government (and
even the High Court) has ordered the farmers to take a crop holiday. In fact, in
mid-January the Tobacco Board decided to prosecute fanners that did not obey the
court order of 'crop holiday.' It also decided to destroy nurseries raised on
1000 hectares after the High Court delivered its judgment on September 28, 2000,
upholding ‘crop holiday.' AP is the largest producer of tobacco, and if the
entire product is not required, the crisis in tobacco production can well be
imagined. Besides, AP, Karnataka is a big grower of fine quality tobacco, most
of which is exported. The crisis in this sector effects six million farmers/labourers
dependent on tobacco growing.
(12)
Potato
This year's potato crop is also facing a crisis. It is feared that potato
growers will not even be able to recover their input costs. In Punjab, by
January this year over 2000 quintals was reaching the mandis every day. Most are
being sold off at a loss.
On one acre of land, the total costs amount to roughly Rs. 13,000 - comprising
Rs. 6,000 for 12 quintals of seeds and other costs of Rs. 7000. The average
yield per acre is 100 bags. At the mandis the growers were getting roughly Rs.
80 per bag. That amounts to a loss of Rs. 5,000 per acre.
Owners of cold storages were refusing to store potatoes because of the recession
in the market.
In Karnataka supari prices have dropped by half in just one year from Rs. 154
per kg. in September '99 to Rs. 78 per kg. a year later. In Kerala, pepper
prices too nearly halved in the same period from Rs. 22,600 per quintal to Rs.
12,000 per quintal. In AP chillies worth Rs. 100 crores are lying in cold
storage, for want of a market. Besides these, even products like apples, jute,
coffee, cardamom were facing depressed sales and prices.
Though, as a result of agitation, the government has increased the import duty
on some products, these are still far less than that permissible by the WTO. For
example the Planters' Association of Tamil Nadu has demanded that maximum
permissible bound rates be imposed for tea (150%) and coffee (100%).
Basically, government policy is geared to facilitate imports, assist the trader-bania
combine and crush the local producer. Its adhoc response is only to the
agitations of the peasant/farmers — even then, it attempts to give the minimum.
II
Rural Unrest
The year 2000 saw a renewed growth in the movements of the peasants/farmers
against the policies of the government, and in defence of their rights.
In February last year hundreds of onion growers from various districts of
Karnataka lay siege to the APMC office in Bangalore after prices crashed from Rs.
650 per quintal to Rs. 250 per quintal. In January, Chandigarh witnessed the
biggest procession seen in recent years 18,000 milk producers/distributors of
Punjab's 80,000 dairy producers, demonstrated against government policy. This
was followed by a strike and morcha of 12,000 on February 12; a morcha of 10,000
on March 16; and a gherao of the Vidhan Sabha on September 6, which was lathi-charged.
In April hundreds of poultry farmers went on a rampage in Hyderabad smashing
thousands of eggs in the streets. In June over 1,000 fishermen from ten states
took out a procession in Delhi against the government's “import fish”
policy.
Since April last year, there was a massive agitation of the 50,000 small tea
growers in the Nilgiris of Tamil Nada, who have been agitating against the
prolonged drop in tea prices. On April 10, more than 1.5 lakh people (50,000
women) participated in a rally at Udhagamandalam to demand a fair price for the
tea growers. The agitation was so intense that the annual flower show had to be
postponed. In May, the agitation intensified, particularly in the Kotagiri area,
with several buses being set on fire. On May 18, the police used excessive force
to disperse a “half-clad' procession organised by the growers. 42 persons were
arrested and youth were stripped, abused and beaten. On July 26, a group of
demonstrators, including a large number of women, were lathi charged. In all,
about 500 people from the area have been lodged in prisons.
Kerala witnessed a novel form of agitation against palmolein imports. It all
began from village Koorachuudu near Kozhikode, where the villagers decided to
boycott palmolein. The programme which was initiated on October 2, resulted in
the village being declared 'palmolein-free' by November 2000. Not only
did shops stop selling palmolein, but even vendors stopped selling
Coca-cola/Pepsi and replaced them with fresh coconuts. A 'Farmer’s Action
Front' took out a big procession in the village. Soon, the other four
villages under the Koorachuudu panchayat were also declared 'palmolein-free'.
A dharna of farmers was taken out at the Kochi port, forcing the port
authorities to ban the import of palmolein. The campaign for the boycott of
palmolein spread fast all over Kerala, being more effective in the districts of
North Kerala. In some places the agitation turned violent, when demonstrators
raided shops and destroyed stocks of palmolein. As part of the compaign, people
and vendors are boycotting Coca-cola/Pepsi and drinking instead tender coconuts.
The effectivity of this boycott campaign can be gauged from the fact that the
sale of palmolein in Kozhikode district has dropped by 75%; while at the all-Kerala
level it has dropped by 50%.
Then, on World Environmental Day fishermen from Gujarat and environmentalists
from all over the country condensed on the village Umbergaon. Defying
prohibitory orders they demonstrated against the Rs 1.600 crore private port
which the Gujarat government was adamant on allowing. They also erected a
memorial to Colonel Pratap Save, who was killed, not while fighting, at the
border, but through brutal beating in police custody, for the criminal act' of
spearheading the agitation against the port.
In UP agitating sugar-cane farmers were fired upon in October, where one person
was killed and a large number injured. The government refused to give their
demands.
Caught in the vortex of the government's free-market policy, the farmers are
continuous losers. If the crop fails, they are burdened with large debts due to
the high cost of inputs. If there is a good crop, the prices crash, and the
farmer finds it difficult to even recover costs. Those who thrive are the
landlords/big kulaks/middle-men/traders combine, the fertilizer/pesticide
manufacturers and dealers and imperialist agri-business that is flooding the
country, with cheap imports.
Ironically, while millions were starving due to drought in many parts of the
country, there was a glut of wheat, rice, oil, sugarcane, onions and even eggs
.... a lot of which has been rotting in government godowns.
(to be continued)
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