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Indian Farmers' Dilemma

By F. Merlin Flower

"Farmers are the backbone of the economy," said the Chief Minister of Andhra Pradesh, one of the states in India. But in some aspects the backbone of the economy appears disfigured and even broken.

Almost all the 70 million farmers in India are exploited by middlemen. These middlemen usurp most of the profit earned by the farmer. The lack of proper storage has forced the farmer to sell his product to the middleman at low cost. As the products perish soon, the farmer sells it at the offered price, said Manjunatha Gowda, the secretary of the Karnataka State Youth Farmers association. The co-operative movement in India, formed to protect farmers against these middlemen, has failed badly, admitted Nagarajaiah, secretary of the Karnataka State Farmers Association. In the neighbouring state of Tamil Nadu, "Ulavar Chanthai," a market devoid of middlemen, was established four years ago but died with a change in the state government.

Loss of profits to middlemen is just one of the problems faced by Indian farmers. Farmers were not able to get even a rupee (US$0.022) per quintal (100 kg) as profit for pulse crops in the last two months, said Nagarajaiah. At times, the farmer is not able to get even a cent, said Ganghadar, general secretary of another farmer society, Karnataka Rajya Raitha Sangha.

"In Chitradurga district in Karnataka," said Nagarajaiah, "an average agricultural family has at least two to three lakh as debt," or 200,000-300,000 rupees (US$4400-6600). He continues, "The import liberalization following World Trade Organisation's guidelines has led to this reduction in prices of crops." Rajanna, Additional Director of Agriculture of India's Agricultural Commission, added that according to the Agreements on Agriculture (AOA), countries which are members of WTO have to give specific commitments for market access of agricultural goods into their countries.

"When there is a heavy import of agricultural goods, there is an increase in the supply of these goods in the market. This lowers the prices," said Vanaja Ramprasad, President, Green Foundation.

Such economic straits have contributed to the nearly 10,000 farmers suicides this year alone in India. The issue could be understood better by taking the example of the plight of farmers in Andhra Pradesh. In this state alone, nearly 3,000 farmers committed suicide this year.

The Information Technology (I.T.) revolution took India by storm. There was technological revolution in almost every field, and India was prepared to be the software hub of the world. In fact it is still a leading country in the I.T. field. There were promising figures of soaring export growth and foreign direct investment, painting an enviable and rosy picture of the economy. Andhra Pradesh was in the forefront of this revolution. Hyderabad, the capital of the state, was promoted as the high tech city, and the then Chief Minister was the High-Tech Chief Minister.

In his enthusiasm, and with advice from the International Monetary Fund (IMF), McKinsey & Company, the World Bank and other consultants, the then Chief Minister dismantled many of the support mechanisms enjoyed by the farmers at the grassroots level. Coincidentally, for almost three years the farmers didnít have a good monsoon and suffered a series of crop failures. Instead of relying to age-old and safe methods of water harvesting or sharing of the limited water resources, farmers resorted to digging additional expensive bore wells. Perhaps this would not have happened with a strong Panchayat (Village) system. Seeds, pesticides and fertilizers were bought at high prices. Most of the farmers were tenants and were not eligible for bank loans, as banks give loans only if land can be offered as collateral. As a result they were forced to borrow from money lenders at interest rates reaching a staggering 36 per cent annually. Middlemen occupied center stage in the life of the farmer, and when the crops failed, the deep debts drove them to commit suicide.

Indebtedness, insecurity due to crop failures, and increases in the cost of seeds and fertilizers aggravated the situation. In the United States, cotton was subsidized at $12.9 billion during 1999-2000. Farmers in India were pitted against these highly subsidized imports. Indian products were very costly compared to the US products, and they suffered heavy losses in market share.

The high tech government collapsed in Andhra Pradesh, and the new government has announced compensation packages to the dead farmers. A new and tragic drama unfolded, with many farmers committing suicide to get the compensation amount for their families. The present Chief Minister has set up help lines and has promised to help farmers by bringing 670 megares (6.7 million hectares) under irrigation. The help lines do not have professional counselors and failed to evoke attention in many places. The national government of India, a country which boasts of having satellites and atomic bombs, is also considering how to address the problem. The Finance Minister of India has unfolded a strategy to involve banks in rural credit, which will take time.