Chapter 7

IMPACT OF NEO-LIBERAL ECONOMIC POLICIES ON THE

INDIAN PEASANTRY

Advent of N eo-Liberalism

The world economic order especially since the beginning of colonial domination

may be broadly divided into three distinct phases: the phase of economic

liberalism which witness~d the drive towards the capture of external markets, the

phase of Keynesianism in the aftermath of the Great Depression which gained

prominence in the post-Second world War period which called for state

inte_rvention for capitalist restructuring, and the phase of Nee-liberalism which

began in the 1970s and accelerated after the end of the Cold War and collapse of

the Soviet Union, that saw the revival of the principles of c?mparative advantage

and free trade.

The ideology of econormc liberalism that we studied earlier dominated the

economic discourse from the time of David Hume, Adam Smith, David Ricardo

and others emerging as a counter to mercantilism, evolved with the development 1 '

of capitalism and underwent various changes with time before returning in the

form of nee-liberalism. The first phase we have witnessed was one of inter­

Imperialist competition and intense rivalry in the race to capture external markets.

The policies of international trade and finance pt.u:sued even during the intervening

period between the First World War and the Great Depression by the capitalist

countries of the west reflected their commitment to the principles of economic

liberalism and an enhanced role for the "free" market the operation of which we

have observed in the second chapter has never been "free" in the sense that the

proponents of economic liberalism claimed. It was clearly motivated by the

"interests of the strongest participants of those markets", especially the colonial

powers with Britain having an undoubted hegemony.l

The process of economic globalisation under colonialism required the adoption of

a set of externally imposed or internally induced policies representing the

imperialist interests ahd was not a natural phenomenon that the people of the

colonies accepted out of their own free will.2We have noted in the second chapter

the operation of the policies of economic liberalism and free trade and also noted

how the Great Depression of 1929 led to the adoption of the Keynesian policies

of demand management for capitalist restructuring. I

"The Great Depression dramatically eroded the power of the financial orthodoxy

and the material interests it represented ... and raised basic questions about the

stability of unregulated capitalism."3The Great Depression made even an early

exponent of free trade, John Maynard Keynes to rethink and argue for state

intervention and public expenditure. Keynesianism hence was a rejection of the

then existing dominant orthodoxy of economic liberalism and the laisse~aire

doctrine. Deficit spending came to be seen as an instrument for improving social

and welfare services. Post-War Keynesian economic theory "established the

legitimacy of state intervention in market economies with the aim of achieving

growth and employment levels decided on the basis of social policy."4The policies

of the welfare state proposed by Keynes came to be accepted by a capitalist class i{-

which was faced with a crisis and had to extricate itself from its then "obvious

failings and s~lf-destructive tendencies."SThe ideas of Keynes, emerging as it did

from a Capitalist crisis came to be accepted and the newly independent nation-

1 William.K.Tabb, The Amoral Elephant: G/ubalisation and the Stf'llggle for Social Justice in the Twen!)'-First Century, Cornerstone Publications, Kharagpur, 2002, p-52. 2 A.K.Bagchi, "Globalisation, Liberalisation and Vulnerability of India and the Third World", Economic and Political Week!J, Vol.34, No.45, 6 November, 1999. 3 Op.Cit, William.K.Tabb, 2002, pp-52-53. 4 Richard Peet, Unho!J Trini!J: The IMF, World Bank and WTO, Zed Books, London, 2003, p-8. s William.K.Tabb, "Du Bois vs. Neoliberalism", in W.E.B.Du Bois' The Souls of Black Folk- 100 Years On: Racism and Imperialism, Ana!Jtical Month!J Review, Vol.l, No.8, November 2003, p-34.

223

states were influenced greatly. It was developed in totality in the context of the

retreat of Imperialism with the post-Second World War process of decolonisation

and was a strategy adopted under the compulsion of the changing geo-political

scenano.

A weakened capitalist class in the aftermath of the Second World War and the

world economic restructuring with an emerging socialist bloc along with the threat

of growing unemployment and recession in their own countries had to rethink its

economic strategies and despite its affinity towards liberalism had to go in for a

phase of Keynesianism. Many developing countries including India we have noted

had the influence of Keynesianism in its planning process. The dirigiste

development strategy -that India embarked upon was influenced by Keynesian

belief in the efficacy of state intervention as we have noted in the third chapter.

The crisis of capitalism in the late 1970s which has been retrospectively called as

'the structural crisis of 1970s and 1980s' was marked by economic instability

arising out of growing unemployment, high inflationary trends, the slowdown in

the growth of labour productivity, lowe~ accumulation and growth rates, inflation,

and the increased macro-instability (booms and recessions).6The crisis was sought

to be initially handled by resotting to Keynesian policies but the inflationary trend

proved to be a deterrent. The global political scenario also saw the socialist bloc

being gripped with internal problems and the policy of peaceful co-existence

coming into place putting an end to the heightened tensions of the 'cold war'

period. This scenario provided the capitalist bloc with the opportunity to return to ! •

the classical economic liberalism which it had shelved temporarily for a few

decades and Keynesianism was replaced by the ideology of Neo-liberalism which

was rather a reaction to the Keynesian state planning and guided economic growth

strategy. The ideological restoration of classical liberalism in its new incarnation in

6 Gerard Dumenil and Dominique Levy, "The Nature and Contradictions ofNeoliberalism" in Leo Panitch and Colin Leys (Eds.), A World of Con.radidions: Socialist Register 2002, K.P.Bagchi and Company, Kolkata, 2002, p-53.

224

the form of Neo-liberalism was a response to the deterioration in the economic

performance of the capitalist world.

The theory and practice of Neo-liberalism was pushed forward more vigorously in

the conjuncture of the escalating debt in Third World countries since the 1970s,

which became the fulcrum of the loan conditional regime of Structural

Adjustment, trade liberalisation, and renewed emphasis on the principle of

comparative advantage in agricultural exports for the'Tlllrd World countries which

were advanced as the antidote to the economic crisis they were facing. 7The theory

of Neo-liberalism in India has been put into practice in a strident and

comprehensive manner since the beginning of the nineties. The Structural

Adjustment Programme and trade liberalisation had been implemented in the I

Latin American and Sub-Saharan African countries for over a decade and a half

before India embarked on this path. 8

As far as the Third World countries are concerned, the operation of Neo-liberal

ideology differs from the operation of the ideology of economic liberalism pursued

under the colonial era in that earlier one or the other Imperialist country exercised

total control over the colony and imposed the policies of trade liberalisation on the

subject country, while in the present context the nation-states are politically

independent and the policies of Neo-liberalism are imposed indirectly through the

international agencies like the World Bank, International Monetary Fund and

World Trade Organisation. Non-state entities like the Transnational Corporations

(INCs) have come to occupy an overbearing influence on policy-making. The

relevance of external markets and sources of raw materials for capitalist

development is as relevant today as it was five centuries ago. The advanced

capitalist countries and the TNCs want the prising open of the land in Third

World countries to ensure a cheap flow of agro-exports from these countries. The

7 Henry Bernstein, ''The Peasantry in Global Capitalism: Who, Where and Why?", Leo Panitch and Colin Leys (Eds.), lll'orking Classe.r: Global &a/ities, Socialist &gister 2001, K.P.Bagchi and Company, Kolkata, 2001, p-17. 8 Utsa Patnaik, "India's Agrarian Economy and New Contradictions Following Liberalisation", The Marxist, Vol.XIV, No.3, July-September, 1998, p-27.

225

unfolding of the Neo-liberal agenda we shall note has led to the same processes of

underdevelopment that was associated with the operation of the ideology of

economic liberalism under colonial conditions.

The Impact of N eo-Liberal Policies on Agriculture

India embarked on the implementation of a comprehensive package of Nee-

liberal economic policies in July 1991 under the ·loan conditional trade

liberalisation with the borrowing of $4.8 billion loan and a system of 'free-trade'

was instituted. The balance of payments crisis of 1990-91 is cited as the most

proximate factor that necessitated the adoption of the loan conditional Structural

Adjustment Programme which was the strategy proposed by the IMF.9'fhe

standby credit was extended to provide balance of payment support and the

prescribed Structural Adjustment was to be implemented under the surveillance of

the IMF over a period of 18 months.1o

Initially the Neo-liberal economic polic:ies did not have any specific set of reforms

or exclusive package to deal with agriculture. The predominance of the agricultural

sector both in terms of income and employment and its intimate relationship with

other sectors of the economy through input, output and consumption linkages

however, ensured that the macro-economic and other changes implied in the

stabilisation and Structural Adjustment Programme had a significant impact on

agriculture. The signing of the General Agreement on Trade and Tariffs (GATT)

in 1994 brought agriculture direcdy under the ambit of Neo-liberal policies.

It was generally believed by the proponents of the Neo-liberal policies that the

liberalisation of agricultural trade and freeing of agricultural markets would lead to

the shifting of domestic inter-sectoral terms of trade in favour of agriculture and

price incentives leading to enhanced investment and output expansion of

9 C.P.Chandrasekhar and Jayati Ghosh, The Market That Failed: A decade of Neo-Liberal Economic Reforms in India, LeftWord Books, New Delhi, 2002, p-31. 10 "Structural Adjustment: \\fho Really Pays?", Public Interest Research Group, New Delhi, 1992, p-3.

226

agriculture. In the absence of the removal of import controls and an overvalued

exchange rate, the terms of trade were expected to shift away from agriculture.ll

Simultaneously it was argued that liberalising imports and allowing a 'flexible'

exchange rate (i.e., devaluing) would lead to increased agricultural exports in most

developing countries, and thereby provide an impetus to more production besides

adding_to agricultural incomes. It was also argued that government intervention in

the output market, for instance, in the form of food subsidy, typically operates to

depress incentives for producers.12 Input subsidies were considered market

distorting and inefficient and a free-play of price mechanism was expected to raise

aggregate agricultural output and farmers were expected to respond to the

incentive of 'remunerative' output prices and the export market.13

This process of trade liberalisation and 'free-trade' were further accelerated Wlth

the signing of the GATT in 1994 at Marrakesh in Uruguay and institution of the

wro regime which is based on the so called principle of 'open multi-lateral

trading system' with the explicit objective of promoting 'free trade'.14The Uruguay

Round deliberated on the contentious issues regarding trade liberalisation and the

provisions and implementation of the Agreement on Agriculture (AOA) which has

a direct bearing on the livelihoods of the poor in the Third World were also

discussed. The main concern of the AOA is to limit and gradually do away with

"all production and market-distorting interventions like subsidies, protective

measures such as quantitative restrictions and high tariffs."15In short it called for

market liberalisation within the national economy implying the elimination of ~ .

subsidies, protective barriers and price controls under the pretext of making Indian

agriculture more "competitive".

11 Jayati Ghosh, ''Twelve Theses on Agricultural Prices", Social Scientist, vol.20, Nwnber 11, November 1992, p-21. 1z Ibid, pp-21-22. 13 D.Narasimha Reddy, Surjit Singh and Dolly Arora (Eds.), Political Econonry ofWTO Regime: Some Aspects of Globa/isation and Governance, Indian Political Economy Association, Rainbow Publishers, New Delhi, 2002, p-15. 14 Ib;d, p-15. 15 D.Narasimha Reddy, "WfO and Food Security: Issues in the Context of Small Farmer Economies Like India" in Amit Dasgupta and Ribek Debroy (Eds.), Salvaging WTOs Future: Doha and B~)'ond, Rajiv Gandhi Foundation, Konark Publishers Pvt Ltd, New Delhi, 2002, p-211.

227

The Neo-liberal economic policies in the field of agriculture sought the free-play

of market ignoring the fact that agriculture unlike industry cannot have a

continuous production process that provides output uninterruptedly. Agricultural

operation in a country like ours is rarely a large enterprise like industry and the

peasantry are handicapped by the inability to produce beyond a point and also

hold large stocks. It is nearly an impossible task to adjust the availability of

agricultural output to meet mark.:t demand as the production proces~ is time

consuming, and the output generation is at discrete intervals subject to the vagaries

of nature leading to large fluctuations. This being the reality, the demand for

agricultural commodities tends to be price-inelastic, which means that agricultural

prices and incomes are subject to large fluctuations which we shall note in the case I

of the two states tl1at we are studying. "This fact alone provides sufficient grounds

for state intervention in agricultural markets. When we consider in addition the

fact that class-differentiation within agriculture inevitably results in a

disproportionate distribution of the burden of such income fluctuations among

the agricultural classes, with the rural poor becoming the worst-affected victims,

the necessity for state intervention in the market becomes even more

pronounced" .t6

The Great Depression underlined the necessity of state intervention in agriculture

prices like never before as the world was jolted by total collapse in agricultural

prices, a shift in the· terms of trade against agriculture and unprecedented

indebtedness of the peasantry. We _have noted in the fifth chapter the resultant

pauperisation of the peasantry and the spate of peasant movements that occurred

in response to the crisis. This scenario had led to the establishment of an elaborate

mechanism of agricultural price administration which procured crops at a

Minimum Support Price from the producers and distributed it to the consumers at

a government ftxed issue price through the wide network of Fair Price Shops. T~e

16 Prabhat Patnaik, "Impact of Globalisation on Indian Agriculture" in Crisis in Agriculture and Response­Seminar Proceedings, 23 August 1998, Uddharaju Ramam Memorial Foundation and Andhra Pradesh Rythu Sangham, I Iyderabad, 1998, p-13.

228

unhindered operation of such a system itself called for an insulation of our

agrarian economy from the vagaries of the world market. There were hence

controls on agricultural exports and imports which were designed to ensure that

the basic objectives of the price-administration mechanism were not undermined.

This had ensured that the domestic agricultural prices did not have a propensity to

fluctuate to the extent of fluctuations in the corresponding world market prices.t7

The World Bank and economists sympathetic to it along with a section of the

Indian peasantry (the Kulak lobby) have in the phase of liberalisation been strong

votaries of removal of restrictions on agricultural trade on the premise that the

agricultural sector would benefit from such a move as the Indian agricultural prices

were on an average lower than the world prices. The move was supposed to be an

anti-poverty measure as the bulk of the poor who reside in dlis sector were likely

beneficiaries. However, we shall see in later sections that the view is erroneous and

the rural poor in India being net buyers of food grains in the market, would be

adversely affected by an increase in agricultural prices especially that of food

grains, and while better agricultural prices does not necessarily lead to

corresponding increase in agricultural wages, it would almost certainly mean higher

cost of living for this section. Simultaneously, the impact of lower agricultural

prices will also be transferred on to the poor peasants and agricultural workers,

whose wages would be reduced on the pretext of crash in prices.18 The basic

premise itself is flawed because even if the Indian agricultural prices 'at a given

point of time may be lower than the world prices, there is no hard and fast rule

that the world prices would never fall below the Indian prices.19 , .

However, even representatives of the peasantry have argued that the strict

implementation of the various provisions like reduction of tariffs, elimination of

non-trade barriers, reduction of production and export subsidies will give our

17 Prabhat Patnaik, "Agricultural Production and Prices Under Globalisation" in Prabhat Patnaik, Retreat to Unfreedom: Ess'!)'S on the Emezy,ing World Order, Tulika Books, New Delhi, 2003, pp-199-200. !8 We have ·witnessed such instances in the Wayanad district of Kerala and the cotton and groundnut growing regions of Andhra Pradesh namely the Karimnagar and Anantapur districts, notably all of them are predominandr cash crop regions. i 9 Op.Cit, Prabhat Patnaik, 1998 pp-15-16.

229

exports 'competitive advantage', thereby giving a good opportunity to push up our

agro-exports.20 Indian agriculture is at present witnessing the impact of these

policies. We shall see in later sections the operation of the world market and price

fluctuations and the actual impact on Indian agricultural prices and the peasantry

as a whole. 'Efficiency' and 'equity' have been the axioms behind the advocacy. of

Liberalism in the present phase.21 Thus we shall note that financial liberalisation,

liberalisation of the land markets, permission to the MNCs and contract' or

corporate farming, dismantling of the PDS are all pushed forward with the

understanding that they would bring more efficiency and equity. The following

sections will look into the actual impact of these policies.

Peasant Classes and Inequalities Under

the N eo-Liberal Economic Regime The implementation of the Neo-liberal economic policies has led to greater

concentration and centralisation of land and resources, thereby sharpening the

peasant class differentiation. The Green Revolution had earlier accelerated the

class differentiation especially in the Green Revolution areas. The class

differentiation i.nevitably leads to a disproportionate distribution of the burden of

income ~uctuations arising out of fluctuating agricultural prices. Inevitably the

rural poor are the worst affected. We shall note in the following sections that the

landlords, big farmers and capitalist landlords have made gains initially, but the ~ .

present agrarian crisis has hit all sections of the peasantry although with obvious

differences in the magnitude of impact. The transformation from a dirigiste strategy

to a market regime dominated by the MNCs and powerful international players has

affected different sections of peasantry differently. We have noted in the third

20Y.V.Krishna Rao, ''Export Oriented Growth of Agricultural Commodities and its Consequences" in Y.V.Krishna Rao (Ed.) The Impact of GAIT and New Economic PolifY on Indian Agriculture, People's Publishing House, New Delhi, 1997, p-77. 21 G.K.Lieten, "~vfultinationals and Development: Revisiting the Debate", Social Scientist, Vol.27, Nos. 11-12, November-December 1999, p-28.

230

chapter that peasant classification cannot be made merely on the size of land

holding and have looked into the value of productive assets other than land along

with the size of land holding.

If we look into the classification of the peasantry based on the value of productive

assets other than land (see Table 7.1) we find a highly unequal distribution of

assets in Andhra Pradesh and ~ concentration of assets in the respondents from

the highest bracket. Out of the total sample of 120 respondents surveyed in the

state, 57 per cent of the respondents fall under the lowest asset bracket and around

29 per cent fall under the highest bracket. There is also a clear concentration of

land assets also in the hands of the highest bracket who own on an average 14.72

acres of operational holding which is about nineteen times the average operational

holding of the former whose average operational holding is only about 0. 78 acres.

In Kerala the inequality is not as sharp in Andhra Pradesh. In Kerala about 27 per

cent of the respondents fall under the lowest asset value bracket while around 28

per cent of the respondents fall under the highest asset value bracket.

The average size of operational holding of the lowest bracket is 0.51 acres while

that of the respondents in the highest bracket is 6.92 acres, which is about

fourteen times that of the former. The average operational holding in Andhra

Pradesh is about one and a half times higher than in Kerala. In terms of average

value of assets, the highest bracket in Andhra Pradesh is endowed with more

assets with it being more than 1.6 times that of the same section in Kerala. The

lowest bracket in Andhra Pradesh although having around more than one and a

half times the operational holding of the same bracket in Kerala, they are much

poorer in terms of assets and the inequality is higher than in Kerala.

231

Table 7.1

Classification of Sample Peasantry Based on Value of Productive Assets

A Average N Range of Asset [Total Value of Total Operational D Value Other No of Productive Assets Operational Average Value of Holding (in H Than Land Respondents Other Than Land Holding Assets Acres) R 0-10000 69 79500 53.65 1152 0.78 A 10001-20000 7 97000 9.63 13857 1.38

p 20001-30000 3 88000 5.15 29333 1.72

R 30001-40000 2 74800 7.5 37400 3.75

A 40001-50000 4 181300 16 4532'i 4 D 50001 and above 35 11597150 515.35 331347 14.72 E s H Total 120 12117750 607.28 100981 5.0(i

!Average Range of Asset lfotal Value of Total pperational Value Other No of Productive Assets Operational !Average Value of ~olding (in

K Than Land Respondents Other Than Land Holding ~.ssets !Acres) E 0-10000 32 42220 16.26 1319 0.51 R 10001-20000 3 54400 1.00 18133 0.33 A L 20001-30000 18 434560 57.39 24142 3.19

A 30001-40000 23 785180 71.34 34138 3.10

40001-50000 10 444650 30.00 4446~ 3.00

50001 and above 34 7168880 235.28 21084S 6.92

Total 120 8929890 411.27 74416 3.4~

If we look into the classification of sample respondents in terms of size of land

holding as has been presented in Table 7.2, it shows a concentration of around 50

per cent in the lowest bracket in both the states. The disparity between a

classification according to value of assets and according to size of land holding

shows clearly that in Andhra Pradesh there is almost an equal number in the

lowest bracket in both classifications while i1~1 Kerala such a relationship does not

exist. If we take the lowest three ranges of classification, in Andhra Pradesh in the

classification based on asset value 79 respondents i.e. nearly 67 per cent of the

total sample come under. this category while in Kerala only 53 i.e. about 44 per

cent come under this category. The same if applied to the classification based on

size of land holding 91 i.e. about 75 per cent and 97 i.e. about 81 per cent in

Andhra Pradesh and Kerala respectively fall under this category. If we even look at

a classification based on the size of operational holding (See Table 7.9 and Table

232

7.10), 79 i.e. nearly 67 per cent (see figures for asset value classification above) in

Andhra Pradesh and 77 i.e. about 64 per cent fall under this category. This clearly

brings out the fact that the section in Kerala has higher standard of living and even

the lowest sections of society have greater concentration of productive assets than

the same section in Andhra Pradesh. The possession of homestead land is one

major reason for such a situation and this also leads to greater inve"'::.'nent for

generating productive assets in' agriculture.

Table 7.2

Classification of Sample Peasantry Based on Size of Land Holding

Size of Land Holding Andhra Pradesh Kerala 0-1 .Arre I 65 (47) 57(18}

1-2.5 Acres 16 20 2.5-5 Acres 10 20 5-10 Acres 13 13

10-20 Acres 09 09 30-50 Acres 05 00

50 and Above 02 01

(fhe figures in parenthesis refers to the number of landless agricultural workers)

In Andhra Pradesh about 72.3 per cent of the respondents in the first category

were landless agricultural workers mostly owning a small hutment while some were

also paying rent for the small huts. Among the landless 46.8 per cent belonged to

the OBC, 44.7 per cent were SC and only 8.5 per cent were from the high castes.

In Kerala about 69 per cent of them had in addition to own housing owned

homestead land on which they cultivated crops like coconut, pepper, arecanut,

cashew nut and vegetables. The housing condition of the respondents in Kerala

was of a far higher standard than in Andhra Pradesh and even respondents in the

first category had better living standards than the respondents in Andhra Pradesh

owning up to 5 acres and more especially in Sirisedu Gram Panchayat m

Karirnnagar district and Ipperu Gram Panchayat in Anantapur district. J

We have resorted to the plotting of Lorenz Curves to bring out the inequality

levels in the two states. The Lorenz Curves were drawn by plotting the percentage

of asset value cumulative on the vertical axis and the percentage of household

233

Percentage of Percentage of Percentage Asset Hold by Asset Hold by of Asset all Sample the Sample in Hold by the (240 Andhra Sample in Households in Pradesh Kerala (120 Andhra (120 Households) Pradesh and Households) Kerala

0.01 0.01 0.02 0.05 0.04 0.09 0.11 0.08 1.35 0.33 0.13 4.5 1.99 0.20 8.6 5.19 0.76 13.43 9.48 3.21 19.17 16.73 10.63 26.68 31.13 31.34 38.94 100 100 100

cumulative on the horizontal axis. The 45 degree line represents the line of perfect

equality and as the curve moves farther away from it the level of inequality is

higher. The Lorenz Curve for Kerala is closer to the line of perfect equality than

the Curve for Andhra Pradesh thereby indicating that the inequality in terms of

productive asset-value is lesser than in Andhra Pradesh. This is more true for the

respondents in the bottom ninety percent of asset distribution. The cumulative

asset distribution structure shows that in Kerala and Andhra Pradesh the bottom I

10 per cent of the sample households hold only 0.02 per cent and 0.01 per cent of

total assets respectively. Similarly the bottom 20 per cent households hold around

0.09 per cent and 0.04 per cent respectively. The households in Kerala hold almost

double the proportion of total assets than in Andhra Pradesh in this bracket. The

lowest 50 per cent households own only 8.6 per cent and 0.20 per cent respectively

in Kerala and Andhra Pradesh implying that the top 50 per cent hold as high as

about 92 per cent and 99.8 per cent in Andhra Pradesh.

The asset distribution is however concentrated ·in favour of the top 10 per cent of

the households in both the states and they hold a~out 61 per cent and 69 per cent

in Kerala and Andhra Pradesh respectively. The top twenty percent own about 73

per cent and more than 89 per cent in Kerala and Andhra Pradesh respectively.

Although production relations have been altered over time, socio-economic

structure has not seen any drastic change. The higher castes continue to be the

main land owners and employers, while the bulk of the agricultural workers are

drawn from the SCs and STs. Upward mobile OBCs are still the small producers

and agricultural workers in Andhra Pradesh. Agricultural workers in irrigated zones

seem to be enjoying better standards of living than the self-employed in agriculture

in the dry zones. In Kerala the implementation of Land Reforms has ensured that

the hitherto untouchable castes got rights over their homestead land and the

OBCs who benefited became dominant cultivators. Caste along with control over

land was considered by the respondents in Andhra Pradesh to be the factors that

led to the hegemony of a few people who dictated terms in the village as far as the

234

markets, credit or terms of labour were concerned. Cut in government expenditure

seems to have led to collapse of employment growth and income growth. A

cursory look at spatial spread of suicides in Andhra Pradesh earlier gave a picture

that it was happening in cotton growiQ.g areas, but now it is spread across the

regions irrespective of crops. Even in Kerala which had greater social security

there have been reports of suicides by peasants with the Wayanad district being the

worst hit. Even a look at the indebtedness status across caste backgrounds clearly

brings out the fact that in both the states the respondents from the SC/ST

commuPity and the OBC were having the highest burden of debt in that order

when compared to the respondents from the General category. However, the

burden of debt in Kerala for the deprived sections is far lower than that in Andhra . I

Pradesh and the difference in the levels of burden of debt between the General

category and the deprived castes is also much higher in Andhra Pradesh while the

gap is much reduced in Kerala. The burden of debt as percentage of amount

borrowed in Andhra Pradesh for the General category is 116 per cent while the

same for the OBCs is 160 per cent and for the SC category it is as high as 170 per

cent. The per capita credit availability also is muc}:t lower for the SC and OBC

category with the General category have an access to about two and a half times

that of the OBCs and more than eight times that of the SC respondents (See Table

No: 6.3). In the case of Kerala the debt burden as a percentage of the amount

borrowed is 118 per cent for the General category, 126 per cent for the OBC and

131 and 113 per cent respectively for the SC and ST categories. The per capita

credit availability for the General category is more than two and a half times that

of the OBCs, nearly five times that of the SC category and nearly thirty four times

that of the ST category (See Table No.6.4). This is a clear indication of higher caste

inequality in Andhra Pradesh and the very fact that the respondents in Kerala from

these sections had a better standard of living than their counterparts in Andhra

Pradesh. However, the per capita credit availability for the Adivasis is dismally low

and they mostly have to rely on borrowings from within their tribes itself.

235

T bl 7 3 S a e . OCla lG rouns Wtse I db d n e te ness s . Andh p d h tatus m ra ra es Items OBC General sc Number of Respondents 57 20 43

Average Land Holding(Acres) 3 17 2

Total AmoWlt Borrowed 7641500 6245000 1635699

Total Indebtedness During 1998-2002 3889438 1530977 1416755 Total AmoWlt Paid towards Interest Pay_ment 4181995 991300 710727

Total Debt Serviced 4157500 4732000 660317

Total AmoWltpaid so far to the Lender 8339495 57237-00 1371044

Total Burden of Debt 12228933 7254277 2787799 Per Capita amoWlt borrowed (may be viewed as credit availability) 134061 312250 38039

IAmoWlt repaid as % of atnOWlt borrowed 109 92 84

Burden of Debt as % of atnOWlt borrowed 160 116 170 Notes Total Indebtedness=> Total loan outstanding Total AmoWlt paid so far to the lender=> Interest Payment+ Debt services Total Burden of the debt = Interest Payment+debt Serviced+Outstanding

Table 7.4: Social Groun-wise Indebtedness in Kerala ·•

Items General OBC sc ST

Number of Respondents 26 72 14 8 Average Landholding(Acres) 6.1 3.2 1.1 1.9 Total AmoWlt Borrowed 6565501 6985000 727000 60000

Total Indebtedness During 1998-2002 1420680 1932857 229900 0 Total AmoWlt Paid towards Interest Payment 1207900 1761997 179830 7940

Total Debt Serviced 5144821 5075443 541000 60000

ifotal AmoWlt Paid so far to the under 6352721 6837440 720830 67940

lrotal Burden of Debt 7773401 8770297 950730 67940 Per Capita amoWlt borrowed (may be viewed as credit availability) 252519 97014 51928 7500

AmoWlt repaid as % of amoWlt borrowed 97 98 99 113

Burden of Debt as % of amoWlt borrowed 118 126 131 113

TotalAP

120

5

15522199

6837169

5884022

9549817

15433839

22271008

129352

99

143

Total Kerala

120

3.5

14337501

3583437

3157667

10821264

13978931

17562368

119479

97.5

122

Agricultural Workers under Liberalisation

Rural India is characterised by large number of agricultural workers mosdy

landless or owning a very small piece of land and depending on the hiring out of

their labour for meeting their needs of bare subsistence. This ever growing reserve

army of rural agricultural workers are largely unorganised; with the exception of a

few states and the implementation of the Neo-liberal policies have led to the

proletarianisation of the indebted and pauperised peasantry. The reduced public

236

expenditure on social welfare, rural development and employment generation has

adversely affected the large mass of agricultural workers. The state of coffee and

tea estates in Wayanad is pathetic with the plantation workers being paid miserably

low on the pretext of crash in prices. Many plantations have stopped harvesting

tea and have declared 'lock-out' citing this reason. The Adivasis who are recruited

in large numbers t~ work in plantations have reported lesser wage-rates than the

other workers.

We have noted during our Survey that the agricultural workers are adversely

affected and the general agrarian crisis coupled wid1 rapid decline in working days

have had a direct bearing on the agricultural wages. In Andhra Pradesh the average

wage rates range from Rs.25 I- to Rs.30 I~ per day for men and only about Rs.15 I­Rs.20 I- for women in Ipperu Gram Panchayat of Anantapur district, Rs.30 I- to

Rs.SOI- for men and Rs.2SI- to Rs.30I- for women in Chenguballa Gram

Panchayat of Chittoor district, Rs.SO I- for men and Rs.30 I- to Rs.35 I- for women

in Unagatla Gram Panchayat of West Godavari district and Rs.SOI- to Rs.70I- for

men and Rs.2SI- to Rs.30I- and up to Rs.SOI- in peak season for women in·

Sirisedu Gram Panchayat of Karimnagar district. The wages for different

agricultural operations also largely remain the same.

In Kerala the wage rates range from Rs.lOOI- to Rs.lSOI- for men and Rs.72l- for

women in Kurichi Gram Panchayat of Kottayam district, Rs.SOI- to Rs.140I- for

men and Rs.60I- to Rs.SSI- for women in Karivellur-Peralam Gram Panchayat of

Kannur district, Rs.7SI- to Rs.lOOI- for men and Rs.60I- for women in Nenmeni , .

Gram Panchayat ofWayanad district, Rs.150/- for men and Rs.72l- for women in

Kainakary Gram Panchayat of Alappuzha district. Notably, the working hours are

restricted to six hours per day and the wages fixed by the KSKTU is Rs.72l- for

women and Rs.132l- for men and is adhered to in most regions except in

Wayanad. In Kerala however, a significant practice which has enhanced the food

security of the agricultural workers is the provision of breakfast, lunch and tea in

addition to the wages. In Wayanad the agricultural workers claimed that the

237

peasants had used the pretext of agrarian crisis and reduced wages by at least 25

per cent. The INF AM which is an organisation of the rich Christian peasantry has

argued for such a cut in wages.

The gender discrimination in wage structure of agricultural workers in Andhra

Pradesh is quite stark with w~men being paid far below the men for the same or

even longer duration of work and even when the activity is same. Kerala also

cannot escape criticism on this count as the wage structure in Kerala although,

allows the women workers to earn more than even the men in Andhra Pradesh for

even lesser working hours, there is a wide gap in the wages that a male worker

earns in Kerala, even if the operation is same. The growth of commercial

agriculture and emphasis on export-oriented ~rops has led to declining working

days and the women are invariably the ones who are displaced. Most of the

respondents gave the dubious claim of 'efficiency' of men as the reason for this.

Our preliminary survey in Daamaramadgu Gram Panchayat of Nellore district in

Andhra Pradesh shows that when paddy farms are converted for aquaculture, large

numbers of workers are displaced from employment opportunities as prawn

culture requires far lesser number of workers, in fact nearly one-tenth of that

required on a similar size of paddy land. Women undoubtedly are displaced totally

from the labour market.

Often it has been argued that high agricultural wages and unionisation has led to

the unviability of agricultural activity in Kerala. Our study differs on the complaint

of high agricultural wages as the peasants have blamed high input costs other than

labour and unremunerative prices and lack of proper procurement facilities as the

main reasons responsible for making agriculture an unattractive proposition. Most

of the respondents felt that the wages paid in Kerala villages was just and not very

high, considering the rising costs of living. On the contrary low agricultural wages,

at times not even one fourth of the wages in Kerala have not made agriculture the

most attractive proposition in Andhra Pradesh. There is a high tendency among

the agricultural workers' families to diversify into other activities especially in

238

Kerala and the younger generation is not keen to take part in manual work despite

higher wages. They prefer to work in shops, beedi factories and the small scale

industries which are less tedious than manual work in the agricultural sector. The

liberalisation phase also witnessed slow growth in agricultural employment almost

tending towards stagnation, shift away from non-agricultural employment in rural

areas and migration to urban areas with some areas also witnessing a peculiar -scenar~o wherein there is a reverse migration or rolling back of earlier employment

diversification to industrial sector leading to an ever enlarging reserve army of rural

agricultural workers. There is growing casualisation of labour and agriculture

which is the most significant employer in rural areas is hit by stagnation and a class

of nouveau poor is burgeoning. The rate of growth of rural labour force is

documented to be faster than the growth of population in rural areas. 22

Let us now look into the case of the Kurichi Gram Panchayat in Kottayam district

of Kerala. By the beginning of the 1990s, the percentage of agricultural workers

which was as high as 57.51% of the population in 1961 reduced to 12.44% in the

1991 census. The drastic fall was however, in the first decade wherein in the 1971

census it reduced to 15.96% of the population, women being the worst hit.

Women agricultural workers who formed 87.23% of the total agricultural workers

in 1961 and numbered 8861 fell to 1307 by 1971, reducing to 37.56% of the total

agricultural workers and fell to 1251 by 1991 which was only 33.97% of the total

agricultural workers.23 Even Kainakary has witnessed a shortage of agricultural

workers especially in peak seasons

In Andhra Pradesh, J eetha system or agricultural labour bonded by contract was

witnessed. In this system a patron-client relationship exists between the cultivator

and the agricultural worker. We have noted in the sixth chapter that this kind of a

patron-client relationship has been existent for generations and employment of

such workers was part of social status and was indicative of one's socio-economic

standing. So if one household is indebted, it takes several years for them to clear

22Radhakrisr..na and Alakh Sharma, 2000. 23 lvmchi Gram Panchqyat Development Plan Document, Kottayam, 1996, pp-24-25.

239

off the debt. The only option left to them at that time was to work as J eetha. It has

also been noted that even school drop-outs are getting employed as J eethagallu to

meet household expenses and coercion to involve educated young men under the

pretext of indebtedness has also been witnessed. This system is a variation of the

Vetti and Begar systems which existed earlier and is indicative of the continuation

of feudal vestiges even to this day with the least disconcerting nature of existence.

Migration to cities in search of jobs has been increasing. People have been facing

droughts and famines for centuries and this has only become more pronounced in

the last decade, forcing small farmers without resources to allow their fields go

fallow and migrate in large numbers to either Bellary, Bangalore or even as far as

the Godavari districts, Nellore and Hyderabad in search of employment

opportunities. Migration from Green Revolution areas in East Godavan to

Unagada in West Godavari, especially to work on Sugarcane fields on contact basis

is quite common. In Wayanad also migration to Coorg in Karnataka and to

Tamilnadu was quite common in a phenomenon of reverse migration because

earlier people from these regions were known to migrate to Wayanad. Low wage

rates to the extent that even subsistence needs can not be met is the main factor

for migration.

In Pamaramadugu Gram Panchayat of Nellore district which does not fall under

the original plan of survey, aqua-culture has drastically reduced employment

opportunities and the "blue revolution" is also found to be almost entirely ·

displacing the women, SC and other lower caste workers and only skilled tribals

are used for the same at'low wage rates. Women seemed to far outnumber men as

agricultural workers and many complained about the male members' idleness or

refusal to work; this was more so the case of those families who had better

financial position earlier and had deteriorated over time due to indebtedness and

crop failures. A process of proletarianisation and pauperisation of the peasantry

was witnessed in Andhra Pradesh and among the peasantry in Nenmeni Gram

Panchayat in Wayanad district of Kerala. Middle peasants have been reduced to

240

the position of wage-labourers in their own fields and elsewhere including in the

meagre opportunities provided by Food-For-Work schemes. Upper caste families

who were well to do earlier are now resorting to activities which were hitherto

considered demeaning or below their dignity, including their women working as

agricultural labourers, although they own 10-20 acres of land. A particular instance

of a graduate woman from the high caste Reddv family in lpperu Gram Panchayat,

owni."lg more thaq 10 acres working as an agricultural worker for wages as low as

Rs.15 I- to Rs.20 I- per day was quite revealing and the family also was unable to

avoid staying on an empty stomach on many occasions.

Costs of Cultivation and Production Constraints

The period after the implementation of the Nee-liberal policies began has

witnessed the combination of a variety of factors from the withdrawal of

government interventions and subsidies to the deregulation of the agricultural

input markets and the interplay of MNCs and private sector which have had the

cumulative effect of constraining production and reducing farm incomes. The

AOA called for reducing the subsidies, and in agriculture the Aggregate Measure

of Support (AMS) was to be reduced by 20 per cent by the developed countries

and 13.3 per cent by the developing countries over a time frame of t~n years. This

was discriminatory to the developing countries because the AMS base for the

advanced capitalist countries will be high and what is in effect institutionalised is

an "unequal principle. "24

The AOA organised agricultural subsidies in various boxes, namely the green box,

blue box and amber box, wherein the blue and green box subsidies are considered

to be "non-distortionary" while the amber box subsidies were branded as "trade

distortionary". The subsidies given by the developing countries for import and

export are thus considered trade distorting in nature and are to be done away with

24Amalesh Banerjee, ''WfO and India's Reform Agenda", in S.B.Verma (Ed.), WTO and Development Opportunitie.r, Deep and Deep Publications, New Delhi, 2005, p-100.

241

even as the developed countries retain subsidies for their peasants in different

ways on efficiency principle.ZSThe manner in which this entire process was carried

out saw India reducing its farm subsidies on fertiliser, credit, electricity and other

agricultural inputs, even as the advanced countries like the USA has maintained its

farm subsidies intact.

The elimination of subsidies has had a debilitating effect on the peasantry in the

Third World countries who had to face rising input prices which further sky­

rocketed after the market access gained by the MNCs, while the MNCs in agri­

business benefited in the form of a transit to super profits by sale of inputs. The

cut in agricultural subsidies is a disincentive to investment in agriculture and

coupled with the high input costs, income deflation and price inflation, rural

poverty gets further accentuated.

The penetration of the MNCs into the market and the drastic cuts in government

subsidies have led to high costs of cultivation. The prices of urea, DAP and

Murate of Potash has seen an unprecedented rise and the peasants have to invest

about 400 per cent more on cultivation. A bag of urea weighing 50 kilogram which

costed Rs.138l- in 1992 has risen to more than Rs.2SOI- now. DAP prices have

risen from Rs.234 I- to Rs.486 I- while MoP prices have risen from Rs.231 I- to

Rs.885l- over the same period. The prices of seed inputs have also. risen

exorbitantly over the period and in the case of MNC seeds upto 400 per cent rise

has taken place.26Irregular power supply and exorbitant tariffs in Andhra Pradesh

has had an adverse impact. The power tariff before the waiver announced after the ~ .

new government came in 2004 was Rs.62SI- per horsepower compared to the

Rs.SOI- earlier.

In Kerala the provision of pump-sets and irrigation subsidies by the Panchayats

has mitigated to a certain extent the problem. However, even b Kerala the

operation of such a system was not satisfactory in Nenmeni Panchayat in Wayanad

25 Ibid, pp-1 00-102. 26 W.Chandrakanth, "Ryots Reeling Under Market Forces", The Hind11, New Delhi Edition, June 11, 2004, p-14.

242

district and even in the other Gram Panchayats the facility largely benefited the

paddy cultivators only. Absence of adequate irrigational facilities strikes one as the

starkest reasons for low yields and crop failures, although it is notable that ground

water resources are concentrated in the hands of the rich and resourceful and their

fields may be lush green while adjacent fields look like a slice of the desert. We

have witnessed instances where a single farmer has dug up to 40 bore wells in

about 15acres of land in Ipperu Gram Panchayat and found only a couple

successful. Even the rich and resourceful have thus been converted to paupers

steeped in debt and government technical assistance in locating potential water

source points is dismal. The water table has depleted drastically and if immediate

strategies for effective water management are not taken up with adequate I

restrictions on indiscrimir.ate exploitation of ground water, the desertification that

has set in will only reach its logical conclusion. There have been efforts at

watershed development mainly by NGOs like the Rural Development Trust but

this is highly inadequate. Only the expediting of pending irrigational projects like

the Handri-Niva the Flood-flow/Parallel flow canals and supplementing it with

adequate watershed development/water harvesting and effective water

management including restrictions on indiscriminate exploitation of ground water

resources by individual peasants can improve the plight of the cultivators.

The absence of improved irrigation facilities, subsidised seeds, fertilisers and

chemicals with strict quality control, cheap timely credit, proper extension facilities

and market linkages will make it impossible for the peasantry to tide over the

present crisis. They act as the biggest constraints on production and the vagaries of

nature are a threat of a smaller magnitude in this era of capital intensive

cultivation. Our study reveals a wide gap between potential yield and actual yield

obtained by the peasants and in almost all the cases the peasants failed to obtain

the expected yield irrespective of the crop grown and the case of groundnut in

Ipperu Gram Panchayat in Anantapur district of Andhra Pradesh and ginger in

Nenmeni Gram Panchayat of Wayanad district in Kerala were the worst placed in

243

this regard with the peasants at times failing to get even one-tenth of the expected

yield.

Our study reveals the existence of wide gaps between actual yield obtained by the

peasantry and the potential yield or expected yield and in almost all the cases,

irrespective of the crop grown, due to a variety of factors ranging from climatic to

topographic, from the problem of pests to that of spurious seeds and pesticides,

from absence of proper irrigation facilities and credit to the absence of timely and

reliable extension services.

Export Orientation of Agriculture and Shifts in Cropping Pattern

The implementation of the Structural Adjustment Programme after India had

gone in for a loan of $4.8 billion in June 1991 gave an export thrust and

agricultural production was oriented towards satisfying the demands of the

advanced countries for fruits and vegetables and raw materials. 'Comparative

advantage' was cited as the reason for India to resort to the export of primary

goods and there has since been a restructuring of our cropping pattern in favour

of export-oriented crops and away from the cultivation of food grains so essential

for the food security of our teeming population.

The process of liberalisation has ensured that according to international demand

the rich and upward mobile producers resort to export oriented agriculture. This

leads to a situation wherein there is diversification from food crops to commercial

crops, resulting in an inverse relationship between agricultural exports and food

security. There is hence the undermining of the objective of self-reliance and this

also erodes the self-sufficiency in food production. 27 This move away from the

cultivation of food grains had been predicted almost immediately by certain

economists, based on the experience of the Latin American and Sub-Saharan

African countries which nad been implementing the Structural Adjustment

27Cf, Utsa Patnaik, The Long TranJition: Emrys on Political Erononry, Tulika Publications, New Delhi, 1999.

244

Programme and trade liberalisation policies a decade and a half before India

embarked on the Neo-liberal economic policies.zs

The operation of the principle of comparative advantage has led to the

development of an agro-export dependency reminiscent of the colony-coloniser

relationship which had established the colonies as raw material appendages of the

metropolitan centre. The fallacy of the theory of comparative advantage which we

have looked into in the second chapter continues to be the basis on which the

present pattern of international specialisation in agricultural production is sought

to be dete11llined. There has always been a high dependence of the advanced

capitalist countries of the temperate North on the Third World countries of the

tropical and sub-tropical regions of the South. This "export-first" policy which is a . I

significant deviation from the "food first" policies we have looked into has led to a

situation of endemic hunger amidst plenty. Record volumes of food grains like rice

and wheat was exported over the period 2002-2003 even as starvation and famine­

like situation was reported from different states. The export of foodgrains of about

20 million tonnes was made at less than the BPL prices under Public Distribution

System.29

Paddy which had emerged as the main crop in the Green Revolution areas,

displacing tobacco, is fast depleting in area of cultivation and sugarcane, and

cashew etc., are gaining ground in the Unagatla Gram Panchayat of West

Godavari: while in Karimnagar the shift is in favour of cotton ~nd chilly. However,

it was found that although all the surrounding villages of Sirisedu Gram Panchayat

in Karinlriagar were resorting to cultivation of BT cotton, this particular village

had resisted it. In Chenguballa of Chittoor district the shift is in favour of MNC

induced gherkin, baby corn and other non-domestic consumables from earlier

paddy, ragi and jowar. This shift however, i£ only being done by those peasants

28 Utsa Patnaik, 'The Likely Impact of Economic Liberalisation and Structural Adjustment on Food Security in India", Workshop organised by ILO and National Commission for Women, New Delhi January 1993. 29 Utsa Patnaik, " The Nature of the New Contradictions in the Agrarian Economy of India in the Present Era of Imperialist Globalisation", 20th A.K.Gopalan Memorial Lecture, 13 July, 2005.

245

who have a regular assured source of irrigation. In Ipperu Gram Panchayat of

Anantapur district, while there had been a shift to groundnut earlier, resourceful

peasants are shifting to sun flower, maize and horticulture.

In Kerala too agricultural development was marked by a distinct trend of a better

growth performance of cash crops especially in the late 1980s and 1990s

accompanied by shifts in cropping pattern in its favour. 1'1 enmeni Gram Panchayat

has witnessed conversion of paddy lands to commercial crops like coconut, ginger,

arecanut etc. Such efforts have been made in the Kuttanad region also but they

were met with stiff opposition from the Kerala State Karshaka Tozhilali Union.

The paddy cultivation has been falling over the years and Gram Panchayats have

tried to promote Group Farming with . the provision of subsidised inputs to I

counter this trend. Experiences from the field show that there has been increase in

production under such a system of cultivation and large scale replication can be

attempted.

In Karivellur-Peralam and Kurichi Gram Panchayats cocoa cultivation was also

experimented with. In the Seventies cocoa cultivation began with great

expectations. The MNC Cadburys and the state government encouraged its

cultivation. However, in the Eighties there was a drastic fall in the cocoa prices

and the cocoa cultivators faced a huge crisis Cocoa cultivation in Kerala

encouraged as a commercial venture proved to be a misadventure as there was no

adequate procurement, marketing or processing facilities and the prices were

unremunerative. Presently, although there is some improvement in the marketing

facilities and better prices exist, the peasants have lost confidence in the crop.

Unfortunately despite such a concrete example from within the state there is a

clamour for vanilla cultivation in the hope of super profits.

The instances of many countries in Latin America and Sub-Saharan Africa facing a

serious food crisis by adopting export oriented agriculture is a stark reminder for

countries like ours which are also following on the same path. While the advanced

countries prescribe export first policies for Third World agriculture a significant

246

aspect is that they also promote competition between the Third World countries

leading to low prices which benefit only the profit-oriented TNCs and the people

of the advanced capitalist countries. This situation is similar to the situation under

the colonial rule as we have noted earlier.

Elimination of Quantitative Restrictions And Fluctuating Agricultural Prices

The premise on which trade liberalisation in agricultural commodities is suggested

for predominantly agricultural countries like India is that global prices are higher

than the domestic prices and that 'free trade' would be beneficial for the local

peasantry. The Indian peasantry is said to benefit in the form of higher returns on

agriculture by exporting and thereby an increased investment and growth in

agriculture was considered to be a logical conclusion. The integration of the

domestic market with the international market was expected to reduce the

distortion of domestic prices and increase significantly the overall agricultural

productivity by an efficient allocation of resources.3° The Agreement On

Agriculture (AOA) called fot "Market Access" which aims at the reduction of

restrictions on imports. The measures suggested were, a) 'tariffication' and b)

reduction of tariffs by a certain percentage.31 'Tariffication' called for the removal

of all Quantitative Restrictions like import quotas, minimum import prices,

discretionary licensing, state trading, total ban of certain imports and switching

over to tariffs in their place. This waP in line with the interests of the developed

capitalist countries of the west which wants countries like ours to reduce sharply

the customs duties on farm imports so that they can sell the huge surpluses in their

30 C.H.Hanumantha Rao, "Reforming Agriculture in the New Context" Economic and Politica/IV'eekb', Vol.29, No.16-17, April16-23, p-353. Jt Op.Cit, D.Narasimha Reddy, 2002, pp-34-36.

247

countries in these markets.32'fhe result however, has been that an asymmetrical

relationship has been built in the pattern of the effective market access.

India was to remove the Quantitative Restrictions for 1429 items by March 31,

2001 out of which 825 were related to agriculture and dairying. This would place

Indian producers iil direct competition with global players even in the domestic

markets under highly unequal terms. For instance, in the European Union, dairy

products and agricultural products like rice: wheat flour etc. continues to have

tariffs of over 120 per cent.33

The elimination of Quantitative Restrictions on imports, thereby leading to

unrestrained imports and lowering of the tariffs far below European and Japanese

levels have proved hostile to the Indi~n peasantry and has had a direct impact in

the form of falling agricultural prices.34 It was argued that a free trade regime

without government intervention would raise the aggregate agricultural output by

ensuring 'remunerative prices' for crops. 35 Dependence on cash crops is a risky

proposition for the peasant and the fluctuating world prices have a debilitating

impact on the individual peasants who invest huge amounts for the farm inputs,

mostly taking credit from the traders or money lenders at high rates of interest.

India has had many instances during its colonial past when the free-trade regime

was in operation, when the fluctuations in world prices and production have had a

direct impact on the Indian peasants. During the Great Depression India faced a

drastic decline in the value of exports of commercial crops like cotton, groundnut

and tobacco leading to a fall in the return from their cultivation. An abnormal

increase in production of cotton in the USA led to decline in the prices· of

American cotton and European countries and Japan shifted from Indian cotton to

American, even as the free-trade regime in India resorted to encouraging cheap

imports from abroad rather than protect Indian cotton. The dumping of cheap

32 Sawalia Bihari Verma and Ash Narayan Pandey, "World Trade Organisation-Some Facts", in Op.Cit, S.B.Verma (Ed.), 2005, p-50. 33 P.N.Sharma and Anuj Kumari, "Challenges to Indian Agriculture Under WI'O Regime" in Ibid, p-279. 34Joan.P.Mencher, "What Happened to Land Reform?" in Sujata Patel, Jasodhara Bagchi and Krishna Raj (Eds.), Thinking SocialS cimce in bulia: Esscrys in Honour of Alice Thorner, Sage Publication, New Delhi, 2002. 35 Op.Cit,Jayati Ghosh, 1992, p-22.

248

rice from Burma and other countries in large quantities during the same period led

to decline in prices and the rice growing regions of the Madras Presidency

witnesse,d drastic reduction in the profit-margins.36

The deceleration of international prices. of palm oil and soyabean oil from $670

and $630 per tonne in 1998 to as low as $360 and $330 respectively in the year

2000 and the flooding of these cheap edible oil imports facilitated by the removal

of Quantitative Restrictions on import and low import tariff has led to ~ crisis for

groundnut farmers in Andhra Pradesh. 37Jn the case of groundnut oil the prices

declined from $911 per tonne in 1998 to $788 in 1999, $718 in 2000 and to $692

in 2001.38The import of edible oils has increased from about 484 thousand tonnes

in 1990-91 to nearly 2,622 thousand tonnes in 1998-99 at the all-India level further

deflating the domestic prices.39 The nature of fluctuation in price levels and the

fact that the groundnut oil prices were always far higher than that of palm oil and

soyabean oil clearly point out to the reasons for the crisis faced by groundnut

farmers. Anantapur has witnessed the closing down of more than a hundred oil

mills in this period thereby accentuating the crisis.

Kerala has been possibly the worst hit as far as the deleterious effects of the

phasing away of Quantitative Restrictions is concerned. The Kerala economy we

have noted has been oriented towards the production of cash crops from a very

long time and from the 1980s onwards there has been a further shift in its favour.

The mid-1990s witnessed a steep fall in the prices of commercial crops and the

downward trend has only continued steadily. This has direcdy affected the

incomes of a large section of the peasantry and also had serious consequences on

36 G.N.Rao and D.Rajasekhar, "Commodity Production and the Changing Agrarian Scenario in Andhra: A Study in Interregional Variations, c. 1910- c. 1947", in Sabyasachi Bhattacharya et.al, (Eds.), The South Indian Economy: Agrarian Change, Indurtrial Structure and Statt Polt~y, c.1914-1947, Centre for Development Studies, Thiruvananthapuram and Oxford University Press, New Delhi, 1991, pp-25-28. 37 C.Narasimha Rao and N.Anjaiah, "The Impact of Economic Reforms on Agriculture: A Study of

' Groundnut", in C.Narasimha Rao (Ed.), A Decade of Economic &formr in India, Serials Publications, New Delhi, 2004, pp-28-29. 38 K.Somasekhar and V.Divyathejo Murthy, ''Economic Reforms and Coconut Economy" in Op.Cit, C.Narasimha Rao (Ed.), 2004, p-34. . 39 S.S.Kalamkar and A.Narayanamoorthy, "Impact of Liberalisation on Domestic Agricultural Prices and Farm Income: An Analysis Acro~s States and Crops", I11dian Journal of Agricultural Economics, Vol.58, No.3, July-September 2003, p-358.

249

the wage structure especially in the plantation sector.4D The import of cheaper

edible oils, especially palm oil has had an equally debilitating impact on the

Coconut farmers especially in Kerala. The new exim policy also allowed for the

import of coconut and its products from April 2001. This has serious

consequences as the Indian price of coconut oil when compared with the

international price was higher by about 62 per cent in 1998, 71 per cent in 1999, 72 '

per cent in 2000 and 117 per cent in 2001 and the prices have fallen from $738 per

tonne in 1999 to as low as $402 in 2001.41This has hit at the huge population

dependent on coconut and related industries and the attack of a disease known as

"Mandari" locally has only increased the intensity of the crisis.

There has been a rapid deterioration in the economy of the once affluet?t Wayanad

district because of drastic fall in prices, drought and diseases and pests those are

uncontrollable in spite of the use of expensive chemicals. More than five-fold drop ~ V' ........ -

in prices of pepper, coffee, tea and other commercial crops and diseases like Quick

Wilt in Pepper enhanced the impact of the crisis.

It is estimated that in Wayanad itself the agrarian crisis has led to huge losses of up

to a thousand crore rupees on a yearly basis and coffee alone accounts for about

one quarter of the losses. This has led to a scenario where even the labour costs

for picking of the coffee berries also cannot be met. The import of coffee from

other co17ntries is direcdy responsible for such a plight.

Table 7.5

Comparative Statement of Average Prices of Major Commercial Crops ofWayanad ~ .

Year Coffee Pepper Green Tea 1998-1999 Rs.67/Kg Rs.210/Kg Rs.15/Kg 1999-2000 Rs.40/Kg Rs.220/Kg Rs.7/I<g 2000-2001 Rs.21/Kg Rs.llO/Kg Rs.6/Kg 2001-2002 Rs.18/Kg Rs.66/Kg Rs.S/Kg 2002-2003 Rs.16/Kg Rs.70/Kg Rs.6/Kg

(Source: A Study by the Primary Co-operative Agriculture and Rural Development Bank, Vythiri, Wayanad.)

40 B.A.Prakash (Ed.), Ktra/a's Economic Developmmt: lsJ'ueJ' and Problem!, Sage Publication, New Delhi, 1999, pp-17-18. 41 Op.Cit, K.Somasekhar and V.Divyathejo ~furthy, 2004, p-34.

250

Pepper which was known as ''Black Gold" and the "King of Spices" had been

considered earlier as the most reliable crop and revenue earner even when prices

of other crops fell. The import of inferior pepper in large quantities from countries

like Vietnam and using it for adulterating the Wayanad variety of pepper has

destroyed the reputation of the local variety and the prices are falling further. The

case of ginger is one of height-.~1ed fluctuations and it has fluctuated between

Rs.2300/- per sack of 60 kilograms to Rs.225/- for the same quantity between

1998 and 2002. Super profits in a year followed by conspicuous consumption in

the form of buying vehicles, building bigger houses etc. followed by higher loans

from private sources including for asset creation for agricultural purposes and

huge losses the very next year has been one major cause of suicides.42

In the case of rubber (RSS 4 Grade Rubber) the price of Malaysian rubber in

between 1991 to 2000 when compared with that of Indian rubber was higher only

in 1994. The table also clearly brings out the nature of the fluctuation in world

prices, which has drastic social consequences (See Table 7 .6). However, the rubber

growing respondents claimed that they were not running losses and it wa~ rather a

matter of fall in profits unlike the other commercial crops like coffee, tea and

pepper.

Table 7.6

Comparison of the Prices of Indian and Malaysian Rubber (1991-2001)

Year Indian Rubber Malaysian Rubber 1991 Rs.2128/Qd Rs.1796/Qd 1992 Rs.2463/Qd Rs.2457/Qd 1993 Rs.2546/Qd Rs.2538/Qd 1994 Rs.3107 /Qtl Rs.3455/Qtl 1995 Rs.5059/Qd Rs.5030/Qd 1996 Rs.5122/Qd Rs.4764/Qd 1997 Rs.3988/Qtl Rs.3614/Qtl 1998 Rs.3013/Qtl Rs.2884/Qtl 1999 Rs.2997 /Qtl Rs.2644/Qtl 2000 Rs.3125/Qtl Rs.3007/Qd 2001 Rs.3109/Qd Rs.2732/Qtl

(Source: Rubber Growers' Companion, Rubber Board India, 2003)

42 We witnessed three such cases in Nenmeni Gram Panchayat.

251

While the peasantry as a whole have been facing the brunt of the crisis, the cartels

of foreign and domestic corporate industrial and trade houses which are

accountable for the price crash of agricultural produces, are reaping super profits.

The instance of coffee which is 'traditionally the developing world's second largest

primary commodity earrier after oil'43 can be taken to illustrate this point. The

price of one kilogram of coffee in 2002-2003 being Rs.16 I-, the same for instant

coffee imported at Co chin port from Malaysia is Rs.24 7 I- and the price of the

same quantity of instant coffee of the Nesde brand in the Indian market is

between Rs.900I- to Rs.1400I-.44 We have also found that the cost of a newly

available version of instant coffee named 'Nescafe Blend 37' is being sold in the

Indian market at Rs.SSOO/- per kilogram. A much more stark instance which we

have come across is the case of a variety of Darjeeling tea called X-Tea which is

being sold at Rs.32,000 I- per kilogram especially in the Japan market while it is

estimated that five kilogram of green leaf tea (costing Rs.SI- to Rs.61- per

kilogram; see Table 7.5) is required to produce one kilogram of black tea. This is

the scenario. even as tea estates in Wayanad district are being closed down.

The world price of coffee in 2001 touched an all time low in 30 years and has

remained well below the production costs for a long period. It has been noted that

the operation of the coffee market is such . that even when the prices rise, the

growers get a meagre return and it is the middlemen or the cartels of the foreign or

domestic corporate industrial and trade houses that reap the benefits.45The case of

tea also is not very different and a few MNCs like Brooke Bond and Nesde ~ .

monopolise all trade in these two items.46 In the case of gherkin which is cultivated

by the peasants in Chenguballa Gram Panchayat in Chittoor district of Andhra

Pradesh, the MNC which is carrying forward the contract farming pays Rs.7 1- per

43 John Madeley, Food for AIL· The Need for a New Agriculturr, Zed Books, London, 2002, p-24. 44 P.A.Muhammad, "Fanners' Distress and Suicides- Causes and Cures", Note prepared on behalf of South Indian Fanners Coordination Committee (SIFCO) presented in Media and Expert Consultation on The Crisis in the Farm Sector: Experience ofW.qyanad District in Kerala, Chennai, September 4, 2004, p-2. 45 Op.Cit,John Madeley, 2002, p-24. 46 "\V:'ayanadinte Varuthiyum Poruthiyum" Malayalam Publication by CPI(M) Wayanad District Committee, 2003.

252

kilogram to the producer, while pickled gherkin is sold in the Indian market at

about Rs.475/- per kilogram. Super profits in crops like ginger in one year

followed by conspicuous consumption on credit from private lenders euphemism

for whom in this part of the country is "Blade Company" at exorbitant rates of

interest, in expectation of similar gains in the next harvest. Price crash or virus

afflicting ginger leads to a vicious cycle of exorbitant input costs, huge losses_

indebtedness and suicides in extreme cases. Although it was argued by those in

favour of liberalisation of trade that farm investment responds more positively to

the price factor than to any other incentive or intervention we have observed that

the fluctuating agricultural prices and exorbitant costs of cultivation has actually

dissuaded many peasants from making any investment. I

Advent of Multi-National Corporations into Indian Agriculture

The system of forced commercialisation by the east India Company had earlier

brought commercial agriculture to the rural countryside paving way for the giant

European business houses to appropriate huge surpluses at the expense of the

indebted peasantry. Under this system we have noted earlier that the peasantry

were forced by contract to grow crops like indigo and opium which made it

mandatory to sell the harvested crop to the planters who were European

entrepreneurs who operated local companies at the behest of the East India

Company one of the "largest, oldest and historically most important 'multinational

companies' of the world."47 The advancement of money at usurious rates of

interest to the peasant had also tied the peasantry to these companies by bonds of

debt and the looming threat of loss of land.

The implementation of Neo-liberal economic policies in the agrarian sector has

led to the phenomenon of monopoly capital represented by the Multi-National

Corporations (MNCs) penetrating rural India with the aim of maximising global

47 Biplab Dasgupta, "Palashi: The Inside Story of a Betrayal", in K.N.Panikkar, Utsa Patnaik and T.J.Byres (Eds.), Essays for Irfan, Tulika Publications, New Delhi, 2000, pp-203-04.

253

capital accumulation. The phenomenon manifested in different ways; on the one

hand it was rather a seemingly indirect intervention in the form of agricultural

inputs like seeds, pesticides and fertilisers produced by certain monopoly houses,

although with great ramifications, while on the other hand it was much more direct

by way of corporatisation of agriculture through the system of contract farming or

the direct farming by MNCs by buying large tracts of land under the liberalised

land markets. The liberalisation regime led to catastrophic changes in the property

and production relations in agriculture and allied sectors. The agricultural and

allied sector was opened not only to the indigenous corporate sector but also for

the MNCs.48The invasion of the countryside by MNCs as producers or as

suppliers of inputs and also as exporters of agricultural products has established a

dependency relationship from which the peasantry can seldom extricate itself.

MNCs like Cargill, Monsanto which has struck an agreement with MAHYCO,

Syngenta, and others have benefited from incentives offered with the objective of

attracting corporate investment in agriculture and related sectors, particularly into

agro and food processing industries.49

In recent times, the Indian government through the National Policy on Agriculture

laid emphasis on private sector participation to improve small farms through

contract farming and called for land leasing arrangements to allow accelerated

transfer-of technology, capital inflow and assured markets for the produce.S0Some

states like Punjab, Andhra Pradesh, Gujarat, Karnataka and Tamil Nadu had

already gone ahead with such activities and have plans to further expand and

facilitate corporate sector involvement in purely export-oriented

agriculture.51Despite, having had a direct experience of forced commercialisation

48 Y.V.Krishna Rao,Agrarian Scenario: 1947-1997, Navakamataka Publication, Bangalore, 1999, p-68. 49Cf, Vandana Shiva, Ashok Emani and Afsar.H.Jafri, "Giobalisation and Threat to Seed Security: Case of Transgenic Cotton Trials in Indir", Economic and Political Week_&, March 6-13, 1999, and Vandana Shiva "Corporatisation of Indian Agriculture and Response of Farmers' Movement", Mainiiream, April 27, 1996, 50 Government of India, 2000, National Poliry on Agriculture, Department of Agriculture and Cooperation, Military of Agriculture, New Delhi, July 2000, para-37. 51 Jayati Ghosh and Amit Thorat, "Capitalist Development in Agrarian Sector and the Indian Peasantry", National Seminar on Indian Agran·an Scenario and Alternative .Policiu, December 26-29, 2003, Thiruvananthapuram, p-1 06-07.

254

under colonial circumstances the advent of the foreign agro-based MNCs and

corporate sector in general into rural India is a relatively a new phenomena. The

private agro-processing companies were under this system the providers of

extension services in the form of inputs, credit, management practices and they

entered buy-back agreements with the peasants.sz

The permission granted to the Pepsi Food Limited in 1989 to start an Agro­

processing unit in Hoshiarpur district of Punjab initiated the new system of

contract farming system in. India.s3 Reminiscent of the Indigo and Opium

cultivation that we have looked into earlier, the MNCs wrested control of the

choices of the peasantry regarding the physical process of agricultural production,

which included 'what was grown and how much, and what inputs were to be used' I

all being enforced by strict supervision by the company offic1als. 54 The

phenomenon has led to the development of what we may term as 'Super

Landlords' wherein the MNCs exercise totalitarian control over the land belonging

to small and marginal farmers who technically retain legal title to land, but have no

autonomy or choice over the actual nature or direction of the production process

and also losing the ability to sell the product in the open market

The production process itself involves the use of a package of exorbitant inputs

provided by the MNC at usurious rates of interest, and the peasant is relegated to

the status of 'a mere operative in a determined chain whose product is alienated

frorn the produc~r·.ss The producer has no option but to sell the produce to the

MN C which alone has the sole right to determine the prices since it exercises a

monopoly in t:lie ·unequal and unfair market and the product itself is usually

unknown to the Third World consumers and is purely export-oriented tailored to

meet the demands of consumers in the temperate regions to which these MNCs

52 Rita Sharma, "Role of Extension in Agriculture", Financing Agiculture, Special Millenium Issue, October­December 1999, p-71. 53 Jayati Ghosh, "Corporate/Contract Farming System: Lessons for Indian Peasantry'', National Seminar on Indian Agrarian Scenario and Alternative Policies, December 26-29, 2003, Thiruvananthapuram, p-71. 54 R.C.Lewontin, 'The Maturing of Capitalist Agriculture: Farmer as Proletariat'', Fred Magdoff and Frederick.H.Buttel (Eds.), Hungry for Profit: Agriculture, Food, and Erolo!J, July-August, 1998, Monthfy Review, Voi.50, 3, p-75. 55 Ibid, p-75.

255

cater to. The production risks however, are solely retained by the peasants even as

the MNCs corner most of the profits. The peasants thus leases out land without

receiving any payment whatsoever, uses exorbitantly priced inputs advanced at

usurious interest rates by the MNC which monitors the use of inputs and ensures

compliance with their standards and is forced to sell at low prices to the

Corporation which in turn reaps super profits. The ~easant becomes

proletarianised, while 'the MNC has no financial obligations in the production

process and yet corner all the farm produce which it processes and exports. The

community consequences of such system of contract f:irming are of a serious ·

nature.

Andhra Pradesh was one of the earliest states to encourage corporatisation and

contract farming. The Vision 2020 Document called for corporate type of farming

or corporatisation of agriculture envisaging that it would enable its farmers,

entrepreneurs and professionals to make agriculture flourish.S6 Under the aegis of

the Andhra Pradesh Rural Development Department the Kuppam region in

Chittoor falling as it does under the Assembly constituency of the then Chief

Minister, N. Chandrababu Naidu saw the implementation of what is known as the

Kuppam Project or the Kennedy Round Project. The Kuppam Project has been

cited as the show-piece of 'agricultural technology for small farming based on

modern technologies and Israeli know-how' and is popularly referred as 'Israeli

Technology.Demonsttation'.S7

The MNC BHC Agro (India) Private Limited with the professed motive of

'awakening the earth and empowering the farmer ..... an acre at a time' is a

subsidiary of the BHC group of companies of the United States of America and

Israel. According to the MNC, the 'vision' of BHC-India was to 'develop and

implement in India a fully integrated, proven model of modern, scientific, ((Market

56 N.Vijaya Ratnam, "Corporatisation of Agriculture in Andhra Pradesh: A Review'', in B.Sambasiva Rao (Ed.), Agriculture in India: Poliry and Performance, Serials Publications, New Dellii, 2003, p-150. 57 P.A.Chowdhary et a/, ''Report of the Farmers' Commission of Experts on Agriculture in Andhra Pradesh", The Farmers' Commission of Experts on Agriculture in Andhra Pradesh and Vyavasayaranga Parirakshana Aikya Porata Vedika, Hyderabad, 2002, p-104.

256

Driven", "Farmer Centric" and "Sunrise to Sunset" agricultural development for

the small and marginal farmers.'SB BHC holds stakes in such projects or has its

market network spread over more than 60 countries. The crops grown under this

Project are gherkin, baby corn, Greece pepper, field beans, capsicum, yellow wax,

berry tomato, cucumber, potato, cauliflower and cabbage.

The first phase of the Kuppam Project was started in 1997 in Chaldiganepalli

village in Ramakuppam Mandai for a period of three years and was spread across

182 acres net sown area at an estimated expenditure of Rs.963.77 lakhs which

would account to about Rs.5.295 lakhs per acre of net cultivated area. The

government expenditure alone came to Rs.4.459 lakhs per acre net cultivated area.

If the expenditure on technology transfer and farmers' share is ignored, investment

by the state comes to a staggering Rs.567.97 lakhs which would come to about

Rs.3.127 lakhs per acre. The BHC was to be paid Rs.81.18 lakhs every year

towards technology transfer. The farmers' share of Rs.152.26 lakhs which would

amount to about Rs.83,366/- was meant for meeting the running cost from the

second crop onwards.S9 The transfer of technology by the MNC consisted of

introducing irrigated agriculture aided by drip farming and it was pompously

termed as ushering in the 'Drip Revolution'. The chemical fertilisers were also

delivered through the drip system and the cultivation involved total mechanisation

except for sowing, harvesting and sorting of the produce. The MNC only sold the

Israeli technology while the entire investment was· made by. the state and the

peasantry. Our observation is that the Model cannot be replicated in the absence

of heavy investment by the state, and its success is predicated on investment by

the state.

The first stage had witnessed the displacement of peasants in the name of land

consolidation and restricted the peasants to a passive role. The second phase

known as the 2KR Project saw the switching of the strategy of the MNC from

direct control over land to 'control over the production process via 'independent

58 BHC-Ind.ia Docwnent. 59 Op.Cit, P.A:Chowdhary eta/, 2002, p-104.

257

farmers' under exclusive, or tied contracts'.6<Yfhe MNC in Chenguballa Gram

Panchayat in Kuppam region of Chittoor district have entered into contract with

small farmers who are expected to produce in accordance with specifications laid

down by the MNC, use exorbitantly priced inputs supplied on credit with high

interest rates. The Company has advertised certain peasants as the beneficiaries of

'drip revolution', 'progressive farming' and a 'wonder crop' called gherkin.61 The

reality is that while certain peasants have benefited initially fr~m high returns over

time the exorbitant prices of inputs which are supplied by the self-proclaimed

"purely profit oriented"62 BHC and the vagaries of nature along with fluctuating

world prices has made it a risky proposition. A particular chemical Vertimac costs

as high as Rs.12,000I- per litre. The payment for prod';lce is very low compared to

the rate at which it is sold. The peasant is paid a mere Rs. 7 I- per kilogram of

gherkin while pickled gherkin is sold in the market at about Rs.SOOI- per kilogram.

Similarly· for baby corn the peasant earns Rs.4 I- per kilogram while unprocessed

baby corn costs around Rs.60I- per kilogram in Indian markets. Notably it has

been found that the cultivation of purely export crops with negligible domestic

consumption has been accompanied by fluctuations in prices and the procurement

prices are lowered further thereby transferring the burden of the losses to the

cultivators. The peasants reported such a problem last year when the prices were

reduced by the Company. Peasants were tied in a dependency relationship and

they claimed that the system of advancing loans and inputs on credit had forced

them to grow only what was prescribed by the Company and they could not

extricate themselves from this system and return to their traditional crops.

The government has given high subsidies to select farmers, at times to political

supporters for installation of drip irrigation system. It was claimed by many

respondents during our Survey that only the then ruling Telugu Desam Party

60 Michel.P.Pimpert and Tom Wakeford, Prqjateerpu: A Citi~n! Jury/Scenario Worle.rhop on Food and Farming Futum for Andhra Praderh, India, IIED London and IDS Sussex, 2004, p-28. 61 "Gherkin a Wonder Crop", Deccan Chronicle, 2 June 2003 and C.R.Gowrishankar and Mahendra Ved, "A Drip Revolution is Going on in A.P", The Times ~(India, Mumbai, 17 April 2003. 62 BHC Document.

258

activists were given the subsidised drip irrigation system. Low world prices last

year had led to huge losses for the peasants. The beneficiaries are limited and the

cultivation is not viable unless heavy subsidy is given. The peasants who grow

gherkin and other commercial crops at present used to formerly grow food grains

like ragi, jowar and paddy. The government then did not show any enthusiasm in

providing them with subsidies, whether for irrigation and other inputs or for the

drip irrigation system which could have been employed even earlier for growing

domestic consumables. The government subsidy is purely for 'Export Only' crops

like gherkin and not for domestic consumables or traditional crops. In addition the

American-Israeli MNC is also paid by the state in a package which is highly lacking

in transparency. The Kennedy Round Project as it is known is already caught in a

controversy with charges of corruption and also doubts being raised about the

BHC.

The existence of unfair and unequal markets and the taking away of the land from

peasants for the purposes of land consolidation and contract farming undermined

the authority of the peasantry. The switching over of the Corporation from its

strategy of direct control over land that they enjoyed during the first phase of the

Kuppam Project to control over the production process ensured a dependency

relationship wherein the peasants bear all the risk and loses while the MNC eams

huge profits from sale of exorbitantly priced farm chemicals, agro-processing,

value addition and wholesale distribution.

The other kind of intervention by the MNCs was in the input market. The

National Seed Corporation that was set up in 1963 with the introduction of the

High Yielding Variety of wheat under the New Agricultural Strategy and the

subsequent network of State Seed Corporations largely took care of the additional

seed requirements of the peasantry. However, with the operation of the World

Bank suppo:ited seed projects, the private sector was granted access into the seed

industry during the period 1973 to 1985. The import of seeds was put under the

Open General License (OGL) category in 1987 and MNCs were permitted to

259

manufacture seeds and also sell them to Indian peasants. The liberalisation of the

seed industry was accelerated under the wro regime wherein the multinational

seed companies have emerged as powerful players displacing the local companies

and seed corporations by a policy of mergers, collaborations and take-overs. They

gradually are proceeding to take 'complete control over seed industry and thus

control the land use pattern in Indian agriculture.'63The withdrawal of subsidy for

seeds and the doing away of the extension services in most states along with the

entry of the MNCs into the seed market have led to a system lacking any

accountability. The problem of fake seeds, especially in chilly and cotton has been

another major source of distress among the peasantry. This problem was reported

mostly in the Sirisedu Gram Panchayat of Karimnagar District, and has been an

exclusive feature of commercial crops.

The invisible intervention of the MNCs which is bound to leave a lasting

impression of a disastrous nature could be in the form of ecological changes that it

may bring about. In the Chenguballa Gram Panchayat almost ten times the

quantity of fertilisers and pesticides used in paddy is used in the cultivation of

gherkin and other crops as prescribed by the MNC. Gherkin cultivation requires

almost 10 types of chemicals with at least 5 applications of each per crop and up to

3 to 4 crops in a year. This is causing serious environmental and health hazard in

the region as corroborated by the peasants and agricultural workers including by

the families who have been advertised as the beneficiaries of Israeli-Model of

cultivation. Breathlessness, nausea and stomach ailments have been reported while ' .

the environmental consequences from the abuse of the soil with an overdose of

chemicals would be an interesting topic for research. Ironically the gherkin is

marketed as organically cultivated product. It is documented that the growth of

agri-business has generated more and more ecological problems "through the

subdivision of traditional diversified farming into specialised production, the break

in the soil nutrient cycle, the pollution of land and water (and food itself) with

63 Jaya Mehta, "Changing Agrarian Structure", in 2002.03, Alternative Economic Survey: Libffalisation Sans Social Justice, Alternative Survey Group, Rainbow Publishers, New Delhi, 2003, p-35.

260

chemicals, soil erosion and other forms of destruction of agricultural

ecosystems ... "64 Hybrid seeds and especially genetically engineered crops require

high chemical inputs in the form of fertilisers and pesticides, many a times on

seeds which turn out to be sp~ous or with grossly exaggerated claims,

Endosulphan, banned world wide as a carcinogenic is used widely in paddy and

sugarcane with even Agricultural Officers d~~..:nding it.65 Notably, a sustained

camp;'ugn by the peasant organisations and groups like the Kerala Shastra Sahitya

Parishad have led to the discontinuation of the use of Endosulphan for cashew

plantations in Kerala where it was noted to have led to widespread incidence of

cancer among the agricultural workers exposed to the chemical.

Politicisation and Decentralisation

The liberalisation period has witnessed two paradigms of decentralisation which

are having fundamental differences with each other being followed in Kerala and

Andhra Pradesh. In Andhra Pradesh we have noted in the last chapter that the

model was a World Bank directed move which promoted the parallel institutions

and NGOs even as the Panchayat Raj Institutions were undermined. The Kerala

model of ''People's Plan" and local development was aimed at carrying forward

the class struggle and articulated the demands of the rural poor while also firsdy

carrying out a campaign and organising the rural poor to assert themselves direcdy

in the development planning at the locallevel.66To the contrary the Andhra Model

achieved the opposite and decision-making has been concentrated in the hands of

bureaucrats and others who have no accountability to the people. It is encouraging

a scenario of loyal retainers or of "obedient-and-supplicant-villagers-being

64 Fred Magdoff, John Bellamy Foster and Fredrick.H.Buttel, "Introduction" in Op.Cit, Fred Magdoff and Fredrick.H.Buttel (Eds.), July-August 1998, p-3. 65 We found the widespread use of endosulphan for paddy, maize and sugarcane in Anantapur and West Godavari villages. 66 Prabhat Patnaik, "A Theoretical Note on Kerala-Style of Decentralised Planning", The Marxist, Vol.XX, No.1, January-March 2004, p-32.

261

patronised-by-NGOs", and of the substitution of "Rights" of the people by the I

concept of "Self-Help".67

We have in the course of our study witnessed the functioning of the two systems

and found the Andhra model to be a highly unaccountable and intransparent

system. The condition has led to the utilisation of nodal officers, and ruling party

activists and even field agricultural staff including those in charge of extension

services. The Resource User's Associations and Self-Help Groups have been

found to have dominance of particular high caste communities.68The benefits

accrue only to a select miniscule population. There is no role of the Gram

Panchayats in development activities or even welfare measures like housing. We

however, found government funding for N GOs to do the same functions.

The implementation of the People's Plan or ]anakeryasuthranam in Kerala has led

to intervention of the Panchayat in improving the living conditions of the

peasantry and also in terms of employment generation. Panchayats have taken up

the task of constructing bunds, roads, providing housing for the deprived sections

and also financing the construction of wells, toilets etc. The state which also is

facing the agrarian distress has witnessed the Panchayat coming forward to assist

the peasants in the form of 50 per cent subsidy for fertilisers and chemicals, a

subsidy of Rs.S/- per kilogram on paddy seeds and irrigation subsidy also through

the Krishi Bhavan. The Panchayats have also encouraged 'Group Farming' and

provided subsidised inputs and tractors or tillers and pump-sets to assist peasants

involved in such activity. Production bonuses were extended to the peasants to 1 •

encourage agricultural activity and the compensation in times of crop loss was also

extended in a far more efficient manner than in most other states. Nearly 85 per

cent of the respondents agreed that the Panchayats were playing a meaningful role

in improving the living conditions of the masses while a small segment also

charged that there was some corruption and nepotism which is maligning the

67 Ibid, p-33. 68 John Harris, "Pu!Jlic :\ction and the Dialectics of Decentralisation: Against the Myth of Social Capital as 'the l\1issing Link in Development', Social Scienti!t, Vol.29, Nos.ll-12, November-December, 2001, p-32.

262

entire process. The Panchayat distributed fertilisers at subsidised rate during the

ninth plan for cultivation of paddy, coconut and vegetables. Towards the end of

the ninth plan and during the tenth plan collective farming or group farming was

encouraged in eleven Padashekharams (Paddy lands contiguous to one another) and

seeds, fertilisers and pesticides were provided for them at fifty per cent subsidy.

Padashekhara Committees are also provided tillers at subsidised rent. The Kera

Karshaka Samiti (Coconut Farmers' Committee; provides sprayer and coconut

climbing machine at subsidised rates. The provision of subsidy increases the

propensity to cultivate, resulting in increased production. There however, is a

dilution of collective farming as people would then hesitate to share expenses on a

uniform basis. The Panchayat also encouraged group farming in vegetables and the . I

nendran banana with subsidised fc:rtilisers, pesticides and free saplings and seeds.

The Panchayats have installed pump sets in Padashekharams and developed

irrigational facilities by repairing and building of new water reservoirs.69

Given this background there is a distinct trend towards depoliticising development

and concentrating all control in few hands outside the purview of democratic

institutions and social control. Most people surveyed in Andhra Pradesh had no

participation in any class or caste based organisation. Unionisation was almost

negligible. Panchayat system had been de-legitimised and bureaucratic control over

implementation of Janmabhoomi, Velugu and other such projects are found with

Panchayats having limited functions and also lack of proper documentation

facilities and staff. In Anantapur a parallel system was set up with NGOs working

in education, health and housing sectors with government funding. Food for Work

schemes has been scarcely taken up and mosdy benefited ruling party supporters.

The agricultural workers and the small peasants however, owed allegiance to the

NGO Rural Development Trust which was working in the field of Watershed

Development and doing good work in water harvesting, providing mid-day meals

in schools and providing housing for the poor. It has to be noted that while the

69 Interview with Kunhikrishnan Master, Member, People's Plan Implementation Committee, Karivellur­Peralam Gram Panchayat.

263

NGO does observe May Day rally and organises some programmes on the

occasion, it acts indirectly to resist radicalisation of the peasants and agricultural

workers as they are content with the small accommodation that the NGO

provides drawing heavily from the government funds and partially funded by the

respondents themselves. This can be contrasted with the housing schemes for the

poor and landless undertake.-.. through the Panchayats in Kerala which are far more

effective and the houses built are of a better quality. In a state where the situation

of housing for the poor and landless is dismal however, the lpperu example is

appreciable.

Impact on PDS Access and Food Security

Food security is achieved when ali people, at ali times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active life.

[Rome Declaration on World Food Security, World Food Summit 1996.]

One of the most serious consequences of the Neo-liberal economic policies has

been the proliferation of endemic hunger, which we would submit is arising out of

the agrarian crisis which is intrinsically linked to the adoption of such policies and

has manifested in the form of high costs of cultivation, falling agricultural prices,

absence of credit at affordable rates of interest, resulting landlessness, decline in

employment opportunities, income deflation, the declinit::Ig purchasing power of

the poor and the fetish among the administrators to dismantle the Public

Distribution System, under pressure from the global trinity to reduce government

expenditure.

The strategy of promoting export-oriented agriculture that we have seen earlier has

only led to an inverse relationship between the food production and exportable

production, i.e., there has increase in agro-exports and a decline in basic food

grains production, thereby having an adverse effect on food security.7° This led to

a problem of availability, accessibility, affordability and absorption of food even in

70 Utsa Patnaik, 'The Scenario in Developing Countries and India: Export-oriented Agriculture and Food Security", An Ana!Jsi• of Far:tori Contributing to Food Iniecuri!J in the Developing CIJuntriu: The Great Grain Drain, Books for Change, Bangalore, 1998, p-37.

264

the context of a continuous build-up of public stock of food grains. The per capita

food grains absorption between the early 1990s when the Neo-liberal reforms

began to the present has been witnessing a steady decline. The annual absorption

of food grains has fallen to an abysmally low 155 kilograms from the 178

kilograms a few years back. Such a situation has been witnessed only during the

initial years of the Second World War; the Great Bengal Famine, and to a certain

extent during the food crisis of the mid-1960s.71It is in such a scenario that a study

of the PDS which historically emerged as a response to the food shortages

becomes all the more relevant.

The PDS in India was conceived as a measure through which the government

sought to address the problem of food security. The strategy was to intervene in 1

the food grains market through the system of procurement, storage and

distribution through the ration card system. This strategy had ensured a

remunerative minimum support price for the producer, generated buffer stocks

stored in the Food Corporation of India godowns and ensured universal

distribution subsidised sugar, wheat, rice, kerosene, edible oil and even coal

through a well-spread network of fair price shops or ration shops licensed for the

purpose by the government. Selective provision of commodities like salt, pulses

and tea also took place. 72'fhe PDS although not fully satisfactory and had diverse

experiences in different regions, it was able to provide some succour to the masses

reeling under poverty and also was relied upon by a sizeable section above the

poverty line. The System was made universal during 1960s and became a , .

permanent feature of the food security programme which overtime came to be

seen a vital component of the strategy to alleviate poverty.73

The putting in place of a regime that advocated Structural Adjustment and trade

liberalisation saw the shelving of the 'food ftrst' policies in the sphere of

71 Cf, Utsa Patnaik, The Republic of Hunger, SAHMAT, New Delhi, 2004, p-5, and "The Challenge of Mass .Hunger", The Hindu, July 31,2004. 72 Madhura Swaminathan, Weakening We!farr.: The Public Distribution of Food in India, LeftWord publication, New Dellii, 2000, p-7. 73Ibid, p-11.

265

agriculture that were pursued between 1950-1990 and replacing it with an 'exports

first' set of policies iri the nineties, with the advocating of export-oriented

agriculture at the expense of food crops.74 The PDS which was the mainstay of the

'food first' policy was overturned and diluted beyond recognition with the

implementation of the Neo-liberal policies. The objective of providing food

. security at universal level was done way with on the pretext of ::.<tending food

subsidies only to the 'really poor'. 75

The process of dismantling of the PDS was undertaken in stages in accordance

with the Neo-liberal ideology which proposes that the market is the best

mechanism. to distribute and market based regulation is far more effective than

state intervention. 76The government was under pressure from the lending agencies

to reduce expenditure and cuts in subsidies was the suggested measure, with food

subsidies being one of the first to be phased out by extending the logic that

'universal coverage is an extravagance' that a poor country like ours can ill afford.

Under the Structural Adjustment Programme initially the Revamped Public

Distribution System (RPDS) was introduced in 1992 followed by the Targeted

Public Distribution System (fPDS) which was introduced in the year 1997 and the

beneficiaries of PDS were now classified into Below Poverty Line (BPL) and

Above Poverty Line (APL) categories which put the rural population into two

water-tight compartments mainly basing itself on the size of land holdings.77

Our study has brought out clearly that merely holding a larger piece of land need

not necessarily mean that it is a larger economic enterprise and a number of

instances of those deprived of the BPL cards have been found to be living in

starvation. During the liberalisation phase India has witnessed rapid price inflation

74 Utsa Patnaik, "The Impact of Globalisation on Poverty and Food Security in India", MarxiJt Samvaadam: GlobaliJation and Kerala's Reii'Jtance, EMS Seminar Issue, No.4, Vol.17-18, 2000 October to 2001 March, AKG Research Centre, Thiruvananthapuram, p-57. 75 P.V.Thomas, "Chronic Poverty in Rural Areas: The Role of Government Policy'', CPRC-IIPA Working Paper No.16, Indian Institute of Public Administration, Chronic Poverty Research Centre, New Delhi, 2004, p-40. 16GiobaliJation a11d the Indian People: Food Security, All India People's Science Network, Prajashakti Book House, Hyderabad, 2002, p-11. 77 Op.Cit, Madhura Swaminathan,2000, p-78.

266

in food grains and income deflation requiring the net buyers from rural areas to

buy at high prices. Rural unemployment is growing even while the wages are not

substantially increasing; the labour days are also declining leading to fluctuating

household incomes. This being the situation certain economists have also gone to

the extent of suggesting that even a fall in food output need not necessarily lead to

food insecurity on the premise that liberalisation has led to faster growth of real

per capita incomes and higher purchasing power which will enable them to access

imported food grainsJS Unfortunately such predictions are predicated on the false

assumption that the interplay of market forces will lead to increased production of

the cash crops, increased value of output and resultant increase in investment in

agricultural activity which will result in increase in demand for labour and increase

in the rural real wages leading to increased economic access to food. In reality we

have noted during our Survey drastic fall in agricultural prices, reduction in private

investment, mono-cropping leading to lower demand for labour, fall in labour days

and as a result money incomes have lagged behind price increases in the rural

sector for net buyers of food grains. It has been noted that it is the absence of an

effective mechanism for disbursal of food grains at affordable prices involving a

comprehensive PDS and lack of purchasing power which is the real cause of

hunger and food security.

The situation in India is paradoxically one of 'want amidst plenty': The Targeted

PDS becomes all the more irrelevant in the event of fluctuating household

incomes even in the case of the peasants who may in the year of assessment have

been well above the poverty line. The fluctuating agricultural prices could render

any section of the rural society vulnerable to price crash and resulting agrarian

distress and we have come across many households which came under the APL

category having problems in access to food. A universal PDS is hence one of the

factors which along with a series of complementary measures like access to land,

78 Anil Sharma made such a claim in the Seminar on WfO: Agreement on Agriculture; India's Negotiating Agenda, Indian Institute of Foreign Trade

267

' -

cheap credit, farm subsidies, remunerative prices etc, can ensure food security for

the entire population.

The System itself in Kerala was not started as a palliative extended to the poor by

a benevolent ruling establishment and we have noted in the preceding chapter that

it was a legacy of the peasant movement. This had a bearing on its future

performance and the Kerala experience remained unmatched by any other state.

The present strategies however, we shall note have put a question mark on the

operation and effective nature even in Kerala. Our Survey brings out the fact that

even in a state like Kerala which was known for relatively greater reach and

efficiency of the PDS, the present scenario on the question of per capita food

absorption is quite dismal and there have even been reports of starvation. I

Table 7.7: Access to PDS and Discrepancies in Assessment

Panchayat BPL Card Holders APL Card Holders Wrongly Placed in APL/Denied Card

Kurichi 12 18 06 Kainakary 11 19 03 Nenmeni 12 16 04

Karivellur-Peralam 06 . 22 08 Kerala 41 75 21 lpperu 22 04 03*

Unagatla 15 09 06 Chenguballa 14 04 06*

Sirisedu 20 02 08* Andhra Pradesh 71 19

.. 23

*Indicates those who do not have any card although th~y should be placed under BPL category, because of inability to bribe the concerned officials or due to lack of political patronage. They are not even cases of wrong assessment like in the case of the others in this category.

In both the states most of the respondents, irrespective of their class-caste

backgrounds claimed hat their purchasing power had reduced considerably during

the last decade due to high input costs, unremunerative prices for the agricultural

products, low wages and rising prices of food grains and other food items. The

ineffective nature of the PDS at present also has been cited as a reason because the

rural poor are forced to rely on the open market for most of their monthly

provision, thereby having to pay much higher rates. The per capita consumption

268

of food grains in the two states are worth noting and in the case of some Gram

Panchayats it has also gone below the national average of 155 kilogram which itself

is at par with the lowest ever in Indian history. During our Survey we have come

across peasants owning even up to 10-20 acres seeking access to subsidised food

gratns.

Table 7.8

Per Capita Food Grain Consumption In Sample Households

Gram Panchayat No of Persons Food Grain Per Capita Consumption Consumption(Kg)

(Kg/Year) Unagatla 179 27084 151.3 Ipperu 153 21480 140.4

Sirisedu 159 24624 154.9 Chenguballa 235 29268 124.6

Andhra Pradesh 726 102456 141.1 Kainakary 170 22296 131.2

Kurichi 130 16716 128.6 ~vellur-Per~ 139 20460 147.2

Nenmeni 157 21888 139.4 Kerala 596 81360 136.5

People across Andhra Pradesh reported false exclusion from access to the facility

after the Targeted PDS was started. This problem was reported across Kerala also. ·

Only rice and kerosene is available. Sugar supply is erratic and almost as expensive

as in the open market. Black marketing especially of kerosene is common. Political

clout has been cited as a necessity to acquire Ration cards.

Starvation and malnutrition is rampant in the rural areas especially in the arid

zones of Andhra Pradesh with women being the worst hit. People in Ipperu Gram

Panchayat in Anantapur district claimed to be starving or living on inadequate

food, at times eating wild fruits, leaves, roots and the pith of the aloe plants. Such

a condition has been reported earlier during the famines of 1876-1878 when the

situation was so agonising that people began to consume prickly pear fruit and a

number of other wild plants and roots including the 'pith of the flowering stalks of

269

the American aloe' and the leaves of devadaru (Sethia indica)J9 People claimed to

be using chilly powder and salt as the side dish along with rice. People have also

complained of inability to work like before and men have stopped working at

relatively young ages, due to malnutrition. In Andhra Pradesh sugar and chicken or

other meat items were a rarity reserved only for festivals like Ugadi or Christmas

which came once a year. Such instances of the poorer sections of the peasantry

being reduced to eating wild grasses, tubers and inferior cereals leading to falling

nutrition levels have been reported under colonial conditions. so Certain studies_

have reported semi-starvation conditions in certain paris of Kerala too like the

high ranges and parts of Wayanad.81 If we look at the Table 7.8 above among the

respondents in the two states the per capita consumption of food grains is only . I

141.1 kilogram in Andhra Pradesh and 136.5 kilogram in Kerala. In Kerala the fact

that the agricultural workers are also provided with breakfast, lunch and tea by the

employers and the fact that tapioca a non-cereal food crop is used extensively may

have led to a deflated figure of per capita consumption of food grains.

Nevertheless, the situation is quite dismal in the two states.

Impact on Land Relations

Landlessness and land insecurity have historically been considered to be the most

significant causes of poverty and hunger and access to land has been considered to

be a sine-qua-non for reducing inequality. Land Reforms in the long run are

expected -to liberate the productive forces through transformation of production

relations, especially the surplus labour power of the peasantry and bestow them

with security of land and tenure, which is considered to be a determinant of

agricultural production as there is a propensity to produce more among those who

79 Purendra Prasad, Famine! and Droughtr: Survival Strategier, Rawat Publications, New Delhi, 1998, p-63. 80 Op.Cit, Utsa Patnaik, 1998, p-52. St Cf, N.l'.fini Raj, E.V.Nybe and KG.Sreeja, "Starving Amidst Plenty: A Case Study of Vattavada in the High Ranges of Kerala, India" in Vineetha Menon, P.R.Gopinathan Nair and KN.Nair (Eds.), Alleviating Pover(y: Case Studies ojucai-Level Linkages and Procems in the Developing World, Rainbow Publishers, New Delhi, 2005, pp 199-212

270

own land or cultivate it under secure tenure. The returns f;om the land acquired

become the incentive for increasing production and there is an expansion of

productive activity. New lands are brought under cultivation and there is greater

employment opportunities as the work days also steadily increase, thereby leading

to increasing household incomes also. Land security has hence been considered to

be a guarantee of economic security and food security for the poor.s2

In the case of India where archaic social relations still continue to exist with the

rural countryside witnessing rigid forms of caste system, redistributive Land

Reforms would be able to alter the situation in favour of the deprived sections of

the society. The redistribution of land has hence been on the political agenda of

the country through much of the period of the freedom struggle and we have

noted in the preceding chapter how the slogan 'land to the tiller' was a tool of

political mobilisation against feudalism and imperialism. The concomitant of a

compromise and creation of a class coalition between the bourgeoisie and the

landlords were the absence of comprehensive Land Reforms. The country also

witnessed series of legislations on Land Reforms and Tenancy Reforms, the

efficacies of which have been widely debated.

Land Reforms in today's context connotes an entirely different meaning which in

fact has lost its redistributive objective aimed at demolishing monopolies over land

in favour of the dominance of the market processes which would in effect give a

new lease of life to the very forces which dt-orlgiilally sought to contain. The

agenda of Land Reforms as posited during the freedom struggle which we looked

into in the preceding chapters h~s · been relegated to the background and the

emphasis has shifted from a focus on land redistribution to the tillers, provision of

security of tenure, ceiling on surplus land and fixation of fair rents to a focus on

'efficiency' of agriculture. 83

Land is a non-reproducible resource and possesses diverse productive capacities

across different regions. The tropical regions have a greater diversity in terms of

82 John Madeley, Food for All.· The Need for a 1\'eu, Agn·culture, Zed Books, London, 2002, p-82. 830p.Cit,Joan.P.Mencher, 2002, p-214.

271

the capacity to produce a wide range of agricultural crops. The colder temperate

regions have their limitations in this aspect and the developed capitalist countries

have to rely on the tropical countries for many agricultural products that form an

important part of their daily consumption pattern. Hence, access to tropical lands

to produce cheap agricultural products like fruits, vegetables etc for their

consumption.

Large farms are considered to be more efficient in the present scenario and there is

a drive towards consolidation in the official circles. State governments have in the

realm of land legislation been discussing the questions of iand ceilings and

Tenancy Reform in an altogether different paradigm. The present proposals of

'Land Reform'1 is aimed at facilitating corporatisation of agriculture and large-scale

agriculture which is supposedly more 'efficient' than small-scale agriculture on

small size of land holding. 'The current proposals for ''Land Reform" are primarily

concerned with liberalising land markets and raising ceilings to enable corporate

agri-business, both domestic and foreign, to enter agriculture in a big way.'84The

facilitation of land markets will only induce mass sell-offs of land causing increased

landlessness, land concentration and rural-urban migration. The resource rich may

buy large tracts of land and the landlords and capitalist farmers grow stronger

while the direction of the redistribution itself may be reversed to move from the

poor towards the rich and the corporate houses.

Present day 'Land Reform' calls for direct farm production by large companies by

substantially extending the ceiling limits or altogether abolishing any such limits.

Ceiling laws are being shelved on the pretext of making Indian agriculture compete

globally. States like Karnataka and Maharashtra have brought changes in the

ceiling provisions. Karnataka has raised the ceiling limit to 20 units for industrial

development, upto 4 units for educational institutions, 10 units for housing

projects and upto 20 units for agro-based units (a unit for ceiling being 10 acres of

84 Venkatesh Athreya, "Redistributive Land Reforms in India: Some Reflections in the Current Context", Paper Presented in the All India Conference on Agriculture and Rural Society in Contemporary India, Barddhaman, December 17-20, 2003, p-1.

272

double cropped irrigated land or 54 acres of un-irrigated land). 85The Maharashtra

government has granted exemption in landholding Act to trusts, companies and

cooperatives for horticulture purposes. 86 Thus the farm size in both these cases

can be up to 1000 acres.

Oral tenancies are replacing written contracts and there is a visible trend towards

ter.:::ncy. It has been argued that the equity implications notwithstanding, Land

Reforms have failed to contribute to agricultural productivity and in transforming

agriculture into a 'surplus generating and high-value agriculture and much less into

precision agriculture'. The ceiling on land holding has been cited as the stumbling

block to high capital investment in agriculture and there has been a call for

liberalising tenancy provision to unfreeze the land-lease market.87It was claimed

that the freeing of the leasing of land would help in improving land-use efficiency

and simultaneously attract more investment in the rural areas without sacrificing

the principle of equity and a case was made out for liberalising the land markets

and altering land relations. 88The need for outside capital in the form of investment

is cited as the reason for allowing the pen~tration of private capital in the field of

agriculture. The lifting of ceiling was considered to be of primary importance to

ensure that the peasant would have the capacity to generate surplus and re-invest it

back in agriculture to improve the farm and productivity. 89

The World Bank economists have also suddenly discovered that 'extremely

inequitable access to productive resources like land prevents economic

growth'90that poverty cannot be alleviated without Land Reform and has also f •

resorted to financing of land reform in some countries such as South Africa,

85 Op.Cit, Y.V.Krishna Rao, 1999, p-68. 86 Op.Cit,Jaya Mehta, 2003, p-35. 87 K.C.Hiremath, ''Reform for Making Indian Agriculture strong, Sustainable and Globally Competitive" in C.Narasimha Rao (Ed.), A De&atk of Economic ReformJ in India, Serials Publication, New Delhi, 2004, pp-281-82. 88 S.S.Acharya, "Indian Agriculture: The Current Concerns" in D.Narasimha Reddy, Surjit Singh and Dolly Arora (Eds.), Political Erononry of WTO Regime: Some .AJpectJ of GlobaliJation and Governance, Indian Political Economy Association, Rainbow Publishers, New Delhi, 2002, pp-68-69. 89 V.M.Dandekar, IASSI, n.d, p-182. 90"Food First 'Backgrounder"', lnJtitute for Food and Development Poliry, Oakland, California, June 2000. Website: http://www.foodfirst.org/pubs/backgrdrs/2001/WOIV7nJ.html.

273

Guatemala, Honduras, Mexico, Colombia, Brazil, the Philippines, Thailand,

Indonesia and India. 91 The World Bank package however, involves the advancing

of loans to the poor to buy land in the open market, seeds and other inputs for

promoting the cultivation of non-traditional export crops.92 The World Bank

reforms relied on land privatisation and free market forces. The market-driven

reforms only envisaged the role of a facilitator for the state, and as a provider of

the necessary legal framework, while 'land must be distributed from "willing

sellers" to "willing buyers" through a market transaction.'93However, these

reforms will only lead to a reversal of the redistributive Land Reforms that have

been implemented before and lead 'revanchist forces' to 'repudiate Land

Reform'.94The experience of the Central and South AtJ;erica, South Africa and

countries like Egypt which went in for market assisted reforms have shown that in

reality they neither benefit the poor nor are they fiscally sustainable.

Our submission is that even in the absence of lifting ceiling on land holdings, by

the sheer operation of the Neo-liberal policies in the field of credit, inputs and

markets, we have witnessed that the cumulative result has been heightened

indebtedness, which has led to distress sale of land. The lifting of ceilings is only

going to further accelerate the alienation of land from the peasantry. Mencher has

pointed to the fact that the process of land consolidation into large plots is taking

place in many Third World countries; including in India and that it coincides with

a general reduction in the demand for land redistribution. 95In this context it is

significant to note that even economists who are otherwise inclined towards

radical Land Reforms and even peasant organisations are positing the price

91 Op.Cit,John Madeley, 2002, p-84. 92Gumisai Mutume, ''World Bank Land Reforms Collide with Civil Society'', http:/ /www.SOyers.org6April.2001. 93 Op.Cit, Venkatesh Athreya, 2003, p-2. 94 William Hinton, ''The Importance of Land Reform in the Reconstruction of China", in Op.Cit, Fred Magdoff and Frederick.H.Buttel (Eds.), 1998, p-151. Hinton talks about revanchist forces repudiating Land Reform, especially in the context of what he terms as the 'reformist' attacks in the 1980s against Land Reforms. Revanchist forces here denotes the dispossessed landlords who return with a vengeance to reclaim their confiscated land. We use it here to signify the force with which there is a reversal of Land Reforms in our country and the distress sale of land by the rural poor to the big peasants and landlords, who have emerged as 'agricultural moneylenders'. 950p.Cit,Joan.P.Mencher, 2002, p-216.

274

question as more important than the land question given the impact of trade

liberalisation on the agricultural prices. The wage question according to them has

emerged as an important class question with the old complaint of high agricultural

wages emerging again and leading to widening divide between agricultural workers

and the peasants. They suggest t..~at the primary goal was to ensure resistance to

the policies of globalisation that lead to fallif"l.g prices.96Increasing lan~llessness and

a price squeeze according to them has led to rural class structures being no longer

determined by land. The focus of peasant associations has shifted away to other

more immediate peasant problems such as issues centring around remunerative

prices, irrigation, electricity, subsidies, loan-waivers, credit facilities etc, from the

central one of 'land to the tiller'.97

We do not agree with the positing of the price question as more important. We

believe based on the findings of our Survey that land remains the central question

in the rural countryside. Our study differs on the complaint of high agricultural

wages as the respondents belonging to the cultivating peasantry have blamed

exorbitant input costs other than that of labour, high land rents and

unremunerative prices and lack of proper procurement facilities as the main reason

for making agriculture an unattractive proposition. The agricultural wages in

Andhra Pradesh being low, it was not a matter which was considered to be a very

serious problem in the state. Even in Kerala nearly hundred per cent of the

respondents have opined that if the government procurement was improved,

agriculture would be a viable proposition and agricultural wages were not an

inhibiting factor. The argument of these economists about the wage-question is

relevant in the case of Wayanad district which has seen a fall in wages in the wake

of falling agricultural prices. Here the relevance of the argument of high

agricultural wages is questionable. It is to be noted that the benefits of high profits

in the event of a rise in world agricultural prices never accrue to the agricultural

96 Cf, ''Discussion" in V.K. Ramachandran and Madhura Swaminathan (Eds.), Agrarian Studies: Essr!JS on Agrarian Relations in Less-Developed Countries, Tulika Publication, 2002, pp-363-64. 97 K.C.Suri And C.V.Raghavulu, "Agrarian :\fovements and Land Reforms" in B.N.Yugandhar (Ed.) Land Reforms in India Vol.3., Sage Publications, New Delhi, 1999, p-46.

275

workers. The relegation of the land question to the background will only lead to

the gradual abandonment of redistributive Reforms and pave way for a -

strengthening of the role of the MNCs in the rurai countryside as the dominant

proprietors of land and the proletarianisation of the peasantry adding to the

already large army of landless agricultural workers.

The return of tenancy with high rents has emerged as a new problem in Kerala and

this has been so in Andhra Pradesh from the very beginning. The penetration of

MNCs into the rural countryside especially in Andhra Pradesh has had far­

reaching implications. The small peasants are being dispossessed and land

consolidation is taking place by purchasing of land at low prices and even a system

wherein the land owning peasantry have no control over the production process

and marketing; is tied by bondage to the MNCs which advance inputs at

exorbitant rates and usurious rate of interest is under a perpetual threat of loss of

land. The landless are in a state of abject poverty and their insecurity including

with regard to food is very high, while there is a return of absentee cultivation.

_ Mencher's contention that Corporate farms attempt to eliminate as much labour

as possible, in a move to avoid having to deal with 'people who feel they are

entided to a living wage' and even in Kerala it was the farmers who owned larger

plots of land, and operated bigger economic enterprises who had exhibited similar

behaviour is worth noting and our study concurs with this point.98 This only

reinforces the importance of land question in the context of falling agricultural

prices. The question of falling prices vis-a-vis Land Reform has to be placed in the 1 •

context wherein no state in India has implemented confiscatory, radical,

redistributive Land Reform like the examples we have looked into in the fourth

chapter. Land Reform even in Kerala although of a qualitatively better nature at

best provided homestead land security of tenure and access to land for a large

section of tenants. The condition of the SC/ST is still not very satisfactory on this

count. Yet, the access to land and security of tenure has ensured a greater

98 Op.Cit,Joan Mencher, 2002, p-216.

276

economic stability than in Andhra Pradesh and greater resilience in countering the

impact of Neo-liberal policies.

In addition to this situation which has kept the agrarian structure in most parts of

the country relatively unaltered with the monopoly over land vested in a few, the

advent of the TNCs into the rural countryside and the demand for removal of

ceilings and gradual tightening of their absolute control over land makes the land

question seminal. The enhanced access to land for the TN Cs we have noted in the

case of the Chenguballa Gram Panchayat has led to greater exploitation of small

and middle peasantrJ. In a situation of falling prices the land question has become

even more important as a site for intensified struggle. Land remains even to this

day like in the colonial period, the 111;ost effective slogan of mobilisation against

feudalism and imperialism which is making inroads into the countryside.

Distress sale of land was witnessed in large numbers in Andhra Pradesh during our

Survey. In Karimnagar this was rampant wherein one third of the people surveyed

had sold their land to clear debts, which also included prosperous farmers. There

were also two cases of suicides due to debts. In the Anantapur village there were 5

cases of farmers' suicide and a peculiar situation wherein the money lenders

refused to take land for loans taken by farmers as repeated droughts and crop

failures had made land less of an asset and more of a liability, with an acre of land

costing only anything between 6,000/- to 20.000/-.99 The farmers who lent money

instead preferred to keep the debtors as J eethagallu for meagre wages. However,

these peasants were under a constant threat of losing their land, which ensured the

continuation of the system in a hereditary succession. More than one third of the

respondents either faced the threat of land, or lost land due to indebtedness. The

West Godavari village which was one of the first in Andhra Pradesh to experience

Green Revolution techniques, however, saw the most severe cases of the Jeetha

system wherein land was usurped by big farmers for non-repayment and workers

turned into J eethagallu. One sixth of the respondents had lost land d_ue to

99 This phenomenon has been reported in other parts of Vizianagaram and Srikakulam districts. Cf, Report of the Farmers' Commission of Experts on Agriculture in Andhra Pradesh, P-42.

277

indebtedness and an equal number were working as J eethagallu. In Chenguballa

Gram Panchayat atleast one tenth of the respondents had lost land and many

more were in a contract with the BHC which is an MNC, at unfavourable and

unequal terms. In recent years the pace of Land Reform in AP has lost

momentum. This is generally attributed to the relative absence of pressure from

the grass-root level and weakness of the peasant movement.

In Kerala also tenancy is making a return in some regions with resort to cash

payments. In Kainakary village we witnessed two cases of land sale to repay debts

while in Nenmeni also there were about one sixth of the respondents who were

threatened with the possibility of loss of land against accumulated debts. This is in

conformity with our hypotl1eses that "emerging contradictions in the agrarian

scenario with economic liberalisation and structural adjustment under the aegis of

the WB-IMF-WTO leads to reversal of the gains of Land Reforms" and "the

ability of the landless to retain control of the land received depends on the stability

of economic environment. This stability stands attacked with the phasing out of

Quantitative Restrictions which protected farmers, falling agricultural prices and

exposure of the peasantry to unfair trade."

Rural Indebtedness

•The Indian peasant is born in debt, lives in debt and dies in debt'too, a statement

made by Malcolm Darling way back in 1925 aptly sums up the plight of the general

mass of the peasantry and the situation has remained unaltered for the vast

majority of the rural masses even to this day. Even to this day, bulk1 of the

institutional or formal credit goes to the larger farmers and access to the credit

market itself is monopolised by the class of landlords or the rich peasants

invariably belonging to the higher caste peasantry.lOt The small and marginal

fa:..mers and the agricultural workers are more dependent on the informal sources

100 M.L.Darling, The Punjab Peasant in Properif]• and Debt, Oxford University Press, London, 1925, p-279. 101 Kaushik Basu, "Agrarian Economic. Relations: Theory and Experience", in Kaushik Basu (Ed.), Agrarian Questions, Oxford University Press, New Deihi, 2000, p-8.

278

of credit like the money lender, traders and cultivators. The exploitation of the

peasantry in the credit market is 'one of the most pervasive and persistent features'

in the rural countryside. This is in spite of major structural changes that the credit

institutions and forms of rural credit have undergone over the years.1o2

Credit plays a significant role in overcoming the vicious cycle of low investment in

agriculture caused by low farm incomes which follows from low resource

productivity. Private capital investment in agriculture can be facilitated by t..~e'

provision of credit at reasonable rates of interest through institutional sources and

also the consumption expenditure of the landless agricultural workers and rural

poor are reliant on credit.103 Institutional banking infrastructure had an impressive

growth from the late 1960s with the nationalisation of many banks and the

extension of banking services to the rural areas was appreciable if not remarkable.

The network of Scheduled Commercial Banks spread across the rural India and

over the period 1969 to 1990 the number of its branches in rural areas grew

exponentially from 1443 to 34867. This was also coupled with a range of policy

guidelines aimed at expansion of access of rural population to formal sector credit.

It was mandatory for banks to allocate 40 per cent of their net credit to the priority

sectors, including agriculture, small scale industries and related activities. The

outstanding credit of rural branches as a share of total outstanding credit saw a

rapid rise fro~ 3.3 per cent in 1969 to 14.2 per cent in 1990 and the credit deposit

ratio also grew from 37 per cent to over 60 per cent during the same ·interval.104

The rapid expansion of rural credit over the years, notwithstanding, the small and I •

102 V.K.Ramachandran and Madhura Swaminathan, "Financial Liberalisation and Rural Credit in India: The Impact on Landless Labour Households", in Jayati Ghosh and C.P.Chandra Sekhar, Work and Well-Being in the Age of Finance, Muttukadu Papers, Tulika Publication, New Delhi, 2003, p-312. 103 C.H.Hanumantha Rao, "Policy Issues Relating to Irrigation and Rural Credit in India" in G.S.Bhalla (Ed.), Economic Uberalisation and Indian Agrict~lture, Institute for Studies in Industrial Development, New Delhi, 1994, p-31 5. 104 Vikas Rawal, "Rural Banking: Agenda for Change", Social Scientist, Vol.32, No.7-8, July-August, 2004, p-58.

279

marginal farmers depend highly on the informal sources of credit and this is clear

even in our Survey.tos

The advent of Neo-liberal econonuc policies and the Structural Adjustment

Programme saw emphasis being laid on finance sector liberalisation. The

immediate fallout of this has been in the form of a distinct reversal of the

development of rural banking and a sivU-ficant cut in the provision of credit to the

rural masses by the formal institutional sources of credit like the nationalised banks

and credit cooperatives.106 The impact on costs of cultivation, agricultural prices,

wages, food security and other socio-economic indicators we have analysed in the ·

preceding sections have led to immiserisation of the peasantry and the rural poor

are caught in a debt trap. The growth of indebtedness led to land being sold to

non-cultivators or big landlords who in most cases are the source of credit and

they in turn lease it out for profit.

Our study has brought out the fact that even those whose operational holding may

be high in acreage are at times highly indebted. It is under such a context that

many have been arguing for the removal of 'concessional' interest rates on the

pretext that the large differential between the market and the official rates would

be an incentive to the availing of institutional credit by rent-seeking middlemen

who would then re-lend it to the deprived sections at market rates and that the

major beneficiaries of institutional credit are the large farmers.107 While our study

corroborates the fact that the share of the large farms in the total institutional

credit is significantly higher than their share in the operated area, we desist from

suggesting such a seemingly progressive proposal because of the very fact that the

rural distress is of a much higher magnitude and affects all classes although at

varying levels.

105 Cf, V.M.Dandekar and F.K.Wadia, "Development of Institutional Finance of Agriculture in India", Journal of Indian School of Political Econonry, Vol.I, No.2, July-December, 1989 which also points out this factor. 106Qp.Cit, Vikas Rawal, 2004. 107 Cf, Wtlliam Nickel and Shamima Khan, ''Rural Credit- Towards a Sustainable System for the Twenty­First Century", Seminar on Agn'cultural Reforms, Indira Gandhi Institute of Development Re5earch, Bombay, 1993.

280

It has also been argued by some who cite the fact that in view of the scarcity of

credit and exorbitant interest rates in the informal sector, the small and marginal

farmers would benefit from institutional sources and low interest rates, go on to

enumerate the reasons for expansion of rural credit108 and finally arrive at a

conclusion that subsidised credit and large overdues have led to inequity and non­

viability of formal rural credit institutions and inefficiency in resource allocation.109

We would rather argue for the effective disbursal and flexible less cumbersome

processes to benefit the rural poor. It is not the wont of the government to

transform itself into a quasi~money-lender, which would be the result if one were

to go by such recommendations. Some have gone to the extent of suggesting that

Indian rural credit actually suffers from three basic problems namely, 'low interest

rates, high defaults and high intermediation costs' (emphasis added) and that

the gradual reduction in concessionality in interest rates would solve these

problems.110

The onset of Neo-liberal economic policies has actually led to the government

deregulating the interest rates that cooperative credit institutions can charge to

their clients.111The target for priority sector lending was sharply reduced based on

the recommendations of the Narasimham Committee in 1992.112Ironically it was

another committee headed by Narasimham in 197 5 which recommended the·

establishment of Regional Rural Banks with the urgent objective of developing the

'rural economy by providing for the purpose of development of agriculture, trade,

commerce, industry and other productive activities in rural areas, credit and other

facilities particularly to the small and marginal farmers: agricultural labourers, small

108 C.H.Hanumantha Rao, Technical Change and Distribution of Gains in Indian Agriculture, Macmillan Press, New Delhi, 1975. 109 Op.Cit, C.H.Hanumantha Rao, 1994, p-317. uo Ashok Gulati, "Economic Reforms and the Rural Sector in India", in Ric Shand (Ed.), Economic Uberalisation in South Asia, Macmillan India Limited, New Delhi, 1999, pp-394-96. 111 Ibid. . 112 Sushil Khanna, "Financial Reforms and Industrial Sector in India", Economic and Political Week&, Vol.34, No.45, p-3231.

281

entrepreneurs for matters connected there with and incidental there to. '113 The

contours of directed credit have been altered drastically with the implementation

of the Narasimham Committee recommendations and the removal of ceilings on

interest rates and the lowering of targets for sector-wise allocation of credit have

weakened the system.114

The system of priority sector lending which was in place had achieved more than .

its stated objective of allocating 40 per cent of all advances to the priority sector by

1990. However, the policies of financial liberalisation led to a decline in the

allocation of bank credit in rural areas for agriculture, while 52 per cent of the

bank credit in rural areas went to agriculture in 1985, the proportion fell to 38 per

cent in 1998. The share of total credit advanced by rural branches fell from 14.2 I

per cent in 1990 to 10.6 per cent in 2002.115

Our study brings out clearly that the cut in provision of credit by the formal sector

to the rural India has been an overwhelming factor that has initiated the agrarian

crisis and accentuated the rural distress by placing the credit-starved at the mercy

of the usurious informal sources of credit which lacks any effective regulatory

body. Financial sector liberalisation has resulted in a reversal of the earlier steps t()

make credit easily accessible to the rural population and 'competitive efficiency'

and 'profitability' became the catchword rather than social profitability and rural

development "The Neo-liberal banking refo~ amounts, in theory and practice, to

a reversal of the public policy objectives of extending the reach of rural credit,

providing cheap and timely credit to rural households (particularly economically

vulnerable households), overcoming historical problems of imperfect and

fragmented rural credit markets, and displacing the informal sector from its

powerful position in rural credit markets."116 .The credit policy was reversed by

113 C.Krishnan, "Growth and Performance of Regional Rural Banks- A Study in Kerala", International Congrw on I.Vrala Studies, Abstracts, Vol.2, A.K.G. Centre for Research and Studies, Thiruvananthapuram, 1994, p-53. 114 V.K.Ramachandran, "Financial Liberalisation and Rural Banking in India", The Marxist, Vol.XIX, No.1, January-March, 2003, p-20. 115 Op.Cit, V.K.Ramachandran and Madhura Swaminathan, 2003, p-319. 116 Op.Cit, V.K.Ramachandran, 2003, p-34.

282

restricting the rural public and co-operative financial institutions from lending to

the peasants, thereby forcing them to be dependent on the private money lenders.

The very idea of priority sector lending was reformulated in such a way that share

of lending to agriculture declined steadily and the advances were extended to the

Agro-industries, the newly created infrastructure funds and to non-banking finance

companies for on-lenrling to the very small-scale sector.117 The direct impact of

such a decline in credit to agriculture has manifested in the form of credit crunch

for the poor and small peasantry. It has been pointed out that the smallest

cultivators, holding less than 2.5 acres, were the worst affected while the advances

to those with more than 5 acres have risen to a level higher in real terms than

before liberalisation.tts

The direct advances to agriculture now also covers the acquisition of vehicles like

jeeps, pick-up vans and mini buses, which are unlikely to be acquired by the small

and marginal farmers and is clearly an elite-biased strategy which is not aimed at

improving either the productivity or marketability. The well-off farmers would

only make such acquisitions either to retain them as status symbols or to diversify

their activities to the non-farm sector. The absentee land holders also could avail

of credit for such purposes under the category of 'agriculturalloan'.119'fhe ceiling

limit for short term credit to be considered under priority sector has been raised to

Rs.llakh. The small and marginal farmers are invariably excluded from the

provision of crop loan because virtually none are in a position to demand crop

loan of this order and a distinct tendency to move in favour of the rich

cultivators.120'fhe inadequacy of credit availability for the purchase of fixed assets

117 Op.Cit, V.K.Ramachandran and Madhura Swaminathan, 2003, p-319. 11s Ibid, p-321. 119 Rajaram Dasgupta, ''Priority Sector Lending: Yesterday, Today and Tomorrow'', Economic and J>_olitical Week_&, October 12, 2002, p-4240. 120 C.Narasimha Rao (Ed.), A Decade of Economic Rejo1711s in India, Serials Publication, New Delhi, 2004, p-169.

283

and for working capital is also accompanied by high transaction costs and problem

of accessibility to all sections.121

The initiation of the Kisan Credit Card Scheme in 1998-99 by the government to

improve credit delivery to farmers, to be operated by Cooperative banks, Regional

Rural Banks and Scheduled Commercial Banks122coming as it did after the

implementation of the policies of financial liberalisation was rendered ineffective

as the access to credit was cont;ingent on the size of operational holdihgs. The

small and marginal farmers were denied this benefit arid it is o"nly going to widen

the skewness in credit availability across farm size.123 Easy credit at low cost is

available to the resource rich while the small and marginal farmers are prevented

from accessing institutional credit due to the cumbersome procedures and rigid I

and hostile attitude of the bank officials.124 The necessity to demonstrate the need

for production loan as opposed to consumption loans and the possession of

marketable assets as security removes the real poor in rural India-the landless

agricultural workers altogether from the ambit of institutional credit.

The onerous terms at.which the informal sources like the private money lenders,

traders and big farmers provide credit notwithstanding, the peasantry rely on them

and once they are unable to generate additional output and default in payment of

interest or the borrowed amount they fall into a debt trap out of which they

seldom can extricate themselves. The incidence of large number of suicide cases in

the regions where the peasants are heavily indebted to non-formal sources of

credit reflects on the situation.125Qur own study also corroborates this fact and the ~ -

Gram Panchayats in Anantapur and Karimnagar districts in Andhra Pradesh and

Wayanad district in Kerala exemplify this phenomenon.

121 S.Mahendra Dev and Vijay Mahajan, ''Employment and Unemployment", in C.H.Hanumantha Rao and S.Mahendra Dev (Eds.), Andhra Praduh Devehpment: Eronomic Reforms and Challenges Ahead, Centre for Economic and Social Studies, Hyderabad, 2003, p-419. 122 "Monetary and Banking Development", Economic S11fli!J: 2003-04, Government of India, Ministry of Finance, Economic Division, New Delhi, 2004, p-61. 123 S.P.Singh, "Agriculture", in 2002-03 Alternative Economic Survey: Liberalisation Sans Social Justice, Rainbow Publishers, New Delhi, 2003, p-45. 124 Ibid, p-44. l25 Y.S.Vyas, "Agrarian Distress: Strategies to Protect Vulnerable Sections", Economic and Political Weekb', Vol.XXXIX, No.S2, December 25-31,2004, p-5579.

284

Clearly the situation in the rural India is one wherein the peasantry faced with the

lack of available working capital are forced to rely on credit at high rates of interest

to meet the costs of cultivation and to make improvements on land. A large·

number are increasingly dependent on the class of traders other than the class of

moneylenders and rich peasants while an altogether new entrant in the credit

market is the Multi National Corporation, none of t~~m being regulated by any

authority. Th~ indebtedness prevents the peasants from obtaining fair market price

for their produce as the markets are also controlled by these forces. The dearness

of agricultural capital and the exorbitant costs involved in agricultural inputs

especially under the impact of cuts in subsidies on power, fertilisers, seeds and

chemi<;:als and the interplay of market forces coupled with the lack of adequate

finance at reasonable rates of interest makes agriculture increasingly unviable and

unattractive.

One third of the respondents in Sirisedu Gram Panchayat had sold their land to

repay debts. There is a return of the tenancy system in a much more disastrous

manner since there is no written agreement on conditions of tenure in most cases.

The tenant was forced to pay the fixed rent in kind or cash, as was decided upon

irrespective of crop loss and drought. High input costs and failure of bore wells

and crop failures have led the peasants into a debt trap and several farmers who · ...

committed suicide were those who were unable to repay the huge debts

accumulated through loans taken from avaricious money lenders at usurious rates

of interest and also harassment social indignities and humiliation. Institutional

credit was minimal, but had rigid recovery system too, while there is no effective

crop insurance scheme to protect the peasants against crop failures. The money

lenders in Ipperu Gram Panchayat in Anantapur district were not keen on

confiscating land in case of non-repayment as the land values were low and

recurrent drought had made it redundant financially. Hence they used pressure

tactics to get valuables. The interest rate was ranging from 24-36 per cent in most

places but also as high as 120 per cent has also been witnessed in West Godavari.

285

However this was the region wherein the highest number of respondents had no

loans outstanding at all.

Table-6.90perational Holding Wide Indebtedness in Andhra Pradesh <Value in R§}

Operational Holding(Acres) Landless AW 0-1 1-2.5 2.5-5 10-May >10 No of Respondents 50 14 15 11 12 18 Total Amount Borrowed 1584699 379000 573500 1022000 3559202 22640602 Total Indebtedness During 1998-2002 983578 355393 598795 1428720 3366490 13570150 Total Amount Paid towards Interest Payment 1252167 282120 455625 589700 2579617 11043257 Total Debt Serviced 772500 89000 51000 145000 1057506 11664829 Total Amount Paid so far to the Lender 2024667 371120 506625 734700 3637123 22708085 Total Burden of Debt 3008245 726513 1105420 2163420 7003613 36278235 Per Capita amount borrowed (may be viewed as credit availability) 31694 27071.4 38233.3 92909.1 296599.9 1257811 Amount repaid as % of amount borrowed 127.8 97.9 88.3 71.9 102.2 100.3 Burden of Debt as % of amount borrowej:l 189.8 191.7 192.7 211.7 196.8 160.2

The reference period is five years i.e., from 1998-2002

Available information from the field suggests that the per capita availability of loan

is lowest for peasants in the range of 0-1 acres. (Marginal farmers). However, the

same for the landless agricultural workers is slightly higher than this section. In

regions like Sirisedu and Ipperu even those holding up to 5 acres are relegated to

the position of agricultural workers only. The high cost of cultivation, low

unremunerative prices for agricultural produce, inability to access irrigation

facilities and crop failures due to drought conditions have led the peasants to leave

their fields uncultivated and work as agricultp~al workers. In Unagatla Gram

Panchayat in the West Godavari district those in possession of one acre of land

did not have the necessity to sell their labour in most cases. This may be due to the

fact that despite having no land, the agricultural workers at least get some wage

whereas due to the resource constraint, and prevailing drought condition during

most of the reference period, the agricultural operations have become

unsustainable and this shrunk their options to avail credit from different sources.

Another reason might be that due to the prevailingJeetha system in the study areas

286

in Andhra Pradesh, the big farmers would always prefer landless agricultural

workers to the marginal farmers while offering non-institutional credit.

a e . : •perauona T bl 710 0 0 mgwtse IH ld" n e te I db dn ess tn era a . K 1 Landless Total

Operational Holding(Acres) AW 0-1 1-2.5 2.5-5 10-May >10 Kcrala No of Respondents 25 38 14 17 iS 9 120 Total Amount Borrowed 1865501 1774500 1022000 2258500 2828000 4589000 14337501 Total Indebtedness During 1998-2002 279180 866857 492000 832900 516500 596000 3583437 Total Amow1t Paid towards '

Interest Payment 334210 558237 234110 427740 544030 1059340 3157667

Total Debt Serviced 1616321 925943 545000 1429500 2311500 3993000 10821264 Total Amount Paid so far to the Lender 1950531 1484180 779110 1857240 2855530 5052340 13978931

Total Burden ofDebt=7+4 2229711 2351037 1271110 2690140 3372030 5648340 17562368 Per Capita amount borrowed (may be viewed as credit availability) 74620 46697 7~000 132853 188533 509889 119479 Amount repaid as % of amount borrowed 105 84 76 82 101 110 97 Burden of Debt as% of amount borrowed 120 132 124 119 119 123 122

Contrary to what we have observed in Andhra Pradesh, the per capita amount

borrowed in Kerala is less than half, indicative of the fact that the credit

requirement in terms of amount of credit is less in tlU.s state. However, it can also

be observed that the first four groups comprising mostly the landless and marginal

farmers, the amount of money borrowed in Kerala is much higher. Considering

the fact that universally, a larger proportion of credit availed by these groups is

either consumed or spent towards unproductive purposes, the comparison

between Kerala and Andhra Pradesh among these groups of farmers show that the

credit availability situation in Kerala is much better for resource poor farmers and

hence provides them with a far greater social security.

Again, analysing the burden of debt among the peasant groups in both the states,

we observe that the same is much higher in Andhra Pradesh than in Kerala when

we consider the burden of debt as a proportion of amount borrowed. The overall

burden of debt in Kerala over last five years of indebtedness as revealed by the

farmers during our field sunrey is only 1.22 times higher than what they had

actually borrowed compared to around 1. 7 times in Andhra Pradesh. Another

287

interesting thing noteworthy here is that the burden of debt in Kerala as a

proportion of amount borrowed is more uniform (ranging between 119% to

132%) across different farmer groups where as in Andhra, the range varies

between 160% to 211%. This clearly indicates that in Andhra the burden of debt is

borne by different groups of farers differently contributing the level of inequality

amon~ groups and their livelihood conditions.

The table below shows the aggregate indebtedness status in all the eight sample

villages in both the states. It is clear from the table that in Kerala, the amount

outstanding as a proportion of amount borrowed is less than that in Andhra

Pradesh. Notwithstanding the fact that in the Neo-liberal era, the agricultural

operations have become non-remunerative universally in a time scale, the less

outstanding loan can be a result of several factors. If we consider the

Table 7.11.· A2Pre~ate lndeL .1. Amo~ Samnle_Resn :tndents in_Andhra n. ..~ • L and Ke_rala Total Amount Paid

Total towards Total Total Amount Amount Total Indebtedness Interest Debt Paid so far to the

Villages Borrowed During 1998-2002 Payment Serviced Lender 1 2 3 4 5 6

3592817 789654 690387 4283204

Unagatla 4293000 (18.4) (16.1) (83.7) (99.8) 1491126 798680 1404500 2203180

lpperu 2236699 (66.7) (35.7) (62.8) (98.5) .. --· 2687389 2106690 1603000 3709690

slrisedu 4174000 (64.4) (50.5) (38.4) (88.9) 1869000 2288265 2949500 5237765

Chenguballa 4818500 (38.79) (47.49) (61.21) (108.7) 6837169 5884022 9549817 15433839

Total Andhra Pradesh 15522199 (44.05) (37.91) (61.52) .(99.43) 379537 1093357 4229863 5323220

, Kainak.ary 4607600 (8.2) (23.7) (91.8) (115.5)

1703080 978500 1796821 2775321 Kurichi 3441001 (49.5) (28.4) (52.2) (80.7)

795820 649010 3598680 4247690 Nenmeni 4394500 (18.1) (14.8) (81.9) (96.7)

705000 436800 1195900 1632700 Karivellur-Pera1am 1894400 (37.2) (23.1) (63.1) (86.2)

3583437 3157667 10821264 13978931 Total Kerala 14337501 (25.0) (22.0) (75.5) (97.5) Notes: Total Indebtedness 1s the total outstanding amount due for repayment. Figures in the Parentheses indicate the percentage of the indicators in total amount borrowed.

288

behavioural aspects of individual farmers in both the states ceten's paribus, a lesser

outstanding loan may indicate lesser interest rate, a better developed formal credit

market, more out of field employment opportunities, less risks and irregularities in

the income flow among debtors, etc. To support the last point, a substantial

proportion of families in Kerala earn handsome remittances from their kith and

kin in the Gulf countries. A sizeable number of respondents in Kerala are also

involved in the service sector. This might have, resulted in the accumulation of

purchasing power in the hands of even non farm population who invest in

construction of building and spend on consumption items leading to the creation

of non farm employment opportunities and demand for domestically produced

farm products as a relief to the farm population.

Table 7.12 Average Asset Value and Amount Borrowed by Respondents in Andhra Pradesh and Kerala

!Average !Amount Borrowed as a

!Average Multiple of Range of Asset Operational lA verage Value lv alue Other No of lA verage Value Holding (in !Average Amount of Productive Than Land Respondents of Assets ~ere) ~orrowed ~ssets

0-10000 69 1152 0.78 32546 28.2

10001-20000 7 13857 1.38 24143 1.7

20001-30000 3 29333 1.72 15333 0.5

30001-40000 2 37400 3.75 287500 7.7

40001-50000 4 45325 4 121875 2.7

50001 and above 35 617061 14.72 342829 0.6 All Sample in iA.ndhta Pradesh 120 184315 5.06 129352 0.7

~

0-10000 32 1319 0.51 24113 18.3

10001-20000 3 18133 0.33 14333 0.8

20001-30000 18 24142 3.19 62056 2.6 30001-40000 23 34138 3.10 125696 3.7

40001-50000 10 44465 3.00 30500 0.7

50001 and above 34 210849 6.92 257056 1.2 IAn Sample in Ketal a 120 74416 3.43 115563 1.6

When we are analysing indebtedness among our sample respondents, it may be

worthwhile to analyse the same in terms of productive assets held by individual

289

farmers. It is important because the operational holding can be misleading due to

differences in quality of land as well as price of land in different localities. Again,

the decisions taken by individual farmers regarding the possible cropping patterns

they would follow depend more logically on the cost of cultivation followed by

their ability to bear that cost among other factors like the market value of the

produce and the estimated marginal revenue from . e~ch additional unit of their

investment.' Such determinants are largely influenced by the value of the

productive assets and the excess capacity they have in order to gain an increasing

return to scale from their additional investments than the size of their

landholdings. In order to make adjustments for discrepancies in the market value

of land in our sample villages we have taken the value of all productive assets I .

other than the land vaiue. Interesting thing to note here is that the number of

respondents in the bottom three classifications in Andhra Pradesh is same in both

types of classifications (i.e., both in case of operational holding ao.d value of

assets). On the other hand the number of farmers in bottom three classifications in

Kerala is less (53) if we go for asset value classification than (17) in case of

operational holding-wise classification.

The above table suggests that in case of the most resource poor sections, the

respondents in Andhra Pradesh have borrowed around 28 times more than what

th~y possess as asset value, compared to only 18 times in Kerala. However, in case

of the most resource rich sections, the amount borrowed as a multiple of asset

value is half in Andhra Pradesh than in Kerala. This is because in Andhra Pradesh

the average asset ownership in this group is around 6 lakhs compared to around 2

lakhs in Kerala.

290

Table 7.13 Average Indebtedness Status of Sample Respondents in Andhra Pradesh & Kerala

!Average Burden of No of !Average !\mount Paid !Average Debt as a

Range of Asset Respo !Average !Amount towards [Amount Average Multiple of Value Other ndent !Amount Outs tan Interest of Debt Burden of Amount Than Land s Borrowed ding Payments Serviced Debt Borrowed

A B c D E F G=D+E+F H ANDHRA PRADESH

0-10000 69 32546 31837 24974 11428 68238 2.1

10001-20000 7 24143 22808 23314 5714 51837 2.15

20001-30000 3 15333 10000 8640 5333 23973 1.56

30001-40000 2 287500 188148 249525 137500 575173 2

40001-50000 4 121875 58921 46091 62954 167966 1.38 50001 and above 35 342829 109679 93951 233671 437302 1.28

All Sample 120 129352 56976 49034 79582 185592 1.43

KERALA 0-10000 32 24113 5187 6447 18982 30616 1.27 10001-20000 3 14333 5940 3320 8393 17653 1.23 20001-30000 18 62056 11994 20174 51944 84113 1.36 30001-40000 23 125696 29378 34497 96317 160192 1.27

40001-50000 10 30500 21900 11410 10100 43410 1.42 50001 and above 34 257056 57619 46337 199922 303878 1.18 All Sample 120 11556.3 27112 25520 89011 141642 1.23

The above table shows that in spite of the fact that in Kerala the sum of average amount

paid towards interest payments and debt serviced is less than that in Andhra Pradesh, the

amount outstanding is also less in Kerala. This has happened though there is not much

difference in the average amount borrowed. This only substantiates our earlier argument

that in Kerala the interest burden is less and the repayment pattern is more predictable in

Kerala. In this classification also we find that the burden of debt for most of the groups is

less in Kerala than in Andhra Pradesh. The chart bellow shows the comparison of burden

of debt in both the states.

291

Chart-2

0.10000

Burden of Debt as a Multiple of Amount Borrowed

10001-20000 20001-30000 30001-40000

Rangr ..,, A11et Value

40001-50000 50001 ond above Toto!

The above chart shows that for almost all the sections under review, the burden

of debt as a multiple of total amount borrowed in Andhra Pradesh is higher than

that in Kerala. It is quite interesting to note that the figures are proportionately

higher in case of lower asset holding groups in Andhra Pradesh whereas in Kerala,

the figure is proportionately higher in case of the better off groups. This may

indicate that in Kerala, the poorer sections of the agrarian community have access

to proportionately cheaper sources of credit, may be in the form of institutional

sources. For the lowest bracket in Andhra Pradesh for every rupee borrowed, the

peasant has to repay more than double the amount while in Kerala it is only about

1.27 rupee. The highest bracket in Andhra Pradesh has to repay about 1.4 rupees

when compared to 1.23 rupees in Kerala. This may be clear from the tables in the

preceding chapter.

The fmdings on indebtedness concur with our hypothesis that "Neo-liberal

economic policies have led to income deflation due to high costs of cultivation,

unremunerative policies and lack of adequate employment opportunities. In such a

context the re-emergence of informal sources of credit charging usurious interest

rates has heightened peasant indebtedness threatening livelihoods and leading to

land alienation."

292

Agrarian Distress and Peasant Response

The agrarian crisis and distress is the result of a systemic revamp of the economic

policies under the Neo-liberal regime and the indebted peasantry are reeling under

the impact of the operation of the market forces. Our study concludes that the

argument that the drought conditicr . .is responsible for the present crisis and that

the Neo-liberal policies operating in the fallacy of the field of agriculture had no

role other than the initial 'social costs of adjustment' is a fallacy. Earlier reports

suggesting that the suicides and sale of kidneys was restricted to the cotton­

growing regions is not anymore true. But our observation is that it is the fanners

who are growing commercial crops like cotton, chillies and groundnut were the

worst hit. In Andhra Pradesh alone more than 10,000 peasants have committed

suicide since the adoption of the Neo-liberal policies.126We have witnessed four

cases of suicides in Ipperu Gram Panchayat and three cases in Sirisedu Gram

Panchayat in Andhra Pradesh.

It is estimated that in Kerala ·since May 2001, more than 1000 peasants have

committed suicide due to indebtedness, with the Wayanad district witnessing

maximum number of suicides.127 The primary factor for such a situation is ~e

high input costs, crash of price of agricultural produce and resulting

unprecedented indebtedness. Drought and crop diseases have only accentuated the

problem and crop losses have led to mounting debts, mosdy taken from the 'Blade

Company'. We have witnessed cases of three suicides during our study in Nenmeni

Gram Panchayat.

A condition of falling incomes and "disappearing livelihoods" was witnessed in the

villages. Starvation and malnutrition is a common phenomena and the condition

of the working classes is also depressing. Both the states of Kerala and Andhra

Pradesh witnessed income deflation and pauperisation which is identical to

situation before the Second World War. However, while the earlier conditions

126 Figures compiled from information shared by Peasant organisations, NGOs etc. 127 Op.Cit, P.A.Muhammad, 2004.

293

spurred the peasantry into protest action of a far reaching nature we are today

witnessing suicides by the hapless peasantry. There have been movements in

Andhra Pradesh against the hike in price of power and people across the state was

mobilised against the move by the Left parties. Struggles for distribution of surplus

land are also taking place, but the wages and agricultural prices remain dismally

low. In Kerala the peasants and agricultural workers are more organised and the

class consciousness is higher because of a stronger organised movement. We have

noted in the previous chapter that the working conditions of the peasantry is far

better and they have better standard of living in Kerala. The agrarian crisis is of a

very serious nature and even Kerala is witnessing suicides by indebted peasantry. A

pan-Indian movement of peasants and agricultural workers is lacking. Devolution

of powers to democratic institutions and an effective intervention in the agrarian

sphere by the Panchayats with participation of the people and a comprehensive

policy of market intervention, employment guarantee, universal PDS, literacy and

access to cheap credit along with land redistribution and organised presence of

peasantry alone can alter the caste-class inequalities and extricate the peasantry

from the crisis. The concluding chapter will look into some of these measures.

1 •

294