The Hindu : Direct payments will increase farm debt

Online edition of India's National Newspaper
Monday, Apr 22, 2002

Opinion

Opinion - News Analysis

Direct payments will increase farm debt

By Vandana Shiva

In India and in Europe, direct payments or income support to farmers are being offered as an alternative to inefficient, non-sustainable farm subsidies. They are being promoted as non-trade distorting and as reducing Government expenditure and fiscal deficits.

However, direct payments are also a subsidy, except that it is agribusiness corporations who are the primary beneficiaries of this form of subsidy. They are a subsidy which artificially support an inefficient, wasteful, non-sustainable and unjust system of agricultural production and agricultural trade. And this subsidy has systematically increased.

Agricultural subsidies were created to support the high input costs of industrial agriculture — machines, chemicals and costly seeds. They were in effect industrial subsidies not agricultural subsidies, because the money provided by Governments went to industry, it did not benefit small family farmers who were uprooted and displaced from agriculture.

Dr. M. S. Swaminathan, the father of the Green Revolution in India, has admitted that has led to farmers of Haryana and Punjab mining soil fertility, not cultivating crops. Data from Punjab shows that farmers retain only 1 per cent of their earnings from rice, and 2 per cent from wheat. The rest goes to the chemical industry for fertilizers and pesticides, the oil industry for diesel for tractors and tubewells, and to trade. When costs of fertilizers and diesel increase, and costs of production go up, the Minimum Support Price (MSP) increases. But it is not a largesse to farmers — it is a largesse to the input industry.

The subsidies that an Indian farmer gets are passed from the Government to the agri-chemical, seed and tractor industry. The subsidy or loan that the farmer gets to purchase these items is passed on directly to the manufacturer. Rather than actually getting a subsidy, the farmer pays interest (however low the rate is) on the money transferred from the Government to the industry. In fact, this `negative' subsidy for the Indian farmer totals $23.7 billion.

In contrast, the subsidies that the U.S. farmers get, allowed by the green box of the Agriculture Agreement of the WTO, have almost doubled from 1989 to 1995. Such subsidies in the U.S. and the E.U. total $353 billion today. Globalisation of agriculture has changed the context of agricultural production and distribution. The context changed from national policy to global markets, the engine shifted from national states to global corporations, and the focus shifted from production to trade. Global trade has become the engine of agricultural policy and agricultural production at national and global levels. At the heart of global trade are artificially low prices of agricultural commodities. These prices are kept low in order to capture markets by displacing domestic production through dumping. Northern Governments lower prices through monopolies and price fixing. Prices are now falling below the cost of production internationally — rendering agricultural production unviable by pushing it into a permanent negative economy.Direct payments are the mechanism that allow corporations to continually lower prices and engage in dumping without risking the collapse of production. They are a means to keep a negative economy afloat to benefit corporations by increasing their profit margins. The low prices are clearly not a result of higher production. In fact, prices are falling in spite of lower production, countering all supply and demand theories. Collapsing prices have more to do with concentration of control than with over supply. Farm prices are low because they are being "fixed'' by corporate monopolies. Industrialisation and globalisation lead to increased control over input supply and commodity purchase by global agribusiness. The corporate giants can determine the prices because farmers are locked into dependency relations for buying inputs and selling their produce.

The fate of direct payments will be worst in India. First, rich landlords will grab the cash, as millionaire farmers of California do. Second, corruption will be rampant. Only 1 per cent of Rural Development Funds reach the beneficiaries. Small farmers will receive nothing from the market because of low prices, and nothing from the Government because of corruption and will be pushed into distress sales and destitution. And the heavy Government expenditure will not go down, because as prices fall lower and lower the direct payments will rise to the direct procurement levels, with gaps between MSP and market price increasing rapidly. Farmers want fair and just prices, that enable them to continue farming. The Minimum Support Price of the Government- dominated procurement era should become the Minimum Purchase Price for procurement by all — the Government, private traders or companies. This is necessary to prevent distress sales and wiping out of the peasantry.

If Governments did not shift to direct payments, either agriculture and peasants would be wiped out, or dramatic changes would need to be made in patterns of production and distribution to keep farmers on the land and ensure food security.

A shift from a negative economy in which costs of production outstrip prices of commodities requires reduction in production costs by reducing input costs, and a reflection of real costs of production in prices. This in turn makes internal input, sustainable agriculture an imperative production along with localisation of food systems and reduction of distribution costs.

To prevent ecologically sustainable, people-centred food systems from emerging, direct payments have been invented to maintain a non-sustainable system based on high costs of production and low farm prices. Direct payments are a direct corporate subsidy that make dumping an intrinsic part of global trade in agriculture. They are a brilliant means for distorting prices and distorting trade. Yet in typical W.T.O. and globalisation doublespeak, they are counted as non-trade distorting support measures.

Direct payments are preventing a transition to sustainable and just food and agriculture systems. They are feeding corporate profits, while the land and small farmers are being destroyed. Subsidies should be withdrawn from systems that destroy farmers, farming and the environmental capital of land, water and biodiversity. Input subsidies and direct payments need to be replaced by a worldwide support to sustainable agriculture, local markets to ensure fair prices for both producers and consumers. Farmers' subsidies and starvation deaths in India are indicators that the current system is dysfunctional nationally. Dumping and destroying domestic markets is showing it is bankrupt globally. Direct payments will increase farm debt and dumping.

Instead of direct payments we need direct marketing. Instead of falling farm prices and rising food prices, we need fair prices to ensure poor farmers have livelihood security and poor consumers have food security. The alternatives are available. Governments no longer have any justification to spend the taxpayer's money to finance the rich.

(The writer is chairperson, International Forum of Agriculture of the International Forum of Globalisation, and Founder of Navdanya.)

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