Indian Agriculture put to the test by the World Trade Organisation

On the 31 July, in a speech marking the end of his term of office, Mr. Mike Moore, the Director General of the World Trade Organisation (WTO), declared: « What motivates us the most are the human beings whom we serve ».  One wonders who will be more reassured by his words: the 900 million Chinese farmers anxious about the consequences of joining the organisation in January 2003, or their counterparts in India.  Agricultural policy there has long been based on the needs of domestic supply and self-sufficiency in food.  The WTO is pushing for a greater openness to markets. The consequence of such an action will be the destruction of the sector by foreign producers for whom the lowering of trade barriers will open up new avenues.  

“Here it is too difficult to be a farmer. I have tried everything, but I always lose”. Things have not been going well for Mr. Gangappa for many years. He is a farmer in the village of Kalmala, some 20 kilometres from Raichur in Karnataka State, in the south of India. He is 33 years old and has 3 hectares of rice and chilli peppers from which he must glean enough to feed and care for his wife and 4 children.  

In common with many others in this sun-scorched corner of the Deccan Plateau, he used to grow cotton at a profit.  In 1996, from an investment of 35 000 rupees (745 dollars), he made 130 000 (2 600 dollars). At the time everything was cheaper. Seeds, pesticides, water, electricity, fuel and even credit was subsidised by the state.  The cost price of a kilo of cotton was 7 rupees, while the market price was 26 rupees. But since then the situation has been reversed: the cost price is now 25 rupees for a kilo, the market price is 17. In the meantime, the cotton mill in Raichur has been closed; victim both of bad management but also of competition and the quality of local cotton. In 1998, an attempt to introduce a cross-fertilised variety of cotton into the region was met by violent reaction (1).

As a result of this, many farmers have fallen back to the cultivation of rice and chilli peppers. However, in 2001, a quintal of rice whose cost price was 400 rupees could only fetch 350 rupees on the market! Some people are storing their rice in the hope of a rise in the market price or an intervention by the government. Others, under pressure from their creditors, have to sell at a loss.  Mr. Gangappa has sold his harvest to a usurer for 10% less than the market price. In the same year the price of chilli peppers also fell. He could expect an income of around 80 000 rupees (1 700 dollars) for a production cost of 90 000 rupees (1 915 dollars); a loss of 10 000 rupees (200 dollars) which will place him further at the mercy of the usurer.

For his neighbour, Mr. Yellapa, also “it was better before”. He used to cultivate oil crops; sun flower and groundnuts. In 2000, the cut in subventions, the competition of imports and the rise in certain production costs, led him to regret his choice. In the space of a few years, explains this villager, the price of certain seed grains sold by an Indian-American multinational went skywards, jumping from 25 to more than 200 rupees a kilo. “Except for rice, he explains, you have to buy the seed each year, because it hardly produces at all in the second year”.  In 2001 he also invested in rice and chilli peppers, taking himself heavily into debt. One finds the same situation not far from there, in the hamlets bordering an irrigation canal. Here a big rice farmer, sitting on his stock, denounces the “imports of rice at low prices”. Another has let his field fallow. He hires himself out for the day, but he says that “it is not enough to live on.”

Someone talks about a certain Satiah, who no longer had the courage to continue. Caught between the market and the usurer, he killed himself by swallowing pesticides. Sometimes the state compensates the family. The money is then used to pay back the debts, otherwise the creditor would take control of the farm land and the family would be forced to fell to the shanty town.

Erosion of incomes

In July 2000, a publication of the Ministry of Agriculture resumed the situation thus: “The growth of agriculture tended to diminish in the 1990’s. Agriculture has become a comparatively low-income profession due to generally unfavourable prices and a low profit margin. This has led to the departure of many farmers and an increase in migration away from rural areas. The situation will be worsened by the entry of the agricultural business into the world market system, unless corrective measures are taken immediately” (3). The Deputy Secretary for Agriculture, Mr. Jain, speaks of an erosion of 15% in farmers’ income in 2001. Yet many earn less than the equivalent of 1 euro a day and most of them are in debt”.

In fact since the agreement of 1994 the small farmers have seen mainly the negative side of things. As for imports, between 1999 and 2001, restrictions were lifted on more than 2,700 products. The last list took effect in April 2001, 2 years ahead of the date limit. Some people see in this haste a favourable gesture towards the USA to encourage it to lift the embargo on the transfer of technology imposed on India after its nuclear tests of May 1998.

This is all worrying. The first test for the question of imports, in this case vegetable oils, is not reassuring. In the first years after joining the World Trade Organisation the government reduced the customs duties on these foodstuffs much in demand by both industry and the consumer. At the time India was almost self-sufficient in the vegetable oil and the world market prices were high. But these prices fell and the local producers found themselves at a double disadvantage. Not only were their products too expensive to export, but they also lost some of the internal market. Within a few years vegetable oils imported from Malaysia, Indonesia, the United States and Brazil had taken up to 40% of the market.  For some the result was a blessing. But for millions of small farmers and for the local transformation factories it was a catastrophe. In the region of Karnataka alone, more than 100 out of 115 oil mills have closed down in the last few years.

 Par ROLAND-PIERRE PARINGAUX