31st Conference: Reports on Commissions


The 31st Conference of All India Kisan Sabha was held at Biplab Das Gupta Nagar, Nashik, Maharashtra between January 28 and 31, 2006.

In the conference 31 delegates from all the states took part in the discussion. The level of disussion was high in standard and rich in content. All the delegates pledged their determination to advance the movement and strengthen the organisation. After the reply of General Secretary to the discussion in which he accepted many suggestions and criticism and made some clarifications on certain issues, the report was unanimously adopted by the conference.

Then the conference was divided into four commissions for detailed discussions on specific subjects.

a. Commission on review of Cuttuck document on movement and organisation.

Convenor: Com. Benoy Konar.

b. Commission on the report of ‘National Commission on Farmers’.

Convenor: Com. Sunakant Mishra.

c. Commission on Agricultural Credit and Crop insurance.

Convenors: Com. Tulsidas and V.K.Ramachandran

d. Commission on Agricultural Prices.

Convenors: Com. S. Malta Reddy and Venkatesh Athreya

In each of the commissions, there was enriching discussion in which several delegates took part. After the discussions, the convenors of the respective commissions have submitted their reports which is published here.

The conference was greeted by fraternal delegates Comrade Jibon Roy, Secrtary CITU, Comrade A. Vijayaraghavan, General Secretary, AIAWU, Comrade K.N. Balagopal, DYFI, Comrade K.K. Ragesh, SFI, and Comrade Kalindi Deshpande, AIDWA.

The conference has elected 137 members for AIKC and 53 members for CKC. Dr. Venkatesh Athreya and Dr. V.K. Ramachandran were elected as Special Invitiees to CKC.

The Maharashtra Committee of AIKS has conducted the Conference in a very impressive manner with a successful rally wherein more than one lakh peasants, mostly tribals and women participated.

K. Varadha Rajan

General Secretary

Reports on Commissions:

Commission on review of Cuttack document on movement and organisation.

Convenor: Com. Benoy Konar.

  1. The problems of consistent weakness in developing peasant movement are those of importance of campaign and propaganda on basic and policy issues and combining it with organising mass struggle on partial, regional and realisable issues, taking up of caste and social oppression issues as anti-feudal struggle; organising struggle with the objective of raising the political consciousness of the peasants and drawing them away from the influence of bourgeois- landlord classes to the camp of working class; problems of building peasant unity against feudalism, monopolists and MNCs as well as imperialism on the basis of fighting ability of agrilabourers and poor peasants; recruiting and rearing of cadres and whole-timers, building up of leadership at different levels; importance of raising fund and its means; importance of democratic functioning and doing away with feudal type authoritative or bureaucratic functioning. All these were discussed in a commission in Cuttuck conference and its recommendation was accepted by the conference as a guiding document.
  2. Again in the presidential address in the Kozhikode Conference, some of the basic problems of organisation were explained. But ten years’ experience since then is far from satisfactory. Comrades in most of the weaker states are yet to implement the document and could not do much to put the guidelines in practice.
  3. During Cuttuck conference time, the effects of imperialistic LPG were yet to manifest itself in the practical lives of the peasantry. But, during the last ten years, there has been serious changes in the economic scenario in general and particularly in agrarian sector of the country. The peasantry of different strata are experiencing the disastrous effect of this with the growing realisation about the effects of LPG. The alternative policy document of Kisan Sabha was updated in Thiruvananthapuram Session of the AIKC so that comrades can take up vigorous campaign and propaganda against it and organise struggle against its manifestation in the lives of the peasantry. In this period, we have witnessed even spontaneous outbursts of the peasantry in some places. Number of peasant suicides under debt burden is swelling alarmingly. Simply it can be said that so far the building of resistance struggle and conducting campaign for educating the peasants are concerned, the situation is most favourable. But unfortunately we, in most of the areas, could not rise to the occasion.
  4. If membership is taken as a criterion there has been little change. In 1994-95 the share of three advanced states in the total membership was 90.17%. Now it stands at 88.5%. It may be noted that the scope of increase in the three states of West Bengal, Kerala and Tripura are decreasing and within few years their, scope of increase will be limited to the rate of population growth. Whereas in other states where feudal atrocities are severe and economic distress are graver, there has been scope of much sharper growth. If we take 7 states like Rajasthan, Karnataka, Haryana, Maharashtra, Punjab, Tamil Nadu and Orissa together, they have registered a growth of 83.75 %. But the growth rate in Rajasthan, Haryana, Punjab and Tamil Nadu is unstable. Sometimes it goes up and again goes down. The nature of enrolment in Andhra Pradesh, one of the states with revolutionary past, is somewhat erratic. This attitude about enrolment sometimes appears to be casual.

It has to be realised that enrolment is the primary condition for growth of organisation.

Regarding enrolment the Cuttuck Commission report said that it should.be conducted as a campaign and movement. Stronger states follow it. They observe one day, one week or one month for the purpose. However weak one state may be, it must be conducted as a campaign with proper organizational preparation for it. Cuttuck Commission further reported, “Just after any struggle, our cadres should appeal and approach the concerned peasants to be members of Kisan Sabha, a committee be formed with the best elements as choiced by the peasant themselves.” It further stated, “List of members be prepared and kept at the taluka or block level in weaker states and at district levels in areas where very large number of members are enrolled.

During this period only three states – Karnataka, Maharashtra and Orissa – have registered almost consistent growth whose rate stands at 259 %. Excepting the three advanced states, enrolment is not taken up as an organised movement. Bihar inspite of having enough potentials is not picking up. So far as Jharkand is concerned, our expectations have not been met.

All adults among agrarian population are entitled to become Kisan Sabha members. But in most states it is the practice to enrol only the head of the family. This practice has to be given up. In Rajasthan there was a strong and militant movement in 2004 which at the expense of six lives was a success. But there is no reflection in the strength of membership.

Rajasthan conducted another militant struggle in 2005. Its impact upon membership and organisation is yet to be known. We hope for improvement this year.

All these weaknesses were discussed in the earlier document. Now endeavour should be there to rectify it.

  1. Campaign movement and struggle

Campaign and struggles that have been organised in states find its place in the general secretary’s report. In consideration of the nature of crisis, our achievement in this respect is not upto our expectations. In Maharashtra earlier we were confined in tribal areas only. Now, we have tried to cross the barrier. The impressive rally on 28.01.2006 has manifested its advance. In Orissa, though very weak, could organise movement for procurement of paddy and against eviction of tribals with success and it has its reflection in membership strength. In Karnataka, powerful movement could be organised against privatisation of power sector and for waiving the arrear power dues with success and also they organised movement against Agri- Produce Marketing Control Act in which both the traders and peasants parrticipated. It has its impact upon the strength of membership.

  1. The accentuation of contradiction between entire peasantry with imperialism has widened the possibilities of bringing in newer sections of people into our fold of struggle thereby paving the way towards forging broadest possible democratic unity in rural India. While not abandoning our basic position of building up of peasant unity based on firm unity of agricultural workers and poor peasants with the middle peasants and taking up the cause of the rural poor in their sharpening contradictions with the rural rich the AIKS must strive to work together with these new sections, build up united struggles with other peasant organisations in order to win over newer allies even if they are working in some of the opportunist organisations. Our main concern is to make people move. As and when people move ahead the mass following of these opportunist organisation will abandon these organisations unwilling to take forward the struggle and will eventually come over to us.
  2. Importance of local issues: Conducting campaign of basic issues, all-India issues or alternative policy is a must. It enriches our activists, help widening of democratic consciousness, but it has no role to rouse the people in action. Issues which touch the heart of the peasantry and appear to them as immediately realisable can only agitate them and rouse them in action. There is no dearth of small and partial issues agitating the peasantry, if one cares for it. Social atrocities against dalits, weaker section and women are random. As we fail to address it, the disruptive caste forces make use of it. Hunger and starvation go on. ‘Struggles for relief can be organised. Funds for poverty alleviation programmes are misappropriated and wasted. The peasantry can be organised and roused on this issue. Besides land and wage related issues, and issues of repression many other issues were mentioned in Cuttuck document. Except without building resistance movement on such issues, organisation can not grow, and new cadres never be built. But sometimes this task is avoided, because it is troublesome and requires hard working and tenacity. Rather some are more interested in campaigns on all-India issues as it does not require concrete accountability. This trend has to be fought out within the organisation.

Morover, every struggle on concrete issues requires widespread campaign movement to earn democratic support. We should not remain confined to the people affected by the issue alone, but spread our campaign to wider areas and sections of the people, raise fund from them. It will not only strengthen the struggle itself, but also bring realization among wider section of people that Kisan Sabha stands for the right cause and for any problem it is the right organisation to be approached. This way, our support base can be extended.

  1. Whatever struggle is there, it failed to enrich the consciousness of the peasantry. In Kozhikode presidential address it was said, “whatever may be the struggles, however may be the militancy and sacrifices, the peasantry, by and large, like shuttle cocks are moving within the boundary of bourgeois – landlord parties in most of the states. Why so happen? Some serious introspection is required.” Though a mass organisation, the AIKS is not void of any noble objective and ideals. It is not a benevolent society like missionary organisations. It is an organisation of struggle. We dream of a society free from hunger, poverty, depression, anxiety and unemployment. In an underdeveloped country, the peasantry constitute the overwhelming majority of the population. It is our objective to draw away the peasantry through educative experiences of such struggles, from the ideological and political enslavement by the bourgeoisie and landlords and bring them in the camp of working class. Unless they learn to dream of such a society, unless they take this existing society as unjust and unreasonable, they will not fight for the change in the correlation of dass forces. All sorts of problems and miseries of the peasantry are inevitably off shoots of this unjust economic and social system. They are various symptoms of the basic disease. While organising peasants on partial issues as symptoms we have to make the peasantry apprise the disease itself. We have to expose the intricate relation between partial and basic problem while conducting struggle on partial issues. Many of our activists lacks this ideological conviction and direction. This weakness has to be removed.

The peasantry has enormous fighting ability but they are not aware of it. It remains in latent form. Through struggles, it can be unleashed by stages. Instead of spoonfeeding, the peasantry has to be taught that it is they who are to liberate themselves in bonds with other toiling people. Except without having training in practice, one cannot, with theoretical teachings on swimming only, swim across a river, rather he is destined to be drowned. So, it is only through active participation in struggles, their fighting potential can flourish. Sometimes resentment of peasants burst out in spontaneous struggles, but we must not leave it to spontaneity, rather we have to rush there with whatever little force we may have, and champion the cause. Again it may be remembered that movements automatically do not lead to organisation. Its development may be charted thus:

Propaganda campaign – movement on concrete issues – consolidation – advanced section of peasants – recruitment of cadres – cadres’ training – further expansion and so like spiral development. In this respect our weakness has to be removed.

  1. Development of cadres and wholetimers are necessary for the expansion and consolidation. But, it cannot grow from vacuum. Development of cadres – wholetimers and that of movement is complimentary to each other like walking on two legs, one helps the other to grow. Little advanced is there in this respect.

Self sacrificing ideals and exemplary pursuation breeds wholetimers, but fund is also an initial factor. Stronger states should help the weaker states in the initial stage. West Bengal and Punjab committees have donated Rs. Five lakhs and Rs. one lakh respectively for this purpose to Rajasthan after their struggle in 2005.

The All India Centre may think of creating a fund for the purpose with help from stronger states. With financial support for one or two years, the concerned state committee should have the determination and planning for becoming self-supporting.

  1. Proper planning: Proper planning is absolutely necessary to strengthen and expand the Kisan movement. One, who is enough rich, does not require to make an advance budget, but the poor has to make it and select priorities. In most of the states we are weak and badly suffer from the shortage of cadres. If we leave everything on spontaneity and fritter our limited resources, we will fail to advance. Proper planning is necessary, taking into consideration the concrete situation, our influence in particular areas, issues affecting the peasants and availability of cadres. Most of the states where we are weak are big in size and population. Comrades working at the state centre are very few and it is not possible for them to regularly look after the district centres. In case of any incident anywhere, it is very difficult to instantly rush from the state centre for effective intervention and giving continued guidance. Communication is not easy, fund is also very short. Even in weak states, we have some relatively strong pockets of influence scattered throughout the state. Some cadres are also available in such pockets. If we divide the state into several regions around one strong pocket of influence and regularly nurse those centres from the state centre, then a regional leadership may develop to spread our activities in contiguous areas and nurse the weaker districts around it. Cadres from strong pockets cannot be shifted at our will to the state centre by they may be used at the proposed regional centre. Tactically we have to select some priority areas and spread contiguously. In class society spontaneous outbursts will be there and we must take hold of that but spontaneity cannot substitute planned efforts.
  2. Democratic functioning and cadre building: Feudal culture and habits prevail upon the society and it tends to influence our organisation also. Democracy is inconsistent with feudalism. In feudalism, the heroes and the lords decide everything. Lord when pleased can give reward to and when angry can also whip anybody. Hero like individual functioning as well as personal likings and dislikings spoil the organisation and impedes the process of cadre building. Habits of readymade prescription giving like mobile physician and hero-like functioning makes the cadres intellectually inert. Whatever problem is there in a locality, the responsible leader should go to the area, meet the committee, however weak it may be there, discuss the problem, analyse the situation and help the comrades to reach a decision. Only in this way comrades learn in practice how to analyse a given situation, judge the correlation of class forces and dialectically come to a conclusion. Individual prescription giving by different leaders always tends to create disruption within the organisation. The heroes forget that the peasantry itself are to emancipate themselves and they lack confidence in the capabilities of cadres. Again cadres can not be built except without projecting examples of lofty ideals, high degree of morality and self-sacrificing attitude of the leadership at all level. This basic teaching on organisation has to be followed.

In the Hindi-belt we are very weak. Socio-economic condition there is favourable for us. But, the leadership is inexperienced. Leaders from stronger states cannot help much because of language problem. Proper leadership has to be developed in this region. The CKC may think of setting up some sort of coordination in this region and meet it regularly. Political and organisational classes have to be organised in this region with special stress.

  1. Fund: Fund is very much necessary for expanding organisation. Fund collection is a part of class struggle. Experience shows that it is the poor who can contribute enormous fund provided they think AIKS to be their own organisation. Even in weak areas, how selectively, at the initial stage, fund can be raised was settled by the Cuttuck Commission decade ago. But it remains to be implemented.
  2. Cuttuck Commission stressed upon the strengthening the centre particularly at the state and district levels. In few states some improvement is there. But in many states, specially in the Hindu areas, the functioning even at the state level is not much improved. Emphasis has to be given upon it.
  3. In conclusion, it can be said that the situation is favourable. Our organisation should rise to the occasion and strive to make headway. This commission report is a complimentary to and review of the Cuttuck Commission report.

Benoy Konar


Annexure: Cuttack document on organisation.

Cuttack document: On Organisation (Adopted by 28th conference of AIKS at Cuttuck, November 19-22,1995)

After the discussion on democratic functioning of Kisan Sabha, the Chairman’s submission was as follows:

  1. The title of the subject does not correspond to the outline of issues as referred to the commission. The title should have been problems of strengthening organization and the outline should contain another item such as ‘Democratic functioning’ of the Kisan Sabha’.
  2. a. Strictly speaking, the peasantry is not a class in itself, but a social category tending to be split into two separate classes, i.e., the bourgeoisie and the proletariat or landless labours with the advance of capitalism which is the order of the day. The upper section of the peasantry has its closeness with the industrial bourgeoisie and the lower section has closeness with the rural labourers. The entire peasantry including the rich section has its conflicts with the T.N.Cs. and big bourgeoisie. With the advance of capitalism in agriculture the grip of the T.N.Cs. and monopolies upon the agrarian sector will increase. Plough will be replaced by tractors, natural fertilizer by chemical fertilizer,old irrigation devices by modern pumps. Use of pesticides and hi-breed seeds will increase. All these items are controlled by the T.N.Cs. and monopolies. Even in matters of storage and marketing, they will largely remain the dominating force. With the deepening of the crisis, this conflict is likely to grow.

Two types of peasants unity are there, one-peasant unity under the influence of the bourgeoisie where rich and middle peasants would be a guiding force (this type of unity prevails in most parts of India which is of no use for the growth of the L. & D. forces, required for social change), the other – peasant unity under the influence of working class, where the poor peasants will play the dominant role.

This is what we desire. But weaker force cannot draw the stronger force closer. Hence, the poor must be made a power. Only by organizing themselves on their own demands and by uniting with the agri-labourers, which makes them strong, and by lending active support to the cause of the richer section in its conflict with the big capital, this type of unity can be achieved. It is a complex and simultaneous process.

b. Though part of the peasantry, the agri-labourers are emerging as a distinct class. They are the most poor with most revolutionary potential. They must be made a pioneer force in the peasant movement. Two kinds of main contradiction are there in the rural areas. One, the contradiction between the agr-labourers and their employers and the other contradiction between the peasantry as a whole (including agr-labourers) and the landlords, the T.N.Cs. and monopolies. Where landlordism is weak, the domination of big capital over agriculture is stronger. The former contradiction is direct, easy apprisable even with low level of consciousness, whereas the latter, though stronger than the former is indirect and demands higher level of consciousness to be apprisable. Agr-labourers – peasant unity – where agr-labs play the guiding role is a must. For this, the agr-labs must be organized on their own specific demands (wage, social security, house-sites, against social discrimination and atrocities and thus be made a force to reckon with, at the same time they must not be made selfish but be roused and rallied in defence of the interest of the peasantry against the onslaught of the landlords, M.N.Cs. and the monopolies. As far the agr-labs are organized for their own cause, as far they actively fight for the cause of the peasantry and as far the conflict between the peasants and their main enemies sharpens, so much unity will be achieved.

Method of agr-lab’s struggle for wages etc should not copy that of industrial workers. In industrial sector, the number of workers far outnumbers that of employers. But in rural sector, the agr-labs, though large in numbers are still minority and the number of the employers is generally larger and they are stratified. Hence agr-labs must remain firm in their demands but must be flexible in their approach. Unless the agr-labs are able to win over a good section of the employers-peasants by way of reason, campaign and appeals for unity against their real enemies, it would be hard for them to achieve success. In industrial sector, the T.Us. conduct campaign for mobilizing public opinion not for winning over employers, but to inflict defeat upon them. But in rural areas the task of organizing vigorous campaign for winning over a good section of the employers is imperative. In rural areas the T.N.Cs, the monopolies remain veiled and both the agr-labs and the empoloyer-peasants tend to treat each other as main enemy and thus miss the common enemy. Only by organizing the agr-labs and by organizing persistent and educative campaigns we can make the both conscious about the real enemy. Reformism denies the necessity of organizing the agr-labs on their own issues in the name of peasant unity and sectarianism denies the importance of unity. In reality both of these trends shield the real enemy.

To initiate wage struggle in new areas, Tamil Nadu experience be taken into account of. They selected a number of contiguous villages, conducted campaign and ground work. The demand was very moderate (not statutory wage). Quantum of increase was not their concern, their concern was to see that whatever increase is there it is realized through struggle. It created confidence among the agr-labs which could help them to advance the struggle further. Initially it was the experience of West Bengal also.

  1. Reformist concept of kisan unity based on dominance of rich and middle peasants still hunts our Kisan Sabha in most of the areas. This erroneous outlook has to be fought out at all levels. The centre have to sit and discuss the problem with at least state-level and district-level leaders at the state centre.
  2. Besides land and wage movement, identification of concrete issues in a locality is not difficult provided one cares for this. Basic contradiction expresses itself in many piecemeal contradictions in the society. A small embankment, a drainage scheme, a small irrigation scheme, a village connecting road, school, an eviction from land or homestead, a dispute over getting back of mortgaged land, a police-repression, a case of social atrocities, local crisis over fertilizer, a cooperative, relief problems and even matter of family feuds can be the issues. Initially peasants objective remains limited to the immediate issues. But we should not attempt to tie-up them to the immediate issues only but by taking the threat of the issue, try to bring the whole truth before them, try to broaden their outlook so that they realize that all these issues are not isolated but are part and parcel of the basic problem. Even the wage and land struggle be conducted with this objective. It will help in recruiting new activists who have to be educated and brought into organization subsequently. With this small struggles the peasants will eventually help increase our mobilizing capacity.
  3. Caste prejudices and discrimination is rampant in most parts of India. Even in advanced states, it is there, though in subtle form. This issue, if taken up earnestly and seriously, can help a lot in spreading our influence and organization.

We fail to take up issues of social oppression because we ourselves suffer from feudal prejudicies. Class origin of our cadres and the social environment have its constant effects. Our comrades even cannot identify the feudal prejudices. We have to organize vigorous campaign over these issues among the peasantry and educate our comrades as well. If we can take up the issues, the very logic of struggle will lead us to joining hands with other organizations and forces that can be united. In reality it is a struggle against feudalism.

  1. Problems of cadres is very serious. Hence proper planning should be there to depute them properly. Whenever there is a struggle in any locality, the state committee or the D.K.C. should not leave it to the local leaders but rush to the area, help our comrades in organizing and leading the struggle. Only thus confidence can grow and new cadres come in. Whatever cadre is there should be judiciously utilized to build some struggle in some areas which will in turn be a source of new cadres for extending struggles to newer areas.
  2. a. Cadre training and recruiting vs. Bureaucratic functioning:

Cadre is the vital question Training has two sides, one theoretical, other practical. Theoretical classes should be there but it would be of no use unless they are trained through practice. Bureaucratic and hero-like functioning of the leader impedes the process of cadre building. Habits of readymade prescription giving like mobile physicial and hero-like functioning makes the cadres intellectually inert. Whatever problem is there in a locality, the responsible leader should go to the area, meet the committee there, discuss the problem, analyse the situation and help the comrades to reach a decision. Only in this way cadres learn how to analyse a given situation, judge the correlation of forces and dialectically come to a conclusion. Individual prescription giving by different leaders always tend to create disruption within the organization. The heroes forget that the peasantry itself are to emancipate themselves. They lack confidence in the capabilities of cadres.

Democratic functioning is lacking in many areas. This practice has to be seriously dealt with. At every level the committee, how much weak it may be, should be met, problems discussed and debated and course of action should be decided upon there. Feudal habits and outlook always breeds individualism and bureaucratic attitude. Constant watch should remain there to check it.

b. Membership:

There remain elements of doubt about the membership figures. By manipulation we can only cheat ourselves, not the enemy. Weakness if not admitted cannot be overcome.

Enrolment of membership should be taken as a campaign and movement. Whatever forces are there in a locality they should collectively organize street corner, village group meetings, speak out to the peasants the aims and objectives of Kisan Sabha and enroll members. Issuing of leaflets and pasting of posters for the purpose would be useful.

Just after any struggle, our cadres should appeal and approach the concerned peasants to be members of K.S., a committee be formed with the best elements as choiced by the peasant themselves.

List of members be prepared and kept at the Taluka or Block level in weaker areas and at G.P. (Gram Panchyat) levels in areas where very large number of members are enrolled.


  1. This task is very essential for strengthening organizations. Not to speak of giving wages to wholetimers, comrades fail to attend even committee meetings because of dearth of fund. The state committees should organize fund collection drive and activise the lower committees in this respect. In weaker states mass collection on its true sense will be a utopia at this stage. Even where there is no mass base worth its name, there are many friends among the peasants scattered over the taluk or block area. The Block committee should prepare a list of them and approach them at the time of harvest to contribute generously. At harvest time, before one puts his crop in grannery, remains liberal about giving contribution. Even donating one bag full of paddy or wheat is not uncommon. After any struggle is conducted, peasants should be appealed for fund. Fund collection has to be taken as a class struggle, . not as begging. We have to make peasants realize that it is their own interest to contribute to the fund for. building their own organization. Money coupons should be used for small collections.
  2. Deputing cadres:

Not to speak of lower levels, even the state or district centres have no cadres exclusively for working for the centre in many states. All state committees should depute a number of whole timers for the centres. Initially it may be two or three or five in the weak states. Same process should be followed for the district centres. The CKC should sit with the respective state committees and help them to chalk out programmes for the purpose. It should be borne in mind that whole timers do not men employees of kisan movement. They must be recruited from among leading comrades or comrades having potential qualities and sacrificing ideals. Proper wages should be provided to them as well.

  1. Committees and Conferences:

Villages with at least 25 members and G.P.areas having 100 or more members should have village or panchayat committees and annual conference should be held. In weaker states or areas, Block/Taluk level conference be held annually. Except without holding regular committee meetings and taking some programmes of campaign, agitation or struggles new cadres cannot be built. Specific comrade or comrades of higher committee should remain present in the lower committee meetings.

  1. Literacy work, health and science awareness, cultural movements etc help to enlighten the peasantry and should be included in the agenda of kisan sabha. Even in areas where organizing struggle on class issues is not possible for the moment because of lack of confidence or fear psychosis, movements on these issues can help us to penetrate in new areas.

Even in strong areas of class struggle the importance of all these issues is formidable. The peasantry at large and particularly the vast poorer section of them remain intellectually and culturally depressed and it becomes very difficult to bring up leadership from them. Enemies are also very much active in polluting the people with degenerating culture. Hence these movements are very much necessary to raise the intellectual level of the peasantry at large and the poorer section in particular.

These movements are often taken as reformist movement, as no element of excitement and militancy are there in these movements and no immediate effect is tangible. Comrades fail to realize its far-reaching effects.

  1. Mass organization: Kisan Sabha is an independent mass organization but not at all void of any political aim. Proper understanding about this dual character is lacking in the organization. Recruitment of millions of members alone cannot make it a mass organization in its true sense, unless it is able to rouse and activate its members from its own platform and earns their confidence. While organizing peasants on various issues, trend of using the platform of political party are rampant. Postering, wall writings, issuance of leaflets are seldom done in the name of Kisan Sabha. Even in mass meetings, speakers often forget that they are speaking on behalf of Kisan Sabha. In India all political parties have their own mass organizations. This practice also adversely influence us. Political identity of peasants, rather than the merit of their issues influences our cadres more in our attitudes towards them. It restricts us to draw and politically enrich the peasants who for the time being are in the political camp of the enemies. Comrades forget that even if all the members of a committee are members of a particular political party, still it is a mass organization and discussion in the committee should be conducted accordingly. This habit goes down to the lower levels and even to the level of meeting of peasants. Sustained efforts should be there to change the existing habits and thinking. Separate offices must be there, but how far or near are those offices situated from the offices of a political party, matters little. The deciding factor is the style of functioning.


Convenor: Com. Suryakant Mishra.

  1. The Commission set up by 31st Conference of AIKS held at Nasik, Maharastra on January 28-31,2006 to discuss the report and recommendation of National Commission on Farmers (NCF) has to make following observations after deliberation and discussion in details.
  2. The Terms of Reference (TOR) and composition of NCF along with the chapter wise executive summaries and Composite Financial Summaries have been annexed herewith for ready reference. It is impossible to circulate chapter wise details and annexure appended with the three voluminous reports of, which extend over 1000 pages. Composite Administrative Initiatives recommended by the Commission (NCF) have not been appended herewith the similar reasons. The entire report is available at the Website: http://www.kisanayog.gov.in.
  3. It is important to mention at the outset that the first volume of the report was submitted in December, 2004 and the second report was submitted in early August, 2005 in the expectation that there will be adequate time for Central and State Governments to examine the suggestions for appropriate financial support in the respective budgets for 2006-07. Given the lack of political will, instead of responding to the urgent need of intervention to mitigate the deep-rooted crisis in agriculture and acute distress of peasantry unprecedented in independent India, the Government decided to kill time by setting up another Committee on Agriculture in.the National Development Council under the Chairmanship of the concerned Union Minister, Shri Sharad Pawar. This Committee in its turn has set up six subcommittees on identical issues in a futile repetative exercise. The manner in which this Committee has started functioning indicate that it will take no less than a year for a report to be finalized. Before taking up to the further details of the report and recommendations made by the NCF, AIKS wants to record its note of appreciation for the effort taken by the NCF to address most of the urgent needs of Indian agriculture and peasantry and formulating recommendations which could have been fully utilized as the basis of preparation of the ensuing budget and discussions in the NDC subcommittee. Thanks are due to Prof. M. S. Swaminathan, Chairman NCF also for eliciting views of AIKS and other farmers’ organizations in the process of preparation of the report.

The third report of NCF was submitted very recently, after the first draft of this note was circulated. This report seems to be appreciative of the Union Government taking “several significant steps” in the mean time, e.g. National Rural Employment Guarantee Act (NREG), Bharat Nirman, National Horticulture Mission, National Rural Health Mission (NRHM) and some steps towards credit and market reforms(Chapter- II, Volume III).However, the fact remains that NREG Act legislated under pressure from the Left is yet to be implemented; Bharat Nirman is yet to take off and includes none of the items recommended by NCF in para 7 chapter I of Summary in the Third report; NRHM allocations made so far are in no way going to increase the public expenditure in health to 2-3% of GDP as promised in CMP since it is yet to cross the 1 % mark; not all the steps taken towards credit and market reforms by the Government are welcome and these have failed to reverse the suicide deaths rightly mentioned in the report. However, NCF makes a very welcome proposal to submit a Draft National Policy in April 2006 followed by discussions with farmer organisations between May and December 2006, so that it could be finally adopted before the 60th anniversary of Independence.

  1. The report in general reflects the concerns of AIKS expressed in its two documents on Alternative Agricultural Policy, the first in the early years of liberalization and second about a decade thereafter, vindicating the apprehensions expressed in the first. While the AIKS document deals very briefly with the genesis of the present crisis originating from the bankrupt policies pursued by the successive bourgeois landlord governments at the Centre and different states along with the impact of change of the correlation of forces at the global scale in favour of imperialism, the NCF reports deal much more extensively with the immediate outcome of the aforesaid policies and developments, not going into the historical context which led to this outcome as detailed in AIKS documents. The conclusion with regard to the immediate causes of the maladies and the steps needed to mitigate them as proposed by the AIKS and NCF are by and large similar. The extensive outlay of NCF’s report makes it a very useful and essential reading for all Kisan leaders and activists interested in updating their understanding about the present agrarian problems and their possible solutions in fuller detail.
  2. It is noteworthy to find “the five basic factors which are central to the present crisis” as per NCF’s report (see chapter I, Wake Up Call- vol 2) starts with the “unfinished agenda in land reforms’; quantity and quality of water, technology fatigue, the access, adequacy and timeliness of institutional credit and opportunities for assured and remuneration marketing” have rightly been highlighted. AIKS has always emphasized on the need of land reforms as the basis of all round development in the country and points out that the focus of attention that this single issue deserves has never been adequately addressed. A cursory and formal mention of this issue is not enough since government at the center and most of the States which shy away even from mentioning this, are actually reversing land reform in a big way. The NCF reports seem to be shying away from mentioning the experience and achievements of the Left led Governments in respect of agrarian reform.

Another very leading factor in the present crisis, namely declining investment in agriculture, though is dealt with adequately in other parts of the report, has somehow not been enlisted in ‘the five basic factors’. The second volume of the report highlights in the first chapter itself that investment in agriculture has stagnated at 13% of GNP and the share of agriculture and allied activities in the total allocation of all states/ UTs is a meagre 6.46% of the Tenth Five Year Plan and 5.62% for the Annual Plan of 2003- 04. The “Composite Financial Summary” of the two reports added together (Rs. 3496 crores + Rs. 8337 crores) amounts to Rs. 11,833 crores (the Third Report does not provide any) excluding the cost of certain items recommended, including those of the ‘Composite Administrative Initiative’ which are yet to be worked out. Considering that even this amount will not substantially change the investments in agriculture and allied sector in terms of percentage of .GNP and total budgetary outlay of the Central Government, the 31 st Conference of AIKS demands that this total amount must be provided in the Union Budget, 2006 – 07. It is difficult to agree with the finding of NCF that “the central component has grown faster in terms of investment… it is now realized that critical weaknesses lie in the State Component and this must be addressed, especially keeping in mind that agriculture is a State subject”(P31, Vol. III). It has to be remembered that the States are in fiscal crisis because of the very policies adopted by therCentral Government. However, the cost of ‘Composite Administrative Initiation’ may be shared by both Centre and the States on a 50: 50 basis. The report rightly reminds us of what Nehru said in 1948. “ Everything else can wait but not agriculture” – a statement that remains equally valid 58 years after it was made, though never to be implemented.

  1. The issue of institutional credit and insurance, being the subject matter of discussion of another Commission set up in this conference, are not being taken up here. So also, the issues related to cost and price, Minimum Support Price (MSP) contract farming and APMC Act etc. which are under the preview of another Commission, are not included here. The chapters on ‘Enhancing Cotton Productivity, Quality and Global Competitiveness’ (P 129-147, Vol. I), ‘Mission for the Prosperity of Sugarcane Farmers’ (P298-352, Vol. II), Agricultural Market Reforms (P394-443,Vol II) AND Chapter III of the 3rd report advocating a “Single Indian Market” for agricultural products, notwithstanding some of the very controversial, debatable and even unacceptable formulations built into these, provides a lot of insight and inputs in this area which may be appropriately utilized by the concerned ‘Commission on Costs and Prices’. It can also take help of the Annexures III of the Second Report titled ‘Agricultural Credit; Some Issues’ (P458-466). Other two Annexure, namely the suggestions sent by NCF relating to NREG Bill 2004 and the Seed Bill 2004 are also not dealt with here for obvious reasons. The first has already been enacted and though AIKS has already taken a view about the second. Certain sections of these aspects in the NCF’s report requires updating. The Vyas Committee report on Cooperatives, for instance, has disappeared from the limelight for quite some time now. Vaidyanathan Committee report is the latest one in this series and it has been taken up by the Union Government for implementation. Above all, the whole range of these issues are inseparably linked with the outcome of the 6th Ministerial Meeting of WTO held at Plongkong. AIKS can claim genuine pride for not being fooled by the illusion spread by the Union Government in this regard ever since the days of Marrakesh. The only thing that is noted here is that it is not only Agreement on Agriculture but the entire outcome of Plong Kong discussions on NAMA, GATS and TRIPS, everything is going to adversely affect Indian agriculture and peasantry ever more than before and there is no justification in underplaying this danger.
  2. Another important issue highlighted by the NCF is the very disturbing trend of the deceleration of the growth rate of agriculture since mid-1995. In particular, the fact that the growth rate of foodgrain sector has fallen behind the population growth rate has endangered national food security. Agriculture had grown at 3.2% from 1982 to 1996 and then decelerated to 2.1% in the Ninth Plan, followed by around 1.5% in the first 3 years of Tenth Plan against a target of 4%. However, it is difficult to understand the rationale of the strategy proposed to achieve a 4% agriculture growth rate based on 8% growth rate in horticulture. While having no reservation about the need for growth in horticulture, AIKS is of the view that the growth rate in the food grain sector cannot be compromised. Further, a higher growth rate for food grains per se cannot ensure food security to our starving millions, unless optimal consumption is ensured by increases in employment and real wage, both of which have been declining. The report rightly mentions that ‘in India producers are also major consumers of food grain’, (P 408 , Volt II) unlike the developed countries where farmers hardly constitute 5-10% of the population. In developed countries it is a consumer vs. producer situation whereas ours is a situation where producers are consumers as well. Enhancing their purchasing power by increasing the price of their produce, wages and employment can expand the market for our agricultural products inside the country. Our agriculture must not be dependent on export. Similarly, our food security must not depend on import. NCF’s recommendation for National Food Security Act on the lines of the Employment Guarantee Act is welcome, and AIKS will take up this issue in a big way. NCF however seems to be shy of recommending the restoration of a Universal PDS, one of the major target of onslaught of the neo-liberal policies.
  3. Another issue dealt in much detail in the NCF’s report is the need to augment knowledge -intensive agriculture. In spite of repetitions, as these appear in relation to other items as well, the main thrust is sought to be given to the application of new developments in science and technology, be it in the field of soil health, water use, agroclimatic – region – based planning or coastal fishing. The use of information and communsication technology to develop Village Knowledge Centres, which has been successfully implemented in some villages of Pondichery to start with, can be successfully replicated in other areas. The Village Knowledge Centres run by marginalized women of middle school standard literacy with some training in computer could provide many useful informations to the farmers, ranging from weather forecasts to market information. If M. S. Swaminathan Research Foundation could make it happen, there is no reason why Kisan Sabha in more organised areas would not be able to replicate it. The only word of caution relates to the choice of appropriate technology that can meet the felt needs of small farms of the particular locality. Technology driven growth minus redistributive land and asset reform is comparable to putting the cart before the horse i.e. a growth that cannot be sustained. The experience of green revolution is a case in point. The NCF report having claimed that the Green Revolution tripled food grain production (80% through yield enhancement) goes further to make the debatable claim that it halved the percentage of hungry and poor people ( Para 1, Chapter II, Summary, vol. III). There are numerous studies which establish that the Green Revolution increased the rich- poor and regional divide. A FAO sponsored study even showed that malnutrition increased 26-30% in the hey day of the Green Revolution. Further, no technology is class – neutral and therefore what we need is pro-poor, gender and eco-friendly, local need and resource based, labour intensive, low – cost and easily transferable technology relevant to concrete socio-economic situations.. Kisan Sabha will make every effort to adopt, use, develop and disseminate such technologies in the interest of the development of productive forces and class struggles. NCF’s proposal to form a ‘National Federation of Farm Technology Mission’ as an umbrella of all crop wise and other relevant technology missions best chaired by a practicing farm woman or man with proven record of creativity in small farm management’ (P 15- 16 Vol. I) is welcome. So also is the proposal to increase research and extension investment to 1 % of agricultural GDP from current level of 0.34% (Para 18, Chapter 2, Summary, Vol. III). However the proposal to provide tax holidays or increased tax concessions for private sector contributions to R&D from the present 14% to 33 % is not acceptable to AIKS.
  4. It is important to note that the recommendations made by NCF were guided by the underlying principles of affordability and implementability (P 16, Vol. I) and not by some pious wishes. This leaves no excuse for the government to evade its responsibility. So far as the additional resources necessary to implement these recommendations are concerned, it is well within the affordability limits. Limitations of space prevent us from going into the details of the ‘Administrative Initiatives’ prescribed by NCF although we shall insert a word of caution. Apparently the administrative arrangements suggested envisage a large number of bodies to be set up at different levels, which runs the risk of multiplication of vertical chains of administration making integration, coordination and convergence more and more difficult. It is advisable to opt for one umbrella approach – as suggested elsewhere in the NCF report itself. The role of Panchayat Raj Institutions (P.R.I) taking a leading role to bring about this convergence with a holistic approach needs to be emphasized. A massive capacity -building component in the form of training, sensitization and empowerment of these bodies and their women, SC, ST, OBC, and practising small farmer members and functionaries in particular, has to be built into the entire gamut of ‘Administrative Initiatives’ recommended by NCF. The role of SHG, CBO, NGO etc in this process, considering the vast potentials they offer, has to be considered complementary to the leading role of constitutional bodies like Panchayats.
  5. NCF has done an excellent job by widening the scope of agriculture to allied activities like fishery and livestock rearing. The chapters titled Livestock and Livelihood’ (P 174 – 179, Vol I) and ‘Fish for All ‘( P 51 — 141 Vol II ) provides a lot of insights into these sectors, and into their problems and potentials. AIKS will take appropriate initiative to take up these issues. The only point to be noted in this regard is that ‘Fish for All’ should not be primarily export dependent. Many local species are facing extinction and reckless catches at the coasts, which are being thrown open to Indian and foreign corporate houses is yet another danger threatening the rich biodiversity of our country. These ominous developments must be resisted.
  6. Two other chapters, titled ‘Productivity and livelihood Enhancement in Rain fed Areas’ (P62- 89, Vol I ) and ‘Enhancing Productivity, Profitability , Stability and Sustainability’ (P142-393, Voi-ll) deserve special mention. These provide problems as well as options available in different agroclimatic zones e.g. hill, arid and coastal zones. They further deal with diverse potentials such as the cultivation of medicinal plants, organic farming, bio-fuel plantations etc. These are subjects that all Kisan leaders and activists must get aquainted with, in order to enable themselves to concretely intervene in concrete situations. Land and water use in different situations is one area of utmost importance. We are rightly reminded of the golden rule that yield per unit area of land should not be over emphasized. What is important is the return per rupee investment and (still more important) per litre water used. What is definitely debatable is whether land use should necessarily follow the market needs (P38,Vol I), entirely ignoring the sustainability. Responding to an immediate market need by way of converting lands growing food grain, for example, to brekish water pisciculture or tea plantation may not be sustainable in the long run. Land Use Boards ‘to be effective’ have to take such factors into consideration.
  7. One cannot but agree with very useful recommendations made by NCF in relation to ‘Integrated Life saving support programme for Farm Families Facing Acute Distress’ ( P 33-61, Vol I), ‘A New Deal For Women in Agriculture’ (P 80 -112, Vol I) , Horticulture ( P 113 – 128, Vol I) , ‘ Beyond Tsunami’ (P 180 – 190, Vol – I) etc. The 31st Conference of AIKS resolves to take up these issues in right earnest with the masses and governments as well. Notwithstanding some of the points raised above, this conference considers the overall report and recommendations submitted by NCF to the union Government, and calls for immediate intervention.

There are many positive points regarding the report. It is perhaps the first effort after the National Commission on Agriculture in the 1970s that has attempted an analysis of indian agriculture in such detail. Almost all aspects of agriculture are dealt with and it is rich in the technical details of agricultural science. Some of the positions in the report that we could easily agree with are the following.

  1. A comprehensive set of immediate relief measure suggested to address the agrarian distress (see Volume 2, pp. 9-18).
  2. Recommendation of agricultural planning to be organized on a watershed basis.
  3. Steps suggested to increase irrigated area and other measures, such as the implementation of a million wells recharge programme.
  4. Establishment of a National Land Use Advisory Service, linked to State and Block Level Land Use Advisory Services.
  5. Establishment of network of advanced soil testing laboratories.
  6. Establishment of about 50,000 farm schools for the purpose of farmer-to-farmer learning.
  7. Initiation of a National Horticulture Mission for capacity building in post-harvest technology.
  8. Steps to specially promote dryland farming.
  9. Organisation of Small Holders’ Horticulture Estates.
  10. Integration of all crop-wise technology Missions.
  11. Credit reform including an enhancement of the total amount available for farm loans and a reduction in interest rates.
  12. Establishing an Indian Trade Organisation (ITO) and our own boxes for domestic agricultural support on the model of WTO’s Blue, Green and Amber Boxes.
  13. Cataloguing of indigenous varieties of different crops to prevent biopiracy.
  14. Promotion of organic farming.
  15. Establishment of Village Knowledge Centres to promote the use of ICT in agriculture.
  16. Suggestion to transform “microfinance to livelihood finance”; that is, the use of SHGs in agriculture and the formalization of their forward and backward linkages.
  17. Emphasis on the revitalisation and democratisation of co-operatives.
  18. Suggestion to revamp the crop insurance system by making it more farmer friendly and reducing premiums.
  19. Careful use of biotechnology in agriculture: for instance, statements like “Biotechnology can help, but only if it is pro-poor, pro-women and pro-environment”, “the public sector must come up with competitive Bt cotton hybrids so as to lower the seed cost and benefit resource poor farmers”, and “insurance should be Introduced along with GM seed sale”.
  20. Improvement in the implementation and expansion (to more crops) of the Minimum support Price system: “There is need for a much stronger protection of MSP in different regions of the country for all commodities” ( Vol. 2, p. 412).
  21. Making regulated markets efficient and establishing more rural periodic markets.
  22. Need to reform age-old marketing laws so as to reduce transaction costs for farmers.
  23. Emphasis on the reduction of transport costs of agricultural commodities across the country.
  24. Emphasis to raise the investment in agricultural research to at least 1 percent of the agricultural GDP. This is only a small list of positive suggestions put forward in the report.

The 31st conference of AIKS demands the UPA Government make necessary provisions in the Union Budget 2006 – 2007 and ensure the implementation of these recommendations pending further discussion in any other forum.


Convenors: Com. Tulsidas and V.K. Ramachandran


Debt is at the centre of contemporary agrarian distress in India. The cutback in formal sector credit has been a major factor in the present agrarian crisis, and financial sector liberalization in the period of structural adjustment has had a rapid, drastic and disastrous impact on the credit system and on the livelihoods of the peasantry and the rural poor.

Three Phases of Banking Policy in India

In respect of banking policy, the period from 1969 to the present can be characterized in terms of three phases. The first was the period following the nationalization of India’s fourteen major commercial banks in 1969. This was also the early phase of the “Green Revolution,” and one of the objectives of the nationalization of banks was for the state to gain access to new liquidity, particularly among landlords and rich farmers, in the countryside. The declared objectives of the new policy with respect to rural banking – what came to be known as “social and development banking” – were: (i) to provide banking services in previously unbanked or under-banked rural areas; (ii) to provide substantial credit to specific development activities, including agriculture and cottage industries; (iii) to provide credit to certain disadvantaged groups, for example, to small and marginal farmers, agricultural workers, Dalit and scheduled tribe households, and to women.

The second phase, which began in the late 1970s and early 1980s, was a period when the rhetoric of land reform was finally discarded by the ruling classes themselves, and when the major instruments of official anti-poverty policy became programmes for the creation of wage employment and loan-cum-subsidy self-employment schemes. This was a period of directed credit, during which the declared policy was to direct credit towards the “weaker sections.”

The period after nationalization was characterized by an expansion of bank credit to rural areas; the credit outstanding from rural branches tripled in the 1970s and continued to rise in the 1980s. Rural deposits grew rapidly after nationalization: their share in aggregate deposits doubled in the 1970s, from 6.5 per cent in 1972 to 12.6 percent in 1980, and continued to grow, although at a slower pace, in the 1980s, reaching a peak in 1990-91. During the first and second phases, the central and state governments adopted a range of policies to encourage production of food grain, including policies of price support, subsidies for inputs such as fertilizers, research and development in high yielding varieties and agricultural extension.

Nevertheless, in the 1970s and 1980s, rural credit policy was biased – as was the green revolution itself – towards landlords and rural rich, who appropriated to themselves a large share of the increased credit supply, and towards regions where the development of productive forces was relatively high.

Liberalisation after 1991 sought to jettison all the achievements, however limited, of the first two phases. The new policy objectives were heralded by the Report of the Committee on Financial Systems (CFS), widely known as the Narasimham Committee, it called for “a vibrant and competitive financial system…to sustain the ongoing reform in the structural aspects of the real economy.” The Report demanded, in essence, that social and development banking be discarded, and that all “directed credit programmes be phased out.” It also recommended that interest rates be deregulated, that capital ad- eouacy norms be changed, that branch licensing policy be revoked, that a new institutional structure that is “market-driven and based on profitability” be created, and that the part played by private banks, Indian and foreign, be enlarged.

Impact of Financial Liberalization on Rural Credit:

The closure of rural bank branches

A stark illustration of the direction of liberalization is provided by the fact that not only did rural bank branch expansion decelerate after 1991, but thousands of rural bank branches were actually shut down (see Table 1). There were 35,216 rural bank branches in India in 1991; the number declined to 32,673 in 2000 and 32,200 in 2004. At the same time, the closure of branches was accompanied by a downgrading of manpower and agricultural-scientific expertise in rural branches.

The fall in rural advances:

Rural India has always received a disproportionately lower share of the total credit advanced by scheduled commercial banks. Nevertheless, there was an increase in the share of advances from rural bank branches, from 3.3 per cent in 1969 to 15.1 per cent in 1992 (see Table 2). Since then, the share of credit advanced by rural branches has steadily fallen. The share of credit advanced by rural branches in total credit fell from 14.2 per cent in 1990 to 10.6 per cent in 2002. Thus, a feature of the agrarian crisis was that even the rural branches of scheduled commercial banks began to wash their hands of their responsibilities to the rural areas.

Credit squeeze on small peasants and agricultural labourers:

The credit policy in the countryside discriminated against the poorer sections. The share of small and marginal farmers in the total advances made by rural bank branches of commercial banks declined, while the share of large farmers increased commensurately (see Table 3). The worst sufferers are the poor and middle peasants and, among them, tenant cultivators. Small tenants in most of India do not have cultivation rights even though they perform all operations on the land, and without collateral, their access to credit is severely constrained. Many tenant cultivators are to be found in the list of farmers’ suicides.

Plummeting Rural Credit-Deposit Ratios:

While rural savings have risen, the advances by rural banks have declined – the obvious consequence is that the credit-deposit ratios of rural branches have fallen steeply. Credit-deposit ratios of rural banks have never crossed 63.9 per cent at the national level.

Nevertheless, in the years following bank nationalization, the credit-deposit ratios of rural scheduled commercial banks rose from 37.6 per ent in 1969 (see Table 4). The savings of rural people are used less and less for reinvestment in the countryside.

Rural credit deposit ratios also show how rural credit is an instrument of active discrimination as between the States of the Union. While West Bengal has a commendable record in mobilizing rural savings, the credit-deposit ratio of rural banks fell to a meager 26.3 per cent in 2000. Similarly, the corresponding credit-deposit ratio in Tripura was 28 per cent in 2004-05.

The new market orientation also leaves poor regions behind, widening regional disparities. The credit deposit ratio of rural branches in Jharkhand, a State whose rural backwardness is widely recognized, was 19 per cent in 2002. The States of North Eastern region of India has also suffered because of liberalization of the formal credit system. The credit-deposit ratio of the entire North Eastern region was just 27.2 per cent in 2002 (Table 5).

Priority sector advances: Decline in allocation and deceptive re-definition:

One of the declared objectives of banking policy after nationalization was to expand the flow of credit to agriculture and small industries, or what were termed “priority sectors.” As Table 6 shows, the share of priority sectors in the total advances of scheduled commercial banks rose from 14 per cent in 1969 to 33 per cent in 1980. The RBI set a target of 40 per cent for priority sector lending and by the mid-1980s this target was met. From 1985 to 1990, in fact, the target was over-achieved, that is, more than 40 per cent of total advances went to priority sectors. From 1991 to 1996, the share of priority sector advances fell, in line with the recommendations of the Narasimham Committee. Credit to agriculture from public sector banks formed 13.9 per cent, 15.8 per cent and 15.6 per cent as a proportion of net bank credit in 1995, 2000 and 2001 respectively, all below the targeted level of 18 per cent.

At first glance, the direction in priority sector lending appears to have been reversed over the last five years. This is, however, a reversal by redefinition: “priority sector” lending now includes advances to newly-created infrastructure funds, to non-banking finance companies for on-lending to very small units, and to the food processing industry. Loans to multinationals like Pepsi, Kelloggs, Hindustan Lever and ConAgra now count as priority sector advances!

Current guidelines require domestic commercial banks to extend not less than 10 percent of net bank credit to the “weaker sections”, including small and marginal farmers, landless labourers, artisans, and beneficiaries of government-sponsored poverty alleviation programmes. Further, one percent of net bank credit has to be extended to very poor borrowers (that is, with incomes less than Rs. 6,500 per annum) under the Differential Rate of Interest (DRI) Scheme. As on 31 March 2003, as against the mandate of 10 percent, public sector banks had extended only 6.7 percent of net bank credit (Rs. 32,304 crore) to “weaker sections.” Only 6 out of 27 public sector banks had achieved the 10 percent goal, while the remaining banks had achieved between 9.4 percent and 1.9 percent of the target. Further, the number of loan accounts under the category of “weaker section financing” declined from 1.76 crores on 31 March 2000 to 1.43 crores on 31 March 2003.

Undermining co-operative credit societies:

In the era of liberalization, the co-operative sector has also been weakened. The ideology of liberalization is profit- and market-driven and opposes the spirit of co-operation. The share of credit of the co-operative sector in total credit flow to agriculture has come down drastically, from about 62 per cent in 1992-93 to 34 per cent in 2002-03 (see Table 7). The oldest credit institution, and the one nearest to farmers, is disappearing on account of the new policies.

The Mutually Aided Co-operative Societies (MACS) are nothing but a handover of the co-operative sector to a handful of families. Recently, the management of Visakha Dairy, a MACS dairy unit, tried to convert it to a producer company under the Companies Act. The High Court of Andhra Pradesh intervened and prevented the misdeed. Such is the situation in MAGS.

Many commissions, committees and task forces have been appointed by the Government of India, the Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development (NABARD) to study the co-operative sector. The recommendations of the most recent such Committee, chaired by A. Vaidyanathan, are, by and large, against the federal structure of India and antagonistic to participatory co-operative societies run by the people. The Vaidyanathan Committee’s vision of the co-operative sector is investor driven rather than member-driven.

Expanding informal sector, burgeoning usury:

Liberalisation, has meant the increasing informalisation of rural credit markets in India. As the formal sector has withdrawn from rural India, moneylending and usury have rushed to fill the vacuum. A larger and larger share of the total advances borrowed by rural households comes from moneylenders, traders, landlords, pawnbrokers and other agents of the informal sector. Village studies and other sources of field level evidence document the onerous conditions on which such loans are given; rates of interest are often 48 to 60 per cent per annum, and rise even to 120 per cent per annum and more. The body of legislation against usury and the regulation of moneyiending remains a dead letter.

New types of rural moneylenders have also emerged. The moneylender is often one who sells seed, pesticides, fertilizers, and purchases the produce. The farmer is thus exploited as one who purchases inputs at high prices and sells produce at low prices, and is forced to pay exorbitant rates of interest as well. Such moneylenders may also have political influence in their villages.

New types of moneylending are associated with new forms of unfree labour, extraeconomic coercion and nearbondage. They are also associated with forms of social humiliation imposed on defaulting borrowers.

Village level data bear stark testimony to the dominant place of the informal sector today. Village level data from different districts in India, combined with information on the banking sector, confirm that the share of formal sources of credit in the total principal borrowed by rural households is extremely low. In a village study conducted in Giridih district in Jharkhand, only 28 per cent of total credit was from the formal sector in 2002-03. In a Tamil Nadu village in Theni district, formal sources of credit accounted for 14 per cent of loans taken and 40 per cent of the principal borrowed by all village households in 1999. In two villages in the Fatehahad and Rohtak districts of the relatively advanced agricultural State of Haryana, formal sources accounted for only 8 to 12 per cent of the total principal borrowed by manual labour households. In fact, even a recent survey conducted by the World Bank and NCAER indicated that only 19.4 per cent of rural households in Uttar Pradesh and 24 per cent in Andhra Pradesh obtained credit from formal sources.

It is important to note that the credit needs of agricultural workers are met almost entirely from the informal sector. With the collapse of loan-cum-subsidy based self-employment schemes, such as the Integrated Rural Development Programme (IRDP), and the schemes based on Differential Rates of Interest and no collateral, agricultural workers have found their access to formal credit cut off.

Micro-credit: No panacea:

The major policy initiative enunciated by the RBI that is aimed at filling the gap left by the retreat of formal sector banking institutions is the establishment of NGO-led micro-credit institutions. It is not surprising that NGO-led micro-credit is also seen by the World Bank and its acolytes as the general panacea for rural credit markets. In the words of the Grameen Bank’s Mohammed Yunus, micro-credit is a way of promoting market-led growth, or of “privatising the economy.” Former World Bank President James Wolfensohn has made the tall claim that “micro-credit programmes have brought the vibrancy of the market economy to the poorest villages and peoples of the world.”

While recognizing that self-help groups, if created and managed democratically, bring a measure of relief to the working people, particularly to women, and while recognizing that these associations have, in specific conditions, encouraged self-reliance among their members, it is quite clear that microcredit is no substitute for the provision of production and consumption credit by formal sector institutions. Micro-credit – which typically involves high transactions costs, which in turn are often transferred to borrowers as high interest rates – should not be posed as a substitute for, or an alternative to, a strong and vibrant’ formal rural banking system. It is not an instrument for mobilising large-scale funds for scientific and technical change in the countryside, and it does not and cannot supplant the informal sector or overcome the historical imperfections of rural credit markets. NGO-controlled micro-credit projects in India cannot hope to achieve the spread and reach of the rural banking system. There are also problems of accountability involved here: NGO-controlled micro-credit organizations are often not subject or open to public scrutiny.

Rural credit in the CMP:

The links between rural distress and the near-collapse of the formal sector of banking are well-recognised, and it is no surprise that when the UPA government came to power in May 2004, it was put under great pressure to take immediate steps with regard to rural credit. The Common Minimum Programme (CMP) of the UPA explicitly addressed the issue of rural credit, and made the following promises:

  • The rural cooperative credit system will be nursed back to health.
  • The UPA Government will ensure that the flow of rural credit is doubled in the next three years and that the coverage of small and marginal farmers by institutional lending is expanded substantially.
  • The delivery system for rural credit will be reviewed.
  • Immediate steps will be taken to ease the burden of debt and high interest rates on farm loans.
  • Crop and livestock insurance schemes will be made more effective.
  • The social obligations imposed by regulatory bodies on private banks and private insurance companies will be monitored and enforced strictly.

Despite these features of the CMP, the banking system is far from meeting the needs of the farming community. The Tenth Plan projection for farm credit was Rs 736,570 crores. In the first two years of the Plan, lending amounted to only Rs 150,810 crores. In other words, in order to meet the target, Rs 586,000 crores would have to be provided in three years. Thus, the promised doubling or tripling of credit is no more than the amount projected in the Plan documents.

National Commission on Farmers on rural credit: some salient features of the Reports :

In its Second Report, as part of a package of measures termed “farmers’ livelihood security compact,” the National Commission on Farmers made certain important recommendations.

It suggested that a special debt survey be undertaken to examine contemporary forms of credit and indebtedness and bondage.

It recommended that the Government decide on a cutoff for debt waiver in consultation with panchayats and farmers’ representative in “distress hotspots.”

It urged the repeal of the Public Demand Recovery Act, enacted by the British, under which farmers can be jailed for defaulting on a paltry sum.

It suggested the creation of a corpus on the lines of calamity funds to assist farmers affected by crop losses.

It urged that the rate of interest on crop loans be reduced to 4 per cent simple interest (rather than compound interest) for arrears.

It recommended that interest on loans in areas affected by drought and floods or heavy pest infestation be waived.

It recommended that a moratorium be announced on debt recovery, including by informal sector, in “distress hotspots.”

It recommended that credit be de-linked from technology, for example, that credit be available even for farmers with traditional breeds of cattle.

  1. The Government must reaffirm the commitment of the state to the policy of social and development banking, and reaffirm the part played by the credit system in redistribution and poverty alleviation. The basic aim of the formal banking system in the rural areas should be to ensure that all the credit requirements of peasants, agricultural workers and other sections of the rural working people are met.
  2. Over the last 13 years, commercial banks have closed down thousands of rural bank branches. This trend must be reversed and the norm of having one rural bank branch for every 15,000 persons must be fulfilled. Commercial banks must also provide adequate staff strength in rural branches, including specialised officers such as Agricultural Officers.
  3. Credit-deposit ratios of rural branches of scheduled commercial banks must immediately be restored to pre-1991 levels. Further, it must be ensured that the rural-credit deposit ratio rises over time. The countryside must get a fair deal in this regard.
  4. Priority sector norms – 40 per cent to the priority sector and 18 per cent to agriculture – must be enforced. In place • of an alternative such as investment in high-return RIDF bonds, there should be a penalty on failure to meet these targets. The redefinition of the priority sector that was pushed by means of successive amendments after 1991 must be reversed.
  5. Interest rates on agricultural loans should be brought down to four per cent per annum, as recommended by the National Commission on Farmers. Special loan-cum-subsidy schemes must be introduced on a large scale for all landless and poor peasant households, Dalit and scheduled tribe households, and other vulnerable sections of the population.
  6. Co-operative credit institutions should be revived on a participatory and democratic basis, and adequate budgetary provision should be made to revitalise this sector. Linkages between banks and cooperative credit institutions need to be strengthened. Cooperative credit institutions should be encouraged to mobilise saving deposits, and to implement State-sponsored credit-based development programmes.

The Kisan Sabha shall build powerful mass movements to achieve these demands.


There are several risks in crop production that cannot be controlled by the cultivator. There are weather-related risks, such as from variations in rainfall or natural disasters like sudden frost, hailstorm, or flooding. There are also market risks, arising from fluctuations in prices. The cultivator, particularly one operating a small amount of land in a poor agricultural region, has very limited capacity to cope with such risks and the associated fluctuations in output and incomes. A landlord or rich farmer is able to spread risk over time and space as he can use stored grains or rely on savings during bad years. He can diversify his crop production across different plots and can also diversify income by engaging in other activities. The major role played by insurance programmes is the indemnification (protection) of producers who might adversely be affected by natural phenomena. An insurance market is based on large numbers, where the incidence of risk is distributed over individuals. A special problem with agriculture, however, is that good or bad weather may affect the entire population in an area.

The participation of private agencies in the crop insurance market is limited because of the nature of risks in agriculture. Because information is limited and imperfect, and because weather phenomena can damage crops over a large area, private insurance companies are unwilling to pay indemnity claims unless they can spread risks. Consequently, as in many developed countries, it has become necessary for public agencies in India to provide all-risk agricultural insurance as a matter of public policy.

The principal benefits from crop insurance are as follows.

It absorbs the shock of crop failure by providing a cushion that assures the peasant a minimum protection against natural calamities. It provides a right to seek compensation in the event of crop failure.

Crop insurance protects the peasant’s investment in crop production and thus improves their risk-bearing capacity. Crop insurance facilitates the adoption of improved technologies, and encourages higher investment, resulting in higher agricultural production.

Crop insurance reduces the risk of farmers becoming defaulters of institutional credit. The reimbursement of indemnities in the case of crop failure enables peasants to repay their debts and maintain credit lines with formal financial institutions.

Instability in prices and yields may not present serious problems in countries where expenditure on food accounts for a relatively small proportion of household budgets. However, more serious problems occur in countries where much of the population has low incomes and it is more difficult for consumers to cope with high food prices.

Even if price support or other mechanisms of price stabilisation are available, crop insurance is necessary to meet the risks of losses in crop output.

The Comprehensive Crop Insurance Scheme in force from 1985-to 1999. From 1999, the National Agriculture Insurance Scheme (NAIS) has been implemented. The coverage of this scheme has been low: only 11 per cent of farmers as well as 11 per cent of area has been covered. NAIS could not meet the needs of the peasantry in distress, particularly those engaged in dry land cultivation.

Low coverage, high premia and low indemnity are the main problems of the existing system of crop insurance. Further, while the National Common Minimum Programme promised to “improve” the crop insurance scheme, the subsidy on the premia to be paid by small and marginal farmers has been stopped in 2005-06 – such is the improvement. Meanwhile, the Farm Income insurance Scheme (FIIS) and Varsha Bima Yojana (VBY) were introduced on a pilot basis in 2003 and 2004, FIIS has been withdrawn and the impact of VBY is yet to be evaluated.

National Commission on Farmers on rural insurance: some salient features of the Reports

The National Commission on Farmers has highlighted the fact that farmers do not have any risk mitigation system to meet climatic and market risks, a condition that can lead to large losses. In addition, farmers are unable to meet losses from expenditures consequent on illness, accidents, and so on, and thus turn to moneylenders and borrow at usurious rates of interest. In order that farmers are able to meet such contingencies, the First Report of the National Commission on Farmers

  • recommended a new integrated family insurance policy, termed Parivar Bima. policy, which would cover crop and livestock risks and also medical costs and life insurance;
  • suggested that NGOs, SHGs, and PACS be allowed to advance loans to meet premium costs;
  • asked for the establishment of a national steering level committee to oversee the development of rural insurance;
  • suggested the creation of a Rural Insurance Development Fund to take up the work of spreading rural insurance;
  • stated that insurance should be treated as “lifesaving support” and not termed “subsidy” since it is non-trade distorting; and

recommended that GOI may consider meeting part of the premium at least during the remaining years of the Tenth Plan.

In its Second Report, the Commission suggested that the Government

  • reduce the premium on crop insurance;
  • expand the coverage of rural insurance to all crops and the entire country;
  • examine the issue of revival of lapsed insurance policies; and
  • introduce Parivar Bima policy, to begin with, in dryland areas.
  1. The first task is to expand the coverage of this scheme to make it accessible to all farmers and to cover all crops, including horticultural crops.
  2. The 50 per cent subsidy on the premium on crop insurance for small and marginal farmers must be reintroduced.
  3. The premium rates paid by the cultivator should not exceed 3 per cent for any crop. Where the rate is higher, the balance should be met through a subsidy provided to the insurance company by the government.
  4. The mid-term appraisal of the Tenth Plan has recommended that “since actuarial premia are likely to be high for regions with low and erratic rainfall, a special budgetary subsidy might be necessary for these regions.” We demand that indemnity levels, and threshold yields and other yardsticks be amended to safeguard the interests of peasants in dryland cultivation.
  5. The amount insured may be flexible, in that farmers may choose to insure any amount up to a specified limit per crop per season.
  6. Insurance companies must be allowed to increase staff substantially so as to be able to cater to the requirements of rural customers.
  7. The current principles for calculating compensation should be revised. In particular, the unit for calculation of. insurance compensation should be the village. As indicated above, the calculation of the threshold yield and indemnity levels should be sensitive to local conditions.
Year Number of rural bank offices Per cent to total bank offices
1969 1443 17.6
1975 7112 35.5
1980 16111 46.9
1985 29408 54.6
1990 34867 58.2
1991 35134 56.9
1992 35254 56.8
1993 35360 56.3
1994 35396 55.9
1995 33017 51.7
1996 32981 51.2
1997 32909 50.5
1998 32854 49.9
1999 32840 49.3
2000 32673 48.7
2001 32640 48.3
2002 32443 47.8
2004 32200 48.0

Source: Shetty(1997) for 1969 to 1990 and Banking

Statistics: Basic Statistical Returns, different issues, thereafter.

Note: Data refer to December each year till 1989 and to March thereafter

Year Credit outstanding to rural areas(in Rs 10 million) Per cent to total credit outsanding
1969 115 3.3
1970 193 4.5
1975 608 6.0
1980 2643 10.7
1985 7489 14.1
1990 17352 14.2
1991 18598 15.0
1992 20692 15.1
1993 22906 14.1
1994 24670 14.0
1995 25174 11.9
1996 29012 11.4
1997 32525 11.4
1998 37598 11.4
1999 42090 11.0
2000 48753 10.6
2001 54431 10.1
2002 66681 10.2

Source: Shetty(1997) for 1969 to 1990 and Banking

Statistics: Basic Statistical Returns, different issues, thereafter.

Note: Data refer to December each year till 1989 and to March thereafter

Year Size class of land holding(in acres)
<2.5 Acres Share 2.5-5 acres Share >5 acres Share All size classes Share
1980-81 25 24 16 16 59 58 10 10
2.4 8 8.3 6 3.8 5 14
4 0.0
1990-91 11 95 24 17 39
80 30 2.2 3 81 45 14 10
8 2 8 5 8 0.0
2000-01 37 36 71 14
39 25 41 25 34 49 51 10
6 8 6 1 9 1 6.1 0.0

Source: Report on Currency and Finance, Various issues.

Year Rural credit deposit ratio(%) Credit-deposit ratio for all areas(%)
1969 37.6 71.9
1970 48.3 78.1
1975 51.9 73.5
1980 56.9 66.9
1985 63.9 61.9
1990 60.7 66.0
1991 60.0 61.9
1992 57.9 57.7
1993 55.3 58.9
1994 50.0 54.3
1995 48.6 55.6
1996 47.3 59.8
1997 44.1 56.8
1998 43.4 55.3
1999 41.0 54.8
2000 40.4 56.0
2001 39.0 56.7
2002 41.8 58.4

Source: Shetty(1997) for 1969 to 1990 and Banking

Statistics: Basic Statistical Returns, different issues, thereafter.

Note: Data refer to December each year till 1989 and to March thereafter

Region/State 1975 1980 1990 2000 2002 1975 1980 1990 2000 2002
Rural All
region 30.1 40.9 45.0 37.6 41.5 45.3 47.5 48.6 43.1 56.2
Haryana 71.0 70.4 68.0 42.8 45.1 66.6 66.1 60.5 67.2 43.7
Himachel Pradesh 11.5 31.3 35.2 25.1 22.2 20.8 28.6 36.2 23.8 23.4
Jammu and Kashmir 20.7 30.3 21.9 14.4 17.5 32.7 31.5 31.3 33.5 36.8
Punjab 16.2 27.8 33.8 44.9 56.0 35.4 38.6 44.1 39.4 41.8
Rajasthan 81.9 76.4 72.9 46.0 51.1 66.9 65.9 57.3 46.7 48.4
region 21.4 31.9 64.5 36.1 31.8 42.7 36.0 52.6 29.1 27.2
Assam 21.0 33.4 67.0 36.2 34.0 48.1 40.6 58.5 32.0 31.7
Manipur 125
52.5 62.8 0 81.8 68.6 34.8 25.1 74.1 37.4 26.4
Meghalaya 17.0 19.3 35.1 24.5 21.4 14.6 14.1 19.4 16.3 18.3
Nagaland 8.0 10.7 51.1 39.9 28.0 23.9 23.7 31.7 15.3 12.8
region 46.2 51.9 62.8 27.1 27.3 63.4 56.2 63.4 37.2 37.6
Bihar 77.9 60.3 51.5 22.4 22.5 44.8 41.8 36.8 22.5 21.3
Jharkhand 19.0 25.1
Orissa 123
37.9 90.1 7 45.8 49.3 57.8 61.1 89.7 41.5 44.5
West Bengal 23.4 32.4 56.9 24.5 24.1 70.0 60.9 56.8 45.5 45.8
region 52.0 50.2 49.4 30.3 30.6 56.5 45.7 47.1 33.9 33.9
Chhattisgarh 27.2 44.0
Madhya Pradesh 52.7 61.1 76.4 43.5 45.8 63.5 52.0 66.1 49.1 46.6
Uttar Pradesh 51.8 47.1 41.7 26.6 28.7 54.3 43.5 40.0 28.2 29.9
Uttaranchal 20.1 23.7
region 40.4 49.2 63.3 50.8 54.2 75.2 71.6 66.4 77.3 79.7
Gujarat 24.7 36.4 52.5 44.0 35.7 60.4 51.8 56.7 49.0 44.1
Maharashtra 74.7 68.8 74.9 59.5 92.0 80.2 79.2 69.4 86.4 92.3
region 88.0 79.6 96.0 70.3 67.1 91.2 77.7 82.7 66.5 64.6
Andhra 108 102
Pradesh 7 8 99.4 76.8 83.0 79.6 71.5 80.4 64.2 61.9
Karnataka 81.2 72.4 94.9 74.9 68.4 95.6 77.8 82.2 63.3 61.6
Kerala 57.5 56.3 72.2 54.8 52.9 68.7 67.5 63.1 41.5 43.3
Tamilnadu 119 102
3 87.2 0 63.4 54.8 105.7 88.0 96.2 88.6 85.4
India 52.0 54.5 61.2 40.4 41.8 72.2 67.2 60.7 56.0 58.4

Source: Chavan(2005)

Year Share of priority sector advances in total credi
1969 14.0
1975 25.0
1980 33.0
1985 39.9
1990 40.7
1991 37.7
1992 37.1
1993 34.4
1994 36.5
1995 33.7
1996 32.8
1997 34.8
1998 34.6
1999 35.3
2000 34.3
2001 34.4

Source: Banking Statistics, different years.

Source 1992-93 1995-96 1998-99 2001-02 2002-03
Co-operatives 9378 10478 15870 23524 23636
Share(%) 61.82 47.56 43.05 37.91 33.98
RRBs 831 1381 2460 4854 6070
Share(%) 5.48 6.27 6.67 7.82 8.73
SCBs 4960 10172 18443 33587 39774
Share(%) 32.70 46.17 50.04 54.13 57.18
Total 15169 22032 36860 62045 69560

Source: Report of the Vaidyanathan Committee.

Commission paper on Agricultural prices-investments-government policies

Convenors: Com. S. Malla Reddy and Venkatesh Athreya.

For more than a decade now, prices of agricultural commodities have been declining in relation to prices of manufactured goods. Costs of inputs such as fertilizer, power, transport and so on have been going up. Difference between the price paid by the consumers and the price paid to the producer has also been increasing because of high trade margins. The disastrous policies of the government in removing all restrictions on imports and in lowering import duties on agricultural products have led to a crash in prices of agricultural commodities. In short, the farmer is not getting a remunerative price for his produce and is often unable to recover even the cost of production. As a result, small and marginal farmers are leaving agriculture and desperately seeking other livelihood avenues or are resorting to suicides as they are overburdened with accumulated debts. A recent National Sample Survey report admits that 40% or more of farmers want to quit farming. A detailed examination of agricultural produce price policy is urgently called for.

  1. Minimum Support Prices (MSP) and Government policy:

The commission on agricultural costs and prices (CACP) claims that it recommends minimum support prices (MSPs) to government based on costs of cultivation. Information on the details of cost of production and recommendations from the concerned State government are being obtained by the Centre before MSP fixation as a matter of form. However, the cost of production is not being taken into consideration by the government while deciding MSP. Last year, the CACP has recommended an arbitrary enhancement of MSP for paddy by Rs.20-30 per quintal without taking into consideration the information and recommendations of the State Government. It is claimed that there is a basis for deciding on these prices and that the purchasing power of people is taken into consideration while fixing these prices. It is argued that if the prices of agricultural products are enhanced, minimum wages payable also need to be enhanced. This casts an additional burden on the industrialists by way of higher wages. To protect their profits, agricultural prices are not being enhanced based on cost of production considerations The peasantry is being given a raw deal to protect the interests of the monopolists. This is one of the factors leading to increasing indebtedness of the farmers and making ‘agriculture’ an unremunerative profession.

  1. Procurement – Government intervention in the Market:

Not only are MSP prices themselves not remunerative, farmers do not even get the MSP. Procurement policy is in shambles. Central agencies like FCI, CCI, NAFED and state agencies like MARKFED and Civil Supplies department should enter into the market and directly purchase the farmers’ produce When the public procuring agencies enter the market and start purchasing, private traders also enter the market and make purchases. Then prices realized by the farmers for their produce will rise. But, what is happening is totally different.

Public agencies are entering the market for purchase/ procurement. But they are refusing direct purchase from the farmers saying that the farmers’ produce is not as per the specifications. Such refused produce is being purchased by the private traders at reduced prices (below MSP). The same produce is then purchased by public agencies from the private traders accepting that the produce is satisfying the prescribed specifications. A substantial portion of procurement by public agencies is taking place through purchase from private traders in the above manner. As a result, public procurement has become profitable for private traders. Public agencies are incurring losses of thousands of crores of rupees due to purchase of produce without minimum specifications from private traders, even as farmers are compelled, in order to meet urgent cash needs, to sell at low prices to private traders for want of purchase by State agencies.

Following are the procurement details by the government during 2001-04 years:

Wheat Rice Total
Year Minimum Actual Minimum Actual Minimum Actual
Procurement Procurement Procurement Procurement Procurement Procurement
Oct. 2001 11.6 36.8 6.5 21.5 18.1 58.3
Oct. 2002 11.6 35.6 6.5 15.8 18.1 51.4
Oct. 2003 11.6 18.4 6.5 5.2 18.1 23.6
Oct. 2004 4 6.9 11.8 13.1 15.8 20

Data in the above table indicates that actual procurement is much higher than the minimum targeted procurement. Purchases from traders account for the major portion of total procurement.

  1. Minimum Support Prices (MSPs) of Rice and Wheat

In recent years, MSPs of rice and wheat have been practically stagnant. The data in Table 2 bring out this point.

Year Wheat Rice
Common A-Grade
2001-02 620 530 560
2002-03 620 530 560
2003-04 630 550 580

Note: In addition to above MSP, Rs.10/- per quintal of wheat and Rs.20/- per quintal of rice has been paid as drought assistance. This additional payment has been enjoyed by the traders/millers alone. Farmers were not benefited by this additional payment. There is only marginal adjustment of MSP. Cost of production is not being taken into consideration. Government is procuring only few crop produces. Many crops are not covered by government procurement policy.

4.Time to fix MSP:

MSP fixation announcement is made at the time of crop harvest. Small and marginal farmers are selling their produce by the time of MSP fixation announcement. Actually, MSPs have to be announced well before crop sowing season in June.

MSP is being announced only for a very few crops. Many crops are not covered by this policy. Important crops like chillies, castor, other oilseed crops and aromatics are not covered by MSP policy. As a result, farmers of these crops are forced to sell their produce at the price decided by the private traders.

  1. Marginal enhancement of MSPs and steep increase of input prices:

Difference between MSP enhancement and input price increase is increasing day by day. Market rates that prevailed 10 years before in the regulated markets are prevailing even today. MSP has increased only marginally. However, as shown in Tables 4 to 6, all input prices have increased sharply. Over the last decade and a half, the rise in input prices has been of the order of 4-5 times and even more in some cases. Input use also has increased over the years, though the rise in input prices and the credit crisis in agriculture have led to some decline between 2002-03 and 2003-04 as shown in Table 3. This is a huge burden on the farmers.

Fertilizer Nutrients 2002-03 2003-04
Nitrogen(N) 10,474 11,324
Phosporus(P) 4,019 4,402
Potash(K) 1,601 1,748
N+P+K 16,094 17,474
Increase Over
Previous year(%) -7.29 8.5
Fertilizer 2002 2003
Urea 206.00 250.80
DAP 427.00 485.60
MOP 190.25 231.25
SSP 149.00 162.36
SSP(G) 159.00 172.36
20:20:0 334.40 378.15
28:28:0 411.60 471.65
Pesticide Unit (Price, Rs. per Unit)
2002 2005
Avanthi 200ml. 670 700
Tracer 100ml. 850 900
Monocrotophos 1 litre 180 220
Crop 2002 2005 Unit
Cotton 362-400 452-1850 Rs. per acre
Maize 180-220 250-450 Rs. per 5 kg.
Rice 280 320 Rs. per 30 kg. bag

Costs of inputs other than fertilizers, pesticides and seeds have also risen. Power charges for irrigation have been steeply increased. A new water policy has been formulated, which is designed to increase water charges many times of what it is at present. Water has been commodified through this policy and water is diverted for industrial use from agriculture. As a result, water use in agriculture has become very costly. There is also the crisis of the decline in the levels of the water table, and the failure of costly investments in tube wells and other irrigation efforts..

Prices of diesel and petrol have increased by 3-4 times. This has increased the cost of production, but the compensation allowed through enhanced prices is only for a part of it

Above data show that prices of seeds, fertilizers, pesticides and all other inputs have steeply increased. Their use per acre also has increased. The enormous increase in costs of cultivation is not accompanied by higher produce prices.

  1. Price Policy and Productivity

Productivity levels of several important crops in India are much lower than in many other countries, both advanced and developing. Some of the relevant data is presented in Table With terms of trade moving against agriculture, increasing input prices, stagnant output prices and a collapse in rural development and public investment expenditures, agricultural productivity is unlikely to increase. Price policy ought to change in favour of farming so that productivity of agriculture is improved, and Indian agriculture reaches levels of productivity already attained by China and other countries.

Crop Country Productivity(kg/ha.) Ranking
Rice World average 3662
Japan 5822 8
China 5900 7
U.S.A 6378 5
India 2880 51
Wheat World average 2475
China 3495 27
France 6554 7
U.K. 6774 3
India 2394 43
Maize India 1583 98
Pulses India 588 126
Groundnut India 919 70
Soyabean India 977 62
Cotton India 297 62
Tobacco India 1413 56
  1. Legislation on Agricultural Markets

Salient features of Agricultural Market Act now in force are given below:

Legal persons, growers and local authorities permitted to establish new markets in any area.

No compulsion on growers to sell their produce through existing regulated markets.

Establishment of direct purchase centers, Consumers/Farmers Markets for direct sale.

Promotion of Public-Private Partnership in the management and development of agricultural markets.

Separate constitution for special markets for commodities like onions, fruits, vegetables, and flowers.

A separate chapter to regulate and promote contract farming arrangements in the country has been provided..

Prohibition of commission agency in any transaction of agricultural commodities with the producers.

Market Committee to promote alternative marketing system, contract farming, direct marketing and farmers/consumers markets.

State Marketing Boards to promote standardization, grading, quality certification, market led extension and training of farmers and market functionaries in marketing related areas.

Constitution of State Marketing Standards Bureau for promotion of grading, standardisation and quality certification of agricultural produce.

  1. Other market related issues:

Traders form syndicate and reduce the whole sale prices steeply at the time of crop harvest disregarding MSP or international price trends. No training is being imparted by the government to the farmers on maintenance of ‘Fair Average Quality’ (FAQ). Farmers are doing this on their own accord at present as they perceive it. Hence, no standard quality is being maintained. Government should train the farmers to maintain FAQ for their produce.

Manipulations and frauds are taking place in agricultural markets, as indicated below:

Cheating in weighment.

Collecting higher commission than prescribed.

Arbitrary fixing of purchase rate.

Thefts of farmers’ produce in the market

Collection of produce transport charges from market yard to traders’ godown from the farmers

Collection of considerable quantity of produce freely in the name of sample collection.

Declaration of bankruptcy by the trader after produce purchase without payment to the farmer – no compensation mechanism to the farmer.

‘Zero’ trading.

Collection of high interest from the farmers for the Advance made by the traders.

No facilities and protection to the farmer and his produce in the market.

Market committees are deliberately not taking any action to curb malpractices / frauds in the market yards.

  1. Horticulture and Vegetable prices

These produces are perishable and have no shelf life. No cold storage facilities are accessible to the farmers. Traders are collecting 20% commission illegally. No regulations are operating in the marketing of these products. Consequently, prices realised by the farmers are highly fluctuating. During the peak harvest time, farmers are unable to realise even harvest and transport charges. As a result, the sights of produce being thrown on the road or of leaving the produce without harvest are not uncommon. Such farmers are landing in total ruin. Consumers, on the other hand, are forced to purchase the same produce at higher prices.

  1. Steep decrease of prices in international markets

Price details for important crops in international markets are given below (in US $ per ton) in Table 8.

Crop 1995-96 1999-2000
Rice 324.42 192.23
Groundnut 494.36 366.78
Cotton 1810 1191
Sugar 295.0 129.08

It can be seen that prices of key crops have been falling rapidly in international markets, thus reminding us of the vulnerability and risks inherent in opening up agriculture under globalization.

  1. Coffee, tea, rubber and aromatic products

Indiscriminate imports of these products are harming the interests of these farmers. A comprehensive protection mechanism should be evolved and grounded to protect the interests of these farmers.

  1. Edible oils and sugar imports:

Large-scale imports of edible oils and sugar are harming the interests of oil seed and sugar cane growers. Develop and implement a comprehensive scheme to protect the interests of these farmers.

  1. By-Products:

Farmers do not get the benefit of the value of their byproducts, as these are siphoned off by traders. The following cases of paddy and cotton are illustrative of this point.

a. Paddy: Value of main and bye-products from one quintal

i. Rice 66kg@ 12/- Rs. 792/-

ii. Broken 4kg@ 5/- Rs. 20/-

iii. Bran 6kg@ 7/- Rs. 42/-

iv. Husk 24kg Rs. 22/-

Sub total Rs. 876/-

Price paid to the farmer per quintal of paddy: Rs. 560/-

Milling and transport charges Rs. 36/-

Sub total Rs. 596/-

Value of bye-products: Rs. 876-596= 280/-

No share is given to the farmer in the bye-product value of Rs. 280/- per quintal.

b. Cotton: Value of bye-product from one quintal of seed cotton (kapas):

i. Cotton lint 35 kg @ 55/- Rs. 1925/- ( 355 kg lint priced at Rs. 19,500/-)

ii. Seed 62 kg :

Oil 5.5 kg @ 45/- Rs. 251/-

Cake 56 kg @ 7/- Rs. 395/-

Sub total Rs. 646/-

Total Value Rs. 2571/-

(-) Processing and transport charges Rs. 101/-

Net Value Rs. 2470/-

Price paid to the farmer Rs. 1800/-

Traders’ profit Rs. 670/-

It can be seen that traders are getting a net income of Rs. 280 and 670 per quintal of paddy and cotton, respectively. In a sample survey conducted during 2000-01, it was reported that traders are getting totally Rs. 30,000 crores from all agricultural products. Value addition is currently monopolized by traders and industrialists. It is not bringing any additional income to the farmers.

In India, 86% of the farmers are small and marginal cultivating about 40% of the land and producing more than 50% in total agricultural production. They are not in a position to have any kind of processing units or undertake any value addition activity, except by way of cleaning and grading.


A key feature of the agrarian crisis has been the collapse of investment. While public investment in agriculture during the 1990s was negligible, private investment was also rather modest. A substantial step-up of public investment in agriculture is urgently needed in order to address the agrarian crisis. This in turn implies serious resource mobilization by government from the well-to-do sections of the people, especially the corporate sector and foreign capital. Instead, the UPA government is handing out more and more tax and other concessions to capitalists while attacking the peasantry through sharp increase in prices of all inputs- fertilizers, pesticides, transport, power etc- and by raising PDS prices. We must demand a reversal of these policies and a massive increase in public investment in agriculture. Specifically:

The Government must increase investment in research and development in agriculture though the ICAR system, the Agricultural Universities and other means. This research must be addressed to improve biological yield potential of seeds, soil health, water use efficiency and productivity of crop agriculture as well as animal husbandry.

The Government must rebuild and expand the extension networks, strengthening the Krishi vigyan Kendras and involving farmers’ organisations in the process.

Massive public investment is needed to build up storage and preservation facilities for crops at decentralised levels, at least at the block if not the village panchayat level.

Government must also allocate under “ Bharat Nirman” and other programmes, much greater resources for building up rural infrastructure, especially road and transport network, marketing infrastructure and communication facilities via mobile phones and internet connectivity. This will help farmers’ access to market information as well as enable the use of locally available marketing infrastructure. These investments must make these facilities freely available to small and marginal farmers, ensuring social inclusion. While Government of India must take the major responsibilities for resource mobilisation and investment, implementation and maintenance should be decentralised through state governments and elected local bodies.

Regulatory mechanisms are practically non-extent with regard to the quality of inputs sold to farmers. Government must put in place strong regulatory mechanisms to ensure that the inputs sold to farmers such as seeds, fertilizers and pesticides are of acceptable quality. The seller must be made liable for losses arising to farmers from poor quality inputs.

Price support is critical not only for crop agriculture but also for animal husbandry and fisheries sector.

A general point on the issue of the price squeeze on farmers in the current agrarian crisis, namely, increase in input prices and fall in the output prices, is that while this affects all farmers, the poor and middle peasants are especially vulnerable and badly affected, as they do not have the staying power nor the ability to delay sales until prices improve. As the Commission on Credit and Insurance points out, the proportion in institutional credit going to small and marginal farmers has been declining in the reforms period.

The central point on the issue of prices is that the vast majority of Indian farmers are not producing for the export markets. The focus should be on strengthening and expanding the domestic market, and ensuing fair deal for the Indian farmer.


  1. Scrap new Agricultural Market Act and in its place enact fresh legislation, designing it to protect farmers’ interest.
  2. MSP policy should be extended to cover all crops.
  3. Government procurement should be direct from the farmers.
  4. Implement market intervention scheme for all crops.
  5. Revamp existing market intelligence extending its scope to monitor and disseminate information on the global and national price situation.
  6. Government should directly handle export of agricultural commodities from the country.
  7. Export subsidy should be paid directly to the farmers.
  8. Farmers should be trained to maintain fair average quality for their produce.
  9. Develop storage facility in the market yards and make it accessible to the farmers.
  10. Promote local consumption to ensure at least 70% product consumption in the domestic market.
  11. Eliminate middlemen in agricultural product marketing.
  12. Increase investment in agriculture and rural infrastructure as part of Bharat Nirman project. Government of India should take the responsibility for resource mobilization. The project should be implemented through a decentralized mode from state to village level.
  13. Substantially step up investments for agricultural extension system.
  14. Regulatory mechanisms for quality control of inputs being sold to farmers should be strengthened. The seller must be made liable for losses arising for poor quality inputs.
  15. Strengthen the price support system not only for crop produce but also for the products of animal husbandry and fisheries.
  16. Proportion of credit and insurance going to small and marginal farmers should be increased commensurate with their number and vulnerability.

Date: January 28-31, 2006