In 2009-10, foodgrain production in the kharif season is projected to fall by 16% over last year. A rainfall deficit of 23% in the 2009 monsoon season and drought in many states led to a 5.3% fall in acreage. The delayed withdrawal of the southwest monsoon will benefit rabi crops. But this will not be enough to make up for the loss in kharif production. (Advance Estimates of Production of foodgrains, oilseeds and other commercial crops for 2009-10 released by the Department of Agriculture and Cooperation provided in Annexure II).

It needs to be noted that even though some increase in the MSPs were effected under UPA-I Government, the increases fell far short of the recommendation of the National Commission of Farmers (NCF) that “the MSP should be at least 50% more than the weighted average cost of production”. Moreover, the estimated costs of production taken into account are far below the actual expenses incurred by the peasants. Going by the Government’s calculations, the MSPs for only three crops; paddy, wheat and rapeseed-mustard; are above the 50% cost-plus level. In cotton, maize, groundnut, musur, bajra, arhar and urad, the MSPs now are 20-30% above C2 and in others between 10-20%. In view of this the AIKS placed its proposals for higher MSPs for 2009 kharif crops before the Commission on Agricultural Costs and Prices (CACP) in March 2009 (attached as Annexure III).

Besides higher support prices, the timely fixation of MSP is also a major issue. In India, kharif crops, which are sown between June and September, account for more than half of the total grains production. The CACP is required to convey its recommendations to the Government well before the sowing season of the crop. However, the MSP fixation is usually announced only by the time of harvest. The small and marginal farmers are thereby forced to make distress sales and also sell at below MSP to private dealers. In view of this, the Kisan Sabha has proposed that the MSP must be mandatorily announced well before the crop-sowing season in June.

The National Policy for Farmers drafted by the NCF and finalised in October 2006 had made several important recommendations regarding public procurement and distribution. It is worthwhile to reiterate the key recommendations of the NCF in this regard:

• What farmers seek is greater protection from market fluctuations. Important steps needed are:
  1. The Minimum Support Price (MSP) mechanism has to be developed, protected and implemented effectively across the country. MSP of crops needs to keep pace with the rising input costs.
  2. The Market Intervention Scheme (MIS) should respond speedily to exigencies especially in the case of sensitive crops in the rainfed areas.
  3. The establishment of Community Foodgrain Banks would help in the marketing of underutilized crops and thereby generate an economic stake in the conservation of agro-biodiversity.
  4. Indian farmers can produce a wide range of health foods and herbal medicines and market them under strict quality control and certification procedures.
  5. The Public Distribution System (PDS) should be universal and should undertake the task of enlarging the food security basket by storing and selling nutritious millets and other underutilized crops.

• The twin goals of ensuring justice to farmers in terms of a remunerative price for their produce, and to consumers in terms of a fair and affordable price for staples (65% of consumers are also farmers) can be achieved through the following integrated strategy:
  1. The MSP and procurement operations are two separate initiatives and should be operated as such. The Government needs to ensure that both the farmers (who also constitute the majority of consumers) and the urban consumers get a fair deal. Due care should be taken of the cost escalation after the announcement of the MSP in its operationalisation. The Government should procure the staple grains needed for the PDS at the price private traders are willing to pay to farmers. Thus, the procurement prices could be higher than the MSP and would reflect market conditions. The MSP needs to be protected in all the regions across the country.
  2. The food security basket should be widened to include the crops of the dry farming areas like /*bajra*, jowar, ragi, */*minor millets and pulses. The PDS should include these nutritious cereals and pulses purchased at a reasonable MSP. This will be a win-win situation both for the dryland farmer and the consumer. *We will witness neither a second green revolution nor much progress in dryland farming unless farmers get assured and remunerative prices for their produce. * #+END_QUOTE
  3. Both universal PDS and enforcing MSP throughout the country for the selected crops are essential for imparting dynamism to agriculture.”

• The Commission on Agricultural Costs and Prices (CACP) should be an autonomous statutory organization with its primary mandate being the recommendation of remunerative prices for the principal agricultural commodities of both dry-farming and irrigated areas. The MSP should be at least 50% more than the weighted average cost of production. The “net take home income” of farmers should be comparable to those of civil servants. The CACP should become an important policy instrument for safeguarding the survival of farmers and farming. Suggestions for crop diversification should be preceded by assured market linkages. The Membership of the CACP should include a few practicing farmwomen and men. The terms of reference and status of the CACP need review and appropriate revision.

Most of these recommendations were not implemented by the UPA-I Government. Public procurement continues to remain limited to a few major crops and procurement operations are carried out only in limited parts of the country. Bulk of the small peasants do not benefit from public procurement. MSP excludes important crops like chilly, areca nut, spices, castor, other oilseeds, aromatics, cash crops, traditional staples etc, thereby leaving their producers at the mercy of private traders. Strengthening and expanding public procurement remains to be a major issue before the Kisan Sabha.

Timely procurement is also a major issue. The delay in procurement and inability to procure sufficient quantity has often forced the cultivators to sell their produce at low prices to private traders to meet their day to day expenses as well as to meet the requirement of initial investment for the next season. The Kisan Sabha has demanded that the Food Corporation of India as well as other Governmental agencies involved with procurement should stay and involve with procurement for a longer period. Timely procurement should be complemented by an adequate storage mechanism so that market prices do not fall below the MSP. There is hence a need for augmentation of Storage Facilities.

Food price inflation in India has risen to very high levels. Measured by wholesale price index, annual inflation in food articles was over 17.5 % in February 2010 (Latest WPI inflation figures in Annexure IV). The rise in prices of vegetables, pulses and cereals are particularly sharp. In terms of consumer price indices, India has the highest inflation rate among all the G 20 countries. The Government has been publicly stating that the reason for food price inflation is because crop prices for farmers have been increased. Such pronouncements, besides concealing the real situation being faced by the peasantry also seeks to divide the people and drive a wedge between the peasants and other sections of the working people. Bulk of the Indian peasantry is a net buyer of food. They are also suffering due to the steep rise in food prices. The main reasons behind high inflation, especially rising food prices are fourfold: (i) neoliberal policies causing agrarian crisis and eroding food self-sufficiency, (ii) weakening of the Public Distribution System (PDS), (iii) failure to check hoarding and speculation and (iv) increase in fuel prices. All these are outcomes of the neoliberal policies pursued by the Congress led Government as well as the erstwhile BJP led NDA Government.

The biggest blow to the PDS came with the introduction of the targeting system in 1996, which made people’s entitlement to cheap food contingent upon the official poverty estimates. The current average national poverty line according to the Planning Commission is only around Rs. 11.80 per person per day for rural areas and Rs. 17.80 per person per day for urban areas. Everyone above these meager income levels are considered to be Above Poverty Line (APL) and therefore excluded from access to subsidised food. This has meant over half of agricultural labourers in India as well as half of dalit and adivasi households are excluded from the BPL category. This faulty policy of dividing the beneficiaries into APL/BPL/Antodaya and other categories, besides excluding a large number of deserving poor, has also led to unviability and closure of several PDS outlets, thus further shrinking its coverage. The weakening of the PDS has deprived people of any relief in the backdrop of the steep rise in the prices of essential commodities.

The Government’s proposed Food Security legislation will be only for BPL cardholders, ensuring 25 kg of foodgrains (rice and wheat) to all BPL families at Rs. 3 per kilo. The total number of BPL families at present is 6.52 crore, which the Government proposes to cut down to 5.91 crore. Antodaya benefits will be eliminated and Antodaya cardholders who at present are getting foodgrains at Rs. 2 per kg will have to pay Rs. 3 per kilo. For both BPL and Antodaya cardholders the quota will be cut by 10 kg per family from the present 35kg to 25 kg. No foodgrain will be allocated for APL sections. Not only will the APL subsidy be eliminated but the APL category will also be cancelled. The proposed law would therefore mean a higher level of exclusion and actually squeezing whatever people are getting today.

The only effective way to ensure food security and providing genuine relief to the people against price rise and inflation is to reintroduce the universal PDS and bring about a massive expansion of PDS outlets. Moreover, besides foodgrains, sugar, pulses and edible oils should be supplied through the PDS in cheap rates.

Besides universalisation of the PDS, the following steps need to be taken by the Government to check price rise and inflation:

• A coordinated countrywide crackdown on hoarding of essential commodities should be launched. Disclosure of stocks of essential commodities by private traders, especially the big corporates, should be made mandatory across the country.
• Futures trading on essential commodities like wheat, potato and some pulses which are still being allowed should be banned forthwith.
• Prices of diesel and petrol should be brought down by cutting excise duties.

In the past, the Union Government announced Statutory Minimum Price (SMP) for purchase of sugarcane by sugar mills. The major sugar growing States, in view of specific conditions, announced a State Advisory Price, which was usually substantially higher than the SMP. The Union Government also announced a levy price for purchase of levy sugar from sugar mills for the purpose of public distribution. This levy price was determined on the basis of SMP.

In a recent judgement, the Supreme Court has asked the union government to fix the levy price on the basis of the SAP rather than the SMP. In order to avoid the burden of paying a higher levy price, and arrears on account of this, the Union Government brought the Essential Commodities (Amendment and Validation) Ordinance (later passed as a Bill in the winter session of parliament), through which the Government sought to bring about changes in sugarcane pricing to the detriment of the farmers. The ordinance sought to replace the statutory minimum price (SMP) with a new category called fair and remunerative price (FRP). The Union Government argued that if States announced a SAP over and above FRP, they would be required to pay for the difference in levy price on account of higher SAP.

This would have two important implications. First, it would result in erosion of power of State governments to influence prices of sugarcane. Secondly, since State governments would be required to bear the additional financial burden, the States would be inclined to not announce SAP. It is noteworthy that prices of sugar have gone up steeply in the recent years resulting in a sharp increase in profits of sugar mills. Instead of instituting a mechanism that would make sugar mills share these additional profits with sugarcane farmers, the new mechanism has threatened to depress prices of sugarcane. In view of this, the Kisan Sabha demands that the system of announcing SAP by the States should be restored and the Central government should ensure that the additional burden of levy on account of SAP is borne by the sugar mills and not by sugarcane farmers.

The Free Trade Agreement which the Central Government has signed with the ASEAN countries will seriously affect the farmers cultivating coconut, tea, coffee, pepper etc. as well as the large fishing community in states like Kerala, Karnataka, Tamilnadu and the North-Eastern region. The ASEAN FTA, which has already come into effect from 1^st January 2010, envisages total elimination of tariffs on a reciprocal basis on about 3200 products by December 2013 while tariff on remaining 800 products will be brought down to zero or near zero levels by December 2016.  This will cover more than 80 per cent of the goods that are traded between India and ASEAN.

The Agreement also has identified certain products as Sensitive, Highly Sensitive and products to be put in the Negative List. The Government claims that this will provide protection for the products mentioned in the negative list, which contains 489 items which includes 303 items of agricultural sector, 81 items of textile sector, 50 items of auto sector and 17 items of chemical sector. The reports show that certain marine products – coconut, cashew, vanilla, nutmeg, coriander, cardamom, ginger, turmeric, copra, coconut oil, tobacco, natural rubber, certain items of textiles and auto products are in the negative list.  For products not in the Negative list, duties will be reduced in a phased manner and brought to zero by 2019. On 5 items – Tea, Coffee, Pepper, Crude Palm Oil (CPO) and Refined Palm Oil (RPO) which are on the Highly Sensitive list there will be a partial duty cut in 2009. Duty on Tea and Coffee will be brought down to 45%, Pepper to 50% and for CPO and RPO it will be brought down to 37.5% and 45% respectively.

The tariff reductions will be made from the prevalent 2005 rate.  The prevalent rate for crude palm oil is 80 per cent, for refined palm oil is 90 per cent, for coffee and black tea is 100 per cent, for pepper is 70 per cent.  As per India’s commitment for tariff reduction by 2019, the tariff rate of crude palm oil will be reduced to 37.5 per cent, for refined palm oil to 45 per cent, for tea and coffee 45 per cent, and for pepper 50 per cent.  Normally, in trade negotiations and also at the WTO level trade negotiations, all tariff cuts are based on bound levels of tariff rates and not on applied levels.  The bound tariff rate for palm oil is 300 per cent, raw coffee stands at 100 per cent, all other forms of coffee at 150 per cent, raw pepper stands at 100 per cent and crushed and ground pepper stand at 150 per cent and tea at 150 per cent.  The bound tariff rates show the magnitude of the reduction made on these products.

The implications of the FTA are bound to be severe, given the fact that our country is characterised by low levels of productivity and also exorbitant costs of cultivation. This will make it near impossible for our farmers to compete against the cheap imports. The productivity level of many of the crops is far higher in many ASEAN countries. Pepper productivity in Kerala is around 320 kg per hectare while Vietnam produces 1.2 tonnes and Indonesia 2.3 tonnes per hectare.  Productivity of coffee in India stands at 765 kg per hectare while Vietnam produces 1.7 tonnes per hectare. In such a situation, the reduction of tariff rates will increase import from ASEAN countries and effect steep fall in prices of agricultural crops.