There is more to onion prices than what meets the eye. And it is time to peel the onion, layer by layer.
No sooner did the onion crisis erupt on your small screen last week, following the retail prices jumping from Rs 35/kg to Rs 60-80/kg, Minister for Commerce Anand Sharma was the first one to make a statement. Even before the Food and Agriculture Minister Sharad Pawar opened his mouth, Anand Sharma had told the nation that the onion crisis was because of hoarding, and that the country had enough stocks.
This year production of onions has been a record with at least one million tonnes more onion produced than the previous year.
I wonder how and why Anand Sharma made this statement. After all, agriculture is Sharad Pawar's beat and normally Cabinet Ministers tread carefully by not transgressing into the domain of a fellow colleague. Even if Anand Sharma commented because he looks into trade, the fact remains that he has never commented earlier when prices of sugar and dal for instance had touched the roof.
As the evening progressed, and the UPA government went into a tizzy, Nafed's managing director Sanjeev Chopra expressed surprise at the sudden price rise. He told the media that there was roughly 20 per cent more supply, and despite the rain damage to the standing crop in September when the sowing takes place in Maharashtra and Rajasthan, the price rise defies any logic. I agree with Sanjeev Chopra. He was being forthright and honest.
While all kinds of explanations were being tossed around, what became increasingly clear was that the trade -- middlemen, in this case -- had made a killing. But what remains hidden from public glare is that the entire onion price crisis is stage managed. It has been created to justify the need to bring in big box retail.
Within the next two days the government went into a massive salvage operation. Knowing well that onion prices have in the past brought down the government, not once but twice, UPA-II didn't want to take any chances. Exports were immediately banned, import duties were brought down to zero, crackdown against hoarders began simultaneously, and lo and behold the prices began to come down.
Meanwhile tomato and garlic prices began to rise. While tomato prices ruled high in Delhi (rising to Rs 40 a kg in retail markets), again there was no reason for tomato prices to rise. In fact, as metros witnessed tomato prices going out of reach, the irony is that Jharkhand farmers were dumping tomatoes on road for want of a fair price. http://bit.ly/hPvuHR
Coming back to onions, before the prices had even stabilised at Rs 50-60 per kg, Anand Sharma moved swiftly to talk to his fellow colleagues on Dec 23 about the need and possibility of opening up to multi-brand retail. In other words, in the midst of a crisis situation, Commerce Minister found time to 'discuss' with his Cabinet colleagues the possibility of inviting multi-brand retail into the country.
For the benefit of some of our readers, when we say multi-brand retail we are talking of big box retail like Wal-Mart and Tesco.
At a time when the Cabinet Secretary was monitoring the onion price situation on an hourly basis, Commerce Minister was confabulating with his ministerial colleagues about multi-brand retail. Finance Minister Pranab Mukherjee, Home Minister P Chidambaram, Defence Minister A K Anthony had taken part in these discussions. Why the urgency? Anand Sharma replied: "Policy formation is a dynamic process, and we are very progressive and forward-looking."
Surely, Mr Sharma. We know what you mean by 'progressive and forward looking'.
In fact, he also met media persons the same day to tell them about the dynamics of FDI in retail. A journalist asked him about the link FDI in retail has with the soaring onion prices. According to The Hindu (Dec 24) "While Mr Sharma rejected the argument that there was a link between the soaring onion prices and the opening up of multi-brand retail to foreign direct investment, the demand for liberalising the sector has been intensifying, especially in the wake of the wide gap between wholesale prices and retail prices."
Now if you are wondering how can someone be planning (and succeeding) in raising onion prices across the country, I want you to remember the sudden eruption of dropsy several years back, which took quite a human toll. Dropsy was blamed on poisonous argemone seeds which had slipped into mustard oil extraction process. This was, as we now know, done to build a market for packed mustard oil. And surely, the sales of loose mustard oil has gone down drastically after that incidence.
Howcome, argemone seeds never found their way into mustard oil after that?
More recently, according to a leaked US diplomatic cable released by WikiLeaks, in a January 2008 meeting, US and Spain trade officials strategized on how to increase acceptance of genetically modified foods in Europe, and among the measures included inflating food prices on the commodities market. Read more about Hike Food Prices To Boost GM Crop Approval In Europe: Leaked Cable by Rady Ananda http://foodfreedom.wordpress.com/2010/12/14/leaked-cable-bubble-gmo-eu/
Allowing big box retail into the country is no less a priority for Manmohan Singh government than the nuclear treaty. President Obama had pressurised India to open up when he visited India in November. Before that, British Prime Minister David Cameron had sought the opening up of Indian market for big box retail when he had made a visit. And more recently, French President Nicolas Sarkozy had also promised more investments if India opens up to retail FDI.
The G-20 has also directed member countries to remove all hurdles in accepting multi-brand retail. It was primarily to meet this directive that the Department of Industrial Policy and Promotion (DIPP) had floated a completely flawed discussion paper on allowing FDI in multi-brand retail. Consultations with the stakeholders (?) have also been completed by the Ministry of Commerce.
Both Sharad Pawar and Anand Sharma are in favour of it. Since there is opposition to multi-brand retail FDI within the Congress party, the onion price drama had to be stage managed. While your tears have by now dried, let us wait and watch how soon the UPA-II gives us another breaking news.
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Now, what FDI in multi-brand retail would do for Indian farmers, is something that I have been regularly talking about. You can read the paper below and judge for yourself.
FDI in retail is the beginning of the end for Indian farmers
It is being projected as a boon for the agricultural sector. In reality, it will spell a death knell for farming. It will be the beginning of an end for Indian farmers.
It has happened in the United States. Ever since big retail – dominated by multi-brand retailers like Wal-Mart, Tesco and Carrefour – has entered the market, farmers have disappeared, and poverty has increased. Today, not more than 7 lakh farmers remain on the farm in America. In fact, the number of farmers has come down to such a low level that America has stopped counting the farmers since its last census in the year 2000.
In Europe, despite the dominance of the big retail, every minute one farmer quits agriculture. According to a report, farmer’s income in France has come down by 39 per cent in 2009, having already slumped by 20 per cent in 2008. In Scotland, low supermarket prices are being cited as the reason for the exodus of dairy farmers. It is therefore futile to expect the supermarkets rescuing farmers in India.
Despite the destruction of farming globally by the supermarkets, the Ministry for Commerce and Industry is gung-ho about allowing foreign direct investment in multi-brand retailing, which means allowing the big players like Wal-Mart and Tesco to swamp the Indian market. “The agriculture sector needs well functioning markets to drive growth, employment and economic prosperity in rural areas,” says a discussion paper drafted by the Department of Industrial Policy and Promotion. I find a number of economists and researchers singing chorus of praise for the role the supermarkets can play.
But do the supermarkets really benefit? Since 2006, India has allowed a partial opening up of the retail sector. Has these retail units benefited the Indian farmers and for that the consumers? The answer is no.
The argument is that the supermarket chains will squeeze out the middlemen thereby providing higher prices to farmers and at the same time provide large investments for the development of post-harvest and cold chain infrastructure. All these claims are untrue, and the big retail has not helped farmers anywhere in the world. Even in Latin American countries, including Brazil, Argentina, Uruguay and Colombia, where supermarkets, most of them owned by multinational giants, now control 65 to 95 per cent of supermarket sales, farmers have been forced to quit agriculture.
If the supermarkets were so efficient and provided dynamism, I would like to know why the US is providing a massive subsidy for agriculture. After all, the world biggest retail giant Wal-mart is based in America and it should have helped American farmers to become economically viable. But it did not happen. American farmers have instead been bailed out by the government, providing a subsidy of Rs 12.50 lakh-crore between 1995 and 2009, and this includes direct income support.
Let me illustrate. Till 1950 in America, a farmer used to receive about 70 per cent of every dollar spent on food. Today, it is no more than 3 to 4 per cent. And that is why the American farmers are being supported in the form of direct income support by the American government.
A latest 2010 report by the Organisation for Economic Cooperation and Development (OECD), a group comprising the richest 30 countries in the world, states explicitly that farm subsidies rose by 22 per cent in 2009, up from 21 per cent in 2008. In just 2009, industrialised countries provided a subsidy of Rs 1,260 billion. And it is primarily for this reason that the farm incomes are lucrative. Take the Netherlands; the average farm family income is 275 per cent of average household income. This is because of the farm subsidies, and not because of supermarkets.
We are therefore importing a failed model from America.
Regarding employment, big retail does not squeeze out middle-men from the food chain. Middle-men by definition mean someone who is between the producer and the consumer. Supermarkets claim that they remove middle-men and therefore are able to provide a higher price to farmers. In reality, what happens is just the opposite. Supermarkets are themselves the big middlemen. They replace the small fish in the trade.
Big fish is known to eat the smaller ones. Supermarkets exactly perform that function. They replace the plethora of small middle-men. The arhtiya clad in a dhoti-curta, is replaced by a smartly dressed up middlemen. An illusion is therefore created as if the supermarkets have removed the middlemen from trading. But in reality, the big boys now share the commission between them. The new battery of middle-men, who replaces the traditional middle-men, are the quality controller, certification agencies, packaging industry, processors, wholesalers etc.
Politics around farmer suicides. To whose benefit?
So former Chief Minister of Andhra Pradesh Chandrababu Naidu has ended his indefinite fast on the eight day. Former Congress MP Jaganmohan Reddy too has finished his 48-hour hunger strike against “leaving distressed farmers in the lurch.” They are demanding an enhanced compensation package for farmers who lost their crops because of natural calamities.
While nine political parties forced Naidu to break his fast, the Congress rebel garnered support of many sitting Congress MLAs. CPM politburo chief Prakash Karat and his colleague Sitaram Yechury, CPIs AB Bardhan, Janata Dal's Sharad Yadav were among several of the Third Front leaders who called on Naidu. Several other political leaders from AIADMK, JD (S) and JD (U) have visited the fasting leader at Hyderabad. A delegation of party leaders had also met Prime Minister Manmohan Singh in New Delhi this week.
Naidu has now announced a massive rally to be held at Guntur on Dec 30.
But before Naidu ended his fast, Prime Minister didn’t waste the opportunity. Knowing that the Andhra Pradesh elections are around the corner, the Centre promptly announced a relief of Rs 400-crore to the farmers affected by recent incessant rains.
With more political support pouring in, Chandrababu Naidu’s fast will surely take a political turn. It already has. While the political fallout will definitely boost Chandrababu Naidu’s electoral prospects, the bigger question remains whether his support for the farmers’ cause will finally bring an end to the great Indian farm tragedy.
The serial death dance in the crop fields across the country has already taken a heavy toll. More than 200,000 farmers have taken to the gallows in the past 15 years, and the nation is still counting.
First of all, let me acknowledge that Chandrababu Naidu is the only political leader who has taken this important step to draw the nation's attention to the plight of the farming community. Naidu succeeded where other farmer leaders failed. I have always wondered why have the farmer leaders (who claim to be non-political) failed to sit on a nationwide indefinite fast to demand better conditions for the farming community.
Nevertheless, there are lessons to be learnt. And I hope Naidu will be talking of policies and approaches that can be sustainable in the long run and also economically viable.
Chandrababu Naidu is essentially demanding Rs 10,000 per acre as compensation to farmers who lost their paddy crop and Rs 15,000 for commercial crops like cotton and sugarcane. While the short-term gain may win him accolades from the beleaguered farming community, this is unlikely to stem the tide. I am not sure whether he has learnt any lessons from the debacle that he had actually created on the farm front before his government was swept away by a tidal wave of angry farmers. Blindly aping the World Bank model of agriculture (as suggested by McKinsey), Andhra had pumped in huge finances to push in an industry-driven agriculture that has not only exacerbated the crisis leading to an environmental catastrophe but also destroyed millions of rural livelihoods.
Chandrababu Naidu’s much talked about Vision 2020 programme aimed at reducing the number of farmers in the State to 40 per cent of the population, and did not have any significant programme to adequately rehabilitate the remaining 30 per cent of the farming population. The objective was to promote the commercial interests of the agribusiness companies (read foreign financial institutes and international bankers) and the IT hardware units. All benefit would have accrued to these companies in the name of farmers.
In reality, Chandrbabu Naidu is only helping the rich kamma community which is keen to make investments in land and agriculture. Because of his faulty policies, which benefit the rich business class, rural-urban migration had reached its peak and livestock deaths and the plight of dalits and other landless and marginalised had worsened. Farmers were asked not to produce more rice (the staple food) as the State had no place to stock it. Farmer suicides had become so common that Mr Naidu had actually sent team of psychiatrists to convince them against taking their own lives.
The unending bloodbath in the Andhra Pradesh countryside has not only failed to evoke any political urgency so as to turn suicides into history but at the same time failed to move the intelligentsia and the academicians to point to the fundamental reasons that have led to the unprecedented agrarian crisis. In fact, what Chandrababu Naidu needs to realise is that his own model of growth what is popularly called the ‘Naidu model’ had failed. It also means failure of the McKinsey’s model of economic development. To talk of ‘Naidu Plus’, as some economists have said, indicates the level of arrogance among a school of economic thought that refuses to see anything except what benefits the industry.
Instead of only stroking the fire, I think here is an opportunity for Chandrababu Naidu to first accept that he committed mistakes, and then come out with a set of policy recommendations that may force the governments to enunciate radical measures that helps resurrect agriculture. It has to begin by providing farmers with an assured monthly income, and extending the non-pesticide management system of sustainable farming that Andhra Pradesh has created to the entire country. After all, with agriculture turning into a highly losing proposition, what is more startling is that over the years the farm earnings of marginal farmers have dropped to less than that of the daily wage labourers.
The only way to ensure economic viability for the farm sector is to set up a Farmers Income Commission on the lines of the 6th pay commission. Based on the minimum land-holdings, and the agro-climatic conditions, the Commission should work out an assured income per acre for the farmers. There is no reason why a farmer cannot earn equal to at least what the peon in the government service gets every moth. Isn’t it sad that while a chaprasi earns Rs 15,000 every month, a farmer does not get more than Rs 2400?
Chandrababu Naidu also needs to know that the future of farming remains hidden in the non-pesticides management of agriculture being promoted by the Society for Elimination of Rural Poverty in Andhra Pradesh. At present, thousands of farmers are cultivating crops without the use of chemical pesticides and fertilisers in 28 lakh acres. Their incomes have gone up, and the soil health is being restored. The programme which began from Andhra Pradesh needs to be extended to the entire country if the aim is to wipe out every tear from the farmers face.
While nine political parties forced Naidu to break his fast, the Congress rebel garnered support of many sitting Congress MLAs. CPM politburo chief Prakash Karat and his colleague Sitaram Yechury, CPIs AB Bardhan, Janata Dal's Sharad Yadav were among several of the Third Front leaders who called on Naidu. Several other political leaders from AIADMK, JD (S) and JD (U) have visited the fasting leader at Hyderabad. A delegation of party leaders had also met Prime Minister Manmohan Singh in New Delhi this week.
Naidu has now announced a massive rally to be held at Guntur on Dec 30.
But before Naidu ended his fast, Prime Minister didn’t waste the opportunity. Knowing that the Andhra Pradesh elections are around the corner, the Centre promptly announced a relief of Rs 400-crore to the farmers affected by recent incessant rains.
With more political support pouring in, Chandrababu Naidu’s fast will surely take a political turn. It already has. While the political fallout will definitely boost Chandrababu Naidu’s electoral prospects, the bigger question remains whether his support for the farmers’ cause will finally bring an end to the great Indian farm tragedy.
The serial death dance in the crop fields across the country has already taken a heavy toll. More than 200,000 farmers have taken to the gallows in the past 15 years, and the nation is still counting.
First of all, let me acknowledge that Chandrababu Naidu is the only political leader who has taken this important step to draw the nation's attention to the plight of the farming community. Naidu succeeded where other farmer leaders failed. I have always wondered why have the farmer leaders (who claim to be non-political) failed to sit on a nationwide indefinite fast to demand better conditions for the farming community.
Nevertheless, there are lessons to be learnt. And I hope Naidu will be talking of policies and approaches that can be sustainable in the long run and also economically viable.
Chandrababu Naidu is essentially demanding Rs 10,000 per acre as compensation to farmers who lost their paddy crop and Rs 15,000 for commercial crops like cotton and sugarcane. While the short-term gain may win him accolades from the beleaguered farming community, this is unlikely to stem the tide. I am not sure whether he has learnt any lessons from the debacle that he had actually created on the farm front before his government was swept away by a tidal wave of angry farmers. Blindly aping the World Bank model of agriculture (as suggested by McKinsey), Andhra had pumped in huge finances to push in an industry-driven agriculture that has not only exacerbated the crisis leading to an environmental catastrophe but also destroyed millions of rural livelihoods.
Chandrababu Naidu’s much talked about Vision 2020 programme aimed at reducing the number of farmers in the State to 40 per cent of the population, and did not have any significant programme to adequately rehabilitate the remaining 30 per cent of the farming population. The objective was to promote the commercial interests of the agribusiness companies (read foreign financial institutes and international bankers) and the IT hardware units. All benefit would have accrued to these companies in the name of farmers.
In reality, Chandrbabu Naidu is only helping the rich kamma community which is keen to make investments in land and agriculture. Because of his faulty policies, which benefit the rich business class, rural-urban migration had reached its peak and livestock deaths and the plight of dalits and other landless and marginalised had worsened. Farmers were asked not to produce more rice (the staple food) as the State had no place to stock it. Farmer suicides had become so common that Mr Naidu had actually sent team of psychiatrists to convince them against taking their own lives.
The unending bloodbath in the Andhra Pradesh countryside has not only failed to evoke any political urgency so as to turn suicides into history but at the same time failed to move the intelligentsia and the academicians to point to the fundamental reasons that have led to the unprecedented agrarian crisis. In fact, what Chandrababu Naidu needs to realise is that his own model of growth what is popularly called the ‘Naidu model’ had failed. It also means failure of the McKinsey’s model of economic development. To talk of ‘Naidu Plus’, as some economists have said, indicates the level of arrogance among a school of economic thought that refuses to see anything except what benefits the industry.
Instead of only stroking the fire, I think here is an opportunity for Chandrababu Naidu to first accept that he committed mistakes, and then come out with a set of policy recommendations that may force the governments to enunciate radical measures that helps resurrect agriculture. It has to begin by providing farmers with an assured monthly income, and extending the non-pesticide management system of sustainable farming that Andhra Pradesh has created to the entire country. After all, with agriculture turning into a highly losing proposition, what is more startling is that over the years the farm earnings of marginal farmers have dropped to less than that of the daily wage labourers.
The only way to ensure economic viability for the farm sector is to set up a Farmers Income Commission on the lines of the 6th pay commission. Based on the minimum land-holdings, and the agro-climatic conditions, the Commission should work out an assured income per acre for the farmers. There is no reason why a farmer cannot earn equal to at least what the peon in the government service gets every moth. Isn’t it sad that while a chaprasi earns Rs 15,000 every month, a farmer does not get more than Rs 2400?
Chandrababu Naidu also needs to know that the future of farming remains hidden in the non-pesticides management of agriculture being promoted by the Society for Elimination of Rural Poverty in Andhra Pradesh. At present, thousands of farmers are cultivating crops without the use of chemical pesticides and fertilisers in 28 lakh acres. Their incomes have gone up, and the soil health is being restored. The programme which began from Andhra Pradesh needs to be extended to the entire country if the aim is to wipe out every tear from the farmers face.
Who says economists and scientists are not corrupt. They scam in the name of economic growth and development
This scam will never hit the headlines. It will never be the subject of a joint Parliamentary committee nor will it ever result in Parliament being blocked for days together.
It doesn’t matter if hundreds of poor people die and millions of livelihoods are destroyed. This is a just the collateral damage that the country must live with if it has to have economic growth. It is worse than any scam we have heard about. And it involves some brilliant minds — our economists and scientists.
As a nation we feel outraged if a patient dies due to a doctor’s neglect. We force the government to imprison the engineer when a bridge collapses. But we remain quiet when hundreds of people die from pesticides poisoning. For the past few weeks, Kerala is witnessing an unprecedented uproar over a human disaster that a potent chemical pesticide — Endosulfan — has caused. Approved for use in cashewnut plantations, the pesticide has killed close to 1,000 people, chronically disabled more than 10,000 inhabitants with neurological disorders, paralysis and deformities, but is still being pushed for commercial application. Endosulfan was considered safe for humans and the environment by the Kerala Agricultural University and the Indian Council for Agricultural Research (ICAR).
This reminds one of the Agent Orange gas used by the Americans to defoliate forest covers in the Vietnam War. Forty years after the war ended, an estimated 500,000 were poisoned to death, and another 650,000 continue to suffer from an array of baffling chronic diseases. Like Endosulfan, Agent Orange, too, was considered safe for humans. And 40 years later, none of the scientists who approved it have been persecuted nor has the company that manufactured and marketed Agent Orange been hauled up for war crimes.
This is the accepted story of the shameful nexus between politics, industry, economists and scientists to slowly poison the current and the future generations; to usurp the natural resources in the name of development, bringing the world close to a tripping point; and to destroy millions of livelihoods in the name of free trade. While engineers and doctors are often brought to book under consumer laws, there is no legal mechanism that holds erring economists and scientists accountable.
It all begins when economic policies and scientific decisions are taken in a ‘closed and opaque’ manner. These policies are often designed to suit the commercial interests of particular companies.
Take the case of the process to justify the approval for FDI in multi-brand retail. The ministry of commerce is working overtime to tailor reports/studies in order to give an impression that big retail will be beneficial for the farmers as well as the consumers.
In reality, it is a massive cover-up operation that involves some research institutes as well as pliable experts who are picked to be part of the expert committees. The fact that big retail has not helped farmers and has instead led to the exit of farmers, is simply ignored. Numerous US studies that clearly show how the big retail eats into the livelihood of small shopkeepers and hawkers, exacerbating poverty, are very conveniently pushed under the carpet.
And if you think scientists are holy cows, think again. Over years, scientists have, with exception, turned out to be more corrupt than the politicians. Institutionalisation of corruption in science, technology and economics has already taken a massive human toll.
If you thought Niira Radia was the only successful corporate lobbyist, you just have to trace the influence International Service for the Acquisition of Agri-biotech Applications (ISAAA) has on Indian agricultural science and you are left wondering whether the biotechnology lobbying group is designing farm research in India. Private banks and consultancy firms like Mckinsey & Co are increasingly writing the farm and health policies for India.
Public sector science is now becoming subservient to private interests. Take the case of the Inter-Academy Report on GM Crops prepared by the top six academies — the Indian Academy of Sciences, Indian National Academy of Engineering, Indian National Science Academy, National Academy of Agricultural Sciences, National Academy of Medical Sciences and the National Academy of Sciences. Submitted in September 2010, the report has been criticised for plagiarism and accused of blatantly siding with the commercial interests of the biotechnology industry.
That the top six distinguished science academies produce a report that is but a cheap public relation exercise on behalf of the biotechnology industry cannot be pardoned. It is time to stem the rot. We need to take a broom to clean the mess that has built up in the name of science and economics. This scam is much bigger than what the TV channels are telling us. And it involves human lives.
Source: Scammed in the name of economic growth and science. DNA, Mumbai, Dec 24, 2010. http://bit.ly/gx63ZE
It doesn’t matter if hundreds of poor people die and millions of livelihoods are destroyed. This is a just the collateral damage that the country must live with if it has to have economic growth. It is worse than any scam we have heard about. And it involves some brilliant minds — our economists and scientists.
As a nation we feel outraged if a patient dies due to a doctor’s neglect. We force the government to imprison the engineer when a bridge collapses. But we remain quiet when hundreds of people die from pesticides poisoning. For the past few weeks, Kerala is witnessing an unprecedented uproar over a human disaster that a potent chemical pesticide — Endosulfan — has caused. Approved for use in cashewnut plantations, the pesticide has killed close to 1,000 people, chronically disabled more than 10,000 inhabitants with neurological disorders, paralysis and deformities, but is still being pushed for commercial application. Endosulfan was considered safe for humans and the environment by the Kerala Agricultural University and the Indian Council for Agricultural Research (ICAR).
This reminds one of the Agent Orange gas used by the Americans to defoliate forest covers in the Vietnam War. Forty years after the war ended, an estimated 500,000 were poisoned to death, and another 650,000 continue to suffer from an array of baffling chronic diseases. Like Endosulfan, Agent Orange, too, was considered safe for humans. And 40 years later, none of the scientists who approved it have been persecuted nor has the company that manufactured and marketed Agent Orange been hauled up for war crimes.
This is the accepted story of the shameful nexus between politics, industry, economists and scientists to slowly poison the current and the future generations; to usurp the natural resources in the name of development, bringing the world close to a tripping point; and to destroy millions of livelihoods in the name of free trade. While engineers and doctors are often brought to book under consumer laws, there is no legal mechanism that holds erring economists and scientists accountable.
It all begins when economic policies and scientific decisions are taken in a ‘closed and opaque’ manner. These policies are often designed to suit the commercial interests of particular companies.
Take the case of the process to justify the approval for FDI in multi-brand retail. The ministry of commerce is working overtime to tailor reports/studies in order to give an impression that big retail will be beneficial for the farmers as well as the consumers.
In reality, it is a massive cover-up operation that involves some research institutes as well as pliable experts who are picked to be part of the expert committees. The fact that big retail has not helped farmers and has instead led to the exit of farmers, is simply ignored. Numerous US studies that clearly show how the big retail eats into the livelihood of small shopkeepers and hawkers, exacerbating poverty, are very conveniently pushed under the carpet.
And if you think scientists are holy cows, think again. Over years, scientists have, with exception, turned out to be more corrupt than the politicians. Institutionalisation of corruption in science, technology and economics has already taken a massive human toll.
If you thought Niira Radia was the only successful corporate lobbyist, you just have to trace the influence International Service for the Acquisition of Agri-biotech Applications (ISAAA) has on Indian agricultural science and you are left wondering whether the biotechnology lobbying group is designing farm research in India. Private banks and consultancy firms like Mckinsey & Co are increasingly writing the farm and health policies for India.
Public sector science is now becoming subservient to private interests. Take the case of the Inter-Academy Report on GM Crops prepared by the top six academies — the Indian Academy of Sciences, Indian National Academy of Engineering, Indian National Science Academy, National Academy of Agricultural Sciences, National Academy of Medical Sciences and the National Academy of Sciences. Submitted in September 2010, the report has been criticised for plagiarism and accused of blatantly siding with the commercial interests of the biotechnology industry.
That the top six distinguished science academies produce a report that is but a cheap public relation exercise on behalf of the biotechnology industry cannot be pardoned. It is time to stem the rot. We need to take a broom to clean the mess that has built up in the name of science and economics. This scam is much bigger than what the TV channels are telling us. And it involves human lives.
Source: Scammed in the name of economic growth and science. DNA, Mumbai, Dec 24, 2010. http://bit.ly/gx63ZE
Tiding over farm woes: Reaping the advantage
Farmers’ unions, who only organise protests demanding higher prices, have failed to educate their members.
As 2010 fades into history, I wonder whether the New Year will bring any hope for farmers. For several years now I have been silently praying and hoping that at least this New Year farmers will have something to cheer. But, unfortunately, it has not happened. With every passing year, their economic condition has further deteriorated.
Excessive use and abuse of chemical fertilisers has poisoned the soils; hybrid crop varieties being pushed at a subsidised price have destroyed the soil fertility and sucked the groundwater dry; drenching crop fields with all kinds of chemical pesticides has not only poisoned the food that we eat but have also brought in more pests; and finally the farmer is left high and dry with no income in hand.
There is no denying that much of the blame would rest with farm officials and university scientists for creating a bloodbath that we witness on the agriculture front. There is hardly a day when dozens of farmers across the country are not drinking chemical pesticides to end their lives. In the past 15 years, more than 2,00,000 farmers have committed suicide. Millions of farmers continue to somehow live in perpetual indebtedness.
Blaming the government is not without any reason. But somewhere deep down, farmers do know that they are equally at fault. The greed to make a fast buck has lured them to unsustainable farming systems. Over the years, farmers have become completely dependent upon what seems to be a well laid out trap by the agribusiness industry. No wonder, the profits of the industry grew whereas farmers were left to die.
However, much of the farm crisis has in many ways been created by farmers themselves. How long can you go on passing the buck to the government and the agricultural university? Why can’t you resolve to turn agriculture more income-generating and sustainable in the long-run? And don’t tell me it is not possible. If you had refrained from following the herd, and adopted low-external input sustainable faming systems you would have been the role model.
Here is a farmer who has shown the way. Meet Subhash Sharma, a farmer from Daroli in Yavatmal district in the heart of the suicide belt of Vidharba. At a time when thousands of farmers in Vidharba have taken the fatal route to escape the humiliation that comes along with increasing indebtedness, he provides his farm workers with bonus and leave travel concession. If this farmer can do it, there is no reason why others cannot live in eternal happiness.
Sharma is not a big landlord. He owns only 16 acres of farm land. And like most of the farmers in the country, he too was in the thick of a vicious cycle of external inputs and perpetual indebtedness. Fed up, he then decided to abandon the fertiliser-pesticides model of farming, and shift the organic cultivation, and the turnaround has led him to a new beginning.
He says that the only way to pull out farmers from the vicious cycle of indebtedness is to push them out of the Green Revolution model of farming. It is during the workshops that he is conducting in several parts of the country that he teaches them by practical training on how to shift to natural farming practices and thereby emerge out of indebtedness.
From 16 acres of land, if Sharma can demonstrate an economically viable model, with inclusive social equity and justice, you too can do it. Here lies the answer to agricultural growth and also to country’s food security. He has even built up a corpus, a Social Security Fund, of approximately Rs 15 lakh, for meeting any eventuality that the workers might encounter. Some death in their family or the marriage of the girl child does bring additional burden, and some relief comes from the Social Security Fund. He also shares the cost of education of their children and other health expenses. Isn’t this a dream that every farmer cherishes but is never able to realise?
Well, when was the last time you heard farm labourers being given an annual bonus and leave travel allowance? Now, don’t be startled, Sharma provides an annual bonus to his team of workers — 16 men and 35 women — who labour on his farm. They get something like Rs 4.5 lakh every year as bonus, which means roughly Rs 9,000 per person. How many farmers, including big landlords, in Karnataka and for that matter in the rest of the country provide bonus to farm workers?
The problem is that farmers’ unions have failed to educate their members. They only organise protests demanding higher prices or opposing trade policies, but rarely do you find them taking upon themselves the monumental task of reviving agriculture. Instead of spending energies to contest elections, ryot sanghas need to take on the responsibility of holding ryot pathshalaas to resurrect farming, bring in natural farming system which are not only sustainable but profitable. There is no reason why every ryot in Karnataka cannot aspire to be the new generation farmer like Sharma.
Source: Deccan Herald
http://www.deccanherald.com/content/122574/reaping-advantage.html
As 2010 fades into history, I wonder whether the New Year will bring any hope for farmers. For several years now I have been silently praying and hoping that at least this New Year farmers will have something to cheer. But, unfortunately, it has not happened. With every passing year, their economic condition has further deteriorated.
Excessive use and abuse of chemical fertilisers has poisoned the soils; hybrid crop varieties being pushed at a subsidised price have destroyed the soil fertility and sucked the groundwater dry; drenching crop fields with all kinds of chemical pesticides has not only poisoned the food that we eat but have also brought in more pests; and finally the farmer is left high and dry with no income in hand.
There is no denying that much of the blame would rest with farm officials and university scientists for creating a bloodbath that we witness on the agriculture front. There is hardly a day when dozens of farmers across the country are not drinking chemical pesticides to end their lives. In the past 15 years, more than 2,00,000 farmers have committed suicide. Millions of farmers continue to somehow live in perpetual indebtedness.
Blaming the government is not without any reason. But somewhere deep down, farmers do know that they are equally at fault. The greed to make a fast buck has lured them to unsustainable farming systems. Over the years, farmers have become completely dependent upon what seems to be a well laid out trap by the agribusiness industry. No wonder, the profits of the industry grew whereas farmers were left to die.
However, much of the farm crisis has in many ways been created by farmers themselves. How long can you go on passing the buck to the government and the agricultural university? Why can’t you resolve to turn agriculture more income-generating and sustainable in the long-run? And don’t tell me it is not possible. If you had refrained from following the herd, and adopted low-external input sustainable faming systems you would have been the role model.
Here is a farmer who has shown the way. Meet Subhash Sharma, a farmer from Daroli in Yavatmal district in the heart of the suicide belt of Vidharba. At a time when thousands of farmers in Vidharba have taken the fatal route to escape the humiliation that comes along with increasing indebtedness, he provides his farm workers with bonus and leave travel concession. If this farmer can do it, there is no reason why others cannot live in eternal happiness.
Sharma is not a big landlord. He owns only 16 acres of farm land. And like most of the farmers in the country, he too was in the thick of a vicious cycle of external inputs and perpetual indebtedness. Fed up, he then decided to abandon the fertiliser-pesticides model of farming, and shift the organic cultivation, and the turnaround has led him to a new beginning.
He says that the only way to pull out farmers from the vicious cycle of indebtedness is to push them out of the Green Revolution model of farming. It is during the workshops that he is conducting in several parts of the country that he teaches them by practical training on how to shift to natural farming practices and thereby emerge out of indebtedness.
From 16 acres of land, if Sharma can demonstrate an economically viable model, with inclusive social equity and justice, you too can do it. Here lies the answer to agricultural growth and also to country’s food security. He has even built up a corpus, a Social Security Fund, of approximately Rs 15 lakh, for meeting any eventuality that the workers might encounter. Some death in their family or the marriage of the girl child does bring additional burden, and some relief comes from the Social Security Fund. He also shares the cost of education of their children and other health expenses. Isn’t this a dream that every farmer cherishes but is never able to realise?
Well, when was the last time you heard farm labourers being given an annual bonus and leave travel allowance? Now, don’t be startled, Sharma provides an annual bonus to his team of workers — 16 men and 35 women — who labour on his farm. They get something like Rs 4.5 lakh every year as bonus, which means roughly Rs 9,000 per person. How many farmers, including big landlords, in Karnataka and for that matter in the rest of the country provide bonus to farm workers?
The problem is that farmers’ unions have failed to educate their members. They only organise protests demanding higher prices or opposing trade policies, but rarely do you find them taking upon themselves the monumental task of reviving agriculture. Instead of spending energies to contest elections, ryot sanghas need to take on the responsibility of holding ryot pathshalaas to resurrect farming, bring in natural farming system which are not only sustainable but profitable. There is no reason why every ryot in Karnataka cannot aspire to be the new generation farmer like Sharma.
Source: Deccan Herald
http://www.deccanherald.com/content/122574/reaping-advantage.html
Procter&Gamble to use Rajasthan health workers to sell sanitary napkins.
In this season of scams you will probably miss this. It may not appear as earthshaking as the Wikileaks or the Radia tape leaks, but it tells us how the corporates are using the official machinery for private commercial gains. In the name of public-private partnership, public services are planned to be used for the benefit of private companies.
Tata's can be accused of turning India into a banana republic, but Procter&Gamble has surely set a new trend. The multinational giant will now utilise the government machinery to sell its products, thereby opening up a marketing channel that the private companies had never thought of. Socialising the costs, and privatising the profits. Isn't this a remarkable marketing strategy?
It wouldn't surprise me if Pepsi and Coke, taking a cue from the precedence established by Procter&Gamble, enter into an agreement with the Rajasthan government to use the State official machinery (including school teachers) to sell cold drinks (at a commission) to quench the thirst of the people living in the semi-arid region of the Great Thar desert !!
It is well acknowledged that public-private partnership (PPP) in reality means that public resources are to be placed at the disposal of the private bodies. I see this happening everywhere, both nationally and internationally. With every passing day the real motive behind the PPP enterprise is becoming clearly visible, and is more blatant. With the weight of the United Nations, World Bank and the national government's behind them, business and industry is now becoming more daring.
Rajasthan's planned MoU with multinational giant Procter&Gamble is one such PPP initiative, and beats all records. Drawing from the success of a pilot project running in four districts -- Jaipur, Donsa, Tonk and Sikar -- Rajasthan government is likely to extend this project to the entire State (Rajasthan is the largest State in India).
As per a Jaipur dateline news report appearing the Hindi daily Dainik Bhaskar (Dec 14, 2010), services of more than 46,000 workers of the Accredited Social Health Activists (ASHA) programme under the National Rural Health Mission will now be used for selling sanitary napkins manufactured by Procter&Gamble. Each packet sold will bring in a commission of Re 1 for the ASHA workers.
Well, of course, this is being done with a pious incentive. More the sale of sanitary napkins means more the protection for the rural women. Each packet costing Rs 7 contains four napkins. If you are street smart and sell 30 napkins, you get an incentive of Rs 50. I am sure the poorly paid ASHA workers must be desperately looking forward to augment their income.
"An ASHA worker gets only Rs 950 per month and has to deliver basic health services and awareness to a large number of rural population. The government appreciates our work but provides less incentive," a worker was quoted as saying in an earlier report in The Times of India. On an average, an ASHA worker receives Rs 450 from the Centre while an additional Rs 500 is provided by the state government.
This is less than what the daily-wage MGNREGA workers can earn in a month.
No wonder, in July 2010, when thousands of ASHA workers had confronted the visiting Union Health Minister Ghulam Nabi Azad, he announced that the Centre will soon bring two new programmes that will provide the workers with additional incentives. Among the programmes he talked about, he specifically mentioned about marketing of asha sahyogini kit (carrying the sanitary napkins).
According to a news report in The Times of India (July 18, 2010): "To promote hygiene awareness among the rural teens, Asha workers will be involved in social marketing of sanitary pads. The government will provide these low-cost sanitary pads at subsidized rates for rural girls aged between 10 and 19 years.
They will also promote the government schemes on family planning.
The new programme was announced by Azad. While addressing the health workers, the minister said that the workers will be provided with incentives to promote the use of these family planning and hygiene products."
Don't be surprised if your postman too starts delivering sanitary napkins. In the age of market economy, Kuchh bhi ho sakta hai
Tata's can be accused of turning India into a banana republic, but Procter&Gamble has surely set a new trend. The multinational giant will now utilise the government machinery to sell its products, thereby opening up a marketing channel that the private companies had never thought of. Socialising the costs, and privatising the profits. Isn't this a remarkable marketing strategy?
It wouldn't surprise me if Pepsi and Coke, taking a cue from the precedence established by Procter&Gamble, enter into an agreement with the Rajasthan government to use the State official machinery (including school teachers) to sell cold drinks (at a commission) to quench the thirst of the people living in the semi-arid region of the Great Thar desert !!
It is well acknowledged that public-private partnership (PPP) in reality means that public resources are to be placed at the disposal of the private bodies. I see this happening everywhere, both nationally and internationally. With every passing day the real motive behind the PPP enterprise is becoming clearly visible, and is more blatant. With the weight of the United Nations, World Bank and the national government's behind them, business and industry is now becoming more daring.
Rajasthan's planned MoU with multinational giant Procter&Gamble is one such PPP initiative, and beats all records. Drawing from the success of a pilot project running in four districts -- Jaipur, Donsa, Tonk and Sikar -- Rajasthan government is likely to extend this project to the entire State (Rajasthan is the largest State in India).
As per a Jaipur dateline news report appearing the Hindi daily Dainik Bhaskar (Dec 14, 2010), services of more than 46,000 workers of the Accredited Social Health Activists (ASHA) programme under the National Rural Health Mission will now be used for selling sanitary napkins manufactured by Procter&Gamble. Each packet sold will bring in a commission of Re 1 for the ASHA workers.
Well, of course, this is being done with a pious incentive. More the sale of sanitary napkins means more the protection for the rural women. Each packet costing Rs 7 contains four napkins. If you are street smart and sell 30 napkins, you get an incentive of Rs 50. I am sure the poorly paid ASHA workers must be desperately looking forward to augment their income.
"An ASHA worker gets only Rs 950 per month and has to deliver basic health services and awareness to a large number of rural population. The government appreciates our work but provides less incentive," a worker was quoted as saying in an earlier report in The Times of India. On an average, an ASHA worker receives Rs 450 from the Centre while an additional Rs 500 is provided by the state government.
This is less than what the daily-wage MGNREGA workers can earn in a month.
No wonder, in July 2010, when thousands of ASHA workers had confronted the visiting Union Health Minister Ghulam Nabi Azad, he announced that the Centre will soon bring two new programmes that will provide the workers with additional incentives. Among the programmes he talked about, he specifically mentioned about marketing of asha sahyogini kit (carrying the sanitary napkins).
According to a news report in The Times of India (July 18, 2010): "To promote hygiene awareness among the rural teens, Asha workers will be involved in social marketing of sanitary pads. The government will provide these low-cost sanitary pads at subsidized rates for rural girls aged between 10 and 19 years.
They will also promote the government schemes on family planning.
The new programme was announced by Azad. While addressing the health workers, the minister said that the workers will be provided with incentives to promote the use of these family planning and hygiene products."
Don't be surprised if your postman too starts delivering sanitary napkins. In the age of market economy, Kuchh bhi ho sakta hai
Punjab farmers victim of sophisticated technology
In the past few days, at least four farmers have committed suicide in the frontline agricultural state of Punjab. In just two districts – Sangrur and Barnala – more than 3,000 farmers have taken the fatal route in the past decade to escape the humiliation that comes along with increasing indebtedness. If a more detailed and exhaustive study of agrarian distress was to be conducted, I am sure Punjab would emerge on the top leaving behind even the suicide-prone belt of Vidharba of Maharashtra.
Punjab is faced with a terrible agrarian crisis at a time when the Confederation of Indian Industry (CII) has signed agreements worth Rs 50-crore for the sale of sophisticated
farm technology and seed. This was announced at the end of a four day Agri-Tech fair that concluded in Chandigarh last Monday. Agriculture Minister Sharad Pawar was among those who attended, and lauded the role of agribusiness industry in boosting food security. Industry heads, senior bureaucrats and agricultural experts lined up to promote expensive technological products.
There can be nothing more paradoxical. Heavy-duty farm machinery being sold at a
time when farmers are grappling with the worst-ever crisis on the farm front. On top of it, Punjab’s deputy Chief Minister Sukhbir Singh Badal had expressed his inability to help farmers in distress saying that the State has no finances left to take care of the farming community. After paying for the staff salaries, and making budgetary allocations for various sectors, Punjab is left with no money to help farmers, he said at the agri-tech fair.
This makes me wonder for how long Indian farmers will continue to be systematically looted, not only by the middlemen and money-lenders but also by the agricultural scientists, input suppliers like seed, fertiliser and seed companies, and of course by the government through the unjust procurement prices. It is time that the farmers throw away the yoke of economic slavery and emerge out into a new age of economic freedom. Why shouldn’t farmers’ be demanding a direct income support instead of being misguided to use all kinds of external inputs as a way out to increase production and in turn increase his income. This is a faulty pathway. It helps only the industry.
For some years now, I have been asking for direct income support for farmers. I strongly feel that direct income support is the only way to bail out the beleaguered farming community. It is also the correct pathway to pull farmers out of the cycle of indebtedness that he is reeling under, and to show him the bright future ahead. Punjab, being the food bowl of the country, has to show the way. I don’t know why Punjab government doesn’t realize that farmers deserve to be at least equated with a chaprasi in the government. This is the least we can do for the people who provide us with our daily bread.
Why chaprasi, you will say? Well, because an ungrateful nation is not even willing to pay him one quarter of what it pays to a chaprasi. I am often told that to ask the policy makers to provide an average farmer a monthly income equivalent to that of a clerk in the government would be asking for too much. This is not true. At least a beginning be made, even if that means bringing the farmer at par with a government chaprasi.
A government chaprasi (peon) receives a monthly income of Rs 15,000 under the 6th pay Commission. The average monthly income of the Indian farmer was worked out at Rs 2,115 in 2003-04 by the National Sample Survey Organisation (NSSO). That was the last time the NSSO computed the farm income. Compultation of farm income was stopped thereafter probably because the government felt too embarrassed by the existing ground realities.
For Punjab, the average monthly of a farming family comes to not more than Rs 3,200 per month. The only other two States where farmer’s income is more than the national average are Jammu & Kashmir and Tamil Nadu. In other words, farmers earn not more than what a NREGA worker get in a month. Isn’t it therefore shocking to see farmers of India, who feed the country, being paid less than a NREGA worker? But more shockingly, I don’t see any section of the intelligentsia, agricultural scientists and the policy makers ever talking about the desperate need to enhance farm incomes.
I have often said that Rs 2000 is what I pay to my maid servant who comes to clean my house and wash the utensils twice a day. She works one hour and walks away with Rs 2000 a month. The poor farmer works 24x7 with his family of five members and yet is unable to earn more than what a maid servant makes in one hour of daily work. This is how we treat our farmers, our annadata.
Punjab is faced with a terrible agrarian crisis at a time when the Confederation of Indian Industry (CII) has signed agreements worth Rs 50-crore for the sale of sophisticated
farm technology and seed. This was announced at the end of a four day Agri-Tech fair that concluded in Chandigarh last Monday. Agriculture Minister Sharad Pawar was among those who attended, and lauded the role of agribusiness industry in boosting food security. Industry heads, senior bureaucrats and agricultural experts lined up to promote expensive technological products.
There can be nothing more paradoxical. Heavy-duty farm machinery being sold at a
time when farmers are grappling with the worst-ever crisis on the farm front. On top of it, Punjab’s deputy Chief Minister Sukhbir Singh Badal had expressed his inability to help farmers in distress saying that the State has no finances left to take care of the farming community. After paying for the staff salaries, and making budgetary allocations for various sectors, Punjab is left with no money to help farmers, he said at the agri-tech fair.
This makes me wonder for how long Indian farmers will continue to be systematically looted, not only by the middlemen and money-lenders but also by the agricultural scientists, input suppliers like seed, fertiliser and seed companies, and of course by the government through the unjust procurement prices. It is time that the farmers throw away the yoke of economic slavery and emerge out into a new age of economic freedom. Why shouldn’t farmers’ be demanding a direct income support instead of being misguided to use all kinds of external inputs as a way out to increase production and in turn increase his income. This is a faulty pathway. It helps only the industry.
For some years now, I have been asking for direct income support for farmers. I strongly feel that direct income support is the only way to bail out the beleaguered farming community. It is also the correct pathway to pull farmers out of the cycle of indebtedness that he is reeling under, and to show him the bright future ahead. Punjab, being the food bowl of the country, has to show the way. I don’t know why Punjab government doesn’t realize that farmers deserve to be at least equated with a chaprasi in the government. This is the least we can do for the people who provide us with our daily bread.
Why chaprasi, you will say? Well, because an ungrateful nation is not even willing to pay him one quarter of what it pays to a chaprasi. I am often told that to ask the policy makers to provide an average farmer a monthly income equivalent to that of a clerk in the government would be asking for too much. This is not true. At least a beginning be made, even if that means bringing the farmer at par with a government chaprasi.
A government chaprasi (peon) receives a monthly income of Rs 15,000 under the 6th pay Commission. The average monthly income of the Indian farmer was worked out at Rs 2,115 in 2003-04 by the National Sample Survey Organisation (NSSO). That was the last time the NSSO computed the farm income. Compultation of farm income was stopped thereafter probably because the government felt too embarrassed by the existing ground realities.
For Punjab, the average monthly of a farming family comes to not more than Rs 3,200 per month. The only other two States where farmer’s income is more than the national average are Jammu & Kashmir and Tamil Nadu. In other words, farmers earn not more than what a NREGA worker get in a month. Isn’t it therefore shocking to see farmers of India, who feed the country, being paid less than a NREGA worker? But more shockingly, I don’t see any section of the intelligentsia, agricultural scientists and the policy makers ever talking about the desperate need to enhance farm incomes.
I have often said that Rs 2000 is what I pay to my maid servant who comes to clean my house and wash the utensils twice a day. She works one hour and walks away with Rs 2000 a month. The poor farmer works 24x7 with his family of five members and yet is unable to earn more than what a maid servant makes in one hour of daily work. This is how we treat our farmers, our annadata.
Will Bihar be the future model of growth that is just and equitable?
Nitish Kumar is back in saddle. As he returns to Bihar, after generating a hope for the better for the average man on the street, I am reminded of what a former Finance Minister of Pakistan and a distinguished economist the late Mehbub-ul-Haq had once told me. As Pakistan’s Finance Minister in the 1960s he was able to generate a growth rate of seven per cent. “And still people voted us out,” he acknowledged.
“It was a rude awakening for me. I then realised that a high economic rate of growth is no indicator of human development." Mehbub-ul-Haq then gave me the memorable gem: “We were wrongly advised that we should take care of GDP and it will automatically take care of poverty. This is not correct. We need to take care of poverty and it will automatically take care of economic growth". This is exactly what Nitish Kumar did. And true to what Mehbub-ul-Haq had predicted, people of Bihar have voted him back to power. He invested in the people, and the people paid back.
A high growth rate of 11.5 per cent between 2004 and 2009 is not the reason why Nitish Kumar has been voted back. Restoring the right to freedom by demolishing the extortion industry was certainly the first step. Simultaneously he followed it up with various development initiatives, which mainline economists would wrongly classify as populist measures. Providing bicycles to school-going girls, and reserving 50 per cent seats for women in panchayats and local bodies was part of the social engineering that he undertook. With the foundations now well laid out, the challenge Nitish Kumar faces in his second term are not only formidable but if attempted in a more realistic and holistic manner can even chart out a new future for the country.
Unlike most other political leaders, I found Nitish Kumar to be more receptive and sensitive to the needs of the poor and marginalised. While the Bihar verdict amply demonstrates his willingness to improve the lot of the masses, I still recall the brief meeting when he asked me several years back as to what I thought was the major reason behind farmer suicides. I am talking of the year 2000-01 when he was for a short period the Union Agriculture Minister.
This was the time when farmers defaulting the banks and private moneylenders (with petty outstanding dues) were hauled up and put behind the bars. Thousands of farmers in distress preferred to commit suicide rather than to face the humiliation that comes along with indebtedness. When recovery agents come and confiscate the land or take away the tractor of a defaulting farmer, for instance, he feels let down in the eyes of the fellow villagers. Farmer’s pride goes for a toss, and he prefers to die.
When I explained that defaulting farmers are put behind bars is because we follow a draconian law that continues from the days of the British Raj, Nitish Kumar was taken by surprise. I told him that between 1904 and 1912 the British had framed a Public Demand Recovery Act, under which farmers could be jailed for defaulting the State for a paltry sum. So much so that even the jail expenses were to be borne by the farmers. The next morning, he shot a letter to the chief ministers (since agriculture is a State subject) to repeal the obsolete law. But such was the callous apathy that none of the State governments even cared to respond to the letter.
With 81 per cent of the population involved in farming, Bihar’s future revolves around agriculture. While Bihar has attained self-sufficiency in food production and produces surplus of milk, the fact remains that the BIMRU State has a large proportion of population living in hunger and faced with abject poverty and malnutrition. The challenge therefore is on how to bring a synergy between agriculture and food security; on how to turn agriculture economically and ecologically sustainable in a manner that it does not lead to farmers committing suicide and at the same time provide food and nutrition for the masses. A healthy agriculture is also the first line of defence against naxalism.
Bihar therefore needs to discard the Green Revolution approach. It has to stop poisoning its soils, contaminating the water bodies and the environment and pushing more and more farmers out of agriculture. Bihar needs to shun the industrial model of farm growth, and build an ecologically sustainable farming model driven by a futuristic vision. Agriculture has to be re-designed and linked with its own traditional time-tested public distribution system – better known as gola – where the communities have been in control and have managed the food needs in a village. Moreover, instead of providing its surplus milk to Assam grid, Bihar should encourage milk intake by integrating animal husbandry with farming. Improving the local cattle breeds by cross-breeding those with some of the best domestic milch breeds like Gir and Kankrej, and providing an assured income to dairy farmers is a sure way to pull farmers out of agrarian distress.
Instead of chemical fertilisers, vermi-composting as a cottage industry has to be encouraged on a massive scale. This will restore soil health, increase crop productivity, and reduce greenhouse gas emissions. It will also generate more rural employment. Chemically pesticides need to be eliminated. Bihar can learn from the ‘Non-Pesticides Management’ system of agriculture from Andhra Pradesh. No chemical pesticides are applied in over 20 lakh hectares in Andhra Pradesh, and yet the crop yields are very high. Driven by its increasingly successful adoption by farmers, Andhra Pradesh plans to raise the area under no-pesticides agriculture to one-crore acres by the year 2014. If this can happen in Andhra Pradesh, there is no reason why Bihar cannot learn from its success.
Bihar cannot repeat the mistakes that relatively developed States like Punjab, Haryana, Maharashtra, Karnataka, Kerala, West Bengal, and Tamil Nadu had committed. Once the role model for the country, these States are now faced with sickness and may soon slip to the BIMARU status. Bihar can create history by showing a development path that is not only sustainable in the long-run but also brings prosperity and happiness to the masses. Nitish Kumar can surely create history by showing the world what true development means. And his time begins now.
“It was a rude awakening for me. I then realised that a high economic rate of growth is no indicator of human development." Mehbub-ul-Haq then gave me the memorable gem: “We were wrongly advised that we should take care of GDP and it will automatically take care of poverty. This is not correct. We need to take care of poverty and it will automatically take care of economic growth". This is exactly what Nitish Kumar did. And true to what Mehbub-ul-Haq had predicted, people of Bihar have voted him back to power. He invested in the people, and the people paid back.
A high growth rate of 11.5 per cent between 2004 and 2009 is not the reason why Nitish Kumar has been voted back. Restoring the right to freedom by demolishing the extortion industry was certainly the first step. Simultaneously he followed it up with various development initiatives, which mainline economists would wrongly classify as populist measures. Providing bicycles to school-going girls, and reserving 50 per cent seats for women in panchayats and local bodies was part of the social engineering that he undertook. With the foundations now well laid out, the challenge Nitish Kumar faces in his second term are not only formidable but if attempted in a more realistic and holistic manner can even chart out a new future for the country.
Unlike most other political leaders, I found Nitish Kumar to be more receptive and sensitive to the needs of the poor and marginalised. While the Bihar verdict amply demonstrates his willingness to improve the lot of the masses, I still recall the brief meeting when he asked me several years back as to what I thought was the major reason behind farmer suicides. I am talking of the year 2000-01 when he was for a short period the Union Agriculture Minister.
This was the time when farmers defaulting the banks and private moneylenders (with petty outstanding dues) were hauled up and put behind the bars. Thousands of farmers in distress preferred to commit suicide rather than to face the humiliation that comes along with indebtedness. When recovery agents come and confiscate the land or take away the tractor of a defaulting farmer, for instance, he feels let down in the eyes of the fellow villagers. Farmer’s pride goes for a toss, and he prefers to die.
When I explained that defaulting farmers are put behind bars is because we follow a draconian law that continues from the days of the British Raj, Nitish Kumar was taken by surprise. I told him that between 1904 and 1912 the British had framed a Public Demand Recovery Act, under which farmers could be jailed for defaulting the State for a paltry sum. So much so that even the jail expenses were to be borne by the farmers. The next morning, he shot a letter to the chief ministers (since agriculture is a State subject) to repeal the obsolete law. But such was the callous apathy that none of the State governments even cared to respond to the letter.
With 81 per cent of the population involved in farming, Bihar’s future revolves around agriculture. While Bihar has attained self-sufficiency in food production and produces surplus of milk, the fact remains that the BIMRU State has a large proportion of population living in hunger and faced with abject poverty and malnutrition. The challenge therefore is on how to bring a synergy between agriculture and food security; on how to turn agriculture economically and ecologically sustainable in a manner that it does not lead to farmers committing suicide and at the same time provide food and nutrition for the masses. A healthy agriculture is also the first line of defence against naxalism.
Bihar therefore needs to discard the Green Revolution approach. It has to stop poisoning its soils, contaminating the water bodies and the environment and pushing more and more farmers out of agriculture. Bihar needs to shun the industrial model of farm growth, and build an ecologically sustainable farming model driven by a futuristic vision. Agriculture has to be re-designed and linked with its own traditional time-tested public distribution system – better known as gola – where the communities have been in control and have managed the food needs in a village. Moreover, instead of providing its surplus milk to Assam grid, Bihar should encourage milk intake by integrating animal husbandry with farming. Improving the local cattle breeds by cross-breeding those with some of the best domestic milch breeds like Gir and Kankrej, and providing an assured income to dairy farmers is a sure way to pull farmers out of agrarian distress.
Instead of chemical fertilisers, vermi-composting as a cottage industry has to be encouraged on a massive scale. This will restore soil health, increase crop productivity, and reduce greenhouse gas emissions. It will also generate more rural employment. Chemically pesticides need to be eliminated. Bihar can learn from the ‘Non-Pesticides Management’ system of agriculture from Andhra Pradesh. No chemical pesticides are applied in over 20 lakh hectares in Andhra Pradesh, and yet the crop yields are very high. Driven by its increasingly successful adoption by farmers, Andhra Pradesh plans to raise the area under no-pesticides agriculture to one-crore acres by the year 2014. If this can happen in Andhra Pradesh, there is no reason why Bihar cannot learn from its success.
Bihar cannot repeat the mistakes that relatively developed States like Punjab, Haryana, Maharashtra, Karnataka, Kerala, West Bengal, and Tamil Nadu had committed. Once the role model for the country, these States are now faced with sickness and may soon slip to the BIMARU status. Bihar can create history by showing a development path that is not only sustainable in the long-run but also brings prosperity and happiness to the masses. Nitish Kumar can surely create history by showing the world what true development means. And his time begins now.
A Norwegian film "Caught in the micro-debt" brings out the truth behind microfinance
All these months I have been telling you how microfinance kills the poor. But somehow I still find that many of the policy makers and planners are still sold to the flawed concept, and some genuinely believe that micro-credit actually helps the poorest of the poor. They (and this includes the Reserve Bank of India as well as the Finance Ministry) are reluctant to initiate any action that may pull down the shutter on something that I have always regarded as a crime.
What is however heartening to observe is that many concerned citizens across the globe have begun to see through the pernicious design, and have now started to question the very basis of the concept. An award-winning Danish documentary film maker, Tom Heinemann, has launched today his latest film "Caught in the micro-debt" (in Norwegian language). Premiered on the Norwegian State TV Channel NRK, the film is based on an investigation by Tom Heinemann who made 'several trips to Bangladesh, and talks with a number of international experts worldwide, shows that the Grameen Bank leads many poor women into a crippling debt spiral.'
You can watch the documentary at www.nrk.no/brennpunkt
The film also makes some serious allegations against Muhammad Yunus, founder of Grameen Bank, had transferred Tk 7 billion to Grameen Kalyan, which has nothing to do with micro-credit operations. More at: http://www.bdnews24.com/details.php?id=180277&cid=2
According to a media statement: "The women pay about 30 per cent interest on loans, as they already have to start paying back after a week. The documentary tells the poor to harsh collection methods from Grameen Bank, which has received the entire 400 million in aid from Norway."
This film shatters the claims that were made by the microfinance institutes worldwide. I only wonder how could distinguished economists, academicians and policy makers eulogise the MFIs without first ascertaining the truth behind the flawed claims. Why didn't academicians at least warn the world? How could the World Bank/IMF and even the donors sink millions of dollars in such dirty enterprises? Why was the truth kept hidden?
Well, not only microfinance, the sordid truth behind the hyper claims being made by the biotechnology industry (and backed by the mainline scientists) has been kept under wraps by a corrupt regulatory regime. Pharmaceutical as well as the food processing industry have also managed to keep the stark truth remain hidden from public glare.There is something terribly going wrong with the people/institutions who are supposed to regulate the system to protect us.
The Norwegian Development Agency Norad, according to the press statement, had supported the Grameen Bank from 1986 to 1997 with a total of 400 million. Focal Point (the NRK programme that has brought this film) has gone through the entire archive of Norad, which has the Grameen Bank to make. Here it emerged that employees of NORAD in the early 1990's was concerned that the poor were trapped in a debt spiral.
In a memo from Norad 20 December 1993 states the following:
"In fact, according to a survey done by David Gibbons and Helen Todd of the 40 women with 10 years of membership (of Grameen Bank), had almost all borrowed privately to pay installments."
And in another note from Norad 1 June 1994 states the following:
"One of the matters which the report points out is that the credit concept as it has evolved, created fertile ground for a practice in which new loans can be used to repay current loans. This may help to explain the impressive repayment statistics as Grameen Bank operates. "
This only goes on to show that even as far as 1993-94 it was known that microfinance was not working. The film then goes on to quote a small borrower, Hazera: "I have had loans from Grameen Bank for 15 years, and I paid my installments on time. At one point I got problems with your refund. The staff of Grameen Bank came and called me names. They threatened me with selling panels from the house. If I did not pay, they would throw me on the street. They said many nasty things to me. I was scared and sold everything I owned and paid installment. The house will collapse. There are holes in the roof. I have no one in the world."
This is nothing but Goonda Raj.
What is however heartening to observe is that many concerned citizens across the globe have begun to see through the pernicious design, and have now started to question the very basis of the concept. An award-winning Danish documentary film maker, Tom Heinemann, has launched today his latest film "Caught in the micro-debt" (in Norwegian language). Premiered on the Norwegian State TV Channel NRK, the film is based on an investigation by Tom Heinemann who made 'several trips to Bangladesh, and talks with a number of international experts worldwide, shows that the Grameen Bank leads many poor women into a crippling debt spiral.'
You can watch the documentary at www.nrk.no/brennpunkt
The film also makes some serious allegations against Muhammad Yunus, founder of Grameen Bank, had transferred Tk 7 billion to Grameen Kalyan, which has nothing to do with micro-credit operations. More at: http://www.bdnews24.com/details.php?id=180277&cid=2
According to a media statement: "The women pay about 30 per cent interest on loans, as they already have to start paying back after a week. The documentary tells the poor to harsh collection methods from Grameen Bank, which has received the entire 400 million in aid from Norway."
This film shatters the claims that were made by the microfinance institutes worldwide. I only wonder how could distinguished economists, academicians and policy makers eulogise the MFIs without first ascertaining the truth behind the flawed claims. Why didn't academicians at least warn the world? How could the World Bank/IMF and even the donors sink millions of dollars in such dirty enterprises? Why was the truth kept hidden?
Well, not only microfinance, the sordid truth behind the hyper claims being made by the biotechnology industry (and backed by the mainline scientists) has been kept under wraps by a corrupt regulatory regime. Pharmaceutical as well as the food processing industry have also managed to keep the stark truth remain hidden from public glare.There is something terribly going wrong with the people/institutions who are supposed to regulate the system to protect us.
The Norwegian Development Agency Norad, according to the press statement, had supported the Grameen Bank from 1986 to 1997 with a total of 400 million. Focal Point (the NRK programme that has brought this film) has gone through the entire archive of Norad, which has the Grameen Bank to make. Here it emerged that employees of NORAD in the early 1990's was concerned that the poor were trapped in a debt spiral.
In a memo from Norad 20 December 1993 states the following:
"In fact, according to a survey done by David Gibbons and Helen Todd of the 40 women with 10 years of membership (of Grameen Bank), had almost all borrowed privately to pay installments."
And in another note from Norad 1 June 1994 states the following:
"One of the matters which the report points out is that the credit concept as it has evolved, created fertile ground for a practice in which new loans can be used to repay current loans. This may help to explain the impressive repayment statistics as Grameen Bank operates. "
This only goes on to show that even as far as 1993-94 it was known that microfinance was not working. The film then goes on to quote a small borrower, Hazera: "I have had loans from Grameen Bank for 15 years, and I paid my installments on time. At one point I got problems with your refund. The staff of Grameen Bank came and called me names. They threatened me with selling panels from the house. If I did not pay, they would throw me on the street. They said many nasty things to me. I was scared and sold everything I owned and paid installment. The house will collapse. There are holes in the roof. I have no one in the world."
This is nothing but Goonda Raj.
MFIs: Profiteering from poverty
Some days back, the New York Times had in a report Indian Microcredit Faces Collapse From Defaults (Nov 17, 2010) stated: "But microfinance in pursuit of profits has led some microcredit companies around the world to extend loans to poor villagers at exorbitant interest rates and without enough regard for their ability to repay. Some companies have more than doubled their revenues annually.
Now some Indian officials fear that microfinance could become India’s version of the United States’ subprime mortgage debacle, in which the seemingly noble idea of extending home ownership to low-income households threatened to collapse the global banking system because of a reckless, grow-at-any-cost strategy."
The NYT had blamed the borrowers in one of India’s largest states for the collapse. Accordingly, they have stopped repaying their loans, egged on by politicians who accuse the industry of earning outsize profits on the backs of the poor. If this is true, I am very happy.
MFIs deserve to be kicked out, the sooner the better for the poor.
Dainik Jagran, the largest selling newspaper in India (it is in Hindi), has carried today (Nov 27, 2010) an interesting report that should serve as an eye-opener. It says that the Ministry of Finance had a couple of days back held a discussion on microcredit in which a document detailing the profits earned by the MFIs was placed before the members. The details are shocking, and show how the MFIs have been extracting their pound of flesh in the name of poverty eradication.
An analysis of 13 major non-banking MFIs shows that the profits these firms accumulated by charging exorbitant interest from the poor borrowers had swelled from Rs 677.3 crore in 2007-08 to Rs 3776.93 crore in 2009-10. In other words, their profits had multiplied by 5.5 times over a period of two years. Since the MFIs have failed to expand the borrower base, it is quite evident that the profit increase is based on the interest amount they have managed to garner.
So while the poor took the fatal route to escape the humiliation that comes with coercive recovery of outstanding loans, the MFIs have made it rich. Bandhan Microfinance has broken all records. Its profits swelled by 34 times in two years. Some of the other players -- SKS Microfinance, Ujjivan Microfinance, BSS Microfinance, Share Microfinance, Sampada Safurti, and Grameen Financial -- have also managed to collect huge profits. Further investigations are on.
MFIs Interest Profit (in crore rupees)
2007-08 2009-10
SKS Microfinance 170.1 958.92
Bandhan 6.56 222.11
BSS 7.03 155.38
Share Microfinance 113.08 475.27
Grameen FS 82.65 327.35
Samdana Safurti 127.45 724.09
Ujjivan 36.37 372.89
(Note: Rs 1 crore=Rs 10 million)
The above chart is self-explanatory. It tells us how lucrative is the microfinance business. If you are foreign educated, and have lost your job in the wake of US recession, it is time to head home and set up an MFI. You can make money from the laudable objective of helping the poor. Many of the stalwarts in the MFI business have done it like this.
And don't worry, you will have a huge support from an equally indifferent educated from the middle class who would call it a 'win-win' situation. Many iNGOs, who also thrive on lending for the poor, would back you up to the hilt. Mainline economists are always there to justify such financial crimes.
You make your profits by sucking the blood of the poor. The resulting social cost would be picked up by the poor.
Now some Indian officials fear that microfinance could become India’s version of the United States’ subprime mortgage debacle, in which the seemingly noble idea of extending home ownership to low-income households threatened to collapse the global banking system because of a reckless, grow-at-any-cost strategy."
The NYT had blamed the borrowers in one of India’s largest states for the collapse. Accordingly, they have stopped repaying their loans, egged on by politicians who accuse the industry of earning outsize profits on the backs of the poor. If this is true, I am very happy.
MFIs deserve to be kicked out, the sooner the better for the poor.
Dainik Jagran, the largest selling newspaper in India (it is in Hindi), has carried today (Nov 27, 2010) an interesting report that should serve as an eye-opener. It says that the Ministry of Finance had a couple of days back held a discussion on microcredit in which a document detailing the profits earned by the MFIs was placed before the members. The details are shocking, and show how the MFIs have been extracting their pound of flesh in the name of poverty eradication.
An analysis of 13 major non-banking MFIs shows that the profits these firms accumulated by charging exorbitant interest from the poor borrowers had swelled from Rs 677.3 crore in 2007-08 to Rs 3776.93 crore in 2009-10. In other words, their profits had multiplied by 5.5 times over a period of two years. Since the MFIs have failed to expand the borrower base, it is quite evident that the profit increase is based on the interest amount they have managed to garner.
So while the poor took the fatal route to escape the humiliation that comes with coercive recovery of outstanding loans, the MFIs have made it rich. Bandhan Microfinance has broken all records. Its profits swelled by 34 times in two years. Some of the other players -- SKS Microfinance, Ujjivan Microfinance, BSS Microfinance, Share Microfinance, Sampada Safurti, and Grameen Financial -- have also managed to collect huge profits. Further investigations are on.
MFIs Interest Profit (in crore rupees)
2007-08 2009-10
SKS Microfinance 170.1 958.92
Bandhan 6.56 222.11
BSS 7.03 155.38
Share Microfinance 113.08 475.27
Grameen FS 82.65 327.35
Samdana Safurti 127.45 724.09
Ujjivan 36.37 372.89
(Note: Rs 1 crore=Rs 10 million)
The above chart is self-explanatory. It tells us how lucrative is the microfinance business. If you are foreign educated, and have lost your job in the wake of US recession, it is time to head home and set up an MFI. You can make money from the laudable objective of helping the poor. Many of the stalwarts in the MFI business have done it like this.
And don't worry, you will have a huge support from an equally indifferent educated from the middle class who would call it a 'win-win' situation. Many iNGOs, who also thrive on lending for the poor, would back you up to the hilt. Mainline economists are always there to justify such financial crimes.
You make your profits by sucking the blood of the poor. The resulting social cost would be picked up by the poor.
India Needs A Seed Liability Bill
For past several weeks, thousands of farmers in Madhya Pradesh, Uttar Pradesh, Chhatisgarh, Rajasthan, Bihar and Jharkhand have been left in the lurch. They had planted urd and til crops in a large acreage, and to their dismay no grain formation took place in the standing crop.
Unable to bear the economic loss, at least four farmers have reportedly committed suicide. Thousands of farmers have been pushed deeper into economic distress. They had also expressed their indignation by holding demonstration and protests at a number of small towns but haven’t got anything more than an official promise to provide them adequate compensation.
This is not the first time that the so called ‘improved seed’ has failed the farmers. Not only the seed supplied by the National Seeds Corporation, but even the seeds of multinational companies like Monsanto, Pioneer Hi-bred and Mahyco and others have routinely failed either to germinate or to form grains. And yet, there is no effort by the government to provide exemplary punishment to the seed companies and at the same time adequately compensate the farmers.
The controversial Seed Bill 2010 that has been placed in Parliament in the ongoing session fails to address the long standing demand of farmers. Originally drafted in 2004, the new Seed Bill that has been reintroduced after much deliberations and discussions still takes a soft line against the seed companies, and provides no succour to farmers. Ignoring most important suggestions made by the Standing Parliamentary Committee on Agriculture, and also by several civil society groups and farmer unions, it tows the line of the seed industry.
Seed Bill 2010 appears to have been drafted by the seed industry, for the seed industry. The proposed amendments once again favour private seed companies and corporations at the expense of farmers.
The $ 26 billion multinational giant Du Pont for instance has already made it clear that it is shifting its focus from agro-chemicals to sell better seed varieties. Monsanto has already created a strong foothold in the seed market, and other multinational seed giants like the Swiss-based Syngenta too have been extending its market. Over 500 private seed companies are presently setting shop in India.
As the seed industry grows, sale of spurious and sub-standard seeds has also grown. Sale of hybrid seeds particularly has become a lucrative business with a large number of fly-by-night operators who make a killing by selling seeds for a year and then disappearing the next year. In the absence of tighter controls, it is the farmers who bear the brunt and continue to suffer silently.
The Seed Bill 2010 proposes a maximum fine of Rs I lakh for not keep proper record of purity and germination of seed as per the laid-out standards. And in cases spurious seeds, the bill proposes a jail term extending to one year and a maximum fine of Rs 5 lakh. Crop losses suffered by farmers will be evaluated by a local expert committee which will work out the compensation to be paid to farmers.
This is simply unfair. When seed fails to germinate or develop grains, it is the farmers’ livelihood that is destroyed. Such is the extent of damage that many farmers prefer to commit suicide unable to bear the loss. It is therefore a question of life and death for a farmer. Considering that a good crop not only provides for food security but also economic security for the farmer’s family, the loss cannot be measured simply in terms of the seed price that the farmer had incurred. Compensation must include the livelihood loss, and should include a minimum liability amount.
What is therefore required is a Seed Liability Bill. Drawn on the lines of the Nuclear Liability Bill, the proposed Seed Liability bill must provide for a minimum economic liability that the seed companies must undertake in event of a crop failure. Agriculture Minister Sharad Pawar cannot be soft on the seed industry as seed is not merely a consumer product but the means of a livelihood for a farm family. One crop failure pushes the farmer deeper into the dreaded debt cycle.
Sometimes back, we had discussed the components of the proposed Seed Bill at a national consultation in New Delhi. The following suggestions do include some of the recommendations of the national consultation held in June this year:
a) the proposed seed bill should provide for mandatory price controls. Farmers must be able to purchase seed at an affordable price. At present, companies are charging prices at will and that too without any rationale. Tomato seed price for instance varies between Rs 475 to Rs 76,000 per kg, and Capsicum seed price between Rs 3,670 to Rs 65,200 a kg.
More recently, seed companies have taken the Andhra Pradesh government to the High Court challenging its decision to regulate prices and royalty. Therefore, the seed bill must include power to decide on price and price controls (including royalties).
b) Since the penalties/punishments have been mild, the government has failed to check the menace of fake, spurious and sub-standard seeds. Companies selling spurious and sub-standard seed should be black-listed. The penalty should include an imprisonment for a maximum period of ten years and a minimum fine of Rs 10 lakh. The penalty should also commensurate with the turnover of the seed company.
In addition, in cases of complete crop loss, the seed company should be directed to pay an amount equal to expected crop output, plus a 50 per cent assured return as livelihood security.
c) Provision for re-registration increases the monopoly of the seed company for at least 20 years. This is unacceptable for the simple reason that it brings in monopoly control over seed through the back door.
d) While seeds may be registered with the National Register of Seeds, it is imperative that State Governments must be given the authority to decide on which of these registered seeds can be licensed to be used in their State.
e) The Seed (Control) Order, 1983 had allowed the unbridled import under open-general license of planting material and seeds of flowers, vegetables and horticultural crops. This Order was exploited by unscrupulous seed trade and business to import plant materials without undergoing any rigorous quality checks. The seed imports have come with a heavy load of pests and diseases posing serious damages to crop cultivation and to the country’s food security. Many hitherto unknown pests have also entered the country.
f) All imports of seeds therefore must undergo mandatory seed testing procedures, including multi-location trials, to ensure its adaptability to the Indian conditions. No self-testing or certificates from foreign seed certification agencies should hold true for Indian conditions.
g) Seed imports should only be allowed after pest risk analysis, local adaptability have been assessed. There is a need for a liability clause to be introduced that makes seed exporter responsible for any pest outbreak and also for the clean-up operations. This assumes importance in the wake of the Bhopal gas tragedy where the chemical companies have simply evaded any liability for the toxic clean-up.
Unable to bear the economic loss, at least four farmers have reportedly committed suicide. Thousands of farmers have been pushed deeper into economic distress. They had also expressed their indignation by holding demonstration and protests at a number of small towns but haven’t got anything more than an official promise to provide them adequate compensation.
This is not the first time that the so called ‘improved seed’ has failed the farmers. Not only the seed supplied by the National Seeds Corporation, but even the seeds of multinational companies like Monsanto, Pioneer Hi-bred and Mahyco and others have routinely failed either to germinate or to form grains. And yet, there is no effort by the government to provide exemplary punishment to the seed companies and at the same time adequately compensate the farmers.
The controversial Seed Bill 2010 that has been placed in Parliament in the ongoing session fails to address the long standing demand of farmers. Originally drafted in 2004, the new Seed Bill that has been reintroduced after much deliberations and discussions still takes a soft line against the seed companies, and provides no succour to farmers. Ignoring most important suggestions made by the Standing Parliamentary Committee on Agriculture, and also by several civil society groups and farmer unions, it tows the line of the seed industry.
Seed Bill 2010 appears to have been drafted by the seed industry, for the seed industry. The proposed amendments once again favour private seed companies and corporations at the expense of farmers.
The $ 26 billion multinational giant Du Pont for instance has already made it clear that it is shifting its focus from agro-chemicals to sell better seed varieties. Monsanto has already created a strong foothold in the seed market, and other multinational seed giants like the Swiss-based Syngenta too have been extending its market. Over 500 private seed companies are presently setting shop in India.
As the seed industry grows, sale of spurious and sub-standard seeds has also grown. Sale of hybrid seeds particularly has become a lucrative business with a large number of fly-by-night operators who make a killing by selling seeds for a year and then disappearing the next year. In the absence of tighter controls, it is the farmers who bear the brunt and continue to suffer silently.
The Seed Bill 2010 proposes a maximum fine of Rs I lakh for not keep proper record of purity and germination of seed as per the laid-out standards. And in cases spurious seeds, the bill proposes a jail term extending to one year and a maximum fine of Rs 5 lakh. Crop losses suffered by farmers will be evaluated by a local expert committee which will work out the compensation to be paid to farmers.
This is simply unfair. When seed fails to germinate or develop grains, it is the farmers’ livelihood that is destroyed. Such is the extent of damage that many farmers prefer to commit suicide unable to bear the loss. It is therefore a question of life and death for a farmer. Considering that a good crop not only provides for food security but also economic security for the farmer’s family, the loss cannot be measured simply in terms of the seed price that the farmer had incurred. Compensation must include the livelihood loss, and should include a minimum liability amount.
What is therefore required is a Seed Liability Bill. Drawn on the lines of the Nuclear Liability Bill, the proposed Seed Liability bill must provide for a minimum economic liability that the seed companies must undertake in event of a crop failure. Agriculture Minister Sharad Pawar cannot be soft on the seed industry as seed is not merely a consumer product but the means of a livelihood for a farm family. One crop failure pushes the farmer deeper into the dreaded debt cycle.
Sometimes back, we had discussed the components of the proposed Seed Bill at a national consultation in New Delhi. The following suggestions do include some of the recommendations of the national consultation held in June this year:
a) the proposed seed bill should provide for mandatory price controls. Farmers must be able to purchase seed at an affordable price. At present, companies are charging prices at will and that too without any rationale. Tomato seed price for instance varies between Rs 475 to Rs 76,000 per kg, and Capsicum seed price between Rs 3,670 to Rs 65,200 a kg.
More recently, seed companies have taken the Andhra Pradesh government to the High Court challenging its decision to regulate prices and royalty. Therefore, the seed bill must include power to decide on price and price controls (including royalties).
b) Since the penalties/punishments have been mild, the government has failed to check the menace of fake, spurious and sub-standard seeds. Companies selling spurious and sub-standard seed should be black-listed. The penalty should include an imprisonment for a maximum period of ten years and a minimum fine of Rs 10 lakh. The penalty should also commensurate with the turnover of the seed company.
In addition, in cases of complete crop loss, the seed company should be directed to pay an amount equal to expected crop output, plus a 50 per cent assured return as livelihood security.
c) Provision for re-registration increases the monopoly of the seed company for at least 20 years. This is unacceptable for the simple reason that it brings in monopoly control over seed through the back door.
d) While seeds may be registered with the National Register of Seeds, it is imperative that State Governments must be given the authority to decide on which of these registered seeds can be licensed to be used in their State.
e) The Seed (Control) Order, 1983 had allowed the unbridled import under open-general license of planting material and seeds of flowers, vegetables and horticultural crops. This Order was exploited by unscrupulous seed trade and business to import plant materials without undergoing any rigorous quality checks. The seed imports have come with a heavy load of pests and diseases posing serious damages to crop cultivation and to the country’s food security. Many hitherto unknown pests have also entered the country.
f) All imports of seeds therefore must undergo mandatory seed testing procedures, including multi-location trials, to ensure its adaptability to the Indian conditions. No self-testing or certificates from foreign seed certification agencies should hold true for Indian conditions.
g) Seed imports should only be allowed after pest risk analysis, local adaptability have been assessed. There is a need for a liability clause to be introduced that makes seed exporter responsible for any pest outbreak and also for the clean-up operations. This assumes importance in the wake of the Bhopal gas tragedy where the chemical companies have simply evaded any liability for the toxic clean-up.
The milk madness. US/EU pushing India to open up for its subsidised milk products
India is the biggest producer of milk in the world. Not satisfied, a High Powered Committee on Animal Husbandry and Dairying has in January 2010 submitted a report to the Planning Commission calling for redoubling of efforts to increase milk production. Well, all this seem to be fine. After all, with increasing population growth, India should be planning for future needs.
But then came President Obama. He brought along more than 200 CEOs and a total of 3,000 officials to pressurise India to provide a market for various American industries. Among the thrust areas the US was looking for dairying topped the agenda as far as the farm sector was concerned. India's Agriculture Minister Sharad Pawar did have a series of negotiations with the US Agriculture Secretary Tom Vilsack.
Sharad Pawar later told media that he has an 'open mind' but for now the Ministry of Agriculture had held back permission for importing US dairy products.
US milk products in any case come laced with harmful hormones, antibiotics and are also derived from milk that has been produced from cows fed with feeds carrying GM ingredients.
India is not a major player when it comes to international trade. The three big players, European Union last year accounted for 32 per cent of the dairy commodity export market by volume, with New Zealand on 22 per cent and the US third on 16 per cent. With markets shrinking, the US, Canada and Europe are now aggressively looking for new markets. And India happens to be a major one.
According to The Hindu (Nov 15, 2010): "In recent bilateral talks during U.S. President Barack Obama's visit to India, the Agriculture Ministry made it clear that India will subject US dairy products to the same protocol and veterinary certification as was applicable to other countries, and that India would have to be sensitive to religious sentiments.
Drawing a parallel with the Codex Alimentarius-recognised Islamic and Jewish dietary code, which is applicable to Halal and Kosher foods, the Indian side held that religious sentiments would not allow for the import of dairy products such as cheese that were manufactured from the milk of cattle fed on blood meal and tissues of ruminant origin or those which contain animal rennet and are unlabelled."
Let me illustrate. For production of cheese, India uses synthetic rennet, which is derived from non-animal sources. In America, animal rennet is used. Animal rennet comes from the membrane lining the stomach of a young calf containing an enzyme called rennin used for curdling milk to make cheese. India is demanding labelling of American cheese.
Now let us understand why the US is able to over-produce and dump the milk products in the developing countries. It is all because of monumental subsidies that are doled out to inefficient US producers (and that includes multinationals). Even though, India is the biggest producer of milk, its dairy industry does not receive any subsidies. On the contrary, the US dairy sector received US $ 4.9 billion between 1995 and 2009. Much of these subsidies are provided for the following programmes (Source: Environment Working Group):
1. Milk Income Loss Contract Payment $2,784,722,485
2. Market Loss Assistance - Dairy $994,714,404
3. Milk Income Loss Transitional Payment $555,990,950
4. Dairy Ecomonic Loss Assistance Program $267,385,319
5. Milk Marketing Fees $171,578,059
6. Dairy Disaster Assistance $21,547,587
7. Dairy Indemnity $3,671,552
Such huge subsidies bring down the international prices and insulate the domestic producers against the volatility of the markets. As if this is not enough, the US has reintroduced export subsidies for the dairy introduced in May 2009. This is what the US Agriculture Secretary had to say in defence: "Subsidies would support the dairy industry, which had “seen its international market shares erode, in part due to the reintroduction of direct export subsidies by the European Union earlier this year.” EU Agriculture Commissioner Mariann Fischer Boel called it ‘very unfair’ of the US to use Europe’s reinstatement of export subsidies “as an excuse to go ahead in this direction.”
US dairy subsidies are for a mere 91,000 metric tons of milk powder, butter and cheese that it has for export. Also its unfair to countries trading fairly, and potentially damaging to global economy's recovery, as someone pointed out. And it is not only US that plays the dirty game. In March 2009, EU had also reintroduced dairy subsidies. As per news report: "the EU also restarted buying excess butter and milk from farmers at intervention prices set respectively at €2,218 and €1,698 per tonne." With these subsidies, EU is also pressurising India to open up its market under bilateral trade agreement, the EU-India FTA.
Ironically, the US had won a dispute against Canada's dairy subsidies in 2003. But who cares if the US were to itself violate the WTO norms. Might is always right. And with economists in tow, and trade negotiators benefiting from the trade regime, the resulting social cost must be borne by the poor and developing countries.
But then came President Obama. He brought along more than 200 CEOs and a total of 3,000 officials to pressurise India to provide a market for various American industries. Among the thrust areas the US was looking for dairying topped the agenda as far as the farm sector was concerned. India's Agriculture Minister Sharad Pawar did have a series of negotiations with the US Agriculture Secretary Tom Vilsack.
Sharad Pawar later told media that he has an 'open mind' but for now the Ministry of Agriculture had held back permission for importing US dairy products.
US milk products in any case come laced with harmful hormones, antibiotics and are also derived from milk that has been produced from cows fed with feeds carrying GM ingredients.
India is not a major player when it comes to international trade. The three big players, European Union last year accounted for 32 per cent of the dairy commodity export market by volume, with New Zealand on 22 per cent and the US third on 16 per cent. With markets shrinking, the US, Canada and Europe are now aggressively looking for new markets. And India happens to be a major one.
According to The Hindu (Nov 15, 2010): "In recent bilateral talks during U.S. President Barack Obama's visit to India, the Agriculture Ministry made it clear that India will subject US dairy products to the same protocol and veterinary certification as was applicable to other countries, and that India would have to be sensitive to religious sentiments.
Drawing a parallel with the Codex Alimentarius-recognised Islamic and Jewish dietary code, which is applicable to Halal and Kosher foods, the Indian side held that religious sentiments would not allow for the import of dairy products such as cheese that were manufactured from the milk of cattle fed on blood meal and tissues of ruminant origin or those which contain animal rennet and are unlabelled."
Let me illustrate. For production of cheese, India uses synthetic rennet, which is derived from non-animal sources. In America, animal rennet is used. Animal rennet comes from the membrane lining the stomach of a young calf containing an enzyme called rennin used for curdling milk to make cheese. India is demanding labelling of American cheese.
Now let us understand why the US is able to over-produce and dump the milk products in the developing countries. It is all because of monumental subsidies that are doled out to inefficient US producers (and that includes multinationals). Even though, India is the biggest producer of milk, its dairy industry does not receive any subsidies. On the contrary, the US dairy sector received US $ 4.9 billion between 1995 and 2009. Much of these subsidies are provided for the following programmes (Source: Environment Working Group):
1. Milk Income Loss Contract Payment $2,784,722,485
2. Market Loss Assistance - Dairy $994,714,404
3. Milk Income Loss Transitional Payment $555,990,950
4. Dairy Ecomonic Loss Assistance Program $267,385,319
5. Milk Marketing Fees $171,578,059
6. Dairy Disaster Assistance $21,547,587
7. Dairy Indemnity $3,671,552
Such huge subsidies bring down the international prices and insulate the domestic producers against the volatility of the markets. As if this is not enough, the US has reintroduced export subsidies for the dairy introduced in May 2009. This is what the US Agriculture Secretary had to say in defence: "Subsidies would support the dairy industry, which had “seen its international market shares erode, in part due to the reintroduction of direct export subsidies by the European Union earlier this year.” EU Agriculture Commissioner Mariann Fischer Boel called it ‘very unfair’ of the US to use Europe’s reinstatement of export subsidies “as an excuse to go ahead in this direction.”
US dairy subsidies are for a mere 91,000 metric tons of milk powder, butter and cheese that it has for export. Also its unfair to countries trading fairly, and potentially damaging to global economy's recovery, as someone pointed out. And it is not only US that plays the dirty game. In March 2009, EU had also reintroduced dairy subsidies. As per news report: "the EU also restarted buying excess butter and milk from farmers at intervention prices set respectively at €2,218 and €1,698 per tonne." With these subsidies, EU is also pressurising India to open up its market under bilateral trade agreement, the EU-India FTA.
Ironically, the US had won a dispute against Canada's dairy subsidies in 2003. But who cares if the US were to itself violate the WTO norms. Might is always right. And with economists in tow, and trade negotiators benefiting from the trade regime, the resulting social cost must be borne by the poor and developing countries.
Free trade helps the rich, not the poor
In recent days, US President Obama is leading a campaign to complete the Doha Development Round at the earliest. His allies of course are very excited, and stand up behind him. They are the real beneficiaries, and so therefore have to aggressively push for free trade. Unfortunately, there is no such thing as free trade. It is a clever term coined to cover-up for an unjust and unethical trade paradigm that is economically unsound and benefits only the rich.
As I wrote in my earlier blog post, Obama is a prisoner of the corporate world. Only the mainline media refuses to acknowledge that, and for obvious reasons. As we all know, the mainline media is corporate controlled and so therefore no difficult questions have to be asked.
With economists on their side, the rich and industrialised countries are desperately trying to open up the developing countries.
This was evident when Obama led the tribe at G-20. As The Guardian says: Obama's free trade conversion is a depressingly short term manoeuvre Barack Obama backed a return to the Doha free trade talks at the G20 summit, but the deal on offer benefits only big business, the west and a handful of powerful interests in developing countries.
The Guardian (Nov 15, 2010) has a full page article today entitled: "Obama's free trade conversion is a depressingly short term manoeuvre." I am bringing the full article for you. It is time you understood how the democratically-elected leaders end up serving only the rich and the crooked. you will now see Prime Minister Manmohan Singh likely to open up for FDI in multi-brand retail. He is simply misleading the country by saying that FDI in retail will help the farmers. Actually, he is doing to oblige the US/UK, and is of course under pressure from Barack Obama as well as David Cameron.
"Obama's free trade conversion is a depressingly short term manoeuvre".
By Phillip Inman
In the dying hours of the G20 summit, US president Barack Obama backed a new round of free trade talks with a view to putting a bill before Congress next year.
What persuadid him? Was it a chat with David Cameron and Angela Merkel? The pair lobbied hard throughout the summit to revive the Doha round of talks on lowering protectionist barriers, started almost 10 years ago in the capital of Qatar.
Or was it a collective desire on the part of all the G20 leaders to deflect criticism over their almost total lack of agreement on important subjects like the prospect of a currency war?
Perhaps it was the forceful editorial in the Wall Street Journal a day before the summit urging Obama to smash trade barriers to drive growth and solve the problems of competitive currency devaluations and global imbalances between rich and poor.
Obama's last minute support appeared to wrong-foot the new top-table countries China and Brazil, which up to that moment had spent most of their time berating Washington for the Fed's decision to switch on the printing presses and inject $600bn into the US economy.
If you would believe Cameron, Merkel and the Murdoch-owned WSJ, free trade is a panacea for all the world's ills. Not only does it give African and other poor nations access to European markets, they say, it also allows capital to flow to where it will be used most efficiently. So western countries will invest in poor countries where there are readily available pools of cheap labour and resources – not to exploit them, but to raise their living standards.
Cameron and Merkel often point to the example of South Korea – how it transformed itself over a mere 30 years into a rich nation, almost all through "free" trading with the rest of the world. That same could happen in Africa, south and central America, former soviet bloc countries and neglected parts of Asia, they say.
Obama's overnight switch of tactics was designed to leave countries that artificially depressed their currency (China) and those that imposed capital controls (Brazil) flapping to find a coherent argument against the logic of globalisation.
It is another depressingly short term tactic that lacks strategic sense, unless we consider the US president has allowed himself to be captured by the interests of big business and those countries, including our own, with an ever growing need for cheaper raw materials and virgin markets. Let's face it, this is what they mean by free trade.
Obama will, no doubt, have listened to those who say protectionism awaits those who block globalisation.
It's true that China heavily restricts access to its markets to protect important industries and employment. There are few opportunities for western, or even other Asian, businesses in the fast growing cities of China's prosperous south and east. A minority stake or partnership is as much as most can expect.
While markets are opening, hence Tesco's multi-billion pound investment in China, the pace is painfully slow.
David Cameron said without progress on lowering trade barriers, the situation would reverse, with terrible consequences for everyone. He promised Chinese premier Wen Jiabao he would force Brussels to consider lowering its trade barriers on Chinese goods as a start along the Doha road. Once Beijing sees the benefits of free trade, it will come to the Doha talks with a more open mind, or at least a weaker argument against lowering some of its own barriers.
Germany is all in favour now its powerhouse economy has successfully driven down wages to a point where it is a super-competitive exporter with much to gain from lower barriers on manufactured goods.
The British also see trade as a route out of the crisis, though more on the services side. (It is noteworthy that Cameron emphasised the export potential of the creative industries as much as manufacturing in his China and G20 speeches last week).
Even president Jacob Zuma of South Africa has converted to the cause. As Cameron's new best friend, they lobbied at Seoul for a free trade area for Africa as another boost to Doha.
Yet there is little reason to accept this kind of turbo-charged capitalism if you are poor or need to defend a welfare state that needs time to undergo reform.
In the latter category, the French are classic objectors. Like most western countries France has adopted "free trade" policies when they disproportionately benefit. It knows that while some of its manufacturing is world class, much of it is woefully inefficient compared to rivals in Asia.
When unemployment is high and looks like remaining that way, the benefits of building Chinese cars in Lyon for Chinese companies will not look so great compared to the havoc it could wreak, wiping out big names like Renault and Peugeot Citroën with unmatchable levels of investment.
The Anglo-German argument has little sympathy for western nations unable to afford welfare provision or maintain jobs in a globalised world. They must cut wages, as the Germans have, or cut welfare – the preferred British route.
The argument that the poor will gain is also flawed. War on Want, among other anti-poverty campaign groups, has consistently argued that free trade is a misnomer for rampant pillaging of third world assets.
There was a campaign to gather developing nations together to fight the west and the big mining companies, manufacturers and banks that wanted a bigger slice of their cake.
But today the world is fractured again. China and Brazil have little in common with their neighbours, which fear them as much as they do the west. In Africa, Zuma wants free trade because he thinks South Africa is like Germany and in pole position to dominate the region economically, which means politically too.
For Zuma, like Merkel, free trade is something their countries are poised to exploit, with bigger banks and more sophisticated manufacturers. South Africa also has a services industry that its neighbours lack. Faced with a choice of investment from China, Europe and the US, African nations could increasingly turn to a smiling Zuma, especially if a local free trade zone makes South African goods and services cheaper. Britain, with strong South African links, would benefit.
Academic assessments agree that the Doha deal on the table will mostly benefit the world's richest countries, along with certain export sectors in powerful developing countries.
The World Bank's analysis shows that 80% of gains from the Doha round will go to high-income economies, and that China, Thailand, India, Indonesia, South Africa, Argentina and Brazil will scoop up almost all the rest.
Sub-Saharan nations and Bangladesh figure on the list of losers.Maybe Obama's mid-term election loss was the turning point. It seems to have robbed him of any fight, and handed those countries that are emerging from the financial crisis with healthy balance sheets and the political structure to compete a chance to consolidate their power.
As I wrote in my earlier blog post, Obama is a prisoner of the corporate world. Only the mainline media refuses to acknowledge that, and for obvious reasons. As we all know, the mainline media is corporate controlled and so therefore no difficult questions have to be asked.
With economists on their side, the rich and industrialised countries are desperately trying to open up the developing countries.
This was evident when Obama led the tribe at G-20. As The Guardian says: Obama's free trade conversion is a depressingly short term manoeuvre Barack Obama backed a return to the Doha free trade talks at the G20 summit, but the deal on offer benefits only big business, the west and a handful of powerful interests in developing countries.
The Guardian (Nov 15, 2010) has a full page article today entitled: "Obama's free trade conversion is a depressingly short term manoeuvre." I am bringing the full article for you. It is time you understood how the democratically-elected leaders end up serving only the rich and the crooked. you will now see Prime Minister Manmohan Singh likely to open up for FDI in multi-brand retail. He is simply misleading the country by saying that FDI in retail will help the farmers. Actually, he is doing to oblige the US/UK, and is of course under pressure from Barack Obama as well as David Cameron.
"Obama's free trade conversion is a depressingly short term manoeuvre".
By Phillip Inman
In the dying hours of the G20 summit, US president Barack Obama backed a new round of free trade talks with a view to putting a bill before Congress next year.
What persuadid him? Was it a chat with David Cameron and Angela Merkel? The pair lobbied hard throughout the summit to revive the Doha round of talks on lowering protectionist barriers, started almost 10 years ago in the capital of Qatar.
Or was it a collective desire on the part of all the G20 leaders to deflect criticism over their almost total lack of agreement on important subjects like the prospect of a currency war?
Perhaps it was the forceful editorial in the Wall Street Journal a day before the summit urging Obama to smash trade barriers to drive growth and solve the problems of competitive currency devaluations and global imbalances between rich and poor.
Obama's last minute support appeared to wrong-foot the new top-table countries China and Brazil, which up to that moment had spent most of their time berating Washington for the Fed's decision to switch on the printing presses and inject $600bn into the US economy.
If you would believe Cameron, Merkel and the Murdoch-owned WSJ, free trade is a panacea for all the world's ills. Not only does it give African and other poor nations access to European markets, they say, it also allows capital to flow to where it will be used most efficiently. So western countries will invest in poor countries where there are readily available pools of cheap labour and resources – not to exploit them, but to raise their living standards.
Cameron and Merkel often point to the example of South Korea – how it transformed itself over a mere 30 years into a rich nation, almost all through "free" trading with the rest of the world. That same could happen in Africa, south and central America, former soviet bloc countries and neglected parts of Asia, they say.
Obama's overnight switch of tactics was designed to leave countries that artificially depressed their currency (China) and those that imposed capital controls (Brazil) flapping to find a coherent argument against the logic of globalisation.
It is another depressingly short term tactic that lacks strategic sense, unless we consider the US president has allowed himself to be captured by the interests of big business and those countries, including our own, with an ever growing need for cheaper raw materials and virgin markets. Let's face it, this is what they mean by free trade.
Obama will, no doubt, have listened to those who say protectionism awaits those who block globalisation.
It's true that China heavily restricts access to its markets to protect important industries and employment. There are few opportunities for western, or even other Asian, businesses in the fast growing cities of China's prosperous south and east. A minority stake or partnership is as much as most can expect.
While markets are opening, hence Tesco's multi-billion pound investment in China, the pace is painfully slow.
David Cameron said without progress on lowering trade barriers, the situation would reverse, with terrible consequences for everyone. He promised Chinese premier Wen Jiabao he would force Brussels to consider lowering its trade barriers on Chinese goods as a start along the Doha road. Once Beijing sees the benefits of free trade, it will come to the Doha talks with a more open mind, or at least a weaker argument against lowering some of its own barriers.
Germany is all in favour now its powerhouse economy has successfully driven down wages to a point where it is a super-competitive exporter with much to gain from lower barriers on manufactured goods.
The British also see trade as a route out of the crisis, though more on the services side. (It is noteworthy that Cameron emphasised the export potential of the creative industries as much as manufacturing in his China and G20 speeches last week).
Even president Jacob Zuma of South Africa has converted to the cause. As Cameron's new best friend, they lobbied at Seoul for a free trade area for Africa as another boost to Doha.
Yet there is little reason to accept this kind of turbo-charged capitalism if you are poor or need to defend a welfare state that needs time to undergo reform.
In the latter category, the French are classic objectors. Like most western countries France has adopted "free trade" policies when they disproportionately benefit. It knows that while some of its manufacturing is world class, much of it is woefully inefficient compared to rivals in Asia.
When unemployment is high and looks like remaining that way, the benefits of building Chinese cars in Lyon for Chinese companies will not look so great compared to the havoc it could wreak, wiping out big names like Renault and Peugeot Citroën with unmatchable levels of investment.
The Anglo-German argument has little sympathy for western nations unable to afford welfare provision or maintain jobs in a globalised world. They must cut wages, as the Germans have, or cut welfare – the preferred British route.
The argument that the poor will gain is also flawed. War on Want, among other anti-poverty campaign groups, has consistently argued that free trade is a misnomer for rampant pillaging of third world assets.
There was a campaign to gather developing nations together to fight the west and the big mining companies, manufacturers and banks that wanted a bigger slice of their cake.
But today the world is fractured again. China and Brazil have little in common with their neighbours, which fear them as much as they do the west. In Africa, Zuma wants free trade because he thinks South Africa is like Germany and in pole position to dominate the region economically, which means politically too.
For Zuma, like Merkel, free trade is something their countries are poised to exploit, with bigger banks and more sophisticated manufacturers. South Africa also has a services industry that its neighbours lack. Faced with a choice of investment from China, Europe and the US, African nations could increasingly turn to a smiling Zuma, especially if a local free trade zone makes South African goods and services cheaper. Britain, with strong South African links, would benefit.
Academic assessments agree that the Doha deal on the table will mostly benefit the world's richest countries, along with certain export sectors in powerful developing countries.
The World Bank's analysis shows that 80% of gains from the Doha round will go to high-income economies, and that China, Thailand, India, Indonesia, South Africa, Argentina and Brazil will scoop up almost all the rest.
Sub-Saharan nations and Bangladesh figure on the list of losers.Maybe Obama's mid-term election loss was the turning point. It seems to have robbed him of any fight, and handed those countries that are emerging from the financial crisis with healthy balance sheets and the political structure to compete a chance to consolidate their power.
G-20: Worried About Corporates, Not People
I have always failed to understand why the governments have been lowering the interest rate on bank savings. In England, as early as in 1996, banks provided barely one per cent interest on savings.
In India, interest on savings has been progressively reduced to 3.5 per cent. If given a choice, Prime Minister’s Economic Advisory Committee would like to also reduce it still further.
All these years the basic habit of household savings has come under a sharp attack. Forced by orthodox economists, and backed by the fast-moving consumer goods industry, governments have deliberately reduced the incentives to save saying that the more you spend the more you add to the national economy. Well, if you don’t believe me read what Alexei Kudrin, Finance Minister of Russia, had to say recently: “If you smoke a pack of cigarettes, that means you are giving more to help solve social problems such as boosting demographics, developing other social services and upholding birth rates…People should understand: Those who drink, those who smoke are doing more to help the state.”
The logic being that the more people spend, the more will be the economic growth. Unfortunately, this is not true. The less people save and more they consume, the more the economy becomes unsustainable in the long-run. It increases people’s inability to cope up with economic pressures, and thereby multiplies their vulnerability to any economic volatility. In turn it brings heavy expenditure burden on the governments, and the economy starts to hang precariously. Such flawed economic thinking sowed the seeds of the US housing bubble in 2008, when people were left with no savings to pay mortgages, triggering a global economic meltdown.
Such predatory lending policies, in the absence of adequate legal protection, is also ‘sucking the blood’ of the poor in the name of micro-finance. The same flawed and in many ways criminal lending practices are robbing the poor across the globe.
If you think the leaders of G-20 economies have learnt their lessons, the answer is no. They continue to pursue the same faulty policies, and want to shift the blame to a ‘foreign hand’. Whether it is micro-finance or global capital, it follows the same route. Instead of taming the galloping horse, the US is trying to do what the Wall Street wants. It is printing excess money to ward-off its short-term crisis, and blame China for its present crisis. We all know that the US and its allies pumped in huge bailout packages, which again went to service the banks and a privileged few, leaving the masses in shock and awe.
China’s trade surplus is what the US is now eyeing to reduce. And China is refusing to oblige. Rightly so.
Isn’t it therefore amusing to find America and its allies calling for balancing growth across countries so that some countries do not grow at a breathtaking speed, while others languish? Since when have the rich and industrialised countries begun to think of balanced growth across nations? Shouldn’t the same principle be also followed when it comes to international trade? Take the case of agriculture. Almost 35 per cent of the global trade in agriculture is in the hands of America and European Union. The US has time and again reiterated its desire to pierce open the developing country markets. WTO is designed to service the interest of agribusiness companies of the developed countries. In the process, 105 of the 149 Third World countries have already become food importing countries. Successful completion of Doha Development round will make the remaining nations also become food importers.
America does not see any wrong in the way it is using WTO to its sole advantage. And it is here that the Seoul Summit of G-20 nations that ended on Friday failed to stand up. Nor did the G-20 leaders call for a radical change in the structural problems that are behind the growing economic crisis. Much of the economic crisis that the world faces emanates from the US, which has over the years multiplied debt, and destroyed natural resources, to buttress growth. In other words, rich countries have aggressively pursued policies that widened economic disparities.
In America, studies show that 10 per cent of the population receives half of the total income every year. On top of it David Rockefeller and Ted Turner (along with multinational corporations) receive phenomenal agricultural subsides. The American decision to pump in an additional $ 600 billion in government bonds further distorts the term of trade. In India, rich corporate houses get a subsidy of Rs 5.16 lakh crore by way of tax exemptions, which is roughly half the total annual budget of the country. In almost all the major economies, 10 per cent of the population has control over 80 per cent of the resources.
The increase in income disparities, aided by fiscal policies that discourage household savings, fuels the stock markets. It is here that speculation takes over, and in the absence of tough regulations, capital flows dictate the economic policies. In the past few months, agricultural commodities prices are once again witnessing price spiral. With over 30 per cent jump in prices, one doesn’t know whether the world will soon witness a repeat of the food riots of 2007. In essence, G-20 leaders have lost control not only over where the excess liquidity flows, but also the global food system.
Ian Fleming gave James Bond the licence to kill. G-20 fails to withdraw the licence to speculate. Global capital therefore continues to be on a killing spree.
In India, interest on savings has been progressively reduced to 3.5 per cent. If given a choice, Prime Minister’s Economic Advisory Committee would like to also reduce it still further.
All these years the basic habit of household savings has come under a sharp attack. Forced by orthodox economists, and backed by the fast-moving consumer goods industry, governments have deliberately reduced the incentives to save saying that the more you spend the more you add to the national economy. Well, if you don’t believe me read what Alexei Kudrin, Finance Minister of Russia, had to say recently: “If you smoke a pack of cigarettes, that means you are giving more to help solve social problems such as boosting demographics, developing other social services and upholding birth rates…People should understand: Those who drink, those who smoke are doing more to help the state.”
The logic being that the more people spend, the more will be the economic growth. Unfortunately, this is not true. The less people save and more they consume, the more the economy becomes unsustainable in the long-run. It increases people’s inability to cope up with economic pressures, and thereby multiplies their vulnerability to any economic volatility. In turn it brings heavy expenditure burden on the governments, and the economy starts to hang precariously. Such flawed economic thinking sowed the seeds of the US housing bubble in 2008, when people were left with no savings to pay mortgages, triggering a global economic meltdown.
Such predatory lending policies, in the absence of adequate legal protection, is also ‘sucking the blood’ of the poor in the name of micro-finance. The same flawed and in many ways criminal lending practices are robbing the poor across the globe.
If you think the leaders of G-20 economies have learnt their lessons, the answer is no. They continue to pursue the same faulty policies, and want to shift the blame to a ‘foreign hand’. Whether it is micro-finance or global capital, it follows the same route. Instead of taming the galloping horse, the US is trying to do what the Wall Street wants. It is printing excess money to ward-off its short-term crisis, and blame China for its present crisis. We all know that the US and its allies pumped in huge bailout packages, which again went to service the banks and a privileged few, leaving the masses in shock and awe.
China’s trade surplus is what the US is now eyeing to reduce. And China is refusing to oblige. Rightly so.
Isn’t it therefore amusing to find America and its allies calling for balancing growth across countries so that some countries do not grow at a breathtaking speed, while others languish? Since when have the rich and industrialised countries begun to think of balanced growth across nations? Shouldn’t the same principle be also followed when it comes to international trade? Take the case of agriculture. Almost 35 per cent of the global trade in agriculture is in the hands of America and European Union. The US has time and again reiterated its desire to pierce open the developing country markets. WTO is designed to service the interest of agribusiness companies of the developed countries. In the process, 105 of the 149 Third World countries have already become food importing countries. Successful completion of Doha Development round will make the remaining nations also become food importers.
America does not see any wrong in the way it is using WTO to its sole advantage. And it is here that the Seoul Summit of G-20 nations that ended on Friday failed to stand up. Nor did the G-20 leaders call for a radical change in the structural problems that are behind the growing economic crisis. Much of the economic crisis that the world faces emanates from the US, which has over the years multiplied debt, and destroyed natural resources, to buttress growth. In other words, rich countries have aggressively pursued policies that widened economic disparities.
In America, studies show that 10 per cent of the population receives half of the total income every year. On top of it David Rockefeller and Ted Turner (along with multinational corporations) receive phenomenal agricultural subsides. The American decision to pump in an additional $ 600 billion in government bonds further distorts the term of trade. In India, rich corporate houses get a subsidy of Rs 5.16 lakh crore by way of tax exemptions, which is roughly half the total annual budget of the country. In almost all the major economies, 10 per cent of the population has control over 80 per cent of the resources.
The increase in income disparities, aided by fiscal policies that discourage household savings, fuels the stock markets. It is here that speculation takes over, and in the absence of tough regulations, capital flows dictate the economic policies. In the past few months, agricultural commodities prices are once again witnessing price spiral. With over 30 per cent jump in prices, one doesn’t know whether the world will soon witness a repeat of the food riots of 2007. In essence, G-20 leaders have lost control not only over where the excess liquidity flows, but also the global food system.
Ian Fleming gave James Bond the licence to kill. G-20 fails to withdraw the licence to speculate. Global capital therefore continues to be on a killing spree.
The myths that kept the MFIs afloat
Microfinance is under attack. Even the normally reticent pink newspapers have now begun to bring out the inherent flaws in the microfinance model. While Finance Minister Pranab Mukherjee and the Reserve Bank of India governor Mr D Subbarao refuse to take notice, public outcry against the criminal micro-credit system that has actually grown with state support, is building up.
It hasn't been that easy. When I first began exposing the fraudulent credit system in the name of the poor, I faced a barrage of criticism by the MFI employees who accused me of not appreciating the difficulties under which they were operating. Short of calling me names, they kept on expressing their 'disgust' at what I wrote, and how much little I knew about the 'wonderful' and 'humanitarian' role they were playing. Someone even went to extent of comparing the MFIs with Mother Teresa !
Nevertheless, as I went along, people began to take notice. A week after my first blog post on MFIs some months back, two young employees working in a microfinance unit contacted me, and thanked me for the "courage" demonstrated in taking the 'bull by the horn'. A day later a journalist called, and she came over to understand my perspective. I wasn't surprised when she told me that somehow she carried an impression that microfinance was a tiny loan at a tiny rate of interest.
Gradually the issue began receiving attention. More and more articles began appearing in newspapers, including vernacular language dailies. Media dug out reports submitted by district collectors in Andhra Pradesh, which showed the killing ways of MFIs. All this helped built up public pressure. Later, some Lok Sabha MPs reached me, and expressed their 'disbelief' over the unbridled exploitation of the poorest. Meanwhile, reports of suicides from Andhra Pradesh began to trickle in. The local TV channels and the print media highlighted the tragedy.
It then became a political issue. Andhra Pradesh government decided to bring in an ordinance to reign in the MFIs. Former Chief Minister Chandrababu Naidu gave a call for non-repayment of the dues.
SKS Microfinance was forced to 'reduce' interest rate to 24 per cent. This kind of window dressing has to be condemned. What a reader wrote to me yesterday is so telling: “I’ve made a tonne of money… more than I ever thought I would make in my lifetime and my kid’s lifetime combined,” says Vikram Akula in a recent interview to Business Standard.
'Yes no one would crib if he became overnight a multi-billionaire tycoon. Except that he made this money by squeezing the blood of the poor and pressurizing them to take their lives while all the time cultivating an image of the "saviour of the poor,"
I am convinced that microfinance is actually a scam. It is inherently a flawed model in the name of reaching small credit to the poor. In reality, the MFIs are no different than the villains of the story -- money lenders. You have just read above what Vikram Akula told a newspaper. I don't have to say more. But don't think that only MFIs in India are bad. MFIs everywhere in the world are bad. In fact, if you have to see their ugliest face, just follow the MFIs in Latin America.
If we really need to pull the poor out of poverty, the MFIs must go. I know it is not going to be easy. I am aware of the hawks sitting in World Bank, UNDP, Ford Foundation and among numerous donors (both private and public) who are not going to let go so easily. Only public pressure can bring down the shutters on MFIs. So don't think your job is over. It has just begun.
I want you to read an excellent article in today's Economic Times (Nov 11, 2010) 'Five myths about microfinance' by T T Ram Mohan. I have never met him, but I must acknowledge that if there is one economic writer that I respect, it is T T Ram Mohan. I love his incisive writings, and admire his analytical ability.
Five myths about microfinance
By T T Ram Mohan
Economic times, Nov 11, 2010
http://bit.ly/dveD5q
The microfinance bubble has burst. The AP government ordinance, the AP opposition's campaign asking borrowers not to repay and the sheer public hostility towards MFIs . all these have put the brakes on MFI activities for now. We need to rethink the role of MFIs in the rural economy . In order to do so, we must first grasp some of the myths on which the MFI sector has rested th US far.
MFIs are crucial to financial inclusion: The big impetus to financial inclusion came way back in 1969 following the nationalisation of banks. Secondly, financial inclusion is not just about giving small-ticket loans. It is also about taking deposits and providing basic banking services.
MFIs are hardly the pioneers in microfinance. The early initiative came from the self-help group (SHG) movement started by the government of India in 1992 under the auspices of Nabarad and with the involvement of banks. This is the biggest outreach programme of its kind in the world. It covers 86 million poor households and has extended credit of Rs23, 000 crore. MFIs cover 30 million customers and have lent over Rs 30,000 crore.
Under the SHG scheme, credit is linked to savings (unlike MFI credit). There is focus on capacity-building among borrowers. The rate of interest is 8-10% with monthly repayment. The suggestion that MFIs are crucial to financial inclusion is only part of an attempt to give respectability to what is increasingly a profit-driven activity.
MFIs have reached out to those ignored by banks: The contention is that MFIs complement the efforts of banks by reaching out to those ignored by banks. This too is not true. AP has an average credit/deposit ratio of over 105% and a ratio of over 80% in half the districts. (The national average is 63%). AP does not lack credit. MFIs would have been made a real contribution had they fanned out to states where the redit/deposit ratios are low. Instead, they have focused on AP.
They have done so because AP houses nearly a quarter of the SHGs. MFIs chose the easy route of tapping into established SHGs for making loans. This was viable in the early stages but, over time, it has led to the problem of multiple lending and excessive debt burdens.
It is no different from private banks in India marketing consumer loans or US banks marketing subprime loans. œ MFIs are an important mechanism for alleviating rural poverty: Credit is only one of several instruments needed for fighting poverty.
Secondly, credit can help alleviate poverty if it goes into income-generation schemes. MFI credit, for the most part, is for consumption. Thirdly, returns to agriculture are so low that it is inconceivable that it can service interest rates of 24% and above that MFIs charge. Since agriculture is the key to rural poverty, it is ridiculous to suggest that MFI credit can help alleviate poverty.
MFIs have substituted moneylenders who used to charge even higher interest rates: The comparison with moneylenders is flawed. Moneylenders donft go out and market their loans as MFIs do. Besides, moneylenders make loans strictly against collateral and this is a built-in check on lending.
Secondly, MFI interest rates in AP are said to be have been in the range of 24-60%. At the upper end, the rates are no different from those of moneylenders. Yes, MFIs did substitute moneylenders in a way because many moneylenders found it expedient to set up MFIs themselves . they could then have easy access to bank funds!
High operational costs means that smallticket loans cannot cost less than 24%: If this is true, how is lending to SHGs viable? The high lending rates of many MFIs translate into fat salaries for executives and abnormal returns. (Some have return on assets of 5%; a bank is lucky if it makes 1%).
Public sector banks (PSBs) have long had branches in the rural areas. Small loans will be one element in their portfolio which will include low-cost deposits and other products. With branch costs fully written off, it is hard to see why microfinance provided by PSBs needs to be priced at 24%. If indeed the operational costs turn out to be steep in some areas, then the bank correspondent and other models need to be developed.
PSBs have not put their best foot forward in respect of microfinance because they lack the incentives to do so. Most are listed now and have had to focus on earnings growth, which is easily provided by corporate and retail credit. The regulatory cap on interest on small loans was a dampener. (The cap is now gone). Lending to MFIs qualified as priority sector credit, so PSBs could not be troubled to build their own portfolios.
Many people think the recent problems with MFIs were the result of some excesses. With a little tweaking here and there, MFIs can be in the forefront of financial inclusion. They are wrong. The entire MFI model needs revisiting. At least PSBs are much better placed to pursue financial inclusion on their own. The AP ordinance and its fallout ensure that the go-go days for MFIs are over. And that is all to the good.
It hasn't been that easy. When I first began exposing the fraudulent credit system in the name of the poor, I faced a barrage of criticism by the MFI employees who accused me of not appreciating the difficulties under which they were operating. Short of calling me names, they kept on expressing their 'disgust' at what I wrote, and how much little I knew about the 'wonderful' and 'humanitarian' role they were playing. Someone even went to extent of comparing the MFIs with Mother Teresa !
Nevertheless, as I went along, people began to take notice. A week after my first blog post on MFIs some months back, two young employees working in a microfinance unit contacted me, and thanked me for the "courage" demonstrated in taking the 'bull by the horn'. A day later a journalist called, and she came over to understand my perspective. I wasn't surprised when she told me that somehow she carried an impression that microfinance was a tiny loan at a tiny rate of interest.
Gradually the issue began receiving attention. More and more articles began appearing in newspapers, including vernacular language dailies. Media dug out reports submitted by district collectors in Andhra Pradesh, which showed the killing ways of MFIs. All this helped built up public pressure. Later, some Lok Sabha MPs reached me, and expressed their 'disbelief' over the unbridled exploitation of the poorest. Meanwhile, reports of suicides from Andhra Pradesh began to trickle in. The local TV channels and the print media highlighted the tragedy.
It then became a political issue. Andhra Pradesh government decided to bring in an ordinance to reign in the MFIs. Former Chief Minister Chandrababu Naidu gave a call for non-repayment of the dues.
SKS Microfinance was forced to 'reduce' interest rate to 24 per cent. This kind of window dressing has to be condemned. What a reader wrote to me yesterday is so telling: “I’ve made a tonne of money… more than I ever thought I would make in my lifetime and my kid’s lifetime combined,” says Vikram Akula in a recent interview to Business Standard.
'Yes no one would crib if he became overnight a multi-billionaire tycoon. Except that he made this money by squeezing the blood of the poor and pressurizing them to take their lives while all the time cultivating an image of the "saviour of the poor,"
I am convinced that microfinance is actually a scam. It is inherently a flawed model in the name of reaching small credit to the poor. In reality, the MFIs are no different than the villains of the story -- money lenders. You have just read above what Vikram Akula told a newspaper. I don't have to say more. But don't think that only MFIs in India are bad. MFIs everywhere in the world are bad. In fact, if you have to see their ugliest face, just follow the MFIs in Latin America.
If we really need to pull the poor out of poverty, the MFIs must go. I know it is not going to be easy. I am aware of the hawks sitting in World Bank, UNDP, Ford Foundation and among numerous donors (both private and public) who are not going to let go so easily. Only public pressure can bring down the shutters on MFIs. So don't think your job is over. It has just begun.
I want you to read an excellent article in today's Economic Times (Nov 11, 2010) 'Five myths about microfinance' by T T Ram Mohan. I have never met him, but I must acknowledge that if there is one economic writer that I respect, it is T T Ram Mohan. I love his incisive writings, and admire his analytical ability.
Five myths about microfinance
By T T Ram Mohan
Economic times, Nov 11, 2010
http://bit.ly/dveD5q
The microfinance bubble has burst. The AP government ordinance, the AP opposition's campaign asking borrowers not to repay and the sheer public hostility towards MFIs . all these have put the brakes on MFI activities for now. We need to rethink the role of MFIs in the rural economy . In order to do so, we must first grasp some of the myths on which the MFI sector has rested th US far.
MFIs are crucial to financial inclusion: The big impetus to financial inclusion came way back in 1969 following the nationalisation of banks. Secondly, financial inclusion is not just about giving small-ticket loans. It is also about taking deposits and providing basic banking services.
MFIs are hardly the pioneers in microfinance. The early initiative came from the self-help group (SHG) movement started by the government of India in 1992 under the auspices of Nabarad and with the involvement of banks. This is the biggest outreach programme of its kind in the world. It covers 86 million poor households and has extended credit of Rs23, 000 crore. MFIs cover 30 million customers and have lent over Rs 30,000 crore.
Under the SHG scheme, credit is linked to savings (unlike MFI credit). There is focus on capacity-building among borrowers. The rate of interest is 8-10% with monthly repayment. The suggestion that MFIs are crucial to financial inclusion is only part of an attempt to give respectability to what is increasingly a profit-driven activity.
MFIs have reached out to those ignored by banks: The contention is that MFIs complement the efforts of banks by reaching out to those ignored by banks. This too is not true. AP has an average credit/deposit ratio of over 105% and a ratio of over 80% in half the districts. (The national average is 63%). AP does not lack credit. MFIs would have been made a real contribution had they fanned out to states where the redit/deposit ratios are low. Instead, they have focused on AP.
They have done so because AP houses nearly a quarter of the SHGs. MFIs chose the easy route of tapping into established SHGs for making loans. This was viable in the early stages but, over time, it has led to the problem of multiple lending and excessive debt burdens.
It is no different from private banks in India marketing consumer loans or US banks marketing subprime loans. œ MFIs are an important mechanism for alleviating rural poverty: Credit is only one of several instruments needed for fighting poverty.
Secondly, credit can help alleviate poverty if it goes into income-generation schemes. MFI credit, for the most part, is for consumption. Thirdly, returns to agriculture are so low that it is inconceivable that it can service interest rates of 24% and above that MFIs charge. Since agriculture is the key to rural poverty, it is ridiculous to suggest that MFI credit can help alleviate poverty.
MFIs have substituted moneylenders who used to charge even higher interest rates: The comparison with moneylenders is flawed. Moneylenders donft go out and market their loans as MFIs do. Besides, moneylenders make loans strictly against collateral and this is a built-in check on lending.
Secondly, MFI interest rates in AP are said to be have been in the range of 24-60%. At the upper end, the rates are no different from those of moneylenders. Yes, MFIs did substitute moneylenders in a way because many moneylenders found it expedient to set up MFIs themselves . they could then have easy access to bank funds!
High operational costs means that smallticket loans cannot cost less than 24%: If this is true, how is lending to SHGs viable? The high lending rates of many MFIs translate into fat salaries for executives and abnormal returns. (Some have return on assets of 5%; a bank is lucky if it makes 1%).
Public sector banks (PSBs) have long had branches in the rural areas. Small loans will be one element in their portfolio which will include low-cost deposits and other products. With branch costs fully written off, it is hard to see why microfinance provided by PSBs needs to be priced at 24%. If indeed the operational costs turn out to be steep in some areas, then the bank correspondent and other models need to be developed.
PSBs have not put their best foot forward in respect of microfinance because they lack the incentives to do so. Most are listed now and have had to focus on earnings growth, which is easily provided by corporate and retail credit. The regulatory cap on interest on small loans was a dampener. (The cap is now gone). Lending to MFIs qualified as priority sector credit, so PSBs could not be troubled to build their own portfolios.
Many people think the recent problems with MFIs were the result of some excesses. With a little tweaking here and there, MFIs can be in the forefront of financial inclusion. They are wrong. The entire MFI model needs revisiting. At least PSBs are much better placed to pursue financial inclusion on their own. The AP ordinance and its fallout ensure that the go-go days for MFIs are over. And that is all to the good.
'Microfinance borrowers are forced to commit suicide'
The Allahabad High Court has yesterday termed an interest rate of 10 per cent that is being charged from defaulting farmers in Uttar Pradesh as 'cruelty' and has described it as similar to the case of 'a dying person being physically beaten.' This news comes in the wake of the leading money lender SKS Microfinance cutting down its interest rate from 24.55 to 24 per cent. This is the second time in a month when the SKS has reduced its lending rate after much hue and cry.
I wonder how come 10 per cent interest being charged from a farmer becomes 'cruelty' whereas 24 per cent rate being charged from his wife in the name of micro finance goes under the category of 'humanitarian' support?
It is therefore quite obvious that micro finance is designed to exploit the poor, and draw every ounce of blood from the hapless poor. And yet, Vijay Mahajan, the CEO of another big money lending firm Basix, has the audacity to say: "There is a need for a study on the suicides by independent social scientists. If the suicides are proved to be due to the activities of MFIs, we will compensate the family and take punitive action against the erring staff."
Why only the erring staff? Why not you, Mr Vijay Mahajan?
And this also reminds me of what the apathatic government officials invariably say whenever news reports of starvation deaths come out. Every time I remember they would contest the news reports by saying that these deaths are not due to starvation but some chronic diseases. Vijay Mahajan is no different.
Business Standard (Nov 10, 2010) quotes K Venkatanarayana of Kakatiya University, who has been studying MFI sector in Andhra Pradesh. He says borrowers are forced to commit suicide. “During training sessions, MFIs say a loan will be waived if the person who had taken it dies. This could be working in a negative manner," he explains.
Wasn't I right? The MFIs are designed to kill. And yet, the killers are roaming free. Why is Andhra Pradesh government not filing FIRs against them? Just look at the four case studies that are pasted below. Why should these widows not get justice? Why shouldn't the MFIs responsible for the deaths of their near and dear be held for murder?
Meanwhile, here is the Business Standard report:
AP suicides raise questions on MFI model
Warangal November 10, 2010
Ban multiple lending, bring about greater transparency, slash interest rates. Only that can salvage the sector, say activists
As the high-rises of Hyderabad fade away, verdant greenery and a cool breeze take over. Early morning, we are travelling through beautiful terrain on our way to Warangal. Once there, however, nature is no solace.
A deafening calm greets us at Venkatadripet near Ghanpur station. In the past couple of months, several residents of this hamlet have faced the alleged coercive methods of micro finance institutions (MFIs) for defaulting on repayments. Their only recourse: taking their own lives.
With the death toll climbing, the government had to finally step in. But heart-wrenching stories of the victims’ families still hang heavy in the air. Warangal district is the worst hit, with 17 suicides reported from the area. Andhra Pradesh reportedly has 57 cases of harassment, including suicides.
R Subrahmanyam, principal secretary, rural development, Andhra Pradesh, minces no words. He says MFIs are raking in hyper-profits at the cost of the rural poor. “MFIs are also resorting to multiple lending without conducting due diligence.”
K Venkatanarayana of Kakatiya University, who has been studying MFI sector in the state closely, says borrowers are forced to commit suicide. “During training sessions, MFIs say a loan will be waived if the person who had taken it dies. This could be working in a negative manner,” he explains.
MFIs charge an interest rate of 26-32 per cent. “This is exorbitant,” says Venkatanarayana. “MFIs have deviated from their path of serving the poor. They are just pushing the poor into a debt trap by multiple lending and lending beyond the capacity of borrowers. There are many MFIs operating in the same area and function on joint legal liability. The model is based on pure profit.”
However, MFIs counter accusations of usury, claiming the interest on a loan includes the cost of finding customers in remote places, appraising them and selecting the creditworthy, disbursing money and collecting repayments for over 50 weeks, administration and raising funds.
“Banks don’t go to the doorstep to offer loans. We ensure that a borrower does not lose a single day’s earnings,” says P Kishore Kumar, managing director, Trident Microfinance, adding that the interest includes insurance cover. There are around 100 MFIs operating in AP, of which only 18 are registered, he adds.
Venkatanarayana blames commercial banks for the mess created by MFIs. “Banks do not want to invest in the rural poor. Reaching out to the poor means investing in infrastructure, manpower and other activities, which they are unwilling to do.”
Kishore Kumar says moneylenders are now calling themselves MFIs. “That’s the reason we have started taking corrective measures. The Microfinance Institutions Network (MFIN), the industry body, was formed with this very purpose.”
To address the issues, the Andhra Pradesh government issued an ordinance on October 15 to protect borrowers from exploitation by MFIs. But has the damage been already done?
MFIN, while agreeing that there might be some aberrations, argues that the ordinance will affect the financial inclusion plans of the government. “There is a need for a study on the suicides by independent social scientists. If the suicides are proved to be due to the activities of MFIs, we will compensate the family and take punitive action against the erring staff. If required, the MFI will be expelled from MFIN,” says Vijay Mahajan, founder of Basix and CEO of MFIN.
Ban multiple lending, bring about greater transparency, slash interest rates and monitor the end-use of loans. These are some of the steps that can be introduced to salvage the MFI sector and make it successful, say activists. But should these not have been done before the MFIs started operating? The Warangal deaths are ample answer to that question.
CASE 1: Ranjitha
Everyone knew K Ramesh. His wife, Ranjitha, borrowed Rs 10,000 from Spandana, an MFI, to buy a buffalo. The family paid 15 weekly instalments of Rs 225 each. But she could not keep up with the repayments. She was part of a group of villagers, who had taken loans. The first time she defaulted, other members of the group pooled in and paid her instalment. But soon after, they insisted that Ramesh clear the dues. Spandan’s agents also started hounding them. Ranjitha doused herself with kerosene and set it alight. The following day, Ramesh hanged himself. Ranjitha was hospitalised with burns, but survived. “If you borrow in a group, you have to repay in a group. That was the diktat,” she says.
CASE 2: KAUSAR
Twenty-two-year-old Kausar, a resident of Warangal, is buckling. She has a two-year-old son and a Rs 10,000-loan to be repaid. She paid 25 instalments on time. But then her child met with an accident and the money was spent on treatment. She again borrowed Rs 12,000 from Swayamkrushi and took another Rs 12,000 through a friend. With medical expenses mounting, she found herself unable to make her repayments. Members of the group threatened to sit in front of her house. This prompted Akbar, her husband, to take the extreme step: suicide. The insurance cover would take care of Kausar’s loans, but she still has to repay the loan taken on her behalf by her friend.
CASE 3: ALIYA
“MFIs don’t crosscheck if a loan was used for the intended purpose,” says Suresh, a friend of Baskaa Aliya in Kadapikonda near Kazipet. Aliya committed suicide after failing to repay money owed to MFIs. His wife, Hyma, had borrowed Rs 40,000 from Sharemoolah and Spandana. Suresh pays Rs 625 a week for the Rs 26,000 loan that his wife had taken. Agents highlight the long-winded procedures that banks follow to sanction loans. This deters the poor from approaching them. They also believe getting a loan from banks is too difficult a job for the likes of Aliya and is the main reason the Andhra government's Paavala Vaddi (loans at 25-paise interest) scheme is not utilised.
CASE 4: RAMA
Multiple borrowing ruined Rama’s life. Her teenage daughter, E Mownika, set herself ablaze after lenders repossessed her sewing machine. She succumbed to her injuries. Her father also suffered burns in an effort to save her. Rama, a resident of Karimabad, had taken loans from five MFIs. The family is yet to return Rs 1,00,000, including Rs 50,000 to Pragati. They used to pay Rs 5,300 every month, but defaulted three months ago. “The agents would tell us to sell household items to repay,” she alleges. Rama had taken loans to expand her business. Her husband runs a paan shop. After falling into a debt trap, she ended up taking fresh loans to repay earlier loans.
http://mediatoday.co.in/stories_discription.php?id=23732
I wonder how come 10 per cent interest being charged from a farmer becomes 'cruelty' whereas 24 per cent rate being charged from his wife in the name of micro finance goes under the category of 'humanitarian' support?
It is therefore quite obvious that micro finance is designed to exploit the poor, and draw every ounce of blood from the hapless poor. And yet, Vijay Mahajan, the CEO of another big money lending firm Basix, has the audacity to say: "There is a need for a study on the suicides by independent social scientists. If the suicides are proved to be due to the activities of MFIs, we will compensate the family and take punitive action against the erring staff."
Why only the erring staff? Why not you, Mr Vijay Mahajan?
And this also reminds me of what the apathatic government officials invariably say whenever news reports of starvation deaths come out. Every time I remember they would contest the news reports by saying that these deaths are not due to starvation but some chronic diseases. Vijay Mahajan is no different.
Business Standard (Nov 10, 2010) quotes K Venkatanarayana of Kakatiya University, who has been studying MFI sector in Andhra Pradesh. He says borrowers are forced to commit suicide. “During training sessions, MFIs say a loan will be waived if the person who had taken it dies. This could be working in a negative manner," he explains.
Wasn't I right? The MFIs are designed to kill. And yet, the killers are roaming free. Why is Andhra Pradesh government not filing FIRs against them? Just look at the four case studies that are pasted below. Why should these widows not get justice? Why shouldn't the MFIs responsible for the deaths of their near and dear be held for murder?
Meanwhile, here is the Business Standard report:
AP suicides raise questions on MFI model
Warangal November 10, 2010
Ban multiple lending, bring about greater transparency, slash interest rates. Only that can salvage the sector, say activists
As the high-rises of Hyderabad fade away, verdant greenery and a cool breeze take over. Early morning, we are travelling through beautiful terrain on our way to Warangal. Once there, however, nature is no solace.
A deafening calm greets us at Venkatadripet near Ghanpur station. In the past couple of months, several residents of this hamlet have faced the alleged coercive methods of micro finance institutions (MFIs) for defaulting on repayments. Their only recourse: taking their own lives.
With the death toll climbing, the government had to finally step in. But heart-wrenching stories of the victims’ families still hang heavy in the air. Warangal district is the worst hit, with 17 suicides reported from the area. Andhra Pradesh reportedly has 57 cases of harassment, including suicides.
R Subrahmanyam, principal secretary, rural development, Andhra Pradesh, minces no words. He says MFIs are raking in hyper-profits at the cost of the rural poor. “MFIs are also resorting to multiple lending without conducting due diligence.”
K Venkatanarayana of Kakatiya University, who has been studying MFI sector in the state closely, says borrowers are forced to commit suicide. “During training sessions, MFIs say a loan will be waived if the person who had taken it dies. This could be working in a negative manner,” he explains.
MFIs charge an interest rate of 26-32 per cent. “This is exorbitant,” says Venkatanarayana. “MFIs have deviated from their path of serving the poor. They are just pushing the poor into a debt trap by multiple lending and lending beyond the capacity of borrowers. There are many MFIs operating in the same area and function on joint legal liability. The model is based on pure profit.”
However, MFIs counter accusations of usury, claiming the interest on a loan includes the cost of finding customers in remote places, appraising them and selecting the creditworthy, disbursing money and collecting repayments for over 50 weeks, administration and raising funds.
“Banks don’t go to the doorstep to offer loans. We ensure that a borrower does not lose a single day’s earnings,” says P Kishore Kumar, managing director, Trident Microfinance, adding that the interest includes insurance cover. There are around 100 MFIs operating in AP, of which only 18 are registered, he adds.
Venkatanarayana blames commercial banks for the mess created by MFIs. “Banks do not want to invest in the rural poor. Reaching out to the poor means investing in infrastructure, manpower and other activities, which they are unwilling to do.”
Kishore Kumar says moneylenders are now calling themselves MFIs. “That’s the reason we have started taking corrective measures. The Microfinance Institutions Network (MFIN), the industry body, was formed with this very purpose.”
To address the issues, the Andhra Pradesh government issued an ordinance on October 15 to protect borrowers from exploitation by MFIs. But has the damage been already done?
MFIN, while agreeing that there might be some aberrations, argues that the ordinance will affect the financial inclusion plans of the government. “There is a need for a study on the suicides by independent social scientists. If the suicides are proved to be due to the activities of MFIs, we will compensate the family and take punitive action against the erring staff. If required, the MFI will be expelled from MFIN,” says Vijay Mahajan, founder of Basix and CEO of MFIN.
Ban multiple lending, bring about greater transparency, slash interest rates and monitor the end-use of loans. These are some of the steps that can be introduced to salvage the MFI sector and make it successful, say activists. But should these not have been done before the MFIs started operating? The Warangal deaths are ample answer to that question.
CASE 1: Ranjitha
Everyone knew K Ramesh. His wife, Ranjitha, borrowed Rs 10,000 from Spandana, an MFI, to buy a buffalo. The family paid 15 weekly instalments of Rs 225 each. But she could not keep up with the repayments. She was part of a group of villagers, who had taken loans. The first time she defaulted, other members of the group pooled in and paid her instalment. But soon after, they insisted that Ramesh clear the dues. Spandan’s agents also started hounding them. Ranjitha doused herself with kerosene and set it alight. The following day, Ramesh hanged himself. Ranjitha was hospitalised with burns, but survived. “If you borrow in a group, you have to repay in a group. That was the diktat,” she says.
CASE 2: KAUSAR
Twenty-two-year-old Kausar, a resident of Warangal, is buckling. She has a two-year-old son and a Rs 10,000-loan to be repaid. She paid 25 instalments on time. But then her child met with an accident and the money was spent on treatment. She again borrowed Rs 12,000 from Swayamkrushi and took another Rs 12,000 through a friend. With medical expenses mounting, she found herself unable to make her repayments. Members of the group threatened to sit in front of her house. This prompted Akbar, her husband, to take the extreme step: suicide. The insurance cover would take care of Kausar’s loans, but she still has to repay the loan taken on her behalf by her friend.
CASE 3: ALIYA
“MFIs don’t crosscheck if a loan was used for the intended purpose,” says Suresh, a friend of Baskaa Aliya in Kadapikonda near Kazipet. Aliya committed suicide after failing to repay money owed to MFIs. His wife, Hyma, had borrowed Rs 40,000 from Sharemoolah and Spandana. Suresh pays Rs 625 a week for the Rs 26,000 loan that his wife had taken. Agents highlight the long-winded procedures that banks follow to sanction loans. This deters the poor from approaching them. They also believe getting a loan from banks is too difficult a job for the likes of Aliya and is the main reason the Andhra government's Paavala Vaddi (loans at 25-paise interest) scheme is not utilised.
CASE 4: RAMA
Multiple borrowing ruined Rama’s life. Her teenage daughter, E Mownika, set herself ablaze after lenders repossessed her sewing machine. She succumbed to her injuries. Her father also suffered burns in an effort to save her. Rama, a resident of Karimabad, had taken loans from five MFIs. The family is yet to return Rs 1,00,000, including Rs 50,000 to Pragati. They used to pay Rs 5,300 every month, but defaulted three months ago. “The agents would tell us to sell household items to repay,” she alleges. Rama had taken loans to expand her business. Her husband runs a paan shop. After falling into a debt trap, she ended up taking fresh loans to repay earlier loans.
http://mediatoday.co.in/stories_discription.php?id=23732
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