Obsessed with the growth figures, the planners have tried but failed to hide the ugly underbelly of India’s economic growth.
Montek Singh Ahluwalia has been at the helm of India’s planning process for quite some time now. It is during his tenure as the deputy chairman of the Planning Commission that India has been pushed deeper and deeper into the quagmire of poverty. With the largest population of hungry in the world, the Global Hunger Index 2010 has placed India in the pit.
I wasn’t therefore shocked when I read Ahluwalia blame the hungry for the rise in food inflation. From someone who literally lives in the ivory tower of the Yojana Bhawan, anything can be expected. But what, of course, surprised me was the audacity with which he blamed the poor and hungry in the rural countryside for the rising inflation. Although I hate to say but there can be nothing more stupid than blaming the poor in the villages as if they have started eating more and therefore the pressure on food prices.
A few years back, former US President George Bush had made that ignominious remark shifting the blame for the 2007 global food crisis to the hungry Indians. He had said that the food crisis was because the Indians had started eating more. In an interview, I had then replied that if Indians started eating as much as the Americans do, then probably the world would need to grow food crops on the moon.
While one can ignore what George Bush had said, how can one pardon the head of India’s planning process who should know much better. It also reflects on the disconnect India’s Planning Commission has with the existing ground realities. Obsessed with the growth figures that continue to be tossed around with much fanfare, the planners have tried but failed to hide the ugly underbelly of India’s economic growth.
Only a few weeks back, India was ranked 67th among 84 hungry countries of the world. Two years back, in 2008, the Global Hunger Index had placed India at 66th position among 88 countries. In other words, India had slipped still lower down the pit in the past two years. I can’t fathom how the International Food Policy Research Institute (IFPRI) had placed India in such a low esteem if the poor in the villages had started eating more.
Take another international report that was submitted by the Save the Children Fund just a few days prior to the UN Summit on Millennium Development Goals (MDGs) that was held in the last week of September in New York. With over 5,000 children succumbing to malnutrition every day, India had once again topped the global ranking. This shocking disclosure is enough to put every Indian to shame. I wonder how the head of Indian Planning Commission can even walk with his head held high.
Let me also draw your attention to the 2006-07 report of the National Sample Survey Organisation (NSSO) which brings out the stark truth. It tells us that the correlation between hunger and economic growth is robustly positive -- more the economic growth, more people go to bed hungry. This challenges the widely held view that economic growth pulls poor out of poverty and hunger.
What makes the alarming situation still worse is that ever since economic liberalisation was launched in 1991, the NSSO tells us that cereal consumption has been on a steady decline, with no corresponding increase in the intake of more nutritious eggs, vegetables, fruits and milk. It means hunger has been on a rise and is now more widespread and well-entrenched. So far the feeling was that with the changing food habits, people have shifted from cereals to nutritious foods like fruits, vegetables and milk. This assumption too does not hold true anymore.
Cereal consumption
The decline in cereal consumption has more or less followed a steady pattern in the rural and urban areas, and of course, much faster in the rural areas. I don’t think Ahluwalia ever read this report. Accordingly, per capita cereal consumption per month in the rural areas across the country has fallen from 13.4 kg in 1993-94 to 11.7 kg in 2006-07.
The decline has been sharper between the period 2004 and 2007 when just in three years, cereals consumption fell from 12.1 kg to 11.7 kg. In the urban centres the decline was from 10.6 kg in 1993-94 to 9.6 kg in 2006-07. In a largely vegetarian society, cereals constitute the single important source of nutrition and therefore its importance in the Indian context is well established.
This is still not the real picture. The NSSO survey does not cover the period 2007-08 when the world was faced with an unprecedented rise on global food prices. In any case, the average household expenditure on food shows an increasing trend, but does not translate into more food consumption. It only means food prices have been on an upswing, and the poor are finding it difficult to fill their bellies. The recent price rise had made it still more difficult for the poor to be well fed. Cereal consumption therefore is expected to fall still further in 2009-10, and the impact it must have had on the poor and hungry can be well imagined.
Source: Deccan Herald, Oct 28, 2010
http://www.deccanherald.com/content/108143/ahluwalias-sermons.html
MFIs are loan sharks, not saviours of the poor
LAST WEEK, the 2010 Global Hunger Index placed India in the pit. Except for Bangladesh, India fared much below all the other South Asian countries. The same week, Andhra Pradesh proposed an ordinance to curb the malpractices that have become synonymous with microfinance institutions (MFIs) forcing a large number of rural poor to take their own lives. Coming in the wake of disturbing news reports of a seemingly unending serial death dance by small borrowers, the AP Ordinance, for the first time, tries to regulate the plethora of MFIs and is likely to provide a debt-swap arrangement. “What started off as an initiative for social and economic upliftment of rural poor has now morphed into a highly competitive business with the sole aim of making profits,” said Chief Minister K Rosaiah. “People are getting caught in debt traps and they see no way out.”
No wonder, the business has grown manifold. India Microfinance Report 2009 tells us that the portfolio of MFIs has grown by 97 percent, and the number of beneficiaries has gone up by 60 percent. The unprecedented growth is in a way shifting the game from the hands of the villains of the story, the sahukars or moneylenders, to a sophisticated, media-friendly organised class of neo-moneylenders. These are not the usual banias but a highly educated class who literally rob the poor. And they have done it remarkably well.
Take the case of this woman from Karimnagar district in AP, who escaped a suicide attempt. Harassed for not being able to repay a Rs. 4,000 loan, she was being forced to sell her house. Another woman lost her husband, and while the body awaited cremation, the MFI goons were at her door demanding their pound of flesh. While the RBI remains a mute spectator, the finance ministry too is unwilling to act.
The reason is simple. For the banks, microfinance has come as a saviour. It is a highly profitable business with assured and timely returns. Without making any effort, all that banks and other donors need to do is to provide refinance at roughly 12 percent interest. The MFIs do the rest, including timely repayments. These intermediaries add another 10-12 percent, and therefore end up charging the borrowers anything above 20-24 percent, which effectively comes to 36 percent on cumulative terms. With more than 98 percent assured returns, the banks couldn’t have asked for more. Realising that there is money in exploiting the hapless poor, private banks and companies like Monsanto, Citicorp, Infosys, ABN Amro, ICICI, and even the United Nations and donors like Ford Foundation have joined to earn profits from poverty.
The debt-swap that the AP government is trying to bring in is unlikely to stem the rot. From what appears in the media, it is designed to let the crooks off the hook. While the recent spurt in suicides in AP and Odisha should have landed many of the MFI CEOs in jail, all that the ordinance is trying to do is to pass on the burden to nationalised banks by forcing them to take over the loans. While they will come under an unmanageable financial burden, the MFIs will emerge the true beneficiaries. In reality, what was once intended to be a charitable activity has now turned predatory. It has resulted in multiple borrowings and defaults, thereby adding on to the hunger index.
What is needed is to provide the poorest of the poor with loans not exceeding an annual interest of 3 percent. Like the Society for the Elimination of Rural Poverty in AP, which provides such loans to self-help groups (SHGs), the banks are directly linked to the poor borrowers. The remaining interest is subsidised by the state. By eliminating the middlemen, the SHGs have built a corpus of Rs. 5,000 crore.
From Tehelka Magazine, Vol 7, Issue 43, Dated October 30, 2010
http://www.tehelka.com/story_main47.asp?filename=Ne301010Proscons.asp
No wonder, the business has grown manifold. India Microfinance Report 2009 tells us that the portfolio of MFIs has grown by 97 percent, and the number of beneficiaries has gone up by 60 percent. The unprecedented growth is in a way shifting the game from the hands of the villains of the story, the sahukars or moneylenders, to a sophisticated, media-friendly organised class of neo-moneylenders. These are not the usual banias but a highly educated class who literally rob the poor. And they have done it remarkably well.
Take the case of this woman from Karimnagar district in AP, who escaped a suicide attempt. Harassed for not being able to repay a Rs. 4,000 loan, she was being forced to sell her house. Another woman lost her husband, and while the body awaited cremation, the MFI goons were at her door demanding their pound of flesh. While the RBI remains a mute spectator, the finance ministry too is unwilling to act.
The reason is simple. For the banks, microfinance has come as a saviour. It is a highly profitable business with assured and timely returns. Without making any effort, all that banks and other donors need to do is to provide refinance at roughly 12 percent interest. The MFIs do the rest, including timely repayments. These intermediaries add another 10-12 percent, and therefore end up charging the borrowers anything above 20-24 percent, which effectively comes to 36 percent on cumulative terms. With more than 98 percent assured returns, the banks couldn’t have asked for more. Realising that there is money in exploiting the hapless poor, private banks and companies like Monsanto, Citicorp, Infosys, ABN Amro, ICICI, and even the United Nations and donors like Ford Foundation have joined to earn profits from poverty.
The debt-swap that the AP government is trying to bring in is unlikely to stem the rot. From what appears in the media, it is designed to let the crooks off the hook. While the recent spurt in suicides in AP and Odisha should have landed many of the MFI CEOs in jail, all that the ordinance is trying to do is to pass on the burden to nationalised banks by forcing them to take over the loans. While they will come under an unmanageable financial burden, the MFIs will emerge the true beneficiaries. In reality, what was once intended to be a charitable activity has now turned predatory. It has resulted in multiple borrowings and defaults, thereby adding on to the hunger index.
What is needed is to provide the poorest of the poor with loans not exceeding an annual interest of 3 percent. Like the Society for the Elimination of Rural Poverty in AP, which provides such loans to self-help groups (SHGs), the banks are directly linked to the poor borrowers. The remaining interest is subsidised by the state. By eliminating the middlemen, the SHGs have built a corpus of Rs. 5,000 crore.
From Tehelka Magazine, Vol 7, Issue 43, Dated October 30, 2010
http://www.tehelka.com/story_main47.asp?filename=Ne301010Proscons.asp
Seven seed companies to control Rajasthan agriculture
Last week, you read how Monsanto had quietly entered into an agreement with the Rajasthan government virtually taking over its agricultural research and extension [http://devinder-sharma.blogspot.com/2010/10/monsanto-takes-over-agriculture-of-semi.html]. Well, we now learn that Monsanto is not alone. There are six other companies which have signed almost a similar kind of agreement with the Rajasthan government.
An indication to this came from State Agriculture Minister Harjiram Burdak. He was quoted in Dainik Bhaskar (Oct 13, 20101) as saying that several other MoUs are in the offing.
After Rajasthan government wrote a letter on June 23 inviting seed companies under public-private partnership to come to the 'rescue' of the semi-arid State, Pioneer Seeds was the first to formally sign an MoU on July 20. Monsanto was probably the last of the lot to reach an agreement on July 27. As per the invitation letter, the State government would finally devise an action plan within three months of signing the agreements. It will therefore be interesting to see what action plan the State government is secretly developing with the private seed companies.
The six companies, besides Monsanto, are:
1. Pioneer Seeds
2. Advanta Seeds
3. Krishi Dhan
4. JK Seeds
5. Sriram Bio Seeds, and
6. Kanchan Jyoti
I will not repeat what I have already said in my earlier blog post Monsanto takes over agriculture of semi-arid Rajasthan. My colleague Dr G V Ramanjaneyulu, Executive Director of the Centre for Sustainable Agriculture, Hyderabad, has meanwhile expressed his concerns. I would like to share his viewpoint with you:
Its really scary to see this kind of agreement between a State and all its agriculture machinery (Add. chief secretary, commissioner agril, vice chancellors, director hort, state seed corporations) to create an appropriate policy environment to encourage innovation in agriculture. this agreement raises few fundamental issues.
This is in response to a invite by Rajasthan govt dated 23rd june, 2010 and the agreement was signed on 27th July 2010. what made the state govt to issue such letter? lack of innovation (if so on what basis?), why in such a hurry and how come so quickly? who are others who responded for this letter?
This MoU provides for identifying suitable high yielding maize/cotton/vegetable hybrids for rainfed areas of rajasthan whereas the experience till now shows that the hybrids are not suitable for rainfed areas. the report of planning commission on vidharba farmers suicides clearly stated that the Bt cotton hybrids not being suitable for rainfed areas as they are water guzzling
Cross licensing for hybrids developed by SAUs to Monsanto will give away public germplasm to private profits. the licensing of Monsanto hybrids to state will make state to spend public money to give private profits. In fact who needs these hybrids? the state? if so what happened to all the public sector maize var/hybrids released so far by rajasthan state agriculture universities? and All India Coordinated Research Project on Maize and Directorate of Maize Research?
Fair opportunity for Partnership seems to be to capture the seed subsidies provided by the department of agriculture/horticulture/tribal development and other development department to help farmers. on what basis such assessment would be made?
Feasibility of protected varieties and honoring the Proprietary rights Monsanto holds seems to be one of the real intentions behind this MoU. We may recall that in India patents on seed are not accepted and Monsanto and its affiliate MMB are using such license agreements (in fact private agreements which have no legal validity) to control their IPRs. Given the Bt cotton royalty experience in Andhra Pradesh (royalty on bt cotton is Rs. 150/packet) and Rajasthan (royalty on bt cotton is Rs. 1200/packet) shows how crucial it is for state governments to act on behalf of farmers rather than to benefit the private companies.
State providing land and infrastructure for the company to establish their units is completely unacceptable. the state governments which are not providing any funds to the state universities and state seed corporations spending huge money to support private industry is completely unacceptable.
Monsanto will take up Feasibility assessment of activities based on its own standard processes of decision making where as state and its machinery has not put in any such conditionality.
This MoU should be immediately withdrawn. Any new proposal made under this MoU should be subjected to public scrutiny and have a public debate. State cannot decide on its own as it has large ecological and economic implications and legal implications in long run.
An indication to this came from State Agriculture Minister Harjiram Burdak. He was quoted in Dainik Bhaskar (Oct 13, 20101) as saying that several other MoUs are in the offing.
After Rajasthan government wrote a letter on June 23 inviting seed companies under public-private partnership to come to the 'rescue' of the semi-arid State, Pioneer Seeds was the first to formally sign an MoU on July 20. Monsanto was probably the last of the lot to reach an agreement on July 27. As per the invitation letter, the State government would finally devise an action plan within three months of signing the agreements. It will therefore be interesting to see what action plan the State government is secretly developing with the private seed companies.
The six companies, besides Monsanto, are:
1. Pioneer Seeds
2. Advanta Seeds
3. Krishi Dhan
4. JK Seeds
5. Sriram Bio Seeds, and
6. Kanchan Jyoti
I will not repeat what I have already said in my earlier blog post Monsanto takes over agriculture of semi-arid Rajasthan. My colleague Dr G V Ramanjaneyulu, Executive Director of the Centre for Sustainable Agriculture, Hyderabad, has meanwhile expressed his concerns. I would like to share his viewpoint with you:
Its really scary to see this kind of agreement between a State and all its agriculture machinery (Add. chief secretary, commissioner agril, vice chancellors, director hort, state seed corporations) to create an appropriate policy environment to encourage innovation in agriculture. this agreement raises few fundamental issues.
This is in response to a invite by Rajasthan govt dated 23rd june, 2010 and the agreement was signed on 27th July 2010. what made the state govt to issue such letter? lack of innovation (if so on what basis?), why in such a hurry and how come so quickly? who are others who responded for this letter?
This MoU provides for identifying suitable high yielding maize/cotton/vegetable hybrids for rainfed areas of rajasthan whereas the experience till now shows that the hybrids are not suitable for rainfed areas. the report of planning commission on vidharba farmers suicides clearly stated that the Bt cotton hybrids not being suitable for rainfed areas as they are water guzzling
Cross licensing for hybrids developed by SAUs to Monsanto will give away public germplasm to private profits. the licensing of Monsanto hybrids to state will make state to spend public money to give private profits. In fact who needs these hybrids? the state? if so what happened to all the public sector maize var/hybrids released so far by rajasthan state agriculture universities? and All India Coordinated Research Project on Maize and Directorate of Maize Research?
Fair opportunity for Partnership seems to be to capture the seed subsidies provided by the department of agriculture/horticulture/tribal development and other development department to help farmers. on what basis such assessment would be made?
Feasibility of protected varieties and honoring the Proprietary rights Monsanto holds seems to be one of the real intentions behind this MoU. We may recall that in India patents on seed are not accepted and Monsanto and its affiliate MMB are using such license agreements (in fact private agreements which have no legal validity) to control their IPRs. Given the Bt cotton royalty experience in Andhra Pradesh (royalty on bt cotton is Rs. 150/packet) and Rajasthan (royalty on bt cotton is Rs. 1200/packet) shows how crucial it is for state governments to act on behalf of farmers rather than to benefit the private companies.
State providing land and infrastructure for the company to establish their units is completely unacceptable. the state governments which are not providing any funds to the state universities and state seed corporations spending huge money to support private industry is completely unacceptable.
Monsanto will take up Feasibility assessment of activities based on its own standard processes of decision making where as state and its machinery has not put in any such conditionality.
This MoU should be immediately withdrawn. Any new proposal made under this MoU should be subjected to public scrutiny and have a public debate. State cannot decide on its own as it has large ecological and economic implications and legal implications in long run.
Rural India and Rural China: both battling against land acquisitions
In a few days from now, the Narmada Bachao Andolan will reflect on the 25 years of struggle 'questioning displacement, assertion of land and forest rights, right to fisheries, right to food and health, livelihood security, exposure of corruption and navnirman (reconstruction) through the Jeevanshalas (life schools), micro-hydel projects, and solar projects.' The struggle that began in 1985 questions the flawed policies in the name of development and economic growth. Growth for whom and what cost?
According to the NBA, rallies and public meetings at both the places -- Dhadgaon in district Nandurbar in Maharashtra, and Badwani in district Badwani in Madhya Pradesh on Oct 22 and 23, respectively -- amidst adivasis of Nandurbar, Alirajpur and farmers from the plains of Nimad would be reinforced with presence of some of the well-wishers from outside. Some months back, after I returned from the Narmada valley, I had written an analysis: Over 200,000 Narmada Dam oustees still to be rehabilitated; a crime that goes unpunished for 25 years.
In that article I had not touched on the issue of construction of the proposed canal systems leading to destruction of irrigated lands. I don't know how the planners can justify the need for canals in an area which is already irrigated by pipes and water bodies being saturated by water from the Narmada river. The dichotomy is brought out clearly in a letter to the Minister for Environment & Forests by a group of respected citizens. You must read the letter to know how development is flawed, and how it aims at only helping usurping land from the control of poor tribal.
"The land being acquired for the canals are the best of fertile agricultural lands on the banks of the Narmada and nearby; which are already receiving pipeline irrigation supply from the river itself and hence do not require canals to feed them. it is absolutely irrational to bring in river water through a canal by destroying the best of land -- and livelihoods -- when the same water is already irrigating village land. The already irrigated land for more than 50 per cent of the proposed command area to be irrigated," the letter says. It has been signed among others by L C Jain, Upendra Baxi, and Kuldeep Nayyar.
The battle for land is not only confined to the Narmada valley. In the past few years, the government is trying to acquire agricultural land across the country under one pretext of the other. In one of my blog posts, I had written: Pitched battles are being fought across the country by the poor and deprived, who fear further marginalisation when their land is literally grabbed by the government on behalf of the industry. Over the years agriculture has been deliberately turned into a losing proposition as a result of which farmers, in most places, are keen to move out provided they get a better price for their land. [You can read the article at http://devinder-sharma.blogspot.com/2010/08/rural-india-on-boil-land-literally.html]
In Madhya Pradesh alone, in central India, as per the data released by the Home Department and tabled in the State Assembly, the number of rural protests had soared from 67 in 2005 to 252 in 2009. To dispel the public protests, police acted acted 35 times, using tear gas 17 times and firing bullets on 8 occasions. As per the official statistics, most of the rural protests were by farmers against land acquisitions.
As rural India rises in protest against land acquisitions, a section of the English media has been telling us that the nation has to draw a lesson from China where land acquisitions have transformed the country and is projecting it on the path to high economic growth. Somehow the impression being given is that it is as if the rural people in China are voluntarily giving up their land for the sake of country's economic growth. Nothing can be further from truth. Rural China too knows that the forcible land
acquisitions is aimed at snatching away from them their last hope of economic security.
According to the NBA, rallies and public meetings at both the places -- Dhadgaon in district Nandurbar in Maharashtra, and Badwani in district Badwani in Madhya Pradesh on Oct 22 and 23, respectively -- amidst adivasis of Nandurbar, Alirajpur and farmers from the plains of Nimad would be reinforced with presence of some of the well-wishers from outside. Some months back, after I returned from the Narmada valley, I had written an analysis: Over 200,000 Narmada Dam oustees still to be rehabilitated; a crime that goes unpunished for 25 years.
In that article I had not touched on the issue of construction of the proposed canal systems leading to destruction of irrigated lands. I don't know how the planners can justify the need for canals in an area which is already irrigated by pipes and water bodies being saturated by water from the Narmada river. The dichotomy is brought out clearly in a letter to the Minister for Environment & Forests by a group of respected citizens. You must read the letter to know how development is flawed, and how it aims at only helping usurping land from the control of poor tribal.
"The land being acquired for the canals are the best of fertile agricultural lands on the banks of the Narmada and nearby; which are already receiving pipeline irrigation supply from the river itself and hence do not require canals to feed them. it is absolutely irrational to bring in river water through a canal by destroying the best of land -- and livelihoods -- when the same water is already irrigating village land. The already irrigated land for more than 50 per cent of the proposed command area to be irrigated," the letter says. It has been signed among others by L C Jain, Upendra Baxi, and Kuldeep Nayyar.
The battle for land is not only confined to the Narmada valley. In the past few years, the government is trying to acquire agricultural land across the country under one pretext of the other. In one of my blog posts, I had written: Pitched battles are being fought across the country by the poor and deprived, who fear further marginalisation when their land is literally grabbed by the government on behalf of the industry. Over the years agriculture has been deliberately turned into a losing proposition as a result of which farmers, in most places, are keen to move out provided they get a better price for their land. [You can read the article at http://devinder-sharma.blogspot.com/2010/08/rural-india-on-boil-land-literally.html]
In Madhya Pradesh alone, in central India, as per the data released by the Home Department and tabled in the State Assembly, the number of rural protests had soared from 67 in 2005 to 252 in 2009. To dispel the public protests, police acted acted 35 times, using tear gas 17 times and firing bullets on 8 occasions. As per the official statistics, most of the rural protests were by farmers against land acquisitions.
As rural India rises in protest against land acquisitions, a section of the English media has been telling us that the nation has to draw a lesson from China where land acquisitions have transformed the country and is projecting it on the path to high economic growth. Somehow the impression being given is that it is as if the rural people in China are voluntarily giving up their land for the sake of country's economic growth. Nothing can be further from truth. Rural China too knows that the forcible land
acquisitions is aimed at snatching away from them their last hope of economic security.
This picture above is a scene of a bloody protest that took place in Longxu town in Guangxi province in China on Oct 13. According to reports, about a thousand villagers clashed with hundreds of police officials. They battled with homemade gasoline bombs, bricks and rods. They were protesting against an irrigation project. So it is not only in India that people rise against unwanted irrigation projects, China too faces the same problem.
According to GlobalVoices blog: "During the fight, one police officer's eyeball was smashed, another one had a head injury. All the police officers from Cangwu county were blocked at the intersection of Xindi Road. Two police dogs were beaten to death. Later, 8 military carriages of armed police from Wuzhou city were mobilized to the spot and later 5 other military carriages of armed police from Cenxi also joined in. The move had attracted thousands of onlookers and eventually the police had to use tear gas to clear the scene." [Read the full report at: http://globalvoicesonline.org/2010/10/16/china-riot-against-land-acquisition-in-guangxi/]
This is what a Chinese villager said: "At present, my village only have 9 pieces of water rice field nearby the lower stream of the river. All have been sold away… what we had got from the compensation was not even enough to buy an apartment… Have you ever tried to understand the situation?? How can we make a living in the future?? For the past 20 yeas in Cangwu county, I have witnessed how the government cheated the people… Now what we have here is all about property market. Limshui is the best example. The government did not even preserve land for relocation in Longwu, Xianglong and Guangchang. In Kan Village, all the lands were acquired in the name of public interest. The government cheated away our land and now I have little confidence but a lot of anger and resentment."
Much of China and India, the two giants, is being rendered landless. Thanks to our political leaders, the masses are being pauperised so as to fill the pockets of the rich and influential. The profits that the rich garner in the process is counted as economic growth. Whether it is a democracy or a communist regime, both follow the same flawed economic prescription. We should also remain perpetually grateful due to the mainline economists for actually laying out a faulty paradigm of economic growth that in reality widens economic disparities, and has led the world to a tripping point. Not only global warming, the economic model of development has also brought the world close to an unprecedented social unrest and chaos.
You just have to wait and watch.
Letting the crooks off the hook; how the AP debt-swap model bails out MFIs.
There is an old Hindi saying. 'Haathi ke daant, khane ke aur, deekhane ke aur'. Translated, it means: Elephants have two sets of teeth. One that it shows, the other that it uses for eating. In lot many ways I find the adage holds true for the politicians as well.
Globally, when politicians are in front of the TV cameras you get to see a visibly concerned face, more often than not it is a fake expression that the politician carries. Once they are off the media glare, they show their true colours. This is what brings me to the true colours behind the Andhra Pradesh government's much publicised move to bring in an ordinance to rein in the erring micro-finance institutions (MFIs).
At the face of it, the proposed ordinance looks to be an outcome of concern. As the Indian Express (Oct 14, 2010) states: 'A special ordinance approved today by the Andhra Pradesh Cabinet to regulate micro-finance institutions (MFIs) is likely to provide for a debt-swapping arrangement wherein high cost debt of MFI customers could be swapped with low interest bearing loans by banks.'
The news report (AP model: swap high cost MFI debt with banks) goes on to say: 'It is learnt that Chief Minister K Rosaiah had earlier explored the possibility of substituting the high cost loans extended by MFIs with low cost debt by asking banks which lent money to MFIs to intervene. "What started off as an initiative for social and economic upliftment of rural poor has now morphed into a highly competitive business with the sole aim of making profits, People are getting caught in debt traps and they see no way out," the CM is said to have said in a meeting on Thursday evening.'
I am not challenging the intention of the Chief Minister who may probably be trying to stem the rot, but the way the ordinance is drafted (from what appears in the media reports) it is quite obvious that the CM has been misled. His advisors have ensured that the real teeth remains hidden. All his efforts therefore to rein in the criminal activities of the MFIs have actually fallen flat. The ordinance will help the MFIs instead.
That the MFIs have been on a looting spree was never in doubt. Except for the pink newspapers world over, which have always eulogised the corrupt and the crooked, everyone knew how the MFIs were fleecing and harassing the rural poor and charging them punitive interest rates in the name of micro-credit. In Andhra Pradesh, it snowballed into a bigger issue because of the serial death dance in the rural areas.
Because the media had earlier buried the scandalous part, the educated were oblivious of the killing ways of micro-finance. I remember a few months back I was in a radio discussion. Along with me were two senior journalists from New Delhi. Somewhere during the course of the discussion I mentioned about the exorbitantly high rate of interest that the MFIs charge. To my utter surprise and dismay, the two journalists did not agree that the average rate of interest on tiny loans was more than 24 per cent. They had never heard of it. Imagine, if this is the level of ignorance that prevails in the national media, what can you expect from the academicians in the universities/colleges or for that matter from the average person in the street.
Coming back to the AP ordinance, the proposed law makes it obligatory for the MFIs to register within one month disclosing details of the recovery methods adopted. They will also have to disclose the details of the interest rates charged. It bans use of coercion and unethical practices in loan recovery, and also makes such actions cognizable and non-bailiable. Penalty for non-compliance will attract three year imprisonment and a fine of Rs 1 lakh.
Now, let us look at how the ordinance will in fact help the MFIs. A quick analysis by the Deccan Chronicle (Oct 14, 2010) under the headline 'State lets MFIs off the hook ' says it all: "The state government, which promised to rein in unscrupulous micro-finance institutions, has instead given them a bonanza of sorts by deciding to implement the system of credit swapping. The Chief Minister, Mr K. Rosaiah, and the rural development minister, Mr V. Vasanth Kumar, said that public sector banks would be asked take over the loans availed from MFIs to mitigate the troubles of poor borrowers.
The state has taken a leaf from the Siricilla credit swapping model wherein public sector banks were asked to take over the loans availed by weavers from private moneylenders in the backdrop of surge of suicides.
At first sight, the decision looks pro-people. But in actuality, it will only help MFIs which have been harassing borrowers driving many of them to suicide. For one, MFIs will get back their entire money along with interest without incurring any expense in collection. Banks, on the other hand, would have to shell out a whopping Rs 9,600 crore to take over then loans. They would also have to cater to the high interest rates charged by MFIs while charging only permissible interest rate themselves.
Bank officials, who are not amused, also cautioned that if they are forced to take over MFI loans this year, the original bank linkage in the form of Pavala Vaddi and SHG tie up will get affected resulting in total collapse of self help group movement in the state." [See the link: http://www.deccanchronicle.com/hyderabad/state-lets-mfis-hook-813]
Didn't I say in my earlier columns that the MFIs wield tremendous money and political power?
Well, this is not a way to curb a crime that flourishes in the name of helping the poor. The spate of suicides that Andhra Pradesh has witnessed in the past two months certainly calls for more tougher regulations. At the same time, the Andhra Pradesh government needs to file FIRs against the CEOs of the erring companies for their role in the crime. This is nothing short of murder, and the culprits cannot be allowed to go free.
Meanwhile, people's anger is boiling over. I hear reports of SKS offices at a number of places in Andhra Pradesh being ransacked in the past two days. If the politicians and the policy makers refuse to use the legal provisions to nip the evil in the bud, what do you expect the ordinary people to do?
Globally, when politicians are in front of the TV cameras you get to see a visibly concerned face, more often than not it is a fake expression that the politician carries. Once they are off the media glare, they show their true colours. This is what brings me to the true colours behind the Andhra Pradesh government's much publicised move to bring in an ordinance to rein in the erring micro-finance institutions (MFIs).
At the face of it, the proposed ordinance looks to be an outcome of concern. As the Indian Express (Oct 14, 2010) states: 'A special ordinance approved today by the Andhra Pradesh Cabinet to regulate micro-finance institutions (MFIs) is likely to provide for a debt-swapping arrangement wherein high cost debt of MFI customers could be swapped with low interest bearing loans by banks.'
The news report (AP model: swap high cost MFI debt with banks) goes on to say: 'It is learnt that Chief Minister K Rosaiah had earlier explored the possibility of substituting the high cost loans extended by MFIs with low cost debt by asking banks which lent money to MFIs to intervene. "What started off as an initiative for social and economic upliftment of rural poor has now morphed into a highly competitive business with the sole aim of making profits, People are getting caught in debt traps and they see no way out," the CM is said to have said in a meeting on Thursday evening.'
I am not challenging the intention of the Chief Minister who may probably be trying to stem the rot, but the way the ordinance is drafted (from what appears in the media reports) it is quite obvious that the CM has been misled. His advisors have ensured that the real teeth remains hidden. All his efforts therefore to rein in the criminal activities of the MFIs have actually fallen flat. The ordinance will help the MFIs instead.
That the MFIs have been on a looting spree was never in doubt. Except for the pink newspapers world over, which have always eulogised the corrupt and the crooked, everyone knew how the MFIs were fleecing and harassing the rural poor and charging them punitive interest rates in the name of micro-credit. In Andhra Pradesh, it snowballed into a bigger issue because of the serial death dance in the rural areas.
Because the media had earlier buried the scandalous part, the educated were oblivious of the killing ways of micro-finance. I remember a few months back I was in a radio discussion. Along with me were two senior journalists from New Delhi. Somewhere during the course of the discussion I mentioned about the exorbitantly high rate of interest that the MFIs charge. To my utter surprise and dismay, the two journalists did not agree that the average rate of interest on tiny loans was more than 24 per cent. They had never heard of it. Imagine, if this is the level of ignorance that prevails in the national media, what can you expect from the academicians in the universities/colleges or for that matter from the average person in the street.
Coming back to the AP ordinance, the proposed law makes it obligatory for the MFIs to register within one month disclosing details of the recovery methods adopted. They will also have to disclose the details of the interest rates charged. It bans use of coercion and unethical practices in loan recovery, and also makes such actions cognizable and non-bailiable. Penalty for non-compliance will attract three year imprisonment and a fine of Rs 1 lakh.
Now, let us look at how the ordinance will in fact help the MFIs. A quick analysis by the Deccan Chronicle (Oct 14, 2010) under the headline 'State lets MFIs off the hook ' says it all: "The state government, which promised to rein in unscrupulous micro-finance institutions, has instead given them a bonanza of sorts by deciding to implement the system of credit swapping. The Chief Minister, Mr K. Rosaiah, and the rural development minister, Mr V. Vasanth Kumar, said that public sector banks would be asked take over the loans availed from MFIs to mitigate the troubles of poor borrowers.
The state has taken a leaf from the Siricilla credit swapping model wherein public sector banks were asked to take over the loans availed by weavers from private moneylenders in the backdrop of surge of suicides.
At first sight, the decision looks pro-people. But in actuality, it will only help MFIs which have been harassing borrowers driving many of them to suicide. For one, MFIs will get back their entire money along with interest without incurring any expense in collection. Banks, on the other hand, would have to shell out a whopping Rs 9,600 crore to take over then loans. They would also have to cater to the high interest rates charged by MFIs while charging only permissible interest rate themselves.
Bank officials, who are not amused, also cautioned that if they are forced to take over MFI loans this year, the original bank linkage in the form of Pavala Vaddi and SHG tie up will get affected resulting in total collapse of self help group movement in the state." [See the link: http://www.deccanchronicle.com/hyderabad/state-lets-mfis-hook-813]
Didn't I say in my earlier columns that the MFIs wield tremendous money and political power?
Well, this is not a way to curb a crime that flourishes in the name of helping the poor. The spate of suicides that Andhra Pradesh has witnessed in the past two months certainly calls for more tougher regulations. At the same time, the Andhra Pradesh government needs to file FIRs against the CEOs of the erring companies for their role in the crime. This is nothing short of murder, and the culprits cannot be allowed to go free.
Meanwhile, people's anger is boiling over. I hear reports of SKS offices at a number of places in Andhra Pradesh being ransacked in the past two days. If the politicians and the policy makers refuse to use the legal provisions to nip the evil in the bud, what do you expect the ordinary people to do?
MFIs: The growth of 'blood money'
Naomi Campbell dogged the headlines sometimes back when the model admitted she was given 'blood diamonds' by the former Liberian ruler Charles Taylor who was accused of funding a brutal and bloody war carried out by rebels in Liberia's neighbouring Sierra Leone.
Well, before you ask me as to why I am talking of 'blood diamonds' today, let me explain. If diamonds become 'blood diamonds' when used to fund a war, I have been thinking what should we name the tiny amounts of 'money' (better known as micro-finance) that is given on credit at exorbitant rate of interest to the poorest of the poor, and which more often than not turns into a killer. Shouldn't the micro-finance therefore be called as 'blood money'?
In the last few days, at least 24 women who received micro-finance have committed suicide in Andhra Pradesh alone. This is only the visible tip of the invisible iceberg of misery that micro-finance inflicts.
In Asia, micro-finance institutions charge an annual interest rate varying between 36-70 per cent. In India alone, MFIs have provided finance to 20 million people. This is of course much less than the 100-125 per cent interest charged in Mexico and other Latin American countries. While the poor die or are driven to despair, such punitive rates of interests have created an opulent class of organised moneylenders who wield tremendous power, money and political clout. They also know the best way to buy media silence is to provide the newspapers with a continuous supply of advertisements.
I am therefore not surprised when the pink newspapers carry full-page interviews of people heading the MFIs, most of whom in my opinion should be in jail. If the Special Task Force chasing the naxals in the trouble-torn tribal regions of central India by mistake gun down a couple of civilians, the media cries hoarse. Nothing wrong, I accept. But when the MFIs force people to take their own lives, no disturbing questions are asked. Why as a society do we refuse to stand up, and question the killing ways of the MFIs? If the policemen can be sent to the jail, why shouldn't the rich CEOs of the MFIs that bank on the sweat and blood of the poor be held accountable for the deaths of the poorest of the poor?
A crime after all is a crime.
Yesterday, we watched a news clip in a regional news channel in Andhra Pradesh. It showed a poor women from Karimnagar district who escaped death from suicide telling how she was being coerced by the MFI goondas to sell her house for her inability to repay a paltry loan of Rs 4,000 (not even $ 100) [The killing ways of micro-finance: http://devinder-sharma.blogspot.com/2010/10/killing-ways-of-micro-finance.html]. On the other hand, the Economic Times (Oct 13, 2010) in an oped piece: 'Micromanager to the core', tells us that the 47-year-old ousted chief executive of SKS Microfinance Suresh Gurumani was entitled to a 'whopping salary of Rs 1.5 crore (Rs 15 million) per year' besides a one-time bonus of Rs 1 crore (Rs 10 million) and a performance bonus of Rs 15 lakh (Rs 1.5 million) per year.
In another report, Sucheta Dalal, India's leading investigative journalist in corporate affairs, says that SKS Micro finance gets an annual salary of Rs 2 crore (Rs 20 million). In any case, we are only talking of the salary and perks of the CEO. What about the other senior MFI functionaries? They too receive bountiful salaries, all derived from the sweat and blood of the poor. Isn't this 'blood money'?
Now you know, whose livelihoods do the MFIs secure.
Ever since Muhammad Yunus got the Nobel Peace Prize for developing the concept of micro-credit and micro-finance, the world has blindly followed the approach. Although Yunus blames the bigger sharks for discrediting the pious intentions behind the micro-credit phenomenon, the fact remains that there were fundamental flaws that we refused to look. Even in Bangladesh, despite the claims to the contrary, micro-credit has failed to make any appreciable dent in addressing poverty and hunger. Since it is politically incorrect to question the efficacy and penetration of micro-finance, the World Bank. UNDP, Asian Development Bank and the international NGOs have all eulogised a faulty informal banking system. In tune, The Reserve Bank of India (RBI) has even gone to the extent of legitimising the exorbitantly destructive interest rates.
I am shocked when I read distinguished economic writers like Swaminathan Aiyar pleading: Don't cap microfinance lending rates (Economic Times, Sept 22, 2010). In case you missed it, here is the link: http://economictimes.indiatimes.com/articleshow/6604369.cms?prtpage=1 Another paper by NA Fernando for the Asian Development Bank too justifies the high interest rates. Numerous other papers on similar lines are routinely presented at various micro-finance summits and conference. The more I read them, the more I realise that there is no convergence between common sense and economic sense.
The Executive Director of the National Bank for Agriculture and Rural Development (NABARD) Mr Prakash Bakshi is perhaps the lone and saner voice that has questioned the MFIs claim. And I am sure you will agree that Mr Prakash Bakshi should know what he is talking about. After all, he heads the biggest public-sector banking support system for agriculture and rural development in India.
In a debate in the inner pages of Economic Times today Oct 13, 2010), Prakash Bakshi states: "In a static village economy , there is little scope to have too many petty traders. Two-thirds of the villagers directly live on non-cash-crop agriculture, and another 20% are small-time artisans.
The cycle of economic activities for these people range from about six months to one year. None of them generate income to meet weekly repayments, and none of these activities generate a rate of return to afford interest rates of 20-40%.
And if they borrow — and many are compelled to borrow at such interest rates because banks have failed to provide them with credit that they deserve at affordable interest rates — they would never be able to rise from their levels of poverty, and very often just go back a few years in their economic status."
Prakash Bakshi is absolutely right. None of the micro-finance activities that we read in the MFI brochures (including that of Grameen Bank) can generate a rate of return to afford interest rates of 20 to 40 per cent. The claims that are being made by MFIs are therefore fraudulent, and are merely a cover up for a generation of policy makers and planners who rarely go to the field.
Micro-finance is one of the biggest financial swindles that goes on in the name of the poor and hungry. It suits the vested interest of the funding agencies, including international financial institutions, and now some multinationals like Monsanto, Citicorp, ICICI and the likes who have pumped in money to generate more profits. They are all playing with 'blood money'.
And as Prakash Bakshi sums up in a milder way: The result is multiple borrowings, multiple defaults and, in the end, agrarian distress, notwithstanding the so-called prompt repayments received by the MFIs.
You can read his full comment at: http://economictimes.indiatimes.com/opinion/et-debate/Poor-cannot-afford-the-interest-rates/articleshow/6739419.cms
Well, before you ask me as to why I am talking of 'blood diamonds' today, let me explain. If diamonds become 'blood diamonds' when used to fund a war, I have been thinking what should we name the tiny amounts of 'money' (better known as micro-finance) that is given on credit at exorbitant rate of interest to the poorest of the poor, and which more often than not turns into a killer. Shouldn't the micro-finance therefore be called as 'blood money'?
In the last few days, at least 24 women who received micro-finance have committed suicide in Andhra Pradesh alone. This is only the visible tip of the invisible iceberg of misery that micro-finance inflicts.
In Asia, micro-finance institutions charge an annual interest rate varying between 36-70 per cent. In India alone, MFIs have provided finance to 20 million people. This is of course much less than the 100-125 per cent interest charged in Mexico and other Latin American countries. While the poor die or are driven to despair, such punitive rates of interests have created an opulent class of organised moneylenders who wield tremendous power, money and political clout. They also know the best way to buy media silence is to provide the newspapers with a continuous supply of advertisements.
I am therefore not surprised when the pink newspapers carry full-page interviews of people heading the MFIs, most of whom in my opinion should be in jail. If the Special Task Force chasing the naxals in the trouble-torn tribal regions of central India by mistake gun down a couple of civilians, the media cries hoarse. Nothing wrong, I accept. But when the MFIs force people to take their own lives, no disturbing questions are asked. Why as a society do we refuse to stand up, and question the killing ways of the MFIs? If the policemen can be sent to the jail, why shouldn't the rich CEOs of the MFIs that bank on the sweat and blood of the poor be held accountable for the deaths of the poorest of the poor?
A crime after all is a crime.
Yesterday, we watched a news clip in a regional news channel in Andhra Pradesh. It showed a poor women from Karimnagar district who escaped death from suicide telling how she was being coerced by the MFI goondas to sell her house for her inability to repay a paltry loan of Rs 4,000 (not even $ 100) [The killing ways of micro-finance: http://devinder-sharma.blogspot.com/2010/10/killing-ways-of-micro-finance.html]. On the other hand, the Economic Times (Oct 13, 2010) in an oped piece: 'Micromanager to the core', tells us that the 47-year-old ousted chief executive of SKS Microfinance Suresh Gurumani was entitled to a 'whopping salary of Rs 1.5 crore (Rs 15 million) per year' besides a one-time bonus of Rs 1 crore (Rs 10 million) and a performance bonus of Rs 15 lakh (Rs 1.5 million) per year.
In another report, Sucheta Dalal, India's leading investigative journalist in corporate affairs, says that SKS Micro finance gets an annual salary of Rs 2 crore (Rs 20 million). In any case, we are only talking of the salary and perks of the CEO. What about the other senior MFI functionaries? They too receive bountiful salaries, all derived from the sweat and blood of the poor. Isn't this 'blood money'?
Now you know, whose livelihoods do the MFIs secure.
Ever since Muhammad Yunus got the Nobel Peace Prize for developing the concept of micro-credit and micro-finance, the world has blindly followed the approach. Although Yunus blames the bigger sharks for discrediting the pious intentions behind the micro-credit phenomenon, the fact remains that there were fundamental flaws that we refused to look. Even in Bangladesh, despite the claims to the contrary, micro-credit has failed to make any appreciable dent in addressing poverty and hunger. Since it is politically incorrect to question the efficacy and penetration of micro-finance, the World Bank. UNDP, Asian Development Bank and the international NGOs have all eulogised a faulty informal banking system. In tune, The Reserve Bank of India (RBI) has even gone to the extent of legitimising the exorbitantly destructive interest rates.
I am shocked when I read distinguished economic writers like Swaminathan Aiyar pleading: Don't cap microfinance lending rates (Economic Times, Sept 22, 2010). In case you missed it, here is the link: http://economictimes.indiatimes.com/articleshow/6604369.cms?prtpage=1 Another paper by NA Fernando for the Asian Development Bank too justifies the high interest rates. Numerous other papers on similar lines are routinely presented at various micro-finance summits and conference. The more I read them, the more I realise that there is no convergence between common sense and economic sense.
The Executive Director of the National Bank for Agriculture and Rural Development (NABARD) Mr Prakash Bakshi is perhaps the lone and saner voice that has questioned the MFIs claim. And I am sure you will agree that Mr Prakash Bakshi should know what he is talking about. After all, he heads the biggest public-sector banking support system for agriculture and rural development in India.
In a debate in the inner pages of Economic Times today Oct 13, 2010), Prakash Bakshi states: "In a static village economy , there is little scope to have too many petty traders. Two-thirds of the villagers directly live on non-cash-crop agriculture, and another 20% are small-time artisans.
The cycle of economic activities for these people range from about six months to one year. None of them generate income to meet weekly repayments, and none of these activities generate a rate of return to afford interest rates of 20-40%.
And if they borrow — and many are compelled to borrow at such interest rates because banks have failed to provide them with credit that they deserve at affordable interest rates — they would never be able to rise from their levels of poverty, and very often just go back a few years in their economic status."
Prakash Bakshi is absolutely right. None of the micro-finance activities that we read in the MFI brochures (including that of Grameen Bank) can generate a rate of return to afford interest rates of 20 to 40 per cent. The claims that are being made by MFIs are therefore fraudulent, and are merely a cover up for a generation of policy makers and planners who rarely go to the field.
Micro-finance is one of the biggest financial swindles that goes on in the name of the poor and hungry. It suits the vested interest of the funding agencies, including international financial institutions, and now some multinationals like Monsanto, Citicorp, ICICI and the likes who have pumped in money to generate more profits. They are all playing with 'blood money'.
And as Prakash Bakshi sums up in a milder way: The result is multiple borrowings, multiple defaults and, in the end, agrarian distress, notwithstanding the so-called prompt repayments received by the MFIs.
You can read his full comment at: http://economictimes.indiatimes.com/opinion/et-debate/Poor-cannot-afford-the-interest-rates/articleshow/6739419.cms
The killing ways of micro-finance
When a few months back the NDTV showed a news clipping of the cremation of a farmer who committed suicide unable to stand the continuous harassment at the hands of micro-finance goons, the nation refused to take notice. The NDTV had carried a Bhubaneshwar dateline story on March 19, 2010: "Orissa: Loan driving farmers to suicides."
The report stated: "In 2009, 43 farmers in Orissa committed suicide. It was a year that saw a massive farm loan waiver by the UPA government and also a record investment of over Rs 1400 crore in farm credit by the state government. But they were all small farmers who couldn't access institutional loan and had to borrow from microfinance NGOs at an exorbitant rate of interest. Many, even the state government, suspect it's this exploitative loan network that may have driven loan farmers to commit suicide.
A farmer in Sambalpur, didn't get water for his fields, subsidies, or insurance cover. What he got readily was a loan from a local microfinance NGO, at an incredibly high 24 per cent interest. The fear that he would never be able to pay back, drove him to suicide."
This was not an isolated event.
In a New Delhi-dateline report Law to rein in micro-finance bodies’ bullying (http://bit.ly/cxMIHp), The Hindustan Times (Oct 12, 2010) states: With the rise in suicides in Andhra Pradesh following harassment at the hands of micro-finance institutions (MFIs), the state is now planning a legislation to control the lending rates and curb the often abusive approach used by MFIs during recollection. In the last few days, on an average 2 to 3 suicides — most of them by women — have been reported, a result of harassment they face from MFIs.
Two to three suicides a day, I don't think can be taken as isolated events.
What kind of harassment are we talking about? In April 2010, The Hindu reported from Hyderabad in Andhra Pradesh: "Some Collectors sent reports about the harassment of borrowers, intimidation, manhandling, abusing and outraging the modesty of women and extreme punishment like making defaulters stand in the hot sun, tying them to trees and making them run in open grounds."
The news report further said: The 40 MFIs operating in the State with total finance portfolio of Rs. 3,000 crore are accused of forcibly enrolling poor women in the rural areas even though a majority of them are already part of the carefully nurtured Self Help Groups (SHGs) under the banner of Indira Kranti Patham.
This kind of barbaric acts of forcing enrollment and recovering money is not only confined to Andhra Pradesh. Across developing countries all over the world, such bullying tactics are being employed by the micro-finance institutions (MFIs). Because of the vested interest, and the general feeling that micro-finance is a pious initiative, the dark underbelly of the organised money-lending often goes unreported. What makes it still worse is the refusal of the international donors and aid agencies to acknowledge the crime that perpetuates in the name of tiny loans.
Sometimes back, the New York Times (April 14, 2010) had in a detailed analysis 'Banks Making Big Profits from Tiny Loans' reported:
-- Drawn by the prospect of hefty profits from even the smallest of loans, a raft of banks and financial institutions now dominate the field, with some charging interest rates of 100 percent or more.
-- Te Creemos, a Mexican lender has some of the highest interest rates and fees in the world of microfinance, analysts say, a whopping 125 percent average annual rate. The average in Mexico itself is around 70 percent, compared with a global average of about 37 percent in interest and fees, analysts say.
-- Compartamos, a Mexican firm that began life as a tiny nonprofit organization, generated $458 million through a public stock sale in 2007, that investors fully recognized the potential for a windfall, experts said. Compartamos charges an average of nearly 82 percent in interest and fees.
I had quoted these examples in an earlier blog post (Banks make big money from the poorest http://devinder-sharma.blogspot.com/2010/04/banks-make-big-money-from-poorest.html) but feel like sharing these once again knowing that public memory is too short. And I am sure like me you too must be wondering how can the poorest of the poor be made to cough out @ an interest rate of 125 per cent. Isn't this a crime?
Even the economic crime is ignored by the regulatory bodies. In the past few days, the capital market regulator in India -- Securities and Exchange Board of India (SEBI) -- has asked SKS Microfinance to cite the reasons that led to the sacking of its CEO. Newspapers are full of reports about the SKS imbroglio, but no one is questioning the role of MFIs in the bigger crime. Reserve Bank of India (RBI) and the Finance Ministry too are turning a blind eye to the barbaric games being played by the MFIs.
Local news channels in Andhra Pradesh have been showing for the past two days or so reports of small borrowers being harassed by the MFIs. A women from Karimnagar is on one of the shows is telling how an MFI was forcing her to sell her house for a paltry loan of Rs 4000 that she had taken.
Ever since I took up the issue to expose the darker side of the microfinance business, I have been flooded with support (of course I have also got my share of hate mails) and suggestions on how to improve the delivery of microfinance. You would have probably read about the zero-interest rate microfinance institute in Pakistan, which figured on this blog sometimes back, but in addition I have the following suggestions:
1. Borrowers of tiny loans should simply stop repayments.
Now before you get angry, let me explain. This is the only way to draw the attention of the policy makers and the decision-makers to the criminal ways of the MFIs.
2. All middlemen in microfinance who act as MFIs should be asked to close shop.
They are the root of the problem. They get credit from the banks/donors at about 12 per cent rate of interest, and further add 12 per cent as their margin thereby fleecing the small borrowers. At weekly repayment plans, the rate of interest effectively comes to 36 per cent.
3. Microfinance needs a model that is being followed by the Society for Elimination of Poverty (SERP) in Andhra Pradesh. The SERP has floated hundreds of SHGs, which get micro-finance @ 3 per cent interest. It draws loans collectively from the nationalised banks, and makes it available to the poorest of the poor at 3 per cent rate of interest. The State government writes-off the remaining component of bank interest (or in other words subsidises the bank interest).
4. At a time when small borrowers are committing suicide or defaulting, SHGs operating under SERP in Andhra Pradesh have created a corpus of Rs 5,000 crores.
The report stated: "In 2009, 43 farmers in Orissa committed suicide. It was a year that saw a massive farm loan waiver by the UPA government and also a record investment of over Rs 1400 crore in farm credit by the state government. But they were all small farmers who couldn't access institutional loan and had to borrow from microfinance NGOs at an exorbitant rate of interest. Many, even the state government, suspect it's this exploitative loan network that may have driven loan farmers to commit suicide.
A farmer in Sambalpur, didn't get water for his fields, subsidies, or insurance cover. What he got readily was a loan from a local microfinance NGO, at an incredibly high 24 per cent interest. The fear that he would never be able to pay back, drove him to suicide."
This was not an isolated event.
In a New Delhi-dateline report Law to rein in micro-finance bodies’ bullying (http://bit.ly/cxMIHp), The Hindustan Times (Oct 12, 2010) states: With the rise in suicides in Andhra Pradesh following harassment at the hands of micro-finance institutions (MFIs), the state is now planning a legislation to control the lending rates and curb the often abusive approach used by MFIs during recollection. In the last few days, on an average 2 to 3 suicides — most of them by women — have been reported, a result of harassment they face from MFIs.
Two to three suicides a day, I don't think can be taken as isolated events.
What kind of harassment are we talking about? In April 2010, The Hindu reported from Hyderabad in Andhra Pradesh: "Some Collectors sent reports about the harassment of borrowers, intimidation, manhandling, abusing and outraging the modesty of women and extreme punishment like making defaulters stand in the hot sun, tying them to trees and making them run in open grounds."
The news report further said: The 40 MFIs operating in the State with total finance portfolio of Rs. 3,000 crore are accused of forcibly enrolling poor women in the rural areas even though a majority of them are already part of the carefully nurtured Self Help Groups (SHGs) under the banner of Indira Kranti Patham.
This kind of barbaric acts of forcing enrollment and recovering money is not only confined to Andhra Pradesh. Across developing countries all over the world, such bullying tactics are being employed by the micro-finance institutions (MFIs). Because of the vested interest, and the general feeling that micro-finance is a pious initiative, the dark underbelly of the organised money-lending often goes unreported. What makes it still worse is the refusal of the international donors and aid agencies to acknowledge the crime that perpetuates in the name of tiny loans.
Sometimes back, the New York Times (April 14, 2010) had in a detailed analysis 'Banks Making Big Profits from Tiny Loans' reported:
-- Drawn by the prospect of hefty profits from even the smallest of loans, a raft of banks and financial institutions now dominate the field, with some charging interest rates of 100 percent or more.
-- Te Creemos, a Mexican lender has some of the highest interest rates and fees in the world of microfinance, analysts say, a whopping 125 percent average annual rate. The average in Mexico itself is around 70 percent, compared with a global average of about 37 percent in interest and fees, analysts say.
-- Compartamos, a Mexican firm that began life as a tiny nonprofit organization, generated $458 million through a public stock sale in 2007, that investors fully recognized the potential for a windfall, experts said. Compartamos charges an average of nearly 82 percent in interest and fees.
I had quoted these examples in an earlier blog post (Banks make big money from the poorest http://devinder-sharma.blogspot.com/2010/04/banks-make-big-money-from-poorest.html) but feel like sharing these once again knowing that public memory is too short. And I am sure like me you too must be wondering how can the poorest of the poor be made to cough out @ an interest rate of 125 per cent. Isn't this a crime?
Even the economic crime is ignored by the regulatory bodies. In the past few days, the capital market regulator in India -- Securities and Exchange Board of India (SEBI) -- has asked SKS Microfinance to cite the reasons that led to the sacking of its CEO. Newspapers are full of reports about the SKS imbroglio, but no one is questioning the role of MFIs in the bigger crime. Reserve Bank of India (RBI) and the Finance Ministry too are turning a blind eye to the barbaric games being played by the MFIs.
Local news channels in Andhra Pradesh have been showing for the past two days or so reports of small borrowers being harassed by the MFIs. A women from Karimnagar is on one of the shows is telling how an MFI was forcing her to sell her house for a paltry loan of Rs 4000 that she had taken.
Ever since I took up the issue to expose the darker side of the microfinance business, I have been flooded with support (of course I have also got my share of hate mails) and suggestions on how to improve the delivery of microfinance. You would have probably read about the zero-interest rate microfinance institute in Pakistan, which figured on this blog sometimes back, but in addition I have the following suggestions:
1. Borrowers of tiny loans should simply stop repayments.
Now before you get angry, let me explain. This is the only way to draw the attention of the policy makers and the decision-makers to the criminal ways of the MFIs.
2. All middlemen in microfinance who act as MFIs should be asked to close shop.
They are the root of the problem. They get credit from the banks/donors at about 12 per cent rate of interest, and further add 12 per cent as their margin thereby fleecing the small borrowers. At weekly repayment plans, the rate of interest effectively comes to 36 per cent.
3. Microfinance needs a model that is being followed by the Society for Elimination of Poverty (SERP) in Andhra Pradesh. The SERP has floated hundreds of SHGs, which get micro-finance @ 3 per cent interest. It draws loans collectively from the nationalised banks, and makes it available to the poorest of the poor at 3 per cent rate of interest. The State government writes-off the remaining component of bank interest (or in other words subsidises the bank interest).
4. At a time when small borrowers are committing suicide or defaulting, SHGs operating under SERP in Andhra Pradesh have created a corpus of Rs 5,000 crores.
True globalisation is when honest and good people come together
Presenting an award for honesty, Orai, Uttar Pradesh, Oct 5, 2010
At a time when there is so much of dishonesty around us we as a society seem to have given up on honesty. Truth is no longer a virtue. It is a matter of convenience. Corruption has increasingly been accepted. In many ways, it has been legalised. Democracy has not only helped corruption to grow, but has institutionalised it. Globalisation has further hastened the process. It has brought the rich and the corrupt together.
Let us accept it. The 21st Century has discarded the robe of honesty.
It is at such depressing times that I salute the person who first thought of identifying some honest people and honouring them. I thought it was a good idea, that will remain confined to the coffee table discussions. When journalist Anil Sharma, who works for one of the Hindi newspapers in one of the mofussil towns in central India, told me that he plans to honour some of the common people who have spent their lifetime working honestly, I wasn't sceptical.
So last week when I travelled to Orai in the heart of the drought-affected Bundelkhand region of Uttar Pradesh, I realised what it means to honestly pick up the honest, and thereby allow the society to recognise and appreciate honesty. The 35 honest people that some enlightened citizens of the Orai town -- under the informal banner of 'Achhe logo ka Varhat Parivar' -- picked up, came from different walks of life. Most of them were drivers, cooks, maid servants, gardener etc.
When I sat on the dais and looked at the awardees I realised there are still a lot of honest people around us. It is only that we fail to recognise them. If you also look around yourself, you will find that more often than not the maid servant who has worked with your family for ages, has never even picked up any currency note that you left behind. She has always returned the expensive gold ring you left behind in the bathroom. Many a times your driver has brought back your wallet that you forgot in the car, and so on.
It isn't that these poor people are honest because they had no choice. They could have also walked away with gold, cash and other expensive items that you have it lying scattered in your home. Some do, but most don't. And all we end up doing by way of reward for them is to show courtesy by giving them a worn-out shirt or a sari. In other words, we have forgotten to recognise and honour honesty. It never strikes us that honesty is a rare virtue that needs to be acknowledged. Perhaps if we did, the tribe of honest people would have grown by now.
As I stood up to present the awards I could see tears rolling down the cheeks of several of the awardees. They couldn't control their emotions. They could never believe that they were being called to the stage to receive an award for something they have always lived with. Later, they shared with me what they felt being honoured for honesty. "I never knew I was doing something big, something great. Saab, from now onwards I can walk with my head held high," quipped one of the recipients.
Along with Swami Rajeshwara Nand and senior local journalist K P Singh, we did the honours, by presenting each awardee with a pressure cooker, a shawl, and some utensils of daily use.
In lot many ways I think the Orai event was historic. At least, I am unaware (and I stand corrected) of any other initiative to honour the honest amongst us. The organisers told me that encouraged by the public response they now plan to hold such events in every ward of the town to begin with. "We will have each month a similar event for each of the wards/mohallas," promised Dr Ramesh Chandra. Anil Sharma already has feelers from people from other neighbouring towns who want to hold similar functions. The need now is to draw up a code of conduct that strictly needs to be adhered to so that the dishonest do not take over.
What began from Orai can certainly trigger a nationwide movement. At the same time, it can die down as one of those events that once took place. It will therefore largely depend upon the ability of some sensitive and concerned people to come together and stand up for the sake of honesty. I have a feeling it will not be that easy, but is certainly do-able. I am looking forward to the day when the fire that began from Orai spreads throughout the country, and finally crosses the national borders.
Globalisation has brought the rich and the crooked together. True globalisation would be when good people from across the globe come together. Perhaps, Orai has sown the seeds of goodness. Let us join hands to reap the harvest across continents. As someone said: It takes one village, then another, and then another...and a revolution is born."
Punjab middlemen get Rs 7,830 million a year for practically doing nothing
Farmers clean grain heaps in Punjab mandis. But can they ensure that their pockets are not cleaned by the middlemen?
The loot continues. And it is backed by the Punjab Government.
This time it is the arhtiyas (middlemen) in Punjab. They walked away with Rs 783-crore (or Rs 7,830 million) in 2009-10 for virtually doing nothing. Before you raise your eyebrows, let me tell you that in the past decade Punjab arhtiyas have been paid Rs 6,400-crore as commission and that too for doing nothing.
Punjab arhtiyas play no significant role in procuring wheat and rice grains. An assured market prevails for these staple grains (and also cotton) and all that the arhtiyas do is to provide for hired labour in the mandis. The Food Corporation of India (FCI) routes the payments to farmers through the arhtiyas for which the middlemen get a commission of 2.5 per cent. They deduct all the pending dues of the farmers, and then issue a cheque for the balance amount.
There are about 20,000 arhtiyas in Punjab.
But look at the political clout they wield. A few weeks back, the FCI decided to make a correction and by-pass the middlemen. It announced direct payments to farmers for the paddy harvest that flows into the mandis. The arhtiyas were quick to react threatening boycott of the procurement process that was slated to begin in a few days. They then lobbied with the Punjab government, and reportedly accompanied Chief Minister Prakash Singh Badal to New Delhi. After a couple of days of hectic parleys, the FCI was forced to withdraw the order.
A two-line order by FCI issued on October 5 says: "direct payment order of minimum support price to farmers is kept under abeyance for Punjab and Haryana up to Sept 30, 2011 or till further orders."
In other words, Punjab arhtiyas get an open license to loot the hapless farmers for another year. For 2010-11, the amount to be neatly and quietly pocketed is expected to exceed Rs 800-crore.
This surely is some 'inclusive' growth.
A recent study conducted by a team of economists led by Dr Sukh Pal Singh of the Punjab Agricultural University (PAU) states: "On the basis of The Punjab Agricultural Produce Markets Act, 1961, Punjab Mandi Board had fixed their commission for different crops, including fruits and vegetables. The rate of commission was fixed at the rate of 1.50 per cent of value of farm produce on May 26, 1961 on ad valurem basis. But, commission agents being a strong political lobby, could manage to increase their commission from time-to-time. The rate of commission was raised to 2.00 per cent on April 11, 1990; it was again raised to 2.50 per cent on 22 May 1998 on all agricultural commodities and 5 per cent fruits and vegetables."
"The market charges for long have been the highest in Punjab . At present the total market charges are 13.5 per cent of the value of the produce; which constitute 4 per cent as purchase tax, 3 per cent as the infrastructure cess on wheat and paddy whereas it is 2 per cent in case of cotton, 2 per cent as market fee, 2 per cent as the rural development fund and 2.5 per cent as the commission for the commission agents. Despite the fact that commission agents do not have any significant role in the procurement of those crops (wheat and paddy) in which assured marketing prevails, they are able to increase their commission from time to time. "
The PAU study goes on to detail the malpractices that middlemen indulge in. It provides an excellent insight into the farming woes. No wonder despite all the half-hearted attention that agriculture is receiving, there is little hope on the farm front. Take a look at what the study says: "The main source of income of the commission agents is not the commission charged on the sale/purchase of crops but the interest taken on the credit advanced to the farmers. An average commission agent advances a loan of Rs 65.74 lakh to farmers. Out of a total debt of Rs 35,000-crores on Punjab farmers during 2008-09, it is estimated that Rs 13,300-crore (38 per cent) is advanced by the non-institutional credit agencies in which commission agent is the major source of finance.
"As per law a person involved in moneylending business must register himself as a moneylender. The Punjab Registration of Moneylenders Act 1938 states that the suits for the recovery of loan could be filed by registered moneylenders with a valid licence. This law laid an obligation on the moneylender to regularly maintain an account for each debtor separately, of all transactions relating to any loan advanced to that debtor. the government prescribed the manner in which accounts had to be kept.
"Moreover, creditor had to furnish each debtor every six months, with a legible statement of accounts signed by the creditor or his agent of any balance or amount that may be outstanding on 30th June or 31st December. But practically, at all levels, there is a violation of this Act. As during our field survey we experienced that among the respondent commission agents not even a single commission agent was registered for the business of moneylending."
I wonder when will policy makers (as well as the farmer unions) are able to emerge free from the clutches of the middlemen. Instead of recovering Rs 6,400-crore that the middlemen have pocketed in the past ten years, the Punjab government has allowed them to fleece the farmers for another year. This is scandalous indeed.
It tells us how a handful of the resourceful (in this case the 20,000 middlemen) can hold the State to ransom. At the national level, over Rs 5,00,000-crores tax exemptions by way of 'revenue foregone' to business and industry is another classic example of the rich pocketing the resources meant for the welfare of the poor. The loot continues.
The emergence of a new global caste system
If Shylock was alive today, I am sure he would have floated a public stock offering and would have been amongst the richest in the world. Forbes magazine would have certainly included his name in the list of the top 50 billionaires, and The Economist would have included his name among the 15 most powerful people in the world.
Probably Shylock was born in wrong times. Profit was not as respected a word as it is today. Also, Shakespeare was no Adam Smith. He wrote to reach people, and in a way entertain them. What he wrote reflected the times that he was living in. Adam Smith was no creative writer, and so it is not fair to compare him with Shakespeare's greatness. But Adam Smith certainly sowed the seeds of greed with a lot of caveat (which unfortunately is never talked about by the modern day Shylocks), and future generations not only realised the power of markets that he so vociferously advocated but went a step ahead by virtually making a killing out of it.
In a world where you are known by how much money you make, and it doesn't matter whether you made it by hook or by crook, the race to join the new emerging class of the bold and beautiful -- these are the new brahmins of the evolving global caste system -- has crossed all barriers. It doesn't matter which race you belong to or which religion you practice or which country you come from, the only qualification you need is the tag that says you are rich enough.
You can ruthlessly exploit the natural resources, and still the economists will applaud claiming the positive difference you made to economic growth. You can slowly poison people through food and medicine, and yet the economists will provide you the justification to do so by ringing loudly the percentage you contributed to the GDP. You can rip the society by providing services in the name of health, education and insurance and still you will be counted among the bold and the beautiful, the people who have the Midas touch.
Gone are the days when air, water and trees were respected, with religion often providing the protective shield. Nature was valuable, and no one tried to measure it in terms of GDP. As long as nature remained outside the GDP calculations, it remained safe. In our quest to join the brahmins of the neocaste system, we have almost brought the planet to a tripping point. Yet, the economists express jubilation over the growing economy across continents.
Look around, and I am sure you will realise how difficult it is becoming to live in a world where everything is for sale. There was a time, and that was generations ago, when the society would despise a Shylock. The bad guys were always on the radar screen, and the good guys would eventually prevail over the evil force. There was no need to celebrate Dussehra festival, to mark the victory of Lord Rama over the demon King Ravana in the battlefields of Lanka. Every day was like a Dussehra.
As society progressed, it changed. Even before Christ, Mark Antony tells us that the good that man does is interred with his bones.
At a time when the world witnesses the emergence of a very powerful neocaste structures and system as you may deem fit, it is being increasingly divided into three classes -- the billionaires, the business class and finally the economy class (some call it the cattle class). Manu Samriti, which defined and analysed the Indian caste structures, often hated in intellectual discourses, has been replaced by an equally more powerful script. This time it is not coming in one volume, but is a continuous exercise that is helping to carve out the contours of the neocaste structures.
When I fly economy class or travel in the 2nd class train compartments, I realise the new caste that I belong to. It doesn't take me long to accept the stark realities, to acknowledge my legitimate place in the cattle class. My class consciousness only dawns on me when I get to travel in the business class. That is when I realise where I belong to. It doesn't matter whether I am born a Hindu, Muslim or Sikh. No one cares whether you are a brahmin, thakur or harijan. What matters is how you measure on the new caste index -- in the scale of prosperity.
This brings me back to where I started. I was talking about the modern day Shylocks. Shakespeare told us how Shylock demanded his pound of flesh. When I read a New York Times feature (Oct 7, 2010) under the shoulder headline -- Benign Capitalism -- Silicon Valley's Midas Vinod Khosla helps poor in native land (reproduced in Hindustan Times today, the only paper where I can read the NYT stories since I belong to the cattle class), I am reminded of the likes of Shylock. But then, if Shylock could demand his pound of flesh what is wrong if the modern day billionaires aim to fight poverty with profit.
Let me quote a paragraph. "He has already been investing in companies that he says fit his model of profitable poverty alleviation. One is Moksha Yug Access, which sets up milk collection and chilling plants to help dairy farmers. The company says it helps farmers reduce transportation costs and get higher prices for their milk than they can with local distribution." I am sure many of you would find this to be a wonderful initiative. Many of you would not even know what harm such private initiatives/companies have done the magnificent dairy cooperative system that turned India into world's largest producer of milk.
Billionaire venture capitalist and co-founder of Sun Microsystems Vinod Khosla has been quoted as saying: "There needs to be more experiments in building sustainable businesses going after the market for the poor." I am sure The Economist and the Forbes magazine would highlight this statement because it suits the interests of those it serves. But what happens to the poor and hungry who pay three times more interest to get a paltry micro-finance, is not your concern. You too have invested in the SKS Microfinance IPO, and are looking forward to suck the last drop of blood from the frail structure of the poorest of the poor.
I want to know at what interest rate has Vinod Khosla been getting his finances. I want to know at what rate of interest does the BASIX chairman get his loans for. If they cannot pay 24 per cent rate of interest (it effectively comes to 35 per cent at weekly repayment plans under coercion) I wonder how do they expect the micro-finance to be re payed back, and still expect the poor to benefit. Well, the brahmins of the neocaste system too need their pound of flesh. Shylock was not alone.
Yes, it sure is benign capitalism. Perhaps Shylock was more crude and certainly outdated. The modern-day Shylock finds ingenious, and the more benign forms where small investors too can make a killing. And it does not matter whether in the process you kill a river, a forest, a hill or even fellow human beings.
Probably Shylock was born in wrong times. Profit was not as respected a word as it is today. Also, Shakespeare was no Adam Smith. He wrote to reach people, and in a way entertain them. What he wrote reflected the times that he was living in. Adam Smith was no creative writer, and so it is not fair to compare him with Shakespeare's greatness. But Adam Smith certainly sowed the seeds of greed with a lot of caveat (which unfortunately is never talked about by the modern day Shylocks), and future generations not only realised the power of markets that he so vociferously advocated but went a step ahead by virtually making a killing out of it.
In a world where you are known by how much money you make, and it doesn't matter whether you made it by hook or by crook, the race to join the new emerging class of the bold and beautiful -- these are the new brahmins of the evolving global caste system -- has crossed all barriers. It doesn't matter which race you belong to or which religion you practice or which country you come from, the only qualification you need is the tag that says you are rich enough.
You can ruthlessly exploit the natural resources, and still the economists will applaud claiming the positive difference you made to economic growth. You can slowly poison people through food and medicine, and yet the economists will provide you the justification to do so by ringing loudly the percentage you contributed to the GDP. You can rip the society by providing services in the name of health, education and insurance and still you will be counted among the bold and the beautiful, the people who have the Midas touch.
Gone are the days when air, water and trees were respected, with religion often providing the protective shield. Nature was valuable, and no one tried to measure it in terms of GDP. As long as nature remained outside the GDP calculations, it remained safe. In our quest to join the brahmins of the neocaste system, we have almost brought the planet to a tripping point. Yet, the economists express jubilation over the growing economy across continents.
Look around, and I am sure you will realise how difficult it is becoming to live in a world where everything is for sale. There was a time, and that was generations ago, when the society would despise a Shylock. The bad guys were always on the radar screen, and the good guys would eventually prevail over the evil force. There was no need to celebrate Dussehra festival, to mark the victory of Lord Rama over the demon King Ravana in the battlefields of Lanka. Every day was like a Dussehra.
As society progressed, it changed. Even before Christ, Mark Antony tells us that the good that man does is interred with his bones.
At a time when the world witnesses the emergence of a very powerful neocaste structures and system as you may deem fit, it is being increasingly divided into three classes -- the billionaires, the business class and finally the economy class (some call it the cattle class). Manu Samriti, which defined and analysed the Indian caste structures, often hated in intellectual discourses, has been replaced by an equally more powerful script. This time it is not coming in one volume, but is a continuous exercise that is helping to carve out the contours of the neocaste structures.
When I fly economy class or travel in the 2nd class train compartments, I realise the new caste that I belong to. It doesn't take me long to accept the stark realities, to acknowledge my legitimate place in the cattle class. My class consciousness only dawns on me when I get to travel in the business class. That is when I realise where I belong to. It doesn't matter whether I am born a Hindu, Muslim or Sikh. No one cares whether you are a brahmin, thakur or harijan. What matters is how you measure on the new caste index -- in the scale of prosperity.
This brings me back to where I started. I was talking about the modern day Shylocks. Shakespeare told us how Shylock demanded his pound of flesh. When I read a New York Times feature (Oct 7, 2010) under the shoulder headline -- Benign Capitalism -- Silicon Valley's Midas Vinod Khosla helps poor in native land (reproduced in Hindustan Times today, the only paper where I can read the NYT stories since I belong to the cattle class), I am reminded of the likes of Shylock. But then, if Shylock could demand his pound of flesh what is wrong if the modern day billionaires aim to fight poverty with profit.
Let me quote a paragraph. "He has already been investing in companies that he says fit his model of profitable poverty alleviation. One is Moksha Yug Access, which sets up milk collection and chilling plants to help dairy farmers. The company says it helps farmers reduce transportation costs and get higher prices for their milk than they can with local distribution." I am sure many of you would find this to be a wonderful initiative. Many of you would not even know what harm such private initiatives/companies have done the magnificent dairy cooperative system that turned India into world's largest producer of milk.
Billionaire venture capitalist and co-founder of Sun Microsystems Vinod Khosla has been quoted as saying: "There needs to be more experiments in building sustainable businesses going after the market for the poor." I am sure The Economist and the Forbes magazine would highlight this statement because it suits the interests of those it serves. But what happens to the poor and hungry who pay three times more interest to get a paltry micro-finance, is not your concern. You too have invested in the SKS Microfinance IPO, and are looking forward to suck the last drop of blood from the frail structure of the poorest of the poor.
I want to know at what interest rate has Vinod Khosla been getting his finances. I want to know at what rate of interest does the BASIX chairman get his loans for. If they cannot pay 24 per cent rate of interest (it effectively comes to 35 per cent at weekly repayment plans under coercion) I wonder how do they expect the micro-finance to be re payed back, and still expect the poor to benefit. Well, the brahmins of the neocaste system too need their pound of flesh. Shylock was not alone.
Yes, it sure is benign capitalism. Perhaps Shylock was more crude and certainly outdated. The modern-day Shylock finds ingenious, and the more benign forms where small investors too can make a killing. And it does not matter whether in the process you kill a river, a forest, a hill or even fellow human beings.
Monsanto takes over agriculture of semi-arid Rajasthan
There is trouble ahead for the semi-arid regions of Rajasthan. What is presently classified as semi-arid region will soon turn arid, and barren. In a region where water is a scarce commodity, water guzzling hybrids will now be promoted with impunity. Rajasthan has in fact invited the multi-national seed giant Monsanto to sow the seeds of destruction. Monsanto has been handed-over the reigns of Rajasthan's agriculture, and in other words its food security.
Rajasthan becomes India's first Monsantoland.
Monsanto has signed an agreement with the Rajasthan Government to engage in public-private partnership to develop and market hybrid seeds of maize, cotton and vegetables like hot pepper, tomato, cabbage, cucumber, cauliflower and water melon. The MoU has been signed on behalf of the State Government with Department of Agriculture, Department of Horticulture, Swami Keshavanand Rajasthan Agriculture University, Maharana Pratap University of Agriculture and Technology, and Rajasthan University of Venterinary and Animal Sciences.
The MoU was signed in July 2010, and a copy of the confidential agreement was obtained using the Right to Information.
With Monsanto virtually taking over seed production and distribution, and at the same time being allowed to use the resarch and extension services of the State and the universities along with the Krishi Vigyan Kendras (KVKs) for disseminating the farm technologies, I wonder what role and task is left for the agricultural universities. If the universities have to be simply subservient to Monsanto, and be the executing agencies, isn't it time to close down these universities and save the tax-payers money? Why should the tax-payers bear the cost of providing supporting services which basically adds to the commercial gains of the private seed giant?
While the objectives include contributing to the agricultural economy through enhanced yields, encouraging cultivation of crops beneficial to farmers, the Rajasthan government has promised to bring in policies and programmes to make this possible by encouraging seed multiplication and distribution. Besides seed production and processing, Monsanto will engage in developing its proprietary germplasm in collaboration with the universities for which it will charge prescribed fee. Both the partners -- Monsanto and Rajasthan government -- will undertake feasibility studies and assessment to ensure that the hybrid seeds enter the seed value chain.
Interestingly, Monsanto will identify which hybrid seeds are to be cultivated, and will also evaluate cross-licencing agreement with the agricultural universities and the departments. To take cotton production to the next level, Monsanto has agreed to bring in mechanical harvesting equipment which will be made available to the universities at no additional cost. Students will also be provided with internships. The MoU provides a detailed list of activities to be conducted, which for all practical purposes means the virtual take-over of Rajasthan's agricultural research, education and extension infrastructure and services. Except that the State will pay for the staff salaries as well as maintenance cost for the infrastructure, universities and the two departments of agriculture and horticulture have been made redundant.
Hybrids are water guzzling crops. They consume roughly 1.5 times more water than the high-yielding varieties. At the same time, hybrids require increased application of chemical fertilisers and pesticides. At a time when across globe and also within India questions are being raised about sustainability of agriculture, I fail to understand the logic of large-scale introduction of hybrids of maize, cotton and vegetables. What is the use of extending the Green Revolution to the northeast parts of the country when the northwestern belt is being virtually turned unfit for food cultivation.
Common sense tells us that you need to cultivate crops that require less water in arid regions. I wonder where has common sense disappeared when it comes to developing suitable and appropriate agriculture technologies. How can anyone justify growing hybrid crops in water deficit regions? Why is the Rajasthan Government so determined to destroy Rajasthan's semi-arid agriculture for all times to come?
Rajasthan becomes India's first Monsantoland.
Monsanto has signed an agreement with the Rajasthan Government to engage in public-private partnership to develop and market hybrid seeds of maize, cotton and vegetables like hot pepper, tomato, cabbage, cucumber, cauliflower and water melon. The MoU has been signed on behalf of the State Government with Department of Agriculture, Department of Horticulture, Swami Keshavanand Rajasthan Agriculture University, Maharana Pratap University of Agriculture and Technology, and Rajasthan University of Venterinary and Animal Sciences.
The MoU was signed in July 2010, and a copy of the confidential agreement was obtained using the Right to Information.
With Monsanto virtually taking over seed production and distribution, and at the same time being allowed to use the resarch and extension services of the State and the universities along with the Krishi Vigyan Kendras (KVKs) for disseminating the farm technologies, I wonder what role and task is left for the agricultural universities. If the universities have to be simply subservient to Monsanto, and be the executing agencies, isn't it time to close down these universities and save the tax-payers money? Why should the tax-payers bear the cost of providing supporting services which basically adds to the commercial gains of the private seed giant?
While the objectives include contributing to the agricultural economy through enhanced yields, encouraging cultivation of crops beneficial to farmers, the Rajasthan government has promised to bring in policies and programmes to make this possible by encouraging seed multiplication and distribution. Besides seed production and processing, Monsanto will engage in developing its proprietary germplasm in collaboration with the universities for which it will charge prescribed fee. Both the partners -- Monsanto and Rajasthan government -- will undertake feasibility studies and assessment to ensure that the hybrid seeds enter the seed value chain.
Interestingly, Monsanto will identify which hybrid seeds are to be cultivated, and will also evaluate cross-licencing agreement with the agricultural universities and the departments. To take cotton production to the next level, Monsanto has agreed to bring in mechanical harvesting equipment which will be made available to the universities at no additional cost. Students will also be provided with internships. The MoU provides a detailed list of activities to be conducted, which for all practical purposes means the virtual take-over of Rajasthan's agricultural research, education and extension infrastructure and services. Except that the State will pay for the staff salaries as well as maintenance cost for the infrastructure, universities and the two departments of agriculture and horticulture have been made redundant.
Hybrids are water guzzling crops. They consume roughly 1.5 times more water than the high-yielding varieties. At the same time, hybrids require increased application of chemical fertilisers and pesticides. At a time when across globe and also within India questions are being raised about sustainability of agriculture, I fail to understand the logic of large-scale introduction of hybrids of maize, cotton and vegetables. What is the use of extending the Green Revolution to the northeast parts of the country when the northwestern belt is being virtually turned unfit for food cultivation.
Common sense tells us that you need to cultivate crops that require less water in arid regions. I wonder where has common sense disappeared when it comes to developing suitable and appropriate agriculture technologies. How can anyone justify growing hybrid crops in water deficit regions? Why is the Rajasthan Government so determined to destroy Rajasthan's semi-arid agriculture for all times to come?
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