Subsidy for the poor is bad; subsidy for the rich is good and always welcome

Subsidy has become a bad word. The moment the word 'subsidy' is mentioned one thinks of another crumb being thrown at the poor; as if tax-payers money is once again being wasted in the name of social security for reasons that are purely political. Over the years, neoliberal economists have successfully managed to create an impression in public perception that all subsides are wrong and need to be phased out. World Bank/IMF have in fact been forcing governments to remove subsidies as part of the fiscal prudence exercises needed to prop up the sagging economy. Let us face it, an average educated person finds subsidy despicable.


I wasn't therefore surprised to read New York Times commentary: "Politics gives some US subsidy program staying power" (NYT, July 14, 2011, http://nyti.ms/qDXRo4). Pitching for removal of wasteful subsidies, and most of these obviously fall in the agriculture sector, the writer tells us how these programs operate more or less like vampires, always coming back when you thought they were dead and gone.


Illustrating his argument with some telling examples, like Washington's Essential Air Service programme that results in an annual burden of $ 1.6 million for just three flights, he adds: "A close look at two programs highlights the age-old politics protecting government spending. The peanut and cotton storage program, which costs $1 million a year, has repeatedly survived cuts thanks to bipartisan support. Under the program, the government picks up storage costs for cotton and peanut farmers when they defer selling crops until prices rise. The peanut storage credits have been around since 2002. The cotton subsidy dates to the 1990s." 


Talking about agricultural subsidies I am reminded of another report "Government's Continued Bailout for Corporate Agriculture," published by the Environment Working Group in 2010 that listed the massive US farm subsidy support over the years. Accordingly, the US had paid a quarter of trillion dollars in farm subsidy support between 1995 and 2009. What makes the farm subsidy conundrum more complicated is the role the highly subsidised commodities play in international trade. Take cotton for example. US cotton subsidy have been known to be killing small cotton growers in western Africa, Asia and Latin America who cannot compete against the heavily subsidised cotton being imported from America. 


I am not in favour of wasteful subsidies. These must be curbed. 


But why is that no economist, and for that matter no policy maker, is ever willing to point a finger at the massive subsidies that are being doled to the industry, services and banking sectors in the name of improving efficiency? If subsidies are bad, these are bad for the industry too. Take the case of India where a similar debate has been raging for quite sometime now. Since 2004, the government has waived taxes, including income tax reductions, for the business and industry to the tune of Rs 22 lakh crore. These tax exemptions are clubbed under the category of 'revenue foregone' and presented in every annual budget. I haven't yet seen any economist or a TV anchor ever pointing a finger to these 'wasteful' subsidies. Perhaps the reason is simple. In some way or the other we all are beneficiaries of the same subsidised system. 


I was surprised to read another report the other day. The government has decided to provide a subsidy (you can call it an investment) of Rs 100,000 crore in the next 10 years for the opulent IT industry. I thought the IT sector has already been one of the major recipients of government subsidies all these years, and is now a cash rich sector. On the other hand, the government finds it unable to take anymore the burden of cooking gas cylinders for the average households. Well, the reason is simple. The outgo on LPG falls under the category of subsidy whereas the subsidy for IT sector is an investment for improving efficiency and thereby add to job creation. 


This is what is called 'tough love'. Tough for you and me, and love for the rich.  

A starving proposition

Sowing trouble: Reckless acquisition of agricultural land imperils food security; call a halt to it before food bowls turn into begging bowls. 

Going by a Hindustan Times-GFK Mode opinion poll conducted across five worst affected villages in Aligarh and Gautam Budh Nagar districts of UP, more than 48 per cent farmers are willing to sell land. All they are looking for is a better compensation package.

The underlying message is loud and clear. Farmers are keen to dispense with their land because agriculture has turned into a losing proposition.

This quick market research reiterates the findings of an earlier National Sample Survey Organisation (NSSO) survey in which 42 per cent farmers had said that they would quit agriculture if given an alternative. Viewed in the light of the terrible agrarian distress reflected in the spate of farmer suicides across the country, the ongoing debate on land acquisition skirts the fundamental issues confronting the economic viability of the farm and the resulting food insecurity.

Cultivable land is being acquired for non-agricultural purposes at a frantic pace at a time when the country is struggling to meet the growing demand for food. If India is to meet  this basic need of its burgeoning population, it will have to bring more land under cultivation. For instance, we will have to set aside 200 lakh acres if we decide to grow domestically the pulses and oilseeds we import. 

Preserving productive agricultural land for cultivation assumes utmost importance. In the US, the federal government is providing US $ 750 million to farmers for the period 2008-13 under the Farm Bill 2008 to conserve and improve their grazing lands. The idea is to ensure that farmers do not divert the land for non-agricultural purposes. 

Why can’t India, too, make adequate investments to protect agricultural land? Why can’t it use the Rashtriya Krishi Vikas Yojna (RKVY) exclusively to improve and preserve farm lands?

Economic development, unfortunately, has come to mean divesting of their meagre land holdings. Policymakers say that with rapid industrialization, average incomes will increase. As a result, people will have more money to buy food from the open market and make more nutritious choices. But the bigger question we have simply overlooked at our own peril is that from where will the additional food come from. 

In Andhra Pradesh, over 20 lakh acres has been diverted from agriculture to non-farm uses. In Haryana, over 60,000 acres has been acquired between 2005 and 2010. In Madhya Pradesh, over 11 lakh acres has been acquired for the industry in the past five years. Punjab, Karnataka, Andhra Pradesh, Maharashtra, Chhatisgarh, and Madhya Pradesh are building up "land banks" for the industry and Rajasthan has allowed the industry to buy land directly from farmers, setting aside the ceiling limit.

No one, in fact, has worked out as to how much agricultural land needs to be acquired to meet the industrial needs, and how much has actually been purchased. It is free for all; you can acquire as much land as you can. 

Rahul Gandhi himself has alleged that along the proposed Yamuna Expressway in UP, roughly 44,000 hectares of fertile farm land is being acquired for townships, industrial clusters, golf courses and an F1 racing track. My own analysis shows that of the total area of 198 lakh acres under food grain crops in UP, one-third or roughly 66 lakh acres will go out of production. This will mean a shortfall in foodgrain production in UP alone to the tune of 145 lakh tonnes.

Giving paramount importance to food security, we should draw a land use map for the country. There should be a moratorium on the sale of farm lands for non-agricultural activities, except for clearly defined ‘public’ purpose. The proposed Land Acquisition Bill must include provisions for enhancing farm incomes. At present the average monthly income of a farmer's family is Rs 2400. Even a peon in a government office is drawing Rs 15,000. A Farmer’s Income Guarantee Act is the answer. 

Source: Hindustan Times, Chandigarh

http://bit.ly/qx7TJD 

True Justice: Supreme Court shows the way

In a series of judgements that have challenged the mainline economic thinking, the country’s highest court has struck at the very foundation of India’s growth story. Moving a step ahead of simple diagnosis and introspection, the Supreme Court has taken on the responsibility of cleaning the mess.

For the aam aadmi, the Supreme Court’s judgements are a telling commentary on what is going wrong. The spate of judgements, coming in quick succession, has obviously upset some of the major loudspeakers of economic reforms. Some newspapers were quick to seek restraint in judicial activism reminding the judiciary of its limits. This was expected because it is this dominant group or individuals who have primarily been the beneficiary of the rot that had set in.    

At a time when economists are calling for sweeping new reforms to maintain the trajectory of growth, the court warns of how the culture of unrestrained selfishness and greed spawned by modern neo-liberal economic ideology has led to ever increasing spirals of consumption giving a false impression of economic growth. The court was responding to a writ petition filed by Nandini Sunder and others against the State of Chhatisgarh.

Whether it is agriculture, land acquisitions, taxation, infrastructure and finance, the emphases is on more reforms (read privatisation) and thereby restore confidence of investors. Be it the media ringmasters, and I am talking of the anchors, or the country’s planners, policy makers and economists working with credit rating agencies, the refrain remains the same for privatisation as the only path to development. Not realising that in lot many ways the line between development and exploitation has blurred.

Nevertheless as growth remains on an upswing, Indiacontinues to slide downhill in human development, hunger and poverty. If it were not for the artificially kept low poverty line, where Rs 20 and Rs 15 earned per day in urban and rural areas constitutes the cut-off for poverty, over 50 per cent of the world’s poor would be officially living in India.    

The dichotomy has never been explained. As the never-ending chorus for the much-awaited second wave of reforms grows louder by the day, there is a rapacious assault on the natural resources. The State has turned a blatant exploiter usurping precious natural resources – water, land and mineral wealth – for private good. The rural hinterland is witnessing land wars the likes of which have never been seen before. While economists continue to justify the takeover of public resources in the name of development, the judiciary has begun to see through the fallacious claims and the resulting socio-economic fallout. Realising that enough is enough the Supreme Court has decided to step in.   

Dismissing another petition filed by the Greater Noida Development Authority and several private builders, the Supreme Court lashed out at the growing incidence of violent land acquisitions: “This is a sinister campaign initiated by several state governments against the people. It is forcing them (land owners) to become slum dwellers or take to crime.” It faulted state governments for using the ‘urgency’ or ‘emergency’ clause for private benefit. The nexus has grown thicker and wider – economists joining ranks with politicians, bureaucrats and builders.

Read the following observation: “The justification often advanced, by advocates of neo-liberal development paradigm, as historically followed, or newly emerging, is that unless development occurs, via rapid and vast exploitation of natural resources, the country would not be able to either compete on the global scale, nor accumulate the wealth necessary to tackle endemic and seemingly intractable problems of poverty, illiteracy, hunger and squalor.” Together with the 50-page order on ‘black money, the country’s highest court has conclusively demolished the mainline economic thinking that weighs economic wealth over human welfare.  

Isn’t this an argument that you hear every other day? That rural India is literally on a boil is of no consequence. After all we are repeatedly told: land is required for manufacturing and industry; more industrial development means more employment; more employment means less of poverty. This popular assumption is regardless of the recommendations of a 2008 Expert Group of Planning Commission, which had concluded: “the benefits of this paradigm have been disproportionately cornered by the dominant sections at the expanse of the poor.” Ironically, it is the same Planning Commission which ignores the recommendations of its own expert groups and continues to thrust economic liberalisation policies that have acerbated economic disparities driving the poor against the wall.     

Land grab is happening at a time when the country is already in the throes of an unmanageable food crisis given that the galloping demands for food in the years to come requiring more area to be maintained under agriculture. For instance, if India is to grow domestically the quantity of pulses and oilseeds (in the form of edible oil) that are presently being imported, an additional 20 million hectares would be required. On the contrary, with arable land – mono-cropped or multi-cropped -- being diverted for non-agricultural purposes, India is fast getting into a much worse hunger trap.

Preserving productive agricultural land for cultivation therefore assumes utmost importance. In the United States, the federal government is providing US $ 750 million to farmers for the period 2008-13 under the Farm Bill 2008 to conserve and improve their farm and grazing lands so as to ensure farmers do not divert it for industrial and private use. In India on the other hand, the State governments are a tearing hurry to divest farm lands and turn them into concrete jungles in the name of development. “When people protest against acquisition of their land, men are arrested and women raped,” the apex court observed.

At a time when the State has more or less abdicated its responsibility to act conclusively against graft, the Supreme Court has appointed a Special Investigation Team (SIT) to repatriate black money. Coming in the wake of the continuous monitoring of the 2G Spectrum scandals that has already sent a number of politicians and corporate honchos to the Tihar jail, only a crusade against land grab by the highest court can come as the much needed respite for the rural poor.   

The court appears determined. “We will not keep our eyes closed. You take it (agricultural land) from one side and give it to the other. This has to go, and if it does not go, this court will step in to ensure that,’ the apex court had warned.  

Agriculture reforms will deepen the agrarian crisis.

The news that Prime Minister Manmohan Singh wants an annual agriculture survey from next year, similar to the pre-Budget Economic Survey, is perhaps aimed at kick-starting agricultural reforms. Agriculture had remained on the back burner ever since the Economic Reforms were unleashed in 1991, and has been literally crying for attention.

The Prime Minister's office, says a report in The Hindustan Times (Agriculture reform next on the menu? HT July 5, 2011) has called for an "analysis of policy issues, evaluation of schemes and their impact on farm economy." This is certainly a welcome step. But if what the Prime Minister told a select group of editors the other day is any indication, agriculture is in for still a worst crisis. Why I say so is because the word 'reform' only means more of privatisation. And privatisation in agriculture, especially for a country like India, would only acerbate the prevailing crisis by bringing in unsustainable technologies through inappropriate policy changes.     

As per The Hindustan Times report: In case of retail, where a proposal to allow global chains to enter the Indian market is awaiting government decision, PM sought to push the case for allowing foreign investment arguing that it would help improve supply-chains and distribution of food supply. At the same time he tried to soothe swayed nerves of small traders who fear they might be out of business. "There is fear of small traders, but without breaking such institutional barriers, there is fear of food inflation. I am hoping we can make a beginning in these areas. These are some of the ideas that are uppermost in my mind," Singh said.

Although the Prime Minister did not mention the contentious term 'FDI in Retail' when he talked of allowing foreign investment to help improve supply chains thereby streamlining distribution of food supply, he actually implied that. I am aware that allowing FDI in Retail is uppermost in Prime Minister's mind and some news reports have indicated that an approval might come within a fortnight or so. As I have said earlier, that of course will be the beginning of the end of Indian agriculture.

Agriculture today is suffering from a terrible crisis resulting primarily from economic unviability and deepening unsustainablity. The tragedy of farm suicides and the growing economic distress is directly proportionate to the imposition of Green Revolution technology. It is true that farmers are burdened with mounting debt but what is not being realised is that the growing indebtedness is because farmers have been forced to buy technological inputs that have not only created the second-generation environmental impacts but also turned farming into a losing proposition.

From Green Revolution, India is fast moving towards what is popularly called Rainbow Revolution. All policies are being amended/designed to help facilitate the take over of small scale agriculture by corporates. Contract farming, future trading and FDI in food retail are some of the measures that can help agribusiness to take control over farming. And it is primarily to strengthen the control of agribusiness over agriculture that farmers are being pushed out of agriculture. The growing, often violent, conflicts over acquisition of land by the government on behalf of the companies only testifies the government's resolve to hand over agriculture to the industry.

Is this the way forward?

I don't think so. What India needs is a kind of agriculture that encourages production by the masses, and not for the masses. Displacing farmers, acquiring fertile land in the name of economic development, and allowing FDI in food retail are some measures that will destroy the very foundations of country's food security. Unfortunately, unlike corruption, the Supreme Court is not coming down heavily on the government's ineptness in handling agriculture. Somehow farming and agriculture has remained outside the thinking frame of the middle class. It is the least understood and the most exploited sector of the economy.

Reviving agriculture would therefore depend upon a right mix of public policies with appropriate action. Here is what I feel should be the approach to be adopted to truly reform agriculture:

Reviving Agriculture
http://www.indiatogether.org/2006/nov/dsh-revive.htm