Bitter Politics Of Sugar

A few months ago, Railway Minister Pawan Kumar Bansal was at pains to explain the desperate need to raise rail fares. The hike is expected to raise additional annual revenue of  Rs 6,600 crore and reduce fiscal deficit.

Union Finance Minister P Chidambaram has been looking at every opportunity to reduce the burgeoning subsidy bill. The undue haste in launching direct cash transfer, the prolonged calibrations in containing the Food Security Bill, and the failed experiment in promoting balanced use of fertilisers were all aimed at clipping wasteful subsidy expenditure.

The partial decontrol of sugar therefore comes as a surprise. That the mills will no longer be forced to sell 10 percent of their produce at low prices to meet the requirements of the public distribution system, is certainly a sweet decision for the Rs 80,000 crore industry. In addition, as per the recommendations of the Rangarajan Committee, the release order mechanism has been abolished. This means that the mills will no longer have to wait for a direction from the government as to when and how much sugar they will release in the market.

What is baffling is the doubling of the subsidy bill from the existing Rs 2,600 crore to an estimated Rs 5,300 crore. While the sugar industry will stand to gain by approximately Rs 2,700 crore from the abolition of levy sugar quota, Chidambaram has already acknowledged that the annual subsidy bill will now grow by an additional Rs 2,600 crore for the next two years. All that the government has done is free the sugar mills of the financial burden, and take the liability on itself. This is “privatisation of profits, and socialisation of costs”.

The annual increase in the subsidy bill will in turn increase the fiscal deficit. But no questions have been asked. Decibels are only raised when subsidies are doled out for the poor; for the rich it constitutes economic reforms.

Moreover, a day after the decision was announced, sugar stocks of the same “cash-starved” companies jumped. Stocks of Shree Renuka Sugars, Balrampur Chini Mills, Dhampur Sugar Mills, Sakthi Sugars, Bajaj Hindustan and others continue to rally high.

Providing a financial bounty to the sugar industry in an election year has its own rewards. The timing of the crucial decision has to be seen in light of the changing electoral configurations. It has killed two birds with one stone.

First, the decision is certainly aimed at appeasing Sharad Pawar of the NCP and to some extent Mulayam Singh Yadav of the Samajwadi Party (SP). In the wake of the talk over the revival of the Third Front, keeping the sugar barons happy will impact the fortunes of the ruling party alliance. Like the 12,000 crore package expected for Bihar in the 12th Plan period ostensibly to appease Nitish Kumar, keeping the remaining flock together is the immediate priority.

At the same time, the government has refrained from fiddling with the cane pricing formula as per the Rangarajan Committee recommendations. Doing away with the State Advised Price (SAP) for cane, which the industry has always been complaining against, has been kept in abeyance, and rightly so. Price decontrol may help big cane growers who can afford the market risk, but for the small farmers, only SAP provides an assured price. Also, for the time being, the government knows that the sugarcane growers lobby is strong in Uttar Pradesh and Maharashtra. Electoral tremors will also be felt across the country, from Punjab to Tamil Nadu. But this is only a temporary reprieve. Once the impending elections are over, the industry will push for completing the remaining decontrol process.

And this is where a wider consultative process should happen rather than simply going by the recommendations of the Rangarajan Committee. In Punjab, Haryana and UP, for instance, sugarcane cultivation requires 1,60,00,000 litres of water per hectare. Sugarcane is a water guzzler and poses the biggest threat to food production. At the same time, world over, the emphasis is on reducing sugar consumption in wake of the growing awareness about its negative health impacts. It is time India moves away from what is good for the sugar industry to what is good for its people. It is time to make a historic correction. 

Source: Bitter Politics of Sugar, Tehelka, New Delhi, April 20, 2013

http://tehelka.com/bitter-politics-of-sugar/

How Margaret Thatcher destroyed public sector science. The case of Plant Breeding Institute at Cambridge.

The erstwhile Plant Breeding Institute at Cambridge (UK) 

Margaret Thatcher, 87, died yesterday. She is being hailed as the Iron Lady who transformed Britain. Every newspaper across the globe has paid rich tributes to her. Some have even carried her obituary on the front page, which is quite a rare honour. 

I only know that she had a steely resolve. Whatever she thought of doing, she did it. That's what I have read over the years. And knowing the determination with which she destroyed public sector science, I can understand why and how she earned the title Iron Lady. Nevertheless, let me share this story of how Britain's only woman Prime Minister, the unyielding Margaret Thatcher, eclipsed one of the world's best known research centre in plant sciences, which was emerging as a global leader in plant molecular biology and genomics. 

I am talking of the famed Plant Breeding Institute (PBI) at Cambridge. 

For any plant scientist, Plant Breeding Institute at Cambridge was a Mecca. As a student of plant breeding I too nourished the desire to make it one day to PBI. But by the time I reached the age to visit PBI as a researcher it had already been sold-off to Unilever. Later, in 1998, Unilever sold it to Monsanto. I remember the controversy over the priceless plant germplasm collections that PBI had at the time it was sold to Unilever. After a lot of public pressure, the plant collections were shifted to another public sector research institute, John Innes Research Centre in Norwich.  

The sale of PBI to Unilever was a great loss to independent science, and of course a loss to humanity. 

It was in 1996 that I went to Cambridge as a Press Fellow. One fine day I called up Sir Ralph Riley, a very distinguished plant geneticist, who also happened to be the founder director of PBI. He came to see me at the Wolfson College, and very politely offered to give me a detour of Cambridge to show me around some of the better known places for plant genetic research. This was indeed a treat. 

After showing me the pub where Watson and Crick had dashed to after discovering the DNA structure, he drove me around to what used to be the PBI. Parked his car somewhere, got out and pointing to the research farm, he said: "This is where plant breeding died." 

I can never forget those words. 

I asked him whether PBI was incurring losses because that's the only economic reason why a research institute would be sold-off. "On the contrary, he said, when PBI was sold by Margaret Thatcher to MNC Unilever, it was bringing in a revenue of (British) Pound 10 million a year against an expenditure of Pound 4 million/year." I don't know how you would take it, but how can any sane person justify selling-off a profit earning research centre? But then, that was Iron Lady. She earned the title because of her dictatorial role in pushing privatisation. 

Not being able to recall certain other notable things that he had shared, I did a quick search today. In one of the Royal Society publications, I find this paragraph: "When Riley became Secretary of the Agricultural and Food Research Council (ARC) in 1978, Shirley Williams, as Secretary of State for Education and Science, had increased the science vote spending and this no doubt encouraged Riley to take the position. However, after the election of the Conservative government led by Margaret (later Baroness) Thatcher (FRS 1983) in 1979, cuts were imposed immediately and further reductions occurred in the years that followed. Throughout his six and a half years in office there were continual major reductions of budget in real terms. This made the job of Secretary difficult, stressful and not a particularly happy one. Whole institutions had to be closed (the Letcome Laboratory and the Weed Research Organisation) and reductions in others led to fewer research sites being sustained. 

So the first step before you privatise is to cut the life line. In this case, budget cuts and staff reduction programmes was actually aimed at stifling public sector research and thereby justify the need to bring inn private funding. This is exactly what happens in other parts of the world, including India. 

"Reductions in staff numbers were necessary across the service, some by compulsory redundancy and closure of programmes. All this made the planned expansion in molecular and cell biology, the new science, more difficult and controversial." 

Subsequently, Sir Ralph Riley wrote: "Unfortunately after I had ceased to have any involvement with the AFRC the government privatised that part of the PBI activity concerned with variety production even though it was generating a return to the Government of about £10 million per year from a total cost in the Institute of about 4 million pounds per year. Thus the work that we had done to bring fundamental and closely applied work together, to permit easy crossfeeding was destroyed. Nevertheless, it may be that it (the former PBI) provides a model that will subsequently be followed by others." (See page 395-396 of this Royal Society publication: http://rsbm.royalsocietypublishing.org/content/49/385.full.pdf).

The rise of market fanaticism

From communalism to economic polarisation, the trend is worrying. While every sensible person decries communalism, I am equally worried at the growing fanaticism not only over political ideologies, but more and more over market fundamentalism. For most economists, academicians, market analysts and business journalists, economic reforms (an euphemism for privatisation) has become a religion. The moment you point to a flaw in the system, you meet an angry uproar that can go to any length to defend the system howsoever flawed it may be.

This is a worrying trend. And it is no less destructive than communalism. 

The same happens on the twitter. You say something that is not palatable to the two warring camps -- lead by Rahul Gandhi and Narender Modi -- and be ready to face a volley of well-orchestrated pot shots. Similarly, if you question for instance the motive behind postponing implementation of General Anti-Avoidance Rules (GAAR), which effectively allows tainted money to flow into the country, you are sure to meet an angry (and often illogical) outburst from noted economists and some of the TV analysts you see very often (Read my earlier blog post: GARR deferred. Investors, stock markets, industry and media celebrate induction of black money http://devinder-sharma.blogspot.in/2013/01/gaar-deferred-investors-stock-markets.html). 

They rise in defence as if their religious feelings have been hurt. 

Yesterday, newspapers all over the world carried an exposure on where the world's richest people hide their wealth. In a report, a study by McKinsey was quoted saying an estimated $32 trillion is stacked in offshore havens. The International Consortium of Investigative Journalists (ICIJ), which includes Washington Post, The Guardian, BBC, have unearthed a treasure trove which runs into hundreds of billions. This is obviously the tip of the iceberg. The ICIJ will soon be publishing the details. (This is where the richest people hide their money, The Daily Beast, April 4, 2013. http://thebea.st/10fhEzt). 

Reading this news report, I am reminded of a recent lecture delivered by Dr Raghuram Rajan, Chief Economic Advisor to Prime Minister. Speaking at the 38th Convocation of the Indian Institute of Management, Bangalore, he said: "To the extent that the rich are self-made, and have come out winners in a competitive, fair and transparent market, society may be better off allowing them to own and manage their wealth while taking a reasonable share as taxes." The Indian Express had this report on its front page under the headline: Lack of chances can hit free enterprise: Rajan http://www.indianexpress.com/news/lack-of-chances-can-hit-free-enterprise-rajan/1096450/).

I thought Rajan should have known that the rich are not the product of a competitive, fair and transparent market. First of all, there is no such thing as transparent markets. Market is not a season that nature has created. It is the outcome of a manipulative system. In all fairness, let us accept that markets are designed. Secondly, and more worrisome is his argument that the society may be better off allowing them to own and manage their wealth while taking a reasonable share as taxes. I wonder what his suggestion will be after reading the latest exposure about the massive wealth stacked in the offshore havens. These super-rich are not even willing to pay the reasonable taxes that he espouses. I don't think the taxes that the super-rich have to pay in India for instance are punitive, and yet we know tens of billions have been stacked abroad.

I had expected mainline economists all over the world to rise in unison demanding the end to tax havens, and asking for retrieving this ill-gotten wealth for the welfare of the society. But did you notice the complete silence, and the calm that prevails across the oceans? Isn't this a conspiracy of silence? Aren't the economists and analysts part of this conspiracy? Shouldn't they be asking for an urgent and massive correction in the way wealth is being generated and then hoarded? 

It is therefore quite obvious that mainline economists go to any length to defend the clearly visible wrongs. Well, isn't this what the religious fanatics also do? Why then we only blame them? When will we start questioning market fanaticism? 

Another report that I would like to draw your attention is based on a study by the Harvard School of Public Health, and presented by the American Heart Association. Published on March 24, 2013, the report says "soft drinks, sodas, 'sports' drinks and 'fruit juice' are associated with 180,000 deaths every year (Soft Drinks Cause Around 180,000 Deaths Every Year, Research Find. http://bit.ly/YnUGq0). Just because these drinks are the products of business enterprises, some of them too big to be pushed out, no economist or a media house internationally raised concern. Nor did any of the G-20 heads who spare no opportunity to swear in the name of market reforms dared to even mention this report. 

A building collapse in Mumbai, burying 52, has evoked anger from all, and rightly so. How come the death of 180,000 people does not even merit a TV discussion or an article by the same breed of economists and analysts who otherwise try to shout down every sensible voice? 

No longer the apple of your eye. How the trade exploits the gullible farmers and consumers. And how the Govt turns a blind eye blaming supply constraints for rising prices.

The entire trade of the enchanting Kashmiri apples is in the hands of commission agents. They decide how much the growers need to be paid and how much you need to shell out. 

For several years now, food inflation continues to pose a serious headache for the government. Nine year after assuming power, Prime Minister Manmohan Singh appears clueless. He told the Confederation of Indian Industry (CII) a few days back that inflation (along with corruption) remains a big challenge. While it is not that he doesn't know what to do, the fact remains he doesn't want to take steps that can bring down inflation simply because these steps would go against the basic tenants of market economy.

For several years now, in almost all the panel discussions that you get to see on the TV channels and also the articles/analysis appearing in major newspapers, the blame has been on supply-demand constraints. Because that is what the text books say. I have always maintained that there is no constraint at the supply side, and the entire fault is with the wholesale-retail trade. If you were to visit a wholesale market (mandi) in the morning hours when the auctions take place, you will find the prices going up by 300-400 per cent just within an hour. And by the time, the produce reaches your home, you end up paying anything between 500 to 600 per cent more than what the farmers have been paid.

Take the case of apples from Jammu & Kashmir. In an eye-opening report Marketing System and Price Spread of Apple in Kashmir submitted by the National Bank for Agriculture and Rural Development (NABARD) the exploitation of apple growers as well as the consumers by a well-knit network of commission agents has been laid bare. While you end up shelling out anything between Rs 105 to Rs 120/kg for the Kashmir apples, the grower get on an average Rs 26 per kg. The production cost is around Rs 35 per kg.

The exploitative system has been perfected over the years. According to a news report in DNA newspaper entitled Agents decide how much you will pay for Kashmiri apples (DNA April 1, 2013 http://bit.ly/17eeRdD) "Supply is manipulated in artificial manner generally at agents level through hoarding of apple in cold stores for short duration and controlled atmosphere stores (CAS) for long duration up to 6-9 months.” Incidentally, traders gets subsidy and also subsidised loans for setting up cold stores and the controlled atmosphere stores (CAS) which is being used by commission agents to their advantage. 

The newspaper further says: "This trend started with Delhi and has spread to all other parts of the country. Though the agents adopted this CAS system in the late 2000s, the scam became big after 2010 when big agents expanded their CAS capacity in Delhi and Kundli (Industrial Growth Center, Sonepat). “Now CAS units are becoming a craze among CAs,” said an area marketing manager of the J&K horticulture marketing and planning department.

It quotes the NABARD study: “The existence of seven cold storages within Azadpur market yard of Delhi and about 100 CAS at Kundli in Haryana (25 km from Azadpur market) is leading to a sort of hoarding’ of Kashmiri apple before it enters Delhi market for auction.” It also blames the banks for extending commercial loans to commission agents instead of growers, who then exploit growers by extending loans at high rates of interest. In 2011-12, apple growers received Rs 1,200-crores of advances of which only Rs 200-crore came from banks. The rest came from the commission agents and others (Agent's apple growers don't get fruit of labour, DNA, Mar 31, 2013, http://bit.ly/16qmEls). 

Reading the reports it becomes quite apparent how the scam has been operating. If we take apple as an example, it become obvious that the price rise being witnessed is not because of supply constraints. Neither can apple growers be blamed for the price increase in the markets. It also negates the view that farmers benefit when inflation goes up. What is at fault, and which unfortunately is brazenly defended by analysts, economists and policy makers, is the exploitative trade. It is the trade that is solely responsible. But why is that no regulation as well as deterring action has been initiated against the nexus that operates between the wholesale and retail traders? 

I agree that it is primarily the poor implementation of APMC Act (1997). Over the years, traders have formed strong cartels which are very powerful and difficult to break simply because the successive governments have preferred to turn a blind eye. These traders also operate as big money bags for political parties and so no one wants to cut the hands that feeds. But to say that the best way forward is to debunk the APMC Act and allow private markets to be set up which will provide a higher price to growers and a better price to consumers is another flawed hypothesis. The prevailing rotten system needs to be set right, but throwing it away is not the right answer.

It is being suggested that foreign direct investment in retail will set the house in order. It will end the exploitation of the farmers by the middlemen. Many fall for this argument. But in the most recent cases of exploitation of dairy farmers by super markets in UK it has been shown that supermarket giants like Tesco and Sainsbury have pushed prices down to unsustainable levels thereby pushing dairy farmers out of business (Retailer aligned milk contracts -- good or bad. http://fairdealfooduk.com/?p=4494). 

Striking at the wholesale-retail trade in India will send a wrong signal for the market economy. The propaganda machinery has so far been telling us that markets correct itself. This is not true. Showing a stick to the trade therefore will go against the fundamental premise of market reforms. Prime Minister is therefore reluctant to discipline the erring trade. He is trying to protect the reforms he unleashed. His commitment is therefore to the market reforms. The nation can continue to suffer and be exploited in the process. #  

Paradox of plenty: India's problem is how to manage food surplus. And ensure millions don't go to bed hungry.

A typical wheat mandi in India. While arrivals are heavy, no place to keep these stocks. 

Nothing can explain this strange and criminal paradox of plenty. More than 45 years after Green Revolution began; India provides a unique spectre of overflowing godowns and rotting grains on the one hand while millions go to bed hungry. Having the largest population of hungry in the world, India ranks 66 among 105 countries in the 2012 Global Hunger Index. That too at a time when there is no shortage of food within the country.

To get rid of the huge stocks, India has aggressively resorted to food exports. While rice exports have touched 10 million tonnes, making India the world’s biggest rice exporter, close to 9.5 million tonnes of wheat has also been exported this fiscal. And yet, grain stocks remain unmanageable.

With over 44 million tonnes of wheat expected to be procured once the procurement season begins officially from April, India will be saddled with a massive and unprecedented food grain (rice and wheat) stock of over 100 million tonnes. Already, as on March 1, Food Corporation of India was holding 62.8 million tonnes of grains – 27.1 million tonnes of wheat and 35.7 million tonnes of rice – good enough to meet the country’s food requirement for another year. Storing an additional 44 million tonnes is simply going to be a nightmare. While the all-time high production and procurement is a historic milestone, it provides an equally daunting task for the government agencies to store it, and store it safely.

“We are looking for space in sugar mills, yards and even in rice mills. It’s going to be very tough,” a visibly worried D S Grewal, principal secretary in Punjab’s food and civil supplies department, told a newspaper. Against an expectation of 14 million tonnes of wheat to be purchased, Punjab has space to keep only 6 million tonnes. Although Punjab has a total food storage space for 23 million tonnes, including 12 million tonnes on open plinths, the grain silos are bursting at the seams with food stocks from the purchases made in the previous year’s lying in the open. 

In Madhya Pradesh, fast emerging as the next wheat bowl of the country, there is space only for about 50 per cent of the expected 13 million tonnes that is likely to be procured by official agencies. “We are looking at even school premises and some government buildings for stocking wheat. We have no other option,” said a senior state official. Since wheat harvests begin early in central India, procurement is already in full swing in over 2,770 purchase centres that have been set up in the state. Not only Punjab and Madhya Pradesh, heavy arrivals are expected from Haryana, Uttar Pradesh, Rajasthan and Bihar.

Nothing can explain this gross food mismanagement. For almost 30 years now, successive governments have failed to accord any priority to food storage and distribution. As early as in 1979, under a ‘grow more food’ campaign launched by the Ministry of Food and Civil Supplies, the need for setting up 50 grain silos across the country was envisaged. The underlying objective was to reduce the burden for stock holding of wheat by the producing states by building a network of grain storage capacity across the country, which would also be used for effective distribution among the poor.

It’s all a question of priority. Food has never been on the top of the national agenda. In the past few years, the UPA has made massive investment in building 250,000 panchayat ghars. These panchayat structures have been provided with a computer link-up and are also being dotted with solar power. Isn’t it strange that while the government has the resources to build panchayat ghars, it has no money to construct warehouses across the country? Still worse, since 2004-05, UPA has doled out Rs 32 lakh-crore by way of tax exemptions to the Corporate, trade and business. These exemptions are clubbed under the category ‘revenue foregone’ in the budget documents. For 2013-14, the ‘revenue foregone’ is Rs 5.73 lakh crore.

The entire food production and distribution system therefore needs an urgent overhaul. If only the government was to focus on agricultural production, procurement and distribution in a decentralized manner, much of the agrarian crisis would disappear. Also, no country can claim to be a super power with millions living in hunger. Therefor the need is to follow a three-pronged approach:

1) Set up a wide network of mandis and temporary purchase centers across Bihar, eastern Uttar Pradesh, West Bengal, Odisha, Assam and the other northeastern states. Extending the Green Revolution to northeast has already increases rice production, but farmers are resorting to distress sale getting about 20 to 30 per cent less because of the absence of procurement centers. 

2) Madhya Pradesh has shown that providing a bonus of Rs 150 per quintal over the procurement price of Rs 1350 a quintal has provided an incentive to farmers to produce more. A higher minimum support price for wheat and rice, and also extending it to pulses, millets and fodder would shift focus to other crops essential for maintaining nutritional security.

3) At least Rs 1 lakh crore be taken out of the ‘revenue foregone’ category, and invested in setting up a network of grain silos, warehouses and godowns across 50 places spread throughout the country. All this is doable provided food is accorded utmost priority in national thinking and planning.    

How does the modern financial-economic-banking system works. An effort to demystify the little understood operations.

Global financial systems follow very mysterious way of operations. I know there is something terribly wrong but have never been able to nail their lies. Not being an economist perhaps make it still difficult to comprehend what goes wrong and how. Nevertheless, whatever little I can understand I have been sharing with my readers. 

Last week I received a letter from one of my readers. Being a banker himself, S/he has a better inside grip over  how the financial systems work. S/he explained to me how the system thrives on government subsidies, and receives a 'backup' support from the policy makers to make it look for competitive and economical. To illustrate, s/he has used the example of rural cottage industries which have been systematically killed for reasons we think are linked to pure economics. 

Over the next few weeks, I would be seeking more details with examples and analysis. To begin with, certain issues that many of us have been pondering over, have been thrown up. I am pasting the letter below (and of course keeping the writer's identity anonymous) for you to think over. Perhaps it will give you some food for thought. If you have any questions, please do write and we can then deliberate.   

Here it is:      

I am following your writings for some time. I share and appreciate your concerns about the matters related to impending food crisis, the danger of GM foods, the wicked designs and propaganda of MNCs above all the state and plight of rural economics.

So I presume you must be having some interest in the matters of finance and economics particularly the economics of rural India. Sir, I have done some deep research work in the field of “Banking, Finance & Economics” and I think that it may be of interest to you and some like-minded people. The finding of my work is quite revealing and shocking in the sense as to how the so-called “Modern Financial Economic System” actually functions.  Sir, if one sensible person is to actually know as to how in reality the Modern Financial Economic System works he will get a shock of his life. In fact the modern financial-economic system is a parasite that survives by sucking the rural sector. The so-called Modern Financial Economic system sucks and destroys the rural India.

Sir, you would agree that the India (or as a matter of fact every country in the world) can emerge as a self-reliant and stronger nation only after our RURAL COTTAGE INDUSTRIES are invigorated. Once this happens we don’t have to do much to strengthen our populace. In fact looking at the impending environmental disasters like Global Warming and Ecological destruction all around the world, we need to go back to the era of rural-cottage industries. As against the modern industries that are inimical to our ecology and environment, the rural-cottage industries are in fact quite eco-friendly. So one wonders why our rural economic system got extinct. There is an argument in favour of Modern Industries is that they are cost-effective and the Modern Industries defeated the rural-cottage industries in open market competition!!! Sir this is perhaps one of the biggest propaganda in entire human history!! I will come to that a little later. 

Sir, the Modern Banking & Financial system is nothing but a pure fraudulent design. To understand the fraudulent nature of this system one needs to understand the Banking system. Without understanding the banking-financial system we cannot understand the modern economic system.  Even the Professors and other educationists too have read the fabricated propaganda in their own student life therefore they don’t have the vision the see the truth; they have been “programmed” to disseminate the propaganda that they have received as student. What they have been taught by their teachers, they simply pass-on the same to their students. It is the standard mechanism of disseminating any false propaganda.

In following paragraphs I would give you some examples of the lies/deception about the Modern financial economic system. From this you can well understand as to how vicious the propaganda is. Here I am giving only some facts without getting into any analysis (due to space constraint). For the start I would give you only three cases:-  

1.  The conventional wisdom, as per books of economics, is that the factory system (i.e. the industrial economic system) triumphed over the traditional cottage industries (particularly the textile industry) due to so-called economy of scales. In simpler words it is touted in the books of economics that factory system of producing (i.e. Mass Production System or MPS from now onwards) the textiles was/is cheaper than traditional cottage industry of textiles therefore in an open market competition MPS triumphed over traditional cottage textile industries. In reality it is one of the biggest lies disseminated in entire human history. Sir, the MPS was and it still is at least 4 to 5 times costlier that traditional cottage industries of textile making. It is a part of well documented historical facts (I can give you unquestionable references regarding this) and even at present it can be proved mathematically. How the industrialisation (MPS) succeeded is quite a saga in itself. I am not giving much details about that due to space constraint; but it is sufficient to say that industrialisation basically succeeded due to unfair and brutal suppression of the cottage industries (particularly of India) by British colonial powers. Had this unfair and brutal suppression not been given to Indian cottage industries by British colonial regime the British factories would have not even came into existence. For the present scenario it is sufficient to say that on an average per meter of cloth manufactured in MPS industries gets an approximate (but hidden) subsidy of, hold your breath, Rs.1000 per meter!!! In fact almost entire “MPS Economy”—other industries too—run on massive subsidies. In other words the so-called Modern Industries are white elephantsthat survive on subsidies. If this subsidy is not given to MPS industries; our rural cottage industries will wipe out the factories of mass production within no time. In other words the rural economy will surge.

2.  Even bigger “game” is the way in which the so-called modern economy (i.e. the Modern Industries) is “artificially sustained”!! You will shocked to know that despite getting huge subsidies the modern industries cannot sustain even for a moment if a “rear guard” action is not taken by Governments to “artificially boost” their sales. In other words the sales of the so-called modern industries are “artificially sustained” through a combination of government actions and banking system. Remember, that this is IN ADDITION to the hidden-subsidies provided to modern industries. For rural cottage industrial system there is NO NEED for artificially boosting the sales!! But our text books of economics don’t even mention this fact!! In fact the authors of those text books themselves are ignorant of this fact!! Now we should also know something about the pivot of modern industrial system—the Banking system.

3.   The banking system is yet another example of outright lying and heavy distortion of the facts. In fact to understand the Modern economics you ought to understand the Banking system without knowing the banking you cannot understand even an iota of Modern economics. Banking is the AXIS of evil in the context of Modern economic system. Banking, as we are told in the text books, is the CHANNEL between the savers and investors or lender and debtors. In other word it is touted that first money is “deposited” in the bank by the “depositors” and then it is given as “loans to debtors”. It can safely be said that this lie too is one of greatest “successful” bluffs of human history. Nothing can be farther from the truth. If the banking were to be really a CHANNEL there would have been nothing fraudulent about this!! But banking in its essence is a purely fraudulent exercise. If you are interested I will explain you later. But for the present I would explain only briefly. In reality banks are just “money creation machines”. In other words the loan that Banks give to the debtors is NOT the money that has been deposited in the bank by the depositors; rather the loan are made “out of thin air” i.e. by “creating money out of nothing” and once the money is brought into the existence by way of making the loan it is only then that it ends up as deposit in the banking system!! There is one more buffoonery also taught in text books of banking system:-The so-called “credit multiplier”. This too is a big propaganda that needs to be busted. Following comment on the banking system can be considered as final verdict on the Banking system.

Contrary to general belief—that it the depositors’ money that is given as loans to debtors—it is the money that is loaned into existence by BANKS ends up as deposit in the banks! First, the money is “created by making loans” and later this money ends up as deposit in the banks!!

Now just think as to what is the need (or rational) for offering interest for attracting the deposits by the commercial banks!! Sir, I have just stated some of the facts about modern financial-economic system but WITHOUT offering any analytical justification for the same. The reason is that these analyses cannot be covered in a short letter. 

Sir, I am writing these matters to you (1) to show as to how big a propaganda is taught in the name of economics where the teachers/professors themselves are utterly ignorant of the reality and (2) to indicate that Modern Industrial economic system is a fraudulent one and once this fraudulent support is withdrawn the so-called modern industrial economic system will collapse and rural cottage economic system will automatically emerge. The general public is fooled about the cost-competitiveness of modern industries. # 

Do tractors play a role in aggravating farm crisis?

Big and attractive tractors are increasingly in demand in Punjab. In this picture a farmer is looking at tractors lined up for sale. 

(Pic courtesy: www.frontlineonnet.com)

Every Monday, second hand tractors start arriving early in Kotkapura grain market in Punjab. By around noon, the grain market turns into a tractor mart. A large number of tractors, of different make and size, are available for a bargain. Many of these are procured by middlemen who market these second-hand tractors in Uttar Pradesh, Rajasthan and Bihar.  You may be thinking that most Punjab farmers are now fed up of tractors and that is why they are keen to dispose these four-wheelers.  No, the reality is that most of those who come to sell have actually acquired a new tractor, much bigger in size, and of course flashier. 

For several decades now, tractor has been a status symbol for Punjab farmers. Unless they own a tractor, irrespective of the fact whether they need it or not, they don’t feel they too have arrived. With over 5 lakh tractors existing in Punjab, once the status symbol has now turned into a symbol of suicide. But still farmers have not given up of tractors. Like the neo-rich in the cities, farmers too have developed a fetish for latest brands. Not many regret the big wheels. The craze for big machines has in fact grown.  

Not everyone of course does it as a style statement. While a large number buy tractors as a necessity, there are some small farmers who often purchase tractors out of social compulsions as it comes in easy instalments and at affordable low interest rates. They buy tractors, even if costs Rs 5 lakh and more, and sell it in a few weeks and from the money they get they buy a small car to be given as dowry for their daughter’s marriage. Many others of course are lured by the marketing blitz and want to join the ranks of progressive farmers since tractor has been promoted as a symbol of pride.   

A tractor alone is not of much use to a farmer. It is the heavy implements, which comes as attachments that are important. So it is the total package -- implements, along with the tractor – that adds on to the growing indebtedness on the farm. In neighbouring Haryana, the subsidy for land leveller has been increased from Rs 50,000 to Rs 75,000; on multiple crop planter from Rs 10,000 to Rs 20,000; on happy seeder from Rs 25,000 to Rs 50,000; on straw reaper from Rs 40,000 to Rs 60,000 and on zero till machine from Rs 15,000 to Rs 20,000. More the expensive implements, means more indebtedness. But this does not mean I am against mechanisation on the farm. What I am asking is the justification in selling the expensive and sophisticated implements and machines to farmers who are already in economic crisis. 

With every second farm household in Punjab owning a tractor, and considering the average farm size is less than 4 acres, tractors have become uneconomical. But still worse, more than 20,000 tractors are being purchased every year. These new tractors are really big machines, ranging from 60-90 horse power, the kind of huge tractors that were available in erstwhile Soviet Union. Generally, the minimum land area required to ensure a tractor remains economically viable is 10 acres. But over the years, under pressure from the industry, governments have reduced the requirement to just 2 acres. Also, a few years back, P Chidambaram, in his earlier avatar as Finance Minister, had reduced sales and excise duty on tractors by 18 per cent making it more attractive for buyers.

It was sometimes in late 1980s that I had visited Cambodia (it was then called Kampuchea). I was appalled to find huge tractors from Soviet Union being used in the country which was devastated under the Pol Pot regime. Since Kampuchea was only recognised by the Soviet block then, the use of massive tractors in the otherwise small farms was therefore quite understandable. I remember having told the Indian Ambassador that it will be good if India could supply small tractors – in the range of 25 to 35 horse power – to Kampuchea as part of the diplomatic initiative to build goodwill among the Kampuchean farmers.

While Cambodia has meanwhile gone for small tractor, Punjab is going for big wheels on small farms. The arrival of huge tractors in Punjab therefore defies any economic logic. I am told some tractor manufacturers are now planning to bring in tractors with 105 horse power.  And so when you hear the next time a story of growing indebtedness on the farm in the frontline state of Punjab, just be sure a tractor is more often than not, the primary reason. 

The tragedy is that the continuing agrarian crisis in the country, which has taken a heavy human toll with 290,470 deaths reported from suicides in past 15 years, provides a huge market for selling machines. In Punjab, despite heavy mechanisation, two farmers are killing themselves every day. Somehow the feeling is that more machines you sell, more sanity would prevail on the farm. Agriculture is being viewed as a machine-deficit sector, and more the machines sell more will be the reduction in farmer suicides. At least, this is what is visible from the way State Governments are aggressively promoting machines for the trouble-torn farming sector employing 57 per cent of the country's workforce.

Interestingly, the price of tractors has gone up by more than 100 per cent in the past five years. Isn’t it strange that while the market price of cars and two-wheelers has not risen by more than 20 per cent (and that too despite the annual inflation), the price of tractors has been on an unprecedented upswing. In other words, who will ensure that the tractor manufacturers do not end up fleecing the gullible farmers? Moreover, I am surprised that the tractor manufacturers have now roped in the agriculture universities in southern parts of India to market tractors. Some universities have reportedly signed MoUs with tractor manufacturers.

I agree that the farm sector faces a terrible paucity of farm workers. But will aggressive sale of all kinds of implements and huge tractors take out farmers from the crisis? Has it helped Punjab farmers tide over agrarian distress? It hasn’t. So why is it that the State governments are blindly promoting tractors? Why can’t the Punjab and Haryana governments and for that matter other state governments instead urge the formation of cooperative societies which help in leasing farm implements to farmers? Why can’t the governments encourage formation of private companies for custom hiring tractors and farm machinery?

I am not suggesting setting up another State cooperative agency, but am seeking encouragement for social entrepreneurship. It is here that I would like to provide the example of Zamindra Farm Solutions in Fazilka in Punjab. It provides big machines as well as farm implements on lease. Over the years, its membership has grown to over 4,000 farmers. Similarly, I know of several small village cooperatives in Punjab which provide implements for a rent. It is time such initiatives are aggressively promoted and encouraged. It is time to save farmers from getting deeper and deeper into a debt trap. #