P. Chidambaram has announced a “bailout” package for Indian farmers by asking the banks in the commercial, cooperative and public sector to increase their rural lending by 30 per cent. This is not the same as increasing public investment in agricultural research and extension, rural infrastructure and irrigation as promised in the common minimum programme. Asking banks to give more loans to solve the problem of suicides caused by indebtedness is like asking a neighbour to turn on his tap to solve the problem of a leaking water storage tank in your backyard. Processes that create structural and systemic indebtedness are leaks in the farmers’ livelihood security. Unless these leaks are fixed, more flow of credit will not help the farmer.

Farmers’ indebtedness is a result of rising costs of agricultural inputs and falling prices of agricultural produce. Both are intended outcomes of trade liberalization and economic reform policies driven by agro-business corporations. Farmers suicides are therefore an inevitable outcome of an agricultural policy which favours corporate welfare at the cost of the farmer. The farmers are driven to their tragic end by a three-fold crisis caused by trade liberalization and globalization policies, deregulation of inputs, imports and prices and the inevitable deepening of debt.

Deregulation of the input sector, the entry of multinationals dealing in seeds, and the creation of seed monopolies have increased the costs of inputs and the risks of crop failure. In 2002, Bihar’s farmers lost Rs 400 crore due to the failure of Monsanto’s hybrid corn. Farmers in Andhra Pradesh and other states ran into losses of Rs 100 crore due to the failure of Bt Cotton. Deregulation of the input sector has allowed the seed MNCs into Indian agriculture for the first time. India’s seed-security had been time-tested — adapted varieties were suited to diverse agro climatic zones and the socio-economic conditions of the peasants. But greedy for profits, MNCs have been selling untested, ill-adapted, high-cost seeds which need high-cost chemicals and intensive irrigation — a sure recipe for a debt trap.

Chidambaram’s “package” for farmers offers no relief to farmers’ distress that is linked to seed insecurity and crop failure. Drought is only a partial explanation for indebtedness and crop failure. The deregulated seeds untested for India’s diverse soil and climatic conditions and rising costs of inputs are a major cause for crop failure and farm debt. Which is why farm suicides are also occurring in irrigated and rain forest areas. They cannot be stopped by asking states to assist banks for formulating new “bankable investment projects” like plantation and horticulture. The crisis calls for radical reform.

The finance minister’s proposal to support organic farming can help because organic agriculture reduces the drain on farmers’ incomes for toxic agrochemicals. But the announcement of Rs 12,700 crore subsidy for urea and DAP undermines the incentive to go organic. Even organic producers need just and fair prices to survive, even they need public investment in research and extension, and input support for organic fertilizers and ecological pest control.

Chidambaram offers no commitment to rebuild seed security, the first link in the farmers livelihood and income security. More credit will not fix this leak of farmers’ hard-earned income for unreliable and costly seeds. The crisis will deepen when corporations extract more resources from poor farmers for royalty patents as a result of the implementation of the trade-related aspects of intellectual property rights agreement of the WTO. Without TRIPS reform, agriculture will become totally unviable for the Indian peasantry.

The second leak in the farmers’ income is the collapse in farm prices due to deregulated trade, especially after the removal of quantitative restrictions. The artificial lowering of international prices has led to depression of domestic prices. The level of dumping has increased since 1995 when the WTO came into force with the aim to “reduce distortions in trade.” From 1995 to 2001, dumping jumped from 23 per cent to 44 per cent in case of wheat, 9 per cent to 29 per cent in the case of soya beans, 11 per cent to 33 per cent in the case of maize, from 17 per cent to 57 per cent in the case of cotton.

The removal of quantitative restrictions implies that Indian peasants are made more vulnerable to the distortion of international prices. The non-procurement by government at the level of minimum support price has also led to a fall in farm prices and hence a fall in farm incomes. On the basis of the fall in the prices of agricultural commodities, Indian farmers are having to bear an annual loss of about Rs 115,800 crore. The CMP has said that the government will “ensure that adequate protection is provided to all farmers from imports, particularly when international prices fall sharply”. Since the international prices are below the cost of production, it is necessary to bring back quantitative restrictions to enable Indian farmers to survive.

The withdrawal of the government from rural investments and rural credit has implied that farmers are indebted to private moneylenders charging high interest rates. Rural branches of banks declined from 35,329 in 1992 to 32,481 in 2002. The finance ministry’s instructions to banks to lend more to farmers will not serve the purpose without corresponding action on other commitments.

We expect a farmer-centred budget from a government brought to power by the distress and discontent our farmers are experiencing. We want to see reform, but ones that are farmer-centred. For this the economic policies of the new government will have to address the following. One, rebuilding of seed security by reviving seed farms and starting community seed banks, regulating seed MNCs and holding them liable for crop failure, false promises, and genetic contamination. Seed prices need to be regulated by putting a ceiling on seed costs. Food staples should be excluded from the IPR regime — both patent laws and the plant variety legislation. Biopiracy has to be prevented, as also patenting of traditional varieties. There is also need to shift subsidies to organic farming or low external input agriculture.

To assure livelihood and income security, quantitative restrictions must be brought back. The government has to ensure that both private and public procurement are governed and regulated by a minimum price. There should be a floor on procurement price.

To give farmers freedom from debt, the government has to increase rural credit through cooperative and public sector banks, regulate interest rates charged by private moneylenders, and make high interest rates illegal. When crops fail because of unreliable, untested seeds, the private company selling seed should pay compensation to farmers. The government should write off farmers’ debts based on high seed costs, unreliable seed supply and high interest rates.

Many of these actions need public investment. The withdrawal of the state from creating the context of livelihood security and income insecurity of farmers is the real cause of the farming crisis. We hope that the budget reflects the mandate rural India gave the United Progressive Alliance.