Of loan waivers and tax waivers

20 May 2008 - In Maharashtra, where the nation's most distressed farmers have been denied the benefit of the 'farm loan waiver,' the government is said to waive crores in entertainment tax that the Indian Premier League cricket matches would normally attract. Media reports in Mumbai on this score reckon that means a loss of up to Rs.10 crore in revenue. As even the pro-corporate newspapers of the city point out, the direct beneficiaries would be Mumbai's millionaires and billionaires. Film stars and corporate bosses who did not find it difficult to spend crores on buying teams and players. That too, for what the media are fond of calling "the world's richest cricket tournament." Simply put, if it goes through, they'll be getting tax waivers on the hiring of cheerleaders, among other things.

True, this is not the first time that entertainment tax has been waived on cricket matches in Mumbai or elsewhere. The BCCI and its affiliates have always enjoyed political patronage. The difference, which has got even members of the ruling front worked up, is that those raking in the crores in exemptions are for-profit-only groups and individuals. By law, any event, musical or cultural, performance or other, staged for profit must pay entertainment tax. But not the IPL, which will have held 10 matches in Mumbai including the Final.

It's an odd situation. The overwhelming majority of Vidharbha's farmers do not gain from the farm loan waiver - because they are too "big." That is, they hold more than two hectares of land. But the IPL waiver goes to some of India's richest millionaires and billionaires. They aren't too big. And the only reason Vidharbha's farmers have holdings that exceed the loan waiver's two-hectare cut-off is because they are dry-land farmers. Their fields are poor, un-irrigated and less productive.

The IPL waiver reports come within three weeks of the Comptroller and Auditor General's report on "Farmer's Packages" in the State. A performance audit the government of Maharashtra chose to present to the Assembly on April 27, the last day of the session. A day on which, as MLAs say, "there isn't enough time to count the pages, let alone read the many documents they push at that time." Clearly, they were not eager on a discussion of the contents.

The very first page of the CAG report tells us why. Despite the State government's Rs.1075-crore "package" for farmers "the suicides, however, continued unabated and the number increased to 1414 during 2006-07." The Prime Minister's visit in mid-2006 and the Centre's Rs.3750-crore package that followed in July also came the year the suicides increased. As we know from earlier reports, including some in this newspaper, they actually went up in the second half of that year.

Erratic spending

Here is the CAG on the official response: "No evaluation of the implementation of the packages, in terms of reduction in agrarian distress, was made." We also learn that tens of crores of rupees aimed at reducing farmer distress were, in fact, never spent. The value of the packages themselves was exaggerated by over Rs.200 crore. Crores were released under some heads with no reference at all to the actual requirement of funds.

Other funds, such as those meant "for increase in production," were released late. Cheques given to some 'beneficiaries' "were dishonoured for want of cash in the bank." The "self-help groups were paid subsidies in excess of admissible norms." Parts of other funds were not released at all. In head after head, funds were underutilised. This is how lackadaisical the governments were with packages worth a total of Rs.4,825 crore. So what's Rs.10 crore for the IPL?

But the CAG report, which is devastating from start to finish, does not stop at that. It has a clear premonition of things to come. On the "interest waiver" that followed the Prime Minister's visit, it says: "While reimbursing banks for interest waived on loans, sanction of fresh loans was not ensured."

That is exactly where most farmers now find themselves again after the "massive farm loan waiver." Fresh credit is very hard to come by. Distress has not come down. There have been over 360 farm suicides since January this year, about 200 of them post-loan waiver. In the official count, there were 153 in January and February. And of these, only 18 were considered "eligible suicides." That is, only 18 families had any hope of being compensated for losing a breadwinner. The figures for March and April will turn out to be much worse.

There was a hope, after Rahul Gandhi's plea in Parliament, that the two-hectare cut-off point would not be imposed on dry-land farmers in places such as Vidharbha and Anantapur. But it was. The very places whose misery had sparked the idea of a loan waiver now stand mostly excluded from it.

There is a very important point the CAG report brings out that tends to get glossed over most of the time. That the farmer's world is not driven by agriculture alone. Farmers, whose incomes have been plummeting, have been hammered by education and health costs. The commercialisation of those sectors has hurt them, as it has countless millions of other Indians, very badly. That is on top of the stick they've taken in agriculture.

"Distress amongst farmers on account of cost of education was not measured." The "allocation of funds (Rs.3 crore at Rs.50 lakh per district) for health was meagre ..." It mentions the government's own survey showing that the health issues were huge and required much larger action.

One of the most important things the CAG points to is the State government evading its own findings. In mid-2006, the government organised what was the biggest door-to-door survey of farm households ever done. It covered over 17 lakh households, that is, all farming households in the six "crisis districts" of Washim, Akola, Yavatmal, Buldhana, Wardha and Amravati. Over a fourth of those families - that is, more than two million people - were found to be in "maximum distress." And more than three quarters of the rest were in what the report called medium distress.

In other words, close to seven million people were in distress in just six districts. That was the finding of the most massive study, powered by over 10,000 field workers. And a report of the State government itself, at that.

Yet, says the CAG, "the selection of beneficiaries ? had no relation to the departmental survey conducted for the assessment of distress. As a result, the prioritisation of relief and rehabilitation works considering the distress level of farmers could not be ensured." Why did the State government ignore its own study? Because the results of that huge survey are, to this day, explosive. Also, de-linking the distress survey from the packages meant you could reward your friends who might never have been in crisis.

Catalogue of failure

One line recurs in different ways through the CAG report: "Authenticity of reported expenditure was doubtful in the absence of proper classification of accounts." Throughout, the report is a catalogue of failure too serious to be written off as "error." On inputs, which farmers were desperate to get at reasonable prices, there was poor assistance. Farmers were hit hard by a poor supply of seed when they needed it most. Seed requirements for several crops, suggests the CAG, were simply not taken seriously. "The estimates were not realistic as these were made based on the amount allocated to this component and not based on actual requirement."

The CAG report captures at the top end, the state of things on the ground. Being a performance audit, it confines itself to that task. It is not a field report. However, the portrait it presents of the government's performance is a sharply accurate one. A picture that sits perfectly with the chaos at the receiving end below.

In the end, this is more than just a report. It is a snapshot, or a series of snapshots, of how governments, particularly the one in Maharashtra, are responding to agrarian distress. The complete apathy, the corruption, the cover-ups, even the contempt for the farmer, that come across. This is a State where all the attention is on the brilliantly-lit, power-guzzling matches of the IPL. It is also a State where many regions face power cuts ranging from 3-16 hours each day. And countless children have completed their examinations without being able to study much. The huge power cuts meant darkness in their homes when they returned from school.

The report is about the packages in this State. But if we extend our thinking a bit, it should lead us to reflect on things much larger. On the crisis in the countryside, on those being marginalised or just driven away. On regions beyond this one and on our attitude towards those who grow our food but can less and less afford to eat it themselves. ⊕

P Sainath
20 May 2008

the hindu

Between rock and a hard place

19 April 2008 - The bailout of Bear Stearns by the U S Federal Reserve was worth $30 billion. That is roughly twice the 'loan waiver' given to millions of Indian farmers. The latter move has been scorched by the ideologues of the free market and neo-liberalism as 'fiscal insanity' or 'irreversible damage.' The media - even those mildly critical - have been far more muted in their criticism of the 'rescue' of Bear Stearns. That is, one of the biggest global investment banks and securities trading and brokerage firms anywhere on the planet.

Think of it: a tiny Wall Street cabal which gave itself bonuses worth billions of dollars just weeks before the crash gets a bailout of Rs.1,19,520 crores. That's almost double the Rs.60,000 crores given to tens of millions of farmers in dire straits in this country. A country where one farmer kills himself every 30 minutes in despair. The problems of farmers do not even begin to end with that waiver.

On the other hand, a bunch of thugs in tuxedos who did pretty much whatever they wanted, laying a minefield across the world, have got the waiver of a lifetime (or many lifetimes). The lifejacket for the bank does not require the return of their bonuses. So much so that Jim Rogers, CEO of Rogers Holdings and a staunch free marketer, calls it "Socialism for the rich." In his words "the Federal Reserve is using taxpayer money to buy a bunch of Bear Stearns traders' Maseratis." He points out that hundreds of billions of dollars are being spent to bail out Wall Street as a whole. The theologians of the global market are between a rock and a hard place. Hypocrisy has rammed into reality.

Three of the basic principles the believers of corporate-led globalisation swear by have been so eloquently summed by Professor James Galbraith Jr. of the University of Texas at Austin. One: all successes are global. Two: all failures are national. Three: the market is beyond reproach.

For over a decade, we were assured that everything good that ever happened was because we had embraced corporate-led globalisation. All the negative effects visible were the result of our own national inertia and corruption. And of course, the market would heal all wounds. The notion of state meddling in economic matters was blasphemy. Now the nations feeding us this rot - which we recite by rote - are nationalising banks, bailing out brigands and pouring in funds to stop factories from closing down.

Now having to blame 'global factors' for the price rise at home must seem a bit galling. Failures at home? Er, well, you see, let's not go there now. This is election year. So we see Minister after Minister, the latest being Kapil Sibal, tell us that the price rise and food shortages in India are the "result of global factors." Nothing to do with us. No less amusing to see the World Bank and the IMF warn of starvation and riots. It's hard to think of anyone who has contributed more to those phenomena than they have. And now Finance Minister P. Chidambaram calls for an urgent "global consensus on the price spiral." Without this, social unrest would conflagrate into a "global contagion."

To be fair to the Union Agriculture Minister, he alone has not laid the blame at the door of faceless global forces. Sharad Pawar locates the problem closer home. In his view, south Indians are eating too many chapathis, leading to shortages of wheat. (DNA page 1, April 2, 2008). An entertaining view but there's a problem with it. Even while dietary changes do affect consumption patterns, these occur over decades. There is little evidence of an outburst of wheat-centric gluttony in the southern states these past six months. (Unless, of course, with great cunning, the southies are hoarding it up for future chapathi orgies.)

Someone is hoarding it up, though, and it is not the general public, south or north. The presence of very large traders including MNCs buying directly from farmers has been on awhile. A process aided by our strangling of the old Agricultural Produce Marketing Committees' Act. We've set the soil for contract farming and corporate agriculture. Meanwhile, the lip service paid to higher Minimum Support Prices (MSP) has proved worse than a sham. In practice, producers are being pushed towards private trade. Fewer procurement centres, delays in purchasing and, still worse, delays in payments are the norm. Then, when procurement is poor, we announce that the farmers are doing so well in the market, they don't want to sell to the state.

The present mess was arrived at with much celebration of the farmer's right to sell as and when he liked, to whom he wished. In effect, millions of farmers, deep in trouble, have been selling their produce at distress rates for several seasons now. The bargaining power of individual farmers on their own is zilch.

Total procurement has been down. When market prices for the farmers' produce have been higher than the MSP, this might be expected. But it has happened even when the MSP has been raised. There have also been cases of traders picking up produce from indebted farmers and then claiming the higher MSP on it themselves. On the whole, though, smaller traders are in trouble. The big boys are here. And so even with enough grain within the country just now, the less well-off cannot access it at affordable rates.

The Centre's pressing the States to act against hoarding is itself an admission of the problem. But there is yet to be a single instance of action against really big hoarders and speculators. These include giant companies operating through a variety of pointmen. The raids now focussed on small traders will yield little.

Meanwhile, the entry and growing entrenchment of giants in retail ensures things will get worse. (Remember this was supposed to provide us with cheap prices? Then look at the gap between wholesale and retail prices.) We have also nurtured the commodities futures market despite its clear links to speculation and price rise. It's odd how every other small trader will brief you at length on this - but you won't see much of that story in the media. In fact, with markets tanking around the world, more speculators have seized on foodgrain as a good bet. Which it is.

Through the reforms period, we have pushed millions of small farmers to shift from foodcrop to cash crops. The acreage under foodcrop has reduced across these years. And we also exported millions of tonnes of grain - as in 2002 and 2003. What's more, we exported at prices cheaper than those we charged poor people in this country for the same grain. The idea was that we had a "huge surplus" of grain and could well afford to export. The truth was that the massive pileup of unsold stock arose from a surplus of hunger rather than of grain. The purchasing power of the poor had collapsed. But the fake "surplus" story came in handy. It allowed the export of grain - heavily subsidised by us - to be consumed by European cattle.

The present mess is no surprise. For years, economists such as Utsa Patnaik have warned strongly that we would arrive at where we are now. As she repeatedly pointed out, the effects of all our actions could be seen in the plummeting net per capita availability of foodgrain. From 510 grams per Indian in 1991 to 422 grams by 2005. With the top fifth of Indians doing better than ever before, this meant that those below were eating far less than they did just a few years ago.

The plunging food intake of the poorer sections has come along with the steady scrapping of the public distribution system. On the one hand, the PDS has been sharply whittled down. On the other, millions who need BPL cards are denied them. In Mumbai, just 0.28 per cent of ration cardholders have BPL cards. Now, even those who do have cards find no supplies to buy. And of course, we've spared no efforts to link our agriculture to the volatility of global prices in a world where a handful of corporations control those prices. Their clout within India has grown rapidly. Their control extends further each day from the field and farm gate to the price and sale of the final product.

Meanwhile, each budget takes further the process of "growth" driven by the consumption of the rich. Tax breaks at the top, cuts in state spending, all these too have a major role in making life unbearable below. Yet, even as the edifice crumbles, a few true believers hold out for the Second Coming. "Price rise reflects scarcity," says one editorial, "and at no time is free trade more effective as a welfare enhancer than when it combats scarcity by quickly getting supplies where the demand is." But governments are "denying free trade this role." Well, get set for the global contagion.