The race is on to gather votes from farmers. Political parties are offering goodies like easy loans. This will not do. The main problem of farmers is that they are not getting remunerative prices, thanks to the skewed import-export policy of the government. The policy is to allow the import of agricultural goods, whenever domestic prices are high. This leads to the lowering of domestic prices and farmers are deprived of the profits they could make in the absence of imports. On the other hand, exports are prohibited when production is high and domestic prices are low. Again, losses due to low prices are imposed on the farmers.
The consumer gets agitated about the increase in prices of vegetables such as onions and tomatoes. He does not realise that this is a small problem. He is getting larger benefits from the import of pulses and edible oils. The cost of production of these items in our country is high and their price is being controlled by cheap imports. We have to decide whether we want cheap tomatoes or pulses. If we become part of the global market, then we will have to bear with the increased price of tomatoes, but we will get cheap pulses. If we want cheap tomatoes, then we must be ready to pay more for pulses.
The increase in price of vegetables is of a short-term nature. There is a year-to-year variation in production of vegetable crops, which leads to sudden spurts in prices sometimes. The benefits reaped by us from the cheap imports of pulses and edible oils, on the other hand, are of a long term nature. The cost of production of these items is high in India, hence we stand to reap benefits year after year from their imports.
The government has implemented a policy of providing agricultural subsidies on fertiliser, electricity and water; and restricting exports in order to contain domestic prices. I think this is counterproductive. The provision of subsidies brings down prices temporarily—only as long as the subsidies are in place. Government revenues are used up in provision of subsidies and public investment in roads, testing labs, cold storage and seed improvisation suffers. The cost of production remains high in the absence of these investments. As a result, the consumer is forced to pay more for the produce year after year. I had the opportunity to visit a farm in the United States a few years ago. They had mapped the soil profile of every field, in plots of 10 feet by 10 feet. This data was fed into the computer. The tractor would then dispense fertilisers depending upon the profile of each small plot. In this way every plant got the required dose of fertiliser, yields were high and cost of production was less. Such technological improvements are not taking place in India because government revenues are being consumed in the provision of subsidies.
There is a similar impact of export restrictions. Exports take place when prices in India are low and those in the international markets are high. Restricting exports means that we are preventing our farmers profiting from higher international prices. Competitors in other countries get the higher prices, however. Our competitors are able to make investments in controlled spread of fertilisers, tissue culture, and other technological advances. Our farmers have to continue with old practices because they do not make the profits required to make these investments. The present policy of provision of subsidies and imposition of export restrictions is counterproductive because it provides short-term relief, while imposing long-term pain on the domestic consumer.
The thinking behind economic reforms was that subsidies would be reduced; an open global market would be adopted and public investment in infrastructure and research would be enhanced. That was the correct direction. However, we have lost our way. Public investment has been nearly stagnant since the beginning of reforms, while subsidies have multiplied manifold. We have not invested in quality control, in particular. Our produce does not conform to the quality standards set by the importing countries. Cold storages are few and far between. Roads and transport infrastructure are inadequate to ship refrigerated items such as frozen peas. We have not been able to establish a chain of testing labs at district headquarters to assist our farmers meet the global quality parameters. As a result, our farmers have not been able to get the increased income from opening of the global markets.
Two paths are open to us. One is to technologically upgrade our agriculture so that we can reduce our cost of production, bring down domestic prices and also compete in the global market. The other is to provide subsidies and impose export restrictions. The former is like providing the student with adequate light and a study table to the student so that he can study and do well. The latter is like providing gifts to the teacher and requesting him to give higher marks to the weak student. This does not deliver in the long run, even if successful immediately.
This is not to say that all is dark on the agrarian front. Our agricultural exports have nearly doubled since 2001. However, there is no cause for celebration. Our agricultural imports have increased nearly fourfold in the same period. This means that our farmers have faced a double whammy. They have not been able to make profits when international prices are high because the government has banned exports. At the same time, they are faced with lower prices due to cheap imports.
We were told that the WTO would open up the global markets for our farmers. The opposite has happened. The WTO has led to opening of our markets to cheap imports, but our farmers are unable to sell in foreign markets. Partly, this is because of the domestic subsidies and non-tariff barriers put in place by the importing countries. But the bigger problem is that our produce is not up to the global standards in the absence of investment in research, transportation and testing infrastructure. Therefore, in the main, government policies are responsible for this sad result; not the WTO. We would have exported our way to success had we invested in technological upgradation and allowed our farmers to export when the going was good.
Not all is lost. We must stop restricting imports and exports of agricultural produce, except for reasons of food security so that the farmer can adjust to global prices. Two, we must scrap all agricultural subsidies and invest the money saved to improve agricultural infrastructure. Three, we must put pressure on the industrial countries to dismantle their domestic agricultural subsidies, as was promised during the signing of the WTO agreement in 1995. This should be the farmer’s agenda in the coming elections.