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To India’s Finance Minister


Dear Shri Chidambaram ji,


You have announced a “bail-out” package for Indian farmers, thousands of whom have taken their lives in distress and hopelessness, by asking the banks in the commercial, cooperative and public sector to increase their rural lending by 30% at Rs. 1,04,500 crore. Asking banks to lend more is not the same as increasing public investment in agricultural research and extension, rural infrastructure and irrigation as promised in the Common Minimum Programme of the United Progressive Alliance.


Asking banks to give more loans to solve the problem of suicides caused by indebtedness is like asking a neighbour to turn on their taps to solve the problem of a leaking water storage tank in your backyard. Firstly, you can’t force your neighbour to turn on his tap. Secondly, even he did, it won’t fix the leak in your tank. Processes that create structural and systemic indebtedness are leaks in the farmers income and livelihood security. Unless these leaks are fixed, more flow of credit will not bail out the farmer and suicides and dispossession will continue. Farmers income is like water in the tank. The new economic policies based on the paradigm of trade liberalization and deregulation of commerce has created a double leak and drain in farmers income.


Why are farmers committing suicide?


Farmers suicides are a result of indebtedness, and debt is a result of rising costs of agricultural inputs and falling prices of agricultural produce. Both the rising costs of production and decline in farm prices are intended outcomes of trade liberalization and economic reform policies driven by agribusiness corporations. Farmers suicides are therefore an inevitable outcome of an agricultural policy which favours corporate welfare and ignores farmers welfare.


The farmers who have committed suicide were driven to their tragic end by a threefold crisis caused by trade liberalization and globalisation policies, deregulation of inputs, imports and prices and the inevitable consequence in deepening debt.


I. Deregulation of Inputs


Deregulation of the input sector, the entry of seed MNC’s and the creation of seed monopolies has increased the costs of inputs and the risks of crop failure. In 2002, farmers of Bihar lost Rs. 400 crore due to the failure of Monsanto’s hybrid corn. Farmers of Andhra Pradesh and other States ran into losses of Rs. 100 crore due to the failure of Bt. Cotton. Seed supplied at Rs. 300 / kg by public sector farms costs Rs. 1600 / kg when bought from Monsanto. Inspite of the high costs, Monsanto’s Bt. Cotton performed miserably in the first commercial planting in 2002. The deregulation of the input sector has allowed seed MNC’s into Indian agriculture for the first time. In India’s history, our seed security and sovereignty was based on the time tested and adapted farmers varieties which accounted for 80% of the seed supply and the varieties bred and tested in the public sector seed farms for our diverse agro climatic zones, appropriate to the socio-economic, conditions of the peasants, MNC’s greedy for quick profits have been selling untested, ill adapted, high cost seeds which need high cost chemicals and intensive irrigation. This is a sure recipe for a debt trap.


Your “package” for farmers offers no relief to the farmers distress linked to seed insecurity and more frequent occurrences of crop failure due to introduction of untested seeds in a deregulated market. 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. This is why farm suicides are occurring in irrigated and rainforest areas, they are taking place in Punjab and U.P, not just in Andhra Pradesh and Karnataka. They are reported from tea gardens and sugarcane belts, from potato agricultural export zones and the cotton belt areas growing “high value” commercial crops. Farm suicides cannot be blamed on nature and the rain.  They cannot be stopped by asking states to assist banks for formulating new “bankable investment project” like plantation and horticulture. Bhagwan Singh a prosperous farmer from Agra took his life when potato prices crashed to Rs. 40-100/quintal while costs of production were Rs. 250-300/quintal. The government fail to regulate the procurement price announced at Rs. 195/quintal.


Even in plantation and horticultural corps farmers suicides have started. Every crop, every ecosystem is affected. The crisis calls for radical reform not business as usual.


Your proposal to support organic farming can help because organic agriculture reduces the drain of farmers incomes for toxic agrochemicals. But your announcement of Rs. 12,700 crore subsidy for urea and DAP undermines the incentive to farmers to go organic. Even organic producers need just and fare prices to survive, and even they need public investment in research and extension and input support for organic fertilizers and ecological pest control. Bank loans cannot be a substitute for public policy and public supportive role to public policy.


You offer no budget commitments to rebuild seed security, the first link in the farmers livelihood and income security. More credit will not fix this leak of farmers scare and hard earned incomes for unreliable, and costly seeds. It will just increase the debt burden, and farmers distress. This crisis will deepen when corporations extract even more resources from resource poor farmers for royalty patents as a result of the implementation of the TRIPS agreement of WTO. Given that corporations like Ricetec patented the Indian Basmati, and Monsanto has patented Indian wheat, without TRIPs reform the future drain of farmers incomes will make agriculture totally unviable for Indian peasantry.


II. Deregulation of Imports


The second leak in the farmers income is the collapse in farm prices due to deregulated of trade, especially after the removal of quantitative restrictions. Removal of quantitative restrictions has led to depression of domestic prices of farm products due to the artificial lowering of international prices because of $ 400 billion of subsidies in rich countries, which is leading to dumping and depression of domestic prices through global price signals reaching domestic markets unattenuated through QR’s. The level of dumping has increased since 1995 when the W.T.O cam into force, even though the proclaimed aim of W.T.O is to “reduce distortions in trade.” While the full cost of U.S wheat in 2001 was $ 6.24/bushel, its export price is $3.5/bushel. In the case of soya bean, the cost was $6.98/bushel, the export price was $4.93/bushel. For maize, the full coast was $3.47/bushel, export price was $2.28/bushel. In the case of cotton, the cost was $0.9313/bushel. and the export price was $0.3968/bushel, a dumping of 57%. The cost of production of rice was $18.66/bushel and it was sold internationally at $14.55/bushel. From 1995 to 2001 dumping jumped from 23% to 44% in the case of wheat, 9% to 29% in the case of soya beans, 11% to 33% in the case of maize, from 17% to 57% in the case of cotton. Removing of QR’s implies making the Indian peasant vulnerable to the distortion of international prices. Annual looses of farmers cross Rs. 1.2 trillion / year. The non-procurement by government at MSP levels 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, the annual losses Indian farmers are bearing are :


Crops Per Year
Oilseeds Rs.    25,000 crore
Potato Rs.      5,000 crore
Sugarcane Rs.      1,500 crore
Wheat Rs.    21,000 crore
Rice Rs.    27,000 crore
Milk Rs.    34,000 crore
Tea Rs.      2,100 crore
Spice ad Plantation Crops in Kerala Rs.         100 crore
Total Rs. 1,15,800 crore


This loss in incomes  is more than what you are asking banks to lend. If farmers have no incomes, how will they pay back their loans?


It is in light of this devastating impact that in a petition to the Prime Minister on August 26, 2003, given before Cancun meeting the Indian People’s Campaign against W.T.O. demanded:


“An unprecedented agrarian distress is being experienced in the country. Anti-peasant anti-people policies of Government have engendered the crisis. Exposure of Indian agriculture to the notoriously volatile and highly distorted global agriculture market in aggravating the crisis. The WTO perspective on agriculture and the so-called international discipline that is evolving there on agriculture, are totally detrimental to peasants, the agricultural workers, the rural and urban poor. In the circumstances, we insist that the Government recognize the crisis situation in agriculture, put an end to their anti-people policies, and, in particular, firmly reclaim and assert out unqualified right to impose quantitative restrictions on imports to promote the development of our agriculture and to safeguard the livelihood of seventy percent of our population.”


The CMP has made a commitment that “the UPA 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 cots of production, it is necessary to bring back QR’s to allow Indian farmers to survive and stop farm suicides.


III. Deepening Debt


Rising costs of production and falling prices of farm products, implies growing rural indebtedness. The withdrawal of 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. Agricultural credit was only 9.8% of total outstanding of scheduled commercial banks. While 43% borrowers are from rural centers, they account for only 13.4% of outstanding loans. This is the ultimate cause, which has driven farmers to take the drastic step of taking their lives. Farmers suicides are in fact the direct outcome of policies of globalisation and economic reform designed to expand the markets and profits of seed and agribusiness MNC’s. Your instructions to banks to lend more to farmers are one element of the commitment in the Common Minimum Programme. Even this needs public investment without corresponding action on other commitments it will do nothing in terms of enhancing the farmers livelihood and income security in the context of rising costs of inputs and falling farm prices.


We expect a farmer centered budget from a government brought to power by the distress and discontent our farmers are experiencing as a direct result of trade liberalization and deregulation policies. We want to see reform, but farmer centered reform to prevent farmers suicides, protect farmers livelihood security and food sovereignty.


For this the economic policies of the new government will have to address the following :


Seed Sovereignty


1. Rebuilding seed security in public hands by reviving seed farms and starting community seed banks.


2. Regulate seed MNCs and hold them liable for crop failure, and false promises, and genetic contamination. Regulate seed prices – put ceiling on seed costs.


3. Exclude food staples from IPR regime – both patent laws and the plant variety legislation.


4. Prevent biopiracy and patenting of traditional varieties eg. Basmati by Ricetec, Wheat by Monsanto in both national and international law.


5. Shift subsidies to organic farming / low external input agriculture to reduce costs of production for farmers and conserve natural resources.


Livelihood And Income Security


1. Bring back QR’s to defend farmers livelihoods in the context of dumping and artificially low international prices.


2. Ensure that both private and public procurement is governed and regulated by a Minimum Price, which guarantees peasants a just price fair wages and sustenance. Put a floor on procurement price.


Freedom From Debt


1. Increase rural credit through cooperative and public sector banks.


2. Regulate interest rates charged by private moneylenders, and make high interest rates illegal. Put ceiling on interest rates charged by private lenders.


3. When crops fail because of unreliable, untested seeds, the private company selling seed should pay compensation to farmers.


4. Write off debt of farmers based on high seed costs, unreliable seed supply and high interest rates.


These steps are necessary to stop the “leakage” of our rural economy. Many of these actions need public investment to rebuild seed sovereignty and food sovereignty. 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. To address the crisis fully, some actions are needed by other ministries. But you hold the key to public investment in agriculture. We hope your budget will reflect the mandate rural India gave you and the commitment the CMP of the UPA has made to the Indian farmers. Your budget will be a litmus test for the new governments commitment to take concrete steps to stop farmers suicides. If you fail the farmers, they will fail your government like they failed the last one. Do not betray the mandate given to you by India’s farmers.


Yours sincerely,


Dr. Vandana Shiva
Managing Trustee

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