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Resource centre on India's rural distress
 
 

Rich bloc wants poor nations to cut farm dole -Subodh Varma
-The Times of India

After a bruising battle between the rich countries and blocs of not-so-rich ones, the Nairobi World Trade Organisation (WTO) meeting of 160 nations failed to reach an agreement on an issue that directly affects 250 million farmers and farm workers in India. One of the bitterest fights, continuing from previous rounds, saw India lead a group of nearly 50 developing countries to stave off attempts by richer countries to kill food and agriculture subsidies and open domestic markets to agricultural commodities. This bizarre fight captures in a nutshell global power equations and its guiding principle that might is right.

Here is what it was all about: under the WTO agreements, every country is allowed some farm subsidies but there are restrictions on anything beyond. That's because subsidies can be used to bring down prices and that will give advantage to the subsidised producers over others. But what the richer countries — US and EU — want is that countries like India, China, Brazil and Indonesia should cut their own subsidies and lower import duties so that agri commodities from richer countries can be easily sent in. But — and this the bizarre part — they don't want to cut their own farm subsidies.

Another preposterous demand, enshrined in the 1995 Agreement on Agriculture, is that farm subsidies in developing countries should be calculated at 1987 prices. So, in 2013-14, the total agricultural output of Rs 17 lakh cr would become Rs 1.8 lakh cr at 1987 prices, and subsidies would have to be limited to 10% of that, that is, just Rs18,000 cr. Actual subsidy in 2013-14 was Rs 2.6 lakh cr.

The US government provided about $12 billion as various kinds of farm subsidies in 2014 according to estimates. Since 1995, the US has paid $256 billion in subsidies to its farmers. The European Union handed out 59 billion euros worth of subsidies to its farmers last year. Yet they stridently condemn India for giving about Rs 25 lakh cr ($40 billion) as food subsidies.

Farmers in the US should not be compared with farmers in India. The average median income of a US farmer was $84,649 per year, almost 70% higher than that of the typical American household. Total inflation-adjusted farm income was estimated at $120 billion in 2014 according to US Department of Agriculture. In contrast, an average farmer's income in India was pegged at Rs 6,426 per month in 2012-13, according to the latest NSSO report. A quarter million farmers have committed suicide in the past 15 years due to economic distress.

How western farm dole-outs affect third world farmers is clearly brought out in a recent study by the Geneva-based International Center for Trade and Sustainable Development (ICTSD). They estimate that the US cotton subsidy under its new 2014 farm Bill would lower global cotton prices by nearly 7%, causing losses to farmers in African countries and India to the tune of a staggering $3.3 billion per year. Indian farmers would stand to lose $800 million per year.


The new US farm Bill has done away with the direct cash payments system and replaced it with an ingenious way of subsidising their farmers: in the name of insurance, the government will guarantee that farmers can sell their crop above a certain price or make a certain amount of revenue. According to the Congressional Budget Office, this kind of "crop insurance" worth about $90 billion will be given to farmers over the next decade.

For India, the support extended to farmers is linked to another important area of concern — food security. Procurement of food grain is done by the government at fixed prices and this grain is then routed into the public distribution system at subsidised prices. Thus, both farmers and the public at large benefit. There are substantive lacunae in this system but in its essence it is a lifeline for India's poor.

The US too has a food assistance programme which costs the US government some $74 billion per year. But at the WTO, US wants India to scrap its food subsidies.