Sunita Narain: Pricing food in poor India

DOWN T0 EARTH

The government is being severely criticised for the wheat it is now planning to import. Rightly so. The bottomline is that the government, to maintain its food stock, will pay higher prices to farmers abroad than it is prepared to pay its own.

This can be dismissed as yet another case of governmental incompetence. But there are lessons that we cannot afford to miss. First, it explodes some half-truths and myths that surround Indian farmers and the farming policy. Second, it exposes the problem of selling a commodity in a country which is too poor to pay for it. Finally, it suggests what we must not do, and conversely what we must do to deal with food and farmers.

It has been widely said in policy circles that we give up our aversion to import food. Contrast this to the present situation "" Indian wheat is cheaper than foreigngrown wheat. And add in this sum, the fact that this is not the 'real' price of the growing foreign wheat.

Between 1995 and 2005, the US spent over $20 billion in subsidies to its wheat farmers. Its 2002 farm bill guarantees wheat farmers a specific price. The EU too provides huge subsidies. In other words, Indian farmers are more than competitive, even in this highly skewed and unfair market.

The next oft-quoted half-truth is that the government provides massive agricultural and food subsidies. It is true that the mother of all 'fertiliser subsidies' has reached grotesque levels. But this 'subsidy' does not go to the farmer, but to the industry. Everybody, except the fertiliser industry, agrees that this is not working. The benefits are not reaching farmers and Indian soils are more depleted than before. But nobody bells the cat.

And it is a travesty to say that farmers get the food subsidy. What the government does is set a 'minimum' price for the procurement of some foodgrains. The problem is it wants to keep the price low, so that it is affordable in its public distribution system. It also wants to contain inflation by keeping food prices low. The minimum support works to depress the prices and not to pay farmers their full rates. As it turns out, this is a food subsidy for consumers""for you and me, not for farmers.

The problem also is that the agricultural market itself is a sham. On the one hand, it is a market full of poor (or relatively poor) people, who cannot afford high food prices. Or is about people who increasingly find that their budget for food needs to be thinned so that they can spend more on processed food or consumer items (as the market demands) or on essentials like water or health or education (as the market fails).

On the other hand, international agricultural commodity markets ensure that prices are kept low. This is not because their people are poor, but because they are rich and can spend on keeping their farmers viable. In all this, the Indian farmer, who ironically is also the poor consumer, is the worst impacted because he or she does not get the price of their labour or capital, and does not get the food as the delivery system is riddled with holes.

In this situation, the environment is the ultimate loser: where prices are depressed, natural resources are discounted. The subsidies given by the rich countries are a reminder that it will cost to grow food""not just because it requires investment to increase productivity, but because it requires continuous investment to sustain that productivity. It requires money to invest in micro-irrigation management, in soil fertility inputs, in land management and managing safety standards. We should be amazed that our farmers manage to invest, within their limited resources, with no external assistance. We should not dismiss this 'art' of agriculture. We must learn from it, improve it and build on it.

But then, we would not go looking to the US for advice on agriculture (as the Planning Commission is doing). We would understand that the US is a country which has to pay its farmers to grow wheat and even then its wheat is full of weeds.