The Maharashtra government decides to continue the monopoly procurement scheme for cotton and announces compensation for the families of cotton farmers who committed suicide.
THE distressed cotton farmers of Maharashtra heaved a collective sigh of relief when Chief Minister Vilasrao Deshmukh announced during the winter session of the State Assembly in Nagpur, the continuation of the Monopoly Cotton Procurement Scheme (MCPS). He also made a conditional offer of monetary compensation to the families of farmers who had committed suicide. Political survival rather than the increasing number of suicides seems to have forced the Democratic Front (DF) government's hand.
Deshmukh was initially dismissive of the suicides. "There are always suicides, so what," he said at a press conference. But, for the farmers in the cotton-growing Vidarbha region, after a second successive crop failure it was a question of life and death. For many there was only one way out of mounting debt: suicide. During the past one year more than 90 suicides were reported from 12 districts in the region, according to a list compiled by the Maharashtra Cotton Growers Farmers Sanghatana.
All seemed lost for the 30 lakh farmers when the government announced in October 2002 that it was scrapping the MCPS. The scheme provided price security in the form of a `bonus in advance', an amount over and above the Central government's minimum support price (MSP). Unfortunately, for political and economic reasons, over the last decade the MCPS accumulated losses upwards of Rs.3,000 crores. It pays an annual interest of Rs.300 crores on this (Frontline, January 3).
The Opposition took advantage of the farmers' plight. It erupted in anger on the opening day of the Assembly session in Nagpur on December 12 and forced Deshmukh to do a rethink on the decision. The State government announced in the Assembly that besides continuing the MCPS, it would pay each suicide victim's family Rs.1 lakh if the reason for the suicide was "wrongful government policies or the forcible recovery of loans". The Maharashtra State Cooperative Cotton Growers Marketing Federation Limited (MSCC-GMFL), the appointed procurement agency, was given the go-ahead to buy raw cotton at Rs.2,300 a quintal. This included the Rs.425 `bonus in advance'. The Central government's MSP is currently Rs.1,875. While the MSP will be paid in full within 15 days of procurement, the bonus will be paid in two instalments during the year.
"This compensation is an eye-wash. If you attach riders to the compensation, nobody will get anything," said Ashok Dhawale, a member of the All India Kisan Sabha. "How will they prove that the reason for the death is mounting debt?" he asked. "The State government says revenue commissioners will inquire into the suicides and decide who is to be awarded compensation. As it is, several District Collectors in Vidarbha say the debts are the result of medical or social problems."
The Kisan Sabha, along with several other farmers organisations, held a rally in Nagpur on the first day of the Assembly session. "The D.F. government was trying to save itself politically, but I think the government got nervous when it realised the level of unrest among the farmers," said Dhawale.
"The suicides are a tragic lapse on the part of the government, particularly with regard to the MCPS," said N.D. Patil, leader of the Peasants and Workers Party. Patil, who is largely credited with creating the MCPS, blames the government for the crisis. The State government maintains that the MCPS ran up huge losses mainly on account of the crash in international cotton prices. "While this is not entirely untrue, they seem to have forgotten that when the MCPS came into existence in 1972, there was a provision made for losses," Patil told Frontline. "They should have stuck to the original plan and not squandered away the money."
Under the MCPS, 25 per cent of the total profits should be kept in a price fluctuation fund. Almost from its inception up to about 1993-94, the MCPS made profits. "In 1995, when international cotton prices fell, the price fluctuation fund should have been able to bail out the government," says Patil. "Therefore, the government has no right to use financial difficulties as an excuse. It has to make good the loss." He suggested that the government make budgetary allocations for the scheme and not be dependent on funding agencies.
The MCPS was started with the singular aim of protecting farmers from private traders. But it got immersed in vote-bank politics. While the Congress(I) and the Nationalist Congress Party have flip-flopped over scrapping the scheme, the Bharatiya Janata Party has consistently demanded its discontinuation. The Shiv Sena, depending on the political mood, has called for the MCPS's abolition. Yet, when the crisis in cotton became apparent, the BJP-Shiv Sena combine seized the opportunity to gain political mileage. It launched a campaign in Vidarbha against scrapping the scheme and followed it up vigorously in the Assembly, giving the shaky D.F. government anxious moments.
"While they made a big noise about the MCPS and the suicides, they did not touch issues such as subsidies and import duties," said Vijay Jawandhia, leader of the Kisan Sanghatana in Wardha district. With the BJP ruling at the Centre, it is unlikely that the State unit would go against the party's agricultural policies. Jawandhia blames the BJP's myopic view on farming and pricing of produce for the present crisis. Besides, the party has always been a proponent of free trade.
Farmers' organisations like the Kisan Sabha and the Kisan Sanghatana demand that the import duty on cotton be increased to 60 per cent. Although under the World Trade Organisation agreement India is allowed to levy import duties on cotton ranging from 100 to 300 per cent, it chooses not to protect its farmers, Jawandhia alleged.
While announcing the decision to reinstate the MCPS, the Chief Minister said that in spite of the World Bank insisting that it discontinue the scheme, the government was going ahead and purchasing raw cotton. In a recent study on Maharashtra's financial condition, the World Bank has pointed out that the MCPS is a drain on the exchequer. "We had signed a memorandum of understanding with the Centre giving our commitment to reforms," said Agriculture Minister Rohidas Patil. He told Frontline that future funding might be jeopardised because of the decision to continue the MCPS. "We will have to convince them on the merits of the scheme." Not only the World Bank but also the Reserve Bank of India (RBI) and National Bank for Agriculture and Rural Development (NABARD) need convincing. They are the ones who release the funds to the Maharashtra State Cooperative Bank, which in turn funds the MCPS. This year the RBI delayed sanctioning the full loan amount of Rs.1,700 crores required by the cotton federation to procure the harvest. It finally sanctioned Rs.900 crores. Farmers were given the last instalment of the bonus for the 2001 crop only in November 2002.
The MCPS is going to cost a cash-strapped State government an additional Rs.450 crores this year. Maharashtra, a once-prosperous State, is now struggling with a debt burden of Rs.70,528 crores. Unsustainable borrowings have led to the State's downfall, says the World Bank. Spending has multiplied more than 23 times since 1994-95. Over-expenditure, the economic recession and the messy Dabhol issue, among others, are bleeding the State. According to the World Bank, the State's debt has tripled in the last seven years.
Meanwhile, the cotton federation has begun to procure raw cotton from Vidarbha at the `bonus in advance' price. For the present, there may be some relief for the farmers, But an end to their troubles will depend largely on the State government's attitude towards them and the Centre amending its liberalised policies.