Reliance Fresh stores like this one will be everywhere !! In the outskirts of Aligarh , some 185 km from New Delhi, lies the nondescript, dusty township of Hathras. From its narrow crowded roads, chaotic traffic with cars, two-wheelers and cattle jostling for space and rows of small shops spilling into the road selling everything from groceries to vegetables to cycles and pressure cookers, you wouldn’t really think that there was anything unique about it. But visit its farms, which produce potatoes, chillies and wheat, and amidst which stands the imposing green and yellow building of Choupal Saagar (an ITC rural retail initiative) some six km off the main town centre, and you’ll get the surprise of your life. Spread over 4.28 acres, the local Choupal Saagar wholesale-cum-retail store has already become the one-stop shop that acts not only as the lightning rod for the aspirations of the region’s semi-urban and rural populace, but also as a catalyst that’s taken farming some way already along the gilt-paved road of high-technology. Inside, the Choupal Saagar’s shelves are crowded with groceries (not just from the ITC stable, but other brands as well), footwear (old-style Bata, still a favourite, competes with newer labels for attention), toys, apparel (John Players), and even video and audio systems, computers and mobile phones (Nokia phones seems like the obvious choice). The sense of flux you get is a little disorienting.
A few thousand kilometers away, the Chairman of Reliance Industries, Mukesh Ambani, is busy inaugurating another of the red and green Reliance Fresh stores in Hyderabad (there are 11 in all in the city)—another milestone in what is a massive agri-initiative. The 3,000 square feet store sells a range of vegetables (many exotic from the average Hyderabadi’s point of view) — leek, celery, Brussels, sprouts, zucchini, pak choy, Chinese cabbage and imported fruit like kiwi, avocado and grapefruit— at astonishingly affordable rates. The retail chain’s motto Grahak Devo Bhava (customer is God) could well have been emblazoned on the wall behind the counter. You realise an agri-retail revolution is well and truly under way.
This comes on top of a second Green Revolution that has brought reforms to the very heart of the economic hinterland—the fields where farmers have hitherto tilled their lands untouched by the onward march of modernity. Riding this wind of change are the bigwigs of India Inc, from the Reliance Group to the Bhartis to the Mahindras to the Godrejs to MNCs like PepsiCo. All of them major corporate players "We are creating a virtuous cycle of prosperity by bringing farmers, small shopkeepers and consumers in a win-win situation" Mukesh Ambani,
CMD, RIL
with enormous resources at their disposal and who have the know-how to remake the face of Indian agriculture. More importantly, with their big-ticket investments, these entrepreneur-farmers are all set to change the fortunes of an industry that has consistently lagged the GDP growth for decades but still employs 67% of the country’s population. These corporates are looking at all aspects of this value chain, from research and development to distribution of seeds, fertilisers and pesticides to helping farmers improve irrigation and avail the latest technologies to providing market information and credit facilities to contract farming to processing to setting up cold chains and warehouses to transporting to exporting and finally retailing the produce. And they are throwing in big money in what is being described as the "farm-firm-fork’’ triangle by most experts.
Reliance has plans to launch many more in-house brands to retail its own produce rather than too much of branded products. Right now its private label for grocery is Reliance Select and it will be shortly launching Fresh Plus, a bigger version of Reliance Fresh, which is to cater to food and grocery, pharmacy and apparel. Mukesh Ambani outlines his vision for the sector, saying: "Conceptually, Reliance is creating a virtuous cycle of prosperity by bringing farmers, small shopkeepers and consumers in a win-win situation. With our new initiative, Reliance will forge strong and enduring bonds with millions of farmers and transform the relationship with consumers to a new level.’’ Reliance’s "agri-intervention model’’ envisages establishing links with farms across several acres in Punjab, West Bengal, Maharashtra and elsewhere with rural centres (district centres) providing goods for farmers and handling their produce. Its new supply chain—which will include state-of-the art cold storage and refrigerated vans for transportation—promises to be a new pipeline that would bring the produce from the areas of cultivation to Reliance’s retail outlets. By 2010, the company plans to have its footprints in 784 towns and cities with 40 more stores slated for Hyderabad alone.
Other corporates are not lagging behind. Bharti’s Fieldfresh too has ambitious plans to set up retail outlets in the country, although they remain extremely tightlipped about it. However, the future could see FieldFresh stores selling veggies and fruits at prices that are comparable with those on the streets—the local sabzi-wala. It could also have cold chains and is likely to lease refrigerated trucks for transporting fruits and vegetables. But as of now, the focus is clearly on exports. Says Rakesh Bharti Mittal, Vice-Chairman, Bharti Enterprises and Director, FieldFresh: "Currently, we are looking at exporting 10% of our total produce, which will largely happen from the Amritsar airport. The logistics for this operation are being developed. In two-to-three years, we should be exporting as much as around 50% of our produce."
ITC’s International Business Division has plans to develop Choupal Fresh, a fresh "Organised retailing is growing very rapidly. We see a tremendous future in the specialty food retail business" Adi Godrej, Chairman, Godrej Group of Companies
food fruit and vegetable initiative for sophisticated metro dwellers. Says S Sivakumar, Chief Executive Officer, ITC’s International Business Division, which is managing the Choupal initiative: "Choupal Fresh is a new and unique format. These stores operate as wholesale stores between 5 am and 7 am and is open for the retail customers for the rest of the day.’’ ITC’s vast experience in backward integration with farmers and managing supply chain dynamics, courtesy its e-Choupal rural initiative, should help make it a grand success. Says Y C Deveshwar, Chairman, ITC, of this potent weapon in his arsenal: "The e-Choupal infrastructure is potentially an efficient delivery channel for rural development and an instrument for converting villages into vibrant economic units." Having already set up stores in Hyderabad, Pune and Chandigarh, the company is now looking at the other metros like Kolkata. And the model will be something akin to Choupal Saagar story, with all the cold chains and associated farmer clusters.
Godrej Agrovet, a part of the Godrej group, was the first off the block to sell fresh fruits and vegetables in the urban market through its Nature’s Basket retail outlets. These outlets, in turn, started sourcing some of their products from Aadhar, Godrej’s rural outlet. Not only does Aadhar act as a retail outlet for the farmers—selling animal feeds, agricultural appliances, pesticides, fertilisers and consumer durables—but it also is a sourcing base of fruits and vegetables from nearby villages.
The group has ambitious agri-business plans. Says Adi Godrej, Chairman, Godrej Group of Companies: "Organised retailing is growing very rapidly. Consumers find it very comfortable and convenient mode of shopping. We see a tremendous future in speciality food retail."
The fruits and vegetables sold in Aadhar are procured mainly through tie-ups with farmers, who come to Godrej Agrovet’s distribution centre, do all the sorting and grading of these fruits and vegetables that are then transported to the Aadhar outlets.
There is, however, no written contract with the farmers, but it works on the basis of mutual interest and on the demand and supply system. Explains C K Vaidya, Managing Director, Godrej Agrovet: "We have a system of generating estimates of demand, which is then converted into orders for the farmers and brought to the distribution centre. The company, which has 30 Aadhars all over Maharashtra, Gujarat, Punjab and Haryana, plans to ramp it up to 1,000 in the next five to seven years.’’
Facelift for the farm
The change is a welcome one. "We are de-risking the farmer’s life in every possible way,’’ points out a visibly enthusiastic Rohtash Mal, Chief Executive Officer, FieldFresh Products. By tying up with hundreds of farmers, (signing a lease) the company is not only assuring them a fixed return, but also promising to buy up all their produce at pre-determined prices. Better still, the company always pays a little more than the prevailing mandi price for the produce. This ensures that the farmers never get a raw deal. "And since it is our business to get the produce to the market, even the logistics problems that used to dog the farmer are taken care of,’’ adds Mal.
"Currently, we are looking at exporting 10% of our total produce. In 2-3 years, we should be exporting 50% of the produce" Rakesh Mittal,
Dir., FieldFresh
All these improvements are more than what the government itself has been able to offer the sector. By moving in and taking over the supply chain in agriculture, corporate India is also breaking the stranglehold of middlemen and loan sharks who not only exploited the farmers, but also routinely marked up prices by as much as 60% without actually adding any value. The modern distribution channels, warehousing and cold storage facilities will also ensure that the produce remains fresh and reaches retail outlets faster. Over the years, they could eliminate the wastages that have for long plagued the procurement system. In the bargain, they open up export possibilities in crops currently beyond the country’s horizon.
Some companies have already begun to seize this opportunity. For instance, at FieldFresh’s 300-acre research centre at Ladhowal (near Ludhiana), womenfolk from nearby villages of Birmi and Phillaur, are growing okra, brinjal, baby corn and chillies, which are being sold not just in other parts of India (in itself an achievement), but in the difficult-to-crack European markets. Not just that, FieldFresh has tie-ups in place with agri companies overseas to help it grow the best-quality European carrot (Sumick of Australia) and baby corn and snap peas (Bomford of UK). "By 2008, we expect to be exporting as much as around 40% of our total produce,’’ says Mal.
FieldFresh’s Ladhowal initiative has also demonstrated to farmers that crop diversification helps retain the fertility of top soil, arrest water depletion (Punjab is losing two feet of groundwater every year) and generate higher incomes for farmers. "Farmers can increase their annual income by a minimum of 30% if they shift from rice and paddy to horticulture. Besides, they have the advantage of raising three crops a year," says Mittal. The company has already tied up with more than 100 big farmers, each of whom work with several smaller farmers to make contract farming happen. Adds Abhiram Seth, Executive Director, Exports & External Affairs, PepsiCo India: "Potatoes alone can double the return for the farmer, if he decides to switch to them from growing wheat and rice. Chillies too are a more paying alternative." Seth should know, since it was his company that initiated the concept of corporate farming in India way back in 1989. PepsiCo is currently growing citrus near Jalandhar, the seeds for which operation come from Tropicana (a Pepsi company) in the United States. Says Seth: "This operation will not only sustain our orange juice business within India but will act as a supply source to our markets in the neighbouring countries, and even in Europe.’’ By 2011, the food and beverages multinational’s India arm will also be able to process its home-grown oranges. The company’s exports from India totaled $40 million last year.
Corporate farming, most experts acknowledge, could be the answer to India "Our group has a
successful partnership template for Indian corporates to bring value to the farmer via agro-engineering" Anand Mahindra, VC & MD, M&M
agricultural crisis. After all, it involves involvement at every point in the value chain of corporates more capable of running risks and sustaining losses than small farmers—from the supply of high-quality seeds to fertilisers to the transfer of technology with the promise of buying the produce at a pre-determined price. One good instance of how corporate involvement helps raise farmers’ incomes comes from Bipin Solanki, Deputy Managing Director of Mahyco Monsanto Biotech. He estimates that the farmers who had planted BT cotton in 2006 are likely to earn an additional Rs 7,026.5 crore on around 8.6 million acres planted with the seeds. He points out that this would be a 36% rise over the Rs 2,100 crore income the same acreage generated in 2005.
Others such as the Global Green Company, an LM Thapar Group company that is engaged in contract farming, have joined the export bandwagon and are raking in big bucks from international markets. Global Green, which vaulted to the position of the third-biggest pickle maker in the world after acquiring Belgium-based Intergarden Group (it was ranked number 10 before) in August this year, has contracts in place with 12,000 farmers in the southern states of Tamil Nadu, Karnataka and Andhra Pradesh. The company has been exporting gherkins, silver onions and jalapenos to 23 countries through 15 global retail chains and is looking to expand its activities further. Says Vineet Chhabra, Managing Director, Global Green: "We are looking at investing in drip irrigation in a bigger way as the product portfolio has grown from being limited to only gherkins to include jalapenos, beans and tomatoes, which enables crop rotation.’’
Also in the game is Mahindra Agri-Business (formerly Mahindra Shubhlabh Services), which is targeting the international market through its contract model. The company plans to get farmers who have been using overstrained potato seeds for several generations to switch to high-yield ones and to extend this to cover 300 acres (it has 22 acres under the crop currently). "This will help produce 6,000 tonnes of potatoes that we plan to export to Pakistan, Bangladesh, Afghanistan and Middle East. We have a price advantage of $100-150 per tonne over potatoes that come from European nations," says Vikram Puri, the company’s Chief Executive Officer.
Roads to change
Of all the changes that have been part of this new green revolution, perhaps the one that has made the biggest difference to the lives of the smaller farmers has been the induction of information technology. It was cigarette major ITC’s e-Choupal model that broke new ground in the early 2000s, showcasing the power of IT to the farmers. By delivering real-time information about market prices and customised knowledge and resolving the crop-related problems of farmers through its IT kiosks and information database, it has managed to build tremendous equity among farmers across the country. In addition, the new storage and handling system offered as part of the initiative preserves the identity of different varieties right through "the farm gate to the dinner plate".
More recently, the company entered the processed food space. "We have a tie-up with the Kitchens of India and Aashirvaad (both ITC operations) to supply for their ready-to-eat lines of business and Choupal Fresh cash and carry stores for fresh fruits and vegetables,’’ says ITC’s Sivakumar. The company has lined up mega plans for the future. By 2010, the company hopes establish 20,000 e-Choupals in 100,000 villages involving 10 million farmers. The cost: Rs 5,000 crore in the next five years.
COGS IN THE WHEEL: Food transport logistics is in a state of flux
Although fertiliser major Tata Chemicals has also taken the contract farming route—it has 45,000 acres under contract in Punjab, Haryana, Uttar Pradesh, West Bengal and Jharkhand—it follows a different model. Under the terms of the contract, the company acts as a technology provider and facilitator of cultivation, while allowing buyers to buy the crop directly to the farmers. For the services rendered, both the farmers and the buyers have to pay a fee to Tata Chemicals. Since the fee is small, the parties involved have taken to the service in a big way. Says Kapil Mehan, Chief Executive Officer (Fertiliser Business), Tata Chemicals: "The retention rate among farmers, which used to be 20-25% a couple of years ago, has risen to 50-60% with the new model’s introduction.’’
A tectonic shift
The factors that have triggered this onrush of investment are many and varied. Foremost among them being the realisation by India Inc that agriculture is a big business in the developed world, involving huge value creation, before the products reached shop-shelves. In sheer potential, India could become the food basket to the world—a supplier of high-value food products that fetch revenues running into billions. After all, the country has all the cultivable land (52% of the total land is under cultivation compared to the global average of 11%) required, the climatic conditions appropriate, and then, of course, there is the labour cost advantage.
To unlock the full potential of this business, the country would require huge dollops of investment in a number of areas. One such choke point is the storage system. While the country produces around 134.5 million tonnes of fruits and vegetables—it is the second-biggest in the world—cold storage facilities exist only for 10% of the total produce. This results in enormous loss through wastages. Fixing this chink in the country’s supply chain alone could alter the sector’s dynamics radically.
Further, the globalisation of trade along with the rising need of most food retailers in the country for high-speed transportation, means the emergence of a huge market for companies that specialise in supply logistics. That of companies sourcing millions of dollars worth of fruits and vegetables all the year round. This has sparked off a boom in food transport logistics business: a storage centre for perishables at Jawaharlal Nehru Port Trust in Kandla; announcement of plans by National Agricultural Cooperative Marketing Federation of India (NAFED) to set up packing houses and warehouses in central and western India; Mitsubishi move to put together a fleet of cold chain trucks, and Reliance’s moves to set up its own supply chain backbone are all a pointer to that.
There are major (regulatory) hurdles to surmount yet before really big-time investments from India Inc can happen in the agri-sector. Even in Punjab, which leads the field among the states, corporates cannot lease land for more than 30 months, which poses uncertainties for corporate investors. As Mittal of FieldFresh explains: "Drip irrigation costs Rs 50,000 per acre and if one wants to use it on 1,000 acres, it will cost no less than Rs 5 crore. We feel that to make the best of drip irrigation, which saves water substantially, collaborative farmers should get some subsidy as well." The fact that agriculture is a state subject further complicates the field. "We don’t deal with one regulatory system, but 28 of them. So this creates problems in having a clear-cut strategy," says Mahindra Agri-Business’ Puri. Then there is the fact that the debate on opening up the agriculture sector is far from closed. Is it the answer to India’s ongoing agrarian crisis? Critics point to the fact that agriculture growth in the last nine years (1997 to 2006) have been just around 2%. Says CPI(M) Politburo Member and Member of Parliament, Nilotpal Basu, "If companies start dictating not only what the farmer should produce and how much, but control the supply chain, farmers will have little freedom of choice. It could result in what are effectively procurement monopolies."
These clouds on the horizon have failed to dampen the sunny spirits of India Inc’s new farmers. They are in the game for the long run—and the stakes are too high for them to let small things get in the way. They are intent on remaking the face of Indian agriculture and have the werewithals to accomplish their objectives. In doing so, they will generate enormous spinoffs for a large number associated with the agricultural sector, even if the numbers run into a few lakh rather than a few crore initially. Alongside employment generation, the initiatives of Bharti, Reliance and others like them would result ultimately in economies of scale and crop diversification—gains that have eluded successive governments over the past six decades.
Additional
Thursday, October 15, 2009
Infosys and agri supply chain ???
Indian IT major Infosys Technologies has developed an information and communication technology-enabled application to help small farmers integrate their business with large retailers and improve efficiencies in agro supply chain. Infosys has developed the application in partnership with the US-based non-profit development organisation ACDI/ VOCA that would help in cutting down farm-to-market losses by 30% to 40%, the company said here on Tuesday.
The application will minimise inventory requirements, reduce wastes and allow retailers and farmers to be better integrated. “Maintaining on-time, programmed delivery of fresh produce from a large and scattered production base is a complex and critical operation. This solution gives the organised retail sector access to a reliable smallholder production base. It thereby decreases farm-to-market losses, currently estimated at 30% to 40% on certain products,” head of India business unit Binod H R said.
The application tackles supply chain management from profiling of farmer clusters to crop planning, scheduling, tracking and forecasting and allows farmers to access technical information including database searches for data and images, access to region-specific weather updates and market information - daily sales volumes and average prices.
Currently, there are 1,700 smallholder farmers integrated into organised supply chains through this application and over the next five to eight years, it is expected to cross a million farmers.
The application is accessible on handheld devices and enables the wholesaler or retailer or other intermediaries to optimise cost by allowing large procurement, efficient transportation and enabling intelligent crop production management, the company added
FE: Feb 27, 2008
The application will minimise inventory requirements, reduce wastes and allow retailers and farmers to be better integrated. “Maintaining on-time, programmed delivery of fresh produce from a large and scattered production base is a complex and critical operation. This solution gives the organised retail sector access to a reliable smallholder production base. It thereby decreases farm-to-market losses, currently estimated at 30% to 40% on certain products,” head of India business unit Binod H R said.
The application tackles supply chain management from profiling of farmer clusters to crop planning, scheduling, tracking and forecasting and allows farmers to access technical information including database searches for data and images, access to region-specific weather updates and market information - daily sales volumes and average prices.
Currently, there are 1,700 smallholder farmers integrated into organised supply chains through this application and over the next five to eight years, it is expected to cross a million farmers.
The application is accessible on handheld devices and enables the wholesaler or retailer or other intermediaries to optimise cost by allowing large procurement, efficient transportation and enabling intelligent crop production management, the company added
FE: Feb 27, 2008
Thursday, October 8, 2009
Tuesday, October 6, 2009
some...issues to ponder
P. Sainath and Farmers' Suicides in India
P. Sainath is one of India's most exalted journalists today. Last year he was awarded a Ramon Magsaysay Award for "his passionate commitment as a journalist to restore the rural poor to India's consciousness, moving the nation to action". I read Sainath's writing occasionally, and last week I attended a talk by him at the University of California at Berkeley. Here are some of my thoughts on Sainath and on farmers' suicides in India - an issue with which Sainath in intimately connected.
Why Sainath is Important
Today's English educated urban upper middle class India remains almost totally ignorant of rural India. An English language journalist seriously interested in rural India is the rarest of rare creatures. It is therefore remarkable that Sainath has decided to devote his career to reporting about rural India. What is even more remarkable is that Sainath, with his passion and eloquence, has been able to successfully carve out a space for himself in the India's English language media.
For this reason alone, Sainath deserves much acclaim.
Farmers' Suicides: Why Sainath's Analysis is Deeply Flawed
Sainath is a remarkable journalist. However, he does not limit himself to reporting. Though he does not claim any special expertise as a researcher or an economist, he offers a very stark analysis of the problems of rural India. While I agree with some parts of his analysis (the existence of an agrarian crisis, the negative impact of industrialized countries' farm subsidies, etc.), I feel that much of Sainath's analysis is, sadly, deeply flawed.
Sainath's Analysis
The issue most closely associated with Sainath is farmers' suicides. According to him, the story goes as follows.
1. In recent years there has been a huge surge in farmers' suicides in rural India.
2. Farmers' suicides are driven by indebtedness.
3. Rising agricultural input costs are responsible for much of the indebtedness.
4. Corporations, freer markets, and globalization are responsible for the rise in input costs, and hence form the root cause of farmers' suicides.
Thanks largely to Sainath, the issue of farmers' suicides in India has become something of a cause celebre in the global anti-globalization movement today.
The Reality of Farmers' Suicides in India
Sainath's uses data from India's National Crime Records Bureau (NCRB) to support his narrative. According to the NCRB data, the total number of suicides in India has risen from 95,829 in 1997 to 118,112 in 2006, an annual growth rate of 2.4%. Farmers' suicides have increased from 13,622 in 1997 to 17,060 in 2006, an annual growth rate of 2.5%. India's population, meanwhile, has been growning at 1.93% annually (between 1991 and 2001).
Total suicides and farmers' suicides in India (reference)
Farmers' suicides as a percentage of total suicides (reference)
It is evident from the data that the number of suicides in India - whether farmer or non-farmer - has grown only slightly over the last decade, especially when adjusted for a growing population. Farmers' suicides as a percentage of total suicides in India has remained fairly constant at around 15%.
Clearly, it is a false notion that farmers' suicide rates in India have shot up dramatically in the last few years.
Farmers' Suicides in Yavatmal District, Maharashtra
While the notion of a huge surge in farmers' suicides in India is largely false, maybe there are pockets where farmers' suicides represent a serious problem.
Let us take a closer look at Yavatmal District in the Vidarbha region of Maharashtra, considered by Sainath as the epicenter of the farmers' suicide crisis. An investigation into farmers' suicides in Yavatmal District was carried out by Meeta and Ravilochan in conjunction with the Yashwantrao Chavan Academy of Development Administration (YASHADA). The findings were published in 2006 in a book called Farmers Suicide: Facts and Possible Policy Interventions. The following are some of the points in this book.
· Yavatmal District has the highest suicide rate in Maharashtra.
· For the years studied, the total number of suicides in Yavatmal District was 640, 819, 832, 787 and 786, in 2000, 2001, 2002, 2003, and 2004, respectively. In each of these years, suicides of farmers and agricultural workers represented 23, 24, 23, 22, and 30 percent, respectively, of all suicides.
· The researchers conducted case studies of individual farmers' suicides in Yavatmal District. A total of 148 case studies are presented in the book. To give a flavor of these case studies, two are very briefly described below.
1. Case 46. A 45 year old farmer who committed suicide by consuming poison in 2004. He had 3 acres of land. There was a crop loan of Rs. 3,954 taken in 2001 from the Primary Agricultural Credit Society, which remained unpaid. In 2003-04 he spent Rs. 10,000 in treating his wife who was a psychiatric patient at a private clinic.
2. Case 120. A 50 year old farmer who committed suicide by consuming poison in 2004. He had 19 acres of land. There was an outstanding loan of Rs. 33,000 with the Bank of Maharashtra, and another outstanding loan of Rs. 8,000 from the Primary Agricultural Credit Society. In 2004 he spent Rs. 60,000 on the marriage of his second daughter. He used to drink alcohol and also gamble. He was having an affair with his bhabhi (sister-in-law). His affair had been discovered shortly before his suicide.
According to the authors of this study,
We found that while indebtedness was rampant, there was little clarity: was it disabling, to what extent, and who was responsible. On one side, indebtedness as high as 75% has been reported since the early 20th century but it was not considered disabling. On the other side, in the early 21st century, only 14% of the victims had indebtedness that resulted in alienation of land and/or animals. Moreover, we discovered that a loan from a rapacious relative rather than a bank or moneylender was often the cause of economic distress of the victim.
What comes out clearly from this study is that each suicide is a unique and complex phenomenon - the reasons and motivations are varied and multifaceted. To find a single cause, one can certainly try to look for common threads running through the suicides, but one must keep in mind that this is bound to be a substantial oversimplification of a highly complex and multidimensional phenomenon.
Implausible and Plausible Causes of Farmers' Suicides
Sainath attributes farmers' suicides to rising indebtedness. How plausible is his reasoning?
It is true that most farmers who have committed suicides have outstanding loans against them. But can that be isolated as the single most important cause for suicide? The fact is that most farmers who do not commit suicide also have outstanding loans against them. To me, factors like poor farm productivity, medical problems, social pressure to spend lavishly on a daughter's wedding, etc., seem to be at least as important as debt - if not more so - in driving people to suicide.
Sainath's further attribution of blame to economic liberalization, globalization, "the neoliberal agenda", etc., are even more implausible. As can be seen clearly from the NCRB data, the crisis of farmers' suicides is not a nationwide phenomenon, but is visible only in certain pockets. Surely it make sense to look for local factors, not just national or global ones. Nation-wide issues like growing cash crops (instead of food crops) are equally applicable to farmers in, say, Gujarat. So how come there are so few suicides among cotton farmers in Gujarat?
A much more plausible cause for cotton farmers' distress in Maharashtra is provided by Sharad Joshi, leader of the Shetkari Sanghatana, an important farmers' organization in Maharashtra. According to Joshi, the primary villain is the Maharashtra State Cotton Monopoly Procurement Scheme - a mechanism that makes the state government the sole buyer of cotton in Maharashtra, and despite generous promises, usually pays farmers less than prevailing market prices. Cotton farmers in Gujarat, who, by contrast, enjoy better access to markets, a state government that invests in infrastructure, and access to new technologies, are witnessing unprecedented prosperity.
Suicides as a Development Indicator
Every suicide is an incredibly sad event. However, a basic question that must be asked is: how valid is suicide rate as an indicator of human development?
Comparison of suicide rates
According to Jean Dreze and Amartya Sen, both eminent developmental economists,
The relevance of the suicide rate as a basic development indicator is far from clear. Indeed, many countries with high suicide rates (e.g., the Scandinavian countries) are doing extremely well in terms of overall social opportunities, and it would be quite odd to take their high suicide rates as a severe indictment of their development record. Suicide rates do correlate with specific social problems such as high rates of unemployment or divorce ... and it is quite possible that problems of this kind contribute to the high rate of suicide in Kerala. But these problems, such as they are, do not detract from Kerala's achievements in other, more fundamental fields such as health and education, just as - say - Finland's high suicide rate does not detract from its success in guaranteeing extensive social opportunities to its citizens.
Farmers' Suicide Crisis in Perspective
Sainath depicts farmers' suicides as one of the worst humanitarian crises facing India. So here are some statistics to keep things in proper perspective.
1. In 2006, 17,060 farmers committed suicide in India.
2. Every year in India some 400,000 to 500,000 children under the age of five die from diarrhea. Diarrhea and other waterborne infectious diseases can be easily prevented simply by improving the infrastructure for drinking water and sanitation.
3. In India some 35,000 people die every year from rabies, i.e., every year twice as many Indians die from rabies alone as from farmers' suicides. Rabies can be very easily prevented, simply by removing stray dogs from public areas.
4. Some 4,000 people die every year in accidents in the Mumbai Suburban Railway system alone (Mumbai city's mass transit system). This is just one example of the enormous numbers of accidents and fatalities that plague India's transportation system - a result of woefully inadequate infrastructure and a virtual absence of even basic safety features.
Such statistics (and there are many more) point to the need for more, not less, economic growth and development in India.
India's Agrarian Crisis
While I disagree with Sainath on many things, I do agree with him that India is facing an agrarian crisis.
One need not look for clues to India's agrarian crisis in suicide statistics - there are many other more obvious pointers, such as anemic growth in agricultural output. The plot below of yield-per-hectare of foodgrains in India illustrates this problem.
Foodgrains yield in India (reference)
This figure points to the issue that is at the heart of India's agrarian crisis: after a period of rapid growth during the Green Revolution, agricultural productivity in India has tapered off. As a result, farm incomes are under pressure. This is in sharp contrast to the industrial and service sectors of the economy, which are booming.
Economic Liberalization and Agriculture
In India the government started a process of economic liberalization in 1991, which aimed to move India away from a Soviet-style statist economic model to a much more free market oriented economic model. Anti-globalizers like Sainath blame economic liberalization for the agrarian crisis in India. I disagree completely. I think it is exactly the opposite - that it is not economic liberalization but rather the lack of it in the agricultural sector that is to blame. If increased economic freedom has made Indian industry boom, why should Indian agriculture be denied the same opportunity?
Below are two examples of how economic liberalization can help Indian farmers.
Consider farmland. Farming in India is not a particularly lucrative profession. It is thus no surprise that, according to a major survey, as many as 40% of Indian farmers would like to give up farming if they had a choice. I think it is important to give these farmers the liberty to monetize the most important asset that they possess - their land - and use the capital to embark on alternative ventures if they so desire. Unfortunately, India's stringent and stifling land regulations do not allow this to happen. According to Barun Mitra,
Indian industry can raise capital from the global market on the basis of a prospectus, which promises performance in the future. But Indian farmers can't raise adequate capital on the basis of the land asset which they already possess.... It is critical that the value of the land of farmers, often their only asset, is maximized, and it is made simple to capitalize. The problem facing the poor is not their poverty, but inability to capitalize their assets... Restrictions such as zoning, land ceiling and land use laws, along with unclear titles and poor land records, grossly undervalue land prices. ... The result is a greatly distorted land market. At one end, there are landowners, millions of small and marginal farmers, who can't even know the market value of their land. At the other end, there are the land mafia and speculators.
Consider farm technology. Like any other sector, to increase productivity, agriculture too needs new and innovative technologies. The good news is that recent advances in fields like biotechnology, genetic engineering, etc., offer immense promise. The bad news is that, partly in response to demands from anti-globalization groups, strict restrictions and prohibitions have been imposed on many of these new technologies.
Gail Omvedt, an American-born Indian scholar who married into a farming family in India has this to say,
Behind the appeal of the campaign is a distorted image of farmers ... which depicts them romantically but demeaningly as backward, tradition-loving, innocent and helpless creatures carrying on with their occupation for love of the land and the soil, and as practitioners of a "way of life" rather than a toilsome income-earning occupation. These imagined farmers have to be protected from market forces and the attacks of multinationals, from the seductions of commercialization and the enslavement of technologies...
Farmers may love the land they work on ... But they are people who are trying to scratch out a living, who want a better life for their children and for whom farming is a source of income and not a very good income. They are familiar with hybrid seeds ... They buy them, try them out, and refuse to use them if they do not perform... Farmers are economic actors and capable of making choices.
The way to overcome widespread poverty is to increase opportunities for people to fully utilize their own talents and abilities. I believe that if given the opportunity, most human beings will be able to overcome poverty through their own enterprise and hard work. For this, economic liberalization and better market access are vitally necessary.
This is not to suggest that the market, by itself, is the answer to all problems. Markets need to be well regulated, with regulations designed to increase choice rather than stifle initiative. And social safety nets must accompany free markets, so that people can survive occasional downturns and bad luck, and live through the vicissitudes of "creative destruction".
Story Versus Analysis
Even though I disagree with much of Sainath's analysis, I can see where he is coming from. He is a journalist - a very good journalist - who is on the lookout for a story that a section of his audience can connect with. His urban English newspaper reading audience, immersed in a post-industrial economy, probably has very little knowledge or interest in the nuances of Maharashtra's cotton procurement system, or in serious but mundane problems like stray dogs and rabies. Maybe Sainath's anti-globalization angle is necessary to attract a certain ideologically inclined section of the metropolitan audience.
Sadly this means that reasoned analysis is sacrificed, and good reporting is lost, in the blind rhetoric of anti-globalization.
.
I hope I will not be caught for plagiarism….as its not my article. However, this is a cut & paste …as I felt it needs greater viewership, though NOT sure whether this C&P exercise would enable wider viewership ??
However, there are a few if and buts about the article !! Though a good one, the conclusions by the author is a bit off-tangent and impractical too. Monetising land or selling his only possession and choosing alternate livelihoods especially for the poor and illiterate farmers is too implausible to say the least !!
P. Sainath is one of India's most exalted journalists today. Last year he was awarded a Ramon Magsaysay Award for "his passionate commitment as a journalist to restore the rural poor to India's consciousness, moving the nation to action". I read Sainath's writing occasionally, and last week I attended a talk by him at the University of California at Berkeley. Here are some of my thoughts on Sainath and on farmers' suicides in India - an issue with which Sainath in intimately connected.
Why Sainath is Important
Today's English educated urban upper middle class India remains almost totally ignorant of rural India. An English language journalist seriously interested in rural India is the rarest of rare creatures. It is therefore remarkable that Sainath has decided to devote his career to reporting about rural India. What is even more remarkable is that Sainath, with his passion and eloquence, has been able to successfully carve out a space for himself in the India's English language media.
For this reason alone, Sainath deserves much acclaim.
Farmers' Suicides: Why Sainath's Analysis is Deeply Flawed
Sainath is a remarkable journalist. However, he does not limit himself to reporting. Though he does not claim any special expertise as a researcher or an economist, he offers a very stark analysis of the problems of rural India. While I agree with some parts of his analysis (the existence of an agrarian crisis, the negative impact of industrialized countries' farm subsidies, etc.), I feel that much of Sainath's analysis is, sadly, deeply flawed.
Sainath's Analysis
The issue most closely associated with Sainath is farmers' suicides. According to him, the story goes as follows.
1. In recent years there has been a huge surge in farmers' suicides in rural India.
2. Farmers' suicides are driven by indebtedness.
3. Rising agricultural input costs are responsible for much of the indebtedness.
4. Corporations, freer markets, and globalization are responsible for the rise in input costs, and hence form the root cause of farmers' suicides.
Thanks largely to Sainath, the issue of farmers' suicides in India has become something of a cause celebre in the global anti-globalization movement today.
The Reality of Farmers' Suicides in India
Sainath's uses data from India's National Crime Records Bureau (NCRB) to support his narrative. According to the NCRB data, the total number of suicides in India has risen from 95,829 in 1997 to 118,112 in 2006, an annual growth rate of 2.4%. Farmers' suicides have increased from 13,622 in 1997 to 17,060 in 2006, an annual growth rate of 2.5%. India's population, meanwhile, has been growning at 1.93% annually (between 1991 and 2001).
Total suicides and farmers' suicides in India (reference)
Farmers' suicides as a percentage of total suicides (reference)
It is evident from the data that the number of suicides in India - whether farmer or non-farmer - has grown only slightly over the last decade, especially when adjusted for a growing population. Farmers' suicides as a percentage of total suicides in India has remained fairly constant at around 15%.
Clearly, it is a false notion that farmers' suicide rates in India have shot up dramatically in the last few years.
Farmers' Suicides in Yavatmal District, Maharashtra
While the notion of a huge surge in farmers' suicides in India is largely false, maybe there are pockets where farmers' suicides represent a serious problem.
Let us take a closer look at Yavatmal District in the Vidarbha region of Maharashtra, considered by Sainath as the epicenter of the farmers' suicide crisis. An investigation into farmers' suicides in Yavatmal District was carried out by Meeta and Ravilochan in conjunction with the Yashwantrao Chavan Academy of Development Administration (YASHADA). The findings were published in 2006 in a book called Farmers Suicide: Facts and Possible Policy Interventions. The following are some of the points in this book.
· Yavatmal District has the highest suicide rate in Maharashtra.
· For the years studied, the total number of suicides in Yavatmal District was 640, 819, 832, 787 and 786, in 2000, 2001, 2002, 2003, and 2004, respectively. In each of these years, suicides of farmers and agricultural workers represented 23, 24, 23, 22, and 30 percent, respectively, of all suicides.
· The researchers conducted case studies of individual farmers' suicides in Yavatmal District. A total of 148 case studies are presented in the book. To give a flavor of these case studies, two are very briefly described below.
1. Case 46. A 45 year old farmer who committed suicide by consuming poison in 2004. He had 3 acres of land. There was a crop loan of Rs. 3,954 taken in 2001 from the Primary Agricultural Credit Society, which remained unpaid. In 2003-04 he spent Rs. 10,000 in treating his wife who was a psychiatric patient at a private clinic.
2. Case 120. A 50 year old farmer who committed suicide by consuming poison in 2004. He had 19 acres of land. There was an outstanding loan of Rs. 33,000 with the Bank of Maharashtra, and another outstanding loan of Rs. 8,000 from the Primary Agricultural Credit Society. In 2004 he spent Rs. 60,000 on the marriage of his second daughter. He used to drink alcohol and also gamble. He was having an affair with his bhabhi (sister-in-law). His affair had been discovered shortly before his suicide.
According to the authors of this study,
We found that while indebtedness was rampant, there was little clarity: was it disabling, to what extent, and who was responsible. On one side, indebtedness as high as 75% has been reported since the early 20th century but it was not considered disabling. On the other side, in the early 21st century, only 14% of the victims had indebtedness that resulted in alienation of land and/or animals. Moreover, we discovered that a loan from a rapacious relative rather than a bank or moneylender was often the cause of economic distress of the victim.
What comes out clearly from this study is that each suicide is a unique and complex phenomenon - the reasons and motivations are varied and multifaceted. To find a single cause, one can certainly try to look for common threads running through the suicides, but one must keep in mind that this is bound to be a substantial oversimplification of a highly complex and multidimensional phenomenon.
Implausible and Plausible Causes of Farmers' Suicides
Sainath attributes farmers' suicides to rising indebtedness. How plausible is his reasoning?
It is true that most farmers who have committed suicides have outstanding loans against them. But can that be isolated as the single most important cause for suicide? The fact is that most farmers who do not commit suicide also have outstanding loans against them. To me, factors like poor farm productivity, medical problems, social pressure to spend lavishly on a daughter's wedding, etc., seem to be at least as important as debt - if not more so - in driving people to suicide.
Sainath's further attribution of blame to economic liberalization, globalization, "the neoliberal agenda", etc., are even more implausible. As can be seen clearly from the NCRB data, the crisis of farmers' suicides is not a nationwide phenomenon, but is visible only in certain pockets. Surely it make sense to look for local factors, not just national or global ones. Nation-wide issues like growing cash crops (instead of food crops) are equally applicable to farmers in, say, Gujarat. So how come there are so few suicides among cotton farmers in Gujarat?
A much more plausible cause for cotton farmers' distress in Maharashtra is provided by Sharad Joshi, leader of the Shetkari Sanghatana, an important farmers' organization in Maharashtra. According to Joshi, the primary villain is the Maharashtra State Cotton Monopoly Procurement Scheme - a mechanism that makes the state government the sole buyer of cotton in Maharashtra, and despite generous promises, usually pays farmers less than prevailing market prices. Cotton farmers in Gujarat, who, by contrast, enjoy better access to markets, a state government that invests in infrastructure, and access to new technologies, are witnessing unprecedented prosperity.
Suicides as a Development Indicator
Every suicide is an incredibly sad event. However, a basic question that must be asked is: how valid is suicide rate as an indicator of human development?
Comparison of suicide rates
According to Jean Dreze and Amartya Sen, both eminent developmental economists,
The relevance of the suicide rate as a basic development indicator is far from clear. Indeed, many countries with high suicide rates (e.g., the Scandinavian countries) are doing extremely well in terms of overall social opportunities, and it would be quite odd to take their high suicide rates as a severe indictment of their development record. Suicide rates do correlate with specific social problems such as high rates of unemployment or divorce ... and it is quite possible that problems of this kind contribute to the high rate of suicide in Kerala. But these problems, such as they are, do not detract from Kerala's achievements in other, more fundamental fields such as health and education, just as - say - Finland's high suicide rate does not detract from its success in guaranteeing extensive social opportunities to its citizens.
Farmers' Suicide Crisis in Perspective
Sainath depicts farmers' suicides as one of the worst humanitarian crises facing India. So here are some statistics to keep things in proper perspective.
1. In 2006, 17,060 farmers committed suicide in India.
2. Every year in India some 400,000 to 500,000 children under the age of five die from diarrhea. Diarrhea and other waterborne infectious diseases can be easily prevented simply by improving the infrastructure for drinking water and sanitation.
3. In India some 35,000 people die every year from rabies, i.e., every year twice as many Indians die from rabies alone as from farmers' suicides. Rabies can be very easily prevented, simply by removing stray dogs from public areas.
4. Some 4,000 people die every year in accidents in the Mumbai Suburban Railway system alone (Mumbai city's mass transit system). This is just one example of the enormous numbers of accidents and fatalities that plague India's transportation system - a result of woefully inadequate infrastructure and a virtual absence of even basic safety features.
Such statistics (and there are many more) point to the need for more, not less, economic growth and development in India.
India's Agrarian Crisis
While I disagree with Sainath on many things, I do agree with him that India is facing an agrarian crisis.
One need not look for clues to India's agrarian crisis in suicide statistics - there are many other more obvious pointers, such as anemic growth in agricultural output. The plot below of yield-per-hectare of foodgrains in India illustrates this problem.
Foodgrains yield in India (reference)
This figure points to the issue that is at the heart of India's agrarian crisis: after a period of rapid growth during the Green Revolution, agricultural productivity in India has tapered off. As a result, farm incomes are under pressure. This is in sharp contrast to the industrial and service sectors of the economy, which are booming.
Economic Liberalization and Agriculture
In India the government started a process of economic liberalization in 1991, which aimed to move India away from a Soviet-style statist economic model to a much more free market oriented economic model. Anti-globalizers like Sainath blame economic liberalization for the agrarian crisis in India. I disagree completely. I think it is exactly the opposite - that it is not economic liberalization but rather the lack of it in the agricultural sector that is to blame. If increased economic freedom has made Indian industry boom, why should Indian agriculture be denied the same opportunity?
Below are two examples of how economic liberalization can help Indian farmers.
Consider farmland. Farming in India is not a particularly lucrative profession. It is thus no surprise that, according to a major survey, as many as 40% of Indian farmers would like to give up farming if they had a choice. I think it is important to give these farmers the liberty to monetize the most important asset that they possess - their land - and use the capital to embark on alternative ventures if they so desire. Unfortunately, India's stringent and stifling land regulations do not allow this to happen. According to Barun Mitra,
Indian industry can raise capital from the global market on the basis of a prospectus, which promises performance in the future. But Indian farmers can't raise adequate capital on the basis of the land asset which they already possess.... It is critical that the value of the land of farmers, often their only asset, is maximized, and it is made simple to capitalize. The problem facing the poor is not their poverty, but inability to capitalize their assets... Restrictions such as zoning, land ceiling and land use laws, along with unclear titles and poor land records, grossly undervalue land prices. ... The result is a greatly distorted land market. At one end, there are landowners, millions of small and marginal farmers, who can't even know the market value of their land. At the other end, there are the land mafia and speculators.
Consider farm technology. Like any other sector, to increase productivity, agriculture too needs new and innovative technologies. The good news is that recent advances in fields like biotechnology, genetic engineering, etc., offer immense promise. The bad news is that, partly in response to demands from anti-globalization groups, strict restrictions and prohibitions have been imposed on many of these new technologies.
Gail Omvedt, an American-born Indian scholar who married into a farming family in India has this to say,
Behind the appeal of the campaign is a distorted image of farmers ... which depicts them romantically but demeaningly as backward, tradition-loving, innocent and helpless creatures carrying on with their occupation for love of the land and the soil, and as practitioners of a "way of life" rather than a toilsome income-earning occupation. These imagined farmers have to be protected from market forces and the attacks of multinationals, from the seductions of commercialization and the enslavement of technologies...
Farmers may love the land they work on ... But they are people who are trying to scratch out a living, who want a better life for their children and for whom farming is a source of income and not a very good income. They are familiar with hybrid seeds ... They buy them, try them out, and refuse to use them if they do not perform... Farmers are economic actors and capable of making choices.
The way to overcome widespread poverty is to increase opportunities for people to fully utilize their own talents and abilities. I believe that if given the opportunity, most human beings will be able to overcome poverty through their own enterprise and hard work. For this, economic liberalization and better market access are vitally necessary.
This is not to suggest that the market, by itself, is the answer to all problems. Markets need to be well regulated, with regulations designed to increase choice rather than stifle initiative. And social safety nets must accompany free markets, so that people can survive occasional downturns and bad luck, and live through the vicissitudes of "creative destruction".
Story Versus Analysis
Even though I disagree with much of Sainath's analysis, I can see where he is coming from. He is a journalist - a very good journalist - who is on the lookout for a story that a section of his audience can connect with. His urban English newspaper reading audience, immersed in a post-industrial economy, probably has very little knowledge or interest in the nuances of Maharashtra's cotton procurement system, or in serious but mundane problems like stray dogs and rabies. Maybe Sainath's anti-globalization angle is necessary to attract a certain ideologically inclined section of the metropolitan audience.
Sadly this means that reasoned analysis is sacrificed, and good reporting is lost, in the blind rhetoric of anti-globalization.
.
I hope I will not be caught for plagiarism….as its not my article. However, this is a cut & paste …as I felt it needs greater viewership, though NOT sure whether this C&P exercise would enable wider viewership ??
However, there are a few if and buts about the article !! Though a good one, the conclusions by the author is a bit off-tangent and impractical too. Monetising land or selling his only possession and choosing alternate livelihoods especially for the poor and illiterate farmers is too implausible to say the least !!
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