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ThirdWorld Network
(India)
December 1994

"We should be ashamed of resting
or having a square meal so long
as there is one able-bodied man
or woman without work or food"
—Mahatma Gandhi

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IMPACTOF

TRADE LIBERALISATION POLICIES
IN INDIA - ANOVERVIEW

I

«or
\A\e eW\othes
\vas
c

Gospel of SAP
may be sapping
poor nations

L. says ^on^SlaVed by
i veSon vgVoV'us

e Market

A fistful of dollars
20
P
consu^a*1

i
\oant°^ *

Enslaved by the free market
One thing that liberalisation
HERE are no doubt some of longer suffer the Indian made for word, a broken promise.
dom our Independent India was to
you present who feel that eign liquor because the manufac­
1 know that this sounds like be a humane society, one guided does not mean is an end to the tan­
our nation is on the verge of turers and purveyors of the heresy at a time when our national by noble principles. Markets are gle of red tape, the rules and regu­
a brave new era. Other than an in­ world's leading Scotch Whiskeys leadership has taken a sharp right not noble. They do not allocate re­ lations that hamstring any honest
frequent problem like our tempo­ arc now happy to make their prod­ turn away from the policies and sources on the basis of justice, but enterprise. Our bureaucrats and
rary inability to meet your grow­ ucts available right here in Delhi. ; programmes of our first four de- simply on the basis of price. No their masters have made it amply
ing demand for Amul butter, each
And of course, all these things.' . cades of nationhood. We have now civilised society entrusts its desti­ clear that they have no intention of
day seems to bring new wonders cost money so we can also take . entered the world of “competi­ ny to the market; yet today we foregoing the modest revenues en­
of the consumer age to the citizens some satisfaction that our salaries tion, liberalisation and globalisa­ seem to be moving rapidly in that joyed by allowing exceptions to
of our cities.
are moving towards ‘world class’,.' tion”. 1 would like to ask you to direction.
the regualations they create and
Our city roads are no longer No longer do our chief executives' think, for a moment, about what
What does this ’liberlisation’ administer. We can take some
filled with cycles and leisurely have to hide their heads in shame; those words really mean.
mean? It would seem that it means small solace in the fact that our in­
strolling pedestrians. We can now today Rs 40 or 50 lakhs per year is
Yesterday’s socialists are now that the state has abandoned the creasingly pervasive corruption
proudly compare our traffic tie moving us upwards and onwards. fierce advocates of 'the market­ right and responsibility to make seems to be a deterent to the entry
ups and pollution with all but a I am told our bureaucrats do ndf place’. Well tutored by their gurus choices about the form of enter­ of at least some foreign firms.
handful of metropolises around feel that they should be left behind ■. .in Washington, Tokyo and Gene- prise that best suits the needs of
Then there is the exciting
the world. It is but a matter of time and that the nicely rounded figure va, they seem determined to en- our people. It means abandoning word, 'globalisation'. There are
before Mercedes and Toyotas and of Rs 90,000
the right and those who seem to believe that this
BMWs add even more glamour to has been pro­
responsibility
means opening international mar­
FIRST
PERSON
/
V
Kurien
t
our thoroughfares.
posed as an apto enter into kets to us. The fact of the matter,
We no longer must wear the propriate
markets to sup­ however, is that globalisation
dhotis, saris, and chappals of our monthly remuneration for our se­ sure that Adam Smith's ‘invisible port, or constrain prices. It means means hamburgers, pizzas, colas,
villages. Today we can don the fin­ nior secretaries to the govern­ hand' becomes quite visible in In­ an end to any limitations on the en­ fancy clothes, new movies and
est from Benetton, from Gucci, ment. To those who point to such dia. Scarcely a day passes when try of capital goods and services, compact discs to titillate our elite.
from ST Laurent or LaCoste just evidence of our ‘progress’, I say one eminence or another fails to irrespecitve of whether these are And, even more sadly, it could
like our counterparts in New York, ‘shame’.
proclaim, “let the market decide." consistent with broader national mean that our wheat farmers la­
Tokyo or Paris.
Is this the independent India We no longer need protect and de­ goals. It is indeed odd that when bour for speculators in Chicago
In the past we had to make do that our parents and grandparents fend the young against the unde­ ritually all of the rich, industrial and that the women who raise,
with the aerated waters of our dreamt of, sacrificed for, and even sirable, the decent person against countries of the North employ pol­ feed and care for our milch ani­
Charan Singhs and Ramesh Chau- died for? Such an India may be in­ the rogue. We will let the market icies to manage their economies, mals earn dividends for stockhold­
hans, but today we can proudly dependent, but it is certainly not decide.
to allocate resources and to pro­ ers in Geneva.
drink Coca Cola and Pepsi and de­ free. And one must even wonder
Now, I am an old fashioned tect their markets, it is somehow
bate their respective merits. For whether our hard won Indepen­ person and I was brought up to be­ appropriate for India to do the Excerpted from the H M Patel Me­
those of us so inclined, we need no dence is rapidly becoming a mere lieve that when we obtained free­ same.
morial Lecture

T

ECONOMIC TINES

>9-15-44

Replay of the raj
GATT is the 20th century equivalent of Mughal largesse to the East India
Company, argues Vandana Shiva
or India, free trade is not a
Textiles were Mughal India’s
As free trade removes protec­
late 20th century innova­ most important exports. With tion for the weak, de­
tion.
It is the re- the introduction of the East industrialisation
and
de­
emergence of a very old instru­ India Company’s monopoly, intellectualisation sets in. The
ment of monopoly control. It weavers, textile merchants East India Company single handoes not herald the end of histo­ and intermediaries lost out. dedly reversed centuries old
ry, merely its repetition. It Their coercion was intrinsic to trade relations between India
does not create new liberties the increasing freedom of the and England. The balance of
for the ordinary Indian. It can company. By its financial clout, trade, which till the 18th centu­
only lead to recolonisat ion.
the company transformed an ry was in India’s favour, took a
The General Agreement on entire class of capitalist wea­ u-turn. From being an industri­
Tariffs and Trade might be vers into contract labour. Besi al centre, India was transform­
more complex than the Fanik- des, it was also into price ed to a supplier of raw materi­
sheer firman granted to the fixing, at times 40 per cent als and markets for English
East India Company in 1717 lower than the market price.
goods.
because the world is more com­
In the 18th century, Bengal
Most social and political
plex today. Instead of one lai ge had around a million weavers. movements of 19th and 20th
corporation, the world now has South India, another half a mil­ century India owe their origins
many • multinational corpora­ lion. By the turn of the century, to this usurpation and diver­
tions. But in core content and the industry which had a near sion of resources, and the
impact, free trade in the 18»h
destruction
of
people’s
and 20th centuries do not dif­
livelihoods.
fer drastically.
,
The Maratha uprising of
In 1717 Faruksheer, grand­
1875 was intimately linked to
son of Aurangzeb, notified his
the vulnerability of cotton
governors in Bengal, Hydera­
exports. Cotton prices, which
bad and Ahmedabad the East
had skyrocketed during the
India Company was free to
American civil war, crashed in
trade all over the Mughal empi­
its aftermath. The Indian far­
re. This document allowed the
mer was left in the lurch. Land
East India Company to lay the
revenue, an unbearable burd­
foundation of British dominan­
en in prosperous years, beca­
ce of India for the next two
me impossible to be met. A
centuries.
third of Indian cotton growers
The East India Company set
became
heavily
indebted.
up its first factory in Bengal on
3 hey lost their lands and
May 14, 1633 at Ilariharpur in
houses.
the Mahanadi delta. On Febru­
Enraged, peasants in Poona
ary 2. 1634, the English obtain­
and Ahmednagar, attacked
ed from Shahjahan a permit to
money lenders and burnt title
bring their ships to Bengal. In A.Dunkel: Today’s Lord Clive
deeds. The Deccan uprising
1651, the governor of Bengal,
on cloth markets in was a movement for secure
Prince Shuja, allowed the com­ monopoly
land
ownership rights and
Europe and Africa was on
pany to trade freely in the pro­ Asia,
exposed the social and environ­
the
road
to
annihilation.
vince in return for an annual
mental insecurity created by
Free trade has always been free
tax of Rs 30,000.
trade.
free for some. It levels
The English were not satis­ more
the
economic
field
for
the
multi
­
The
vital resources needed
fied. They wanted free move­ national. In the process small
survival are still land, water,
ment of their goods throughout local producers lose their eco­ for
and
biodiversity.
The most fun*
the country. They were angling nomic freedom and are either
human and democra*
for a single document from the coopted by the multinational damental
tic rights are rights to these.
emperor that would remove or
become
economically However, free trade as free*
impediments to merchandise
dom to the multinational is bas­
dispensable.
movement and give the compa­
Nor does free trade sustain ed on the forced alienation o(
ny legal and moral justification markets. The East India Com­ the common man’s biodiversi­
to assert its rights in conflicts pany’s increased imports of ty rights.
with’ local authorities. The -Indian textiles affected the
The
Indian
government
Faruksheer firman provided English woollen textile mar­ appears not have learnt much
both.
ket. English weavers rioted from East India Company.
The East India Company had and the government had to ban Land security is already being
now placed itself in a very Indian calico imports. This undermined in Maharashtra.
favourable position. Not only gave way later to increasingly Land ceilings have been remov­
did Indian merchants have to heavier duties on Indian texti­ ed for export corporations.
Trade related intellectual
pay customs and transit duties le imports.
Protection is therefore a logi­ property rights, especially its
which the company had exemp­
ted itself from, they also lacked cal corollary to free trade. clauses on life forms, is another
protection from the Mughal “Social” and “environmental irreversible step to give multi­
fleet against attacks by Euro­ clauses” raised at Marrakech national seed and pharmaceuti­
pean frigates. European piracy this April do not significantly cal corporations monopoly con­
eventually
choked
Indian differ from the Lancashire trol in agriculture and health
manufacture exports. By this mills* insistence on higher dut­ care. The seed satyagraha and
time, the company’s monopoly ies on Iridian textiles. Free farmers’ movements against
in several sectors was absolute. trade does not remove protec­ GATT are the 20th century
In one of them the results were tion. It limits protection to the equivalents of the Deccan
economically strong.
uprising.
horrible.

F

TT 41-6-14

2

Gospel of SAP may be
sapping poor nations
otwithstanding criticism
by developing countries of die
still conditionalities imposed
on them by the Brellon Woods twins
at their recently concluded special
50th anniversary conference in
Madrid, the World Bank emphasised
on the necessity of introducing struc­
tural adjustment programme (SAP)
in developing economics. The Bank
also advanced the apparently simple
thesis that governments in develop­
ing countries have been mismanag­
ing their economies—not producing
sullicient goods (whether of primary
materials or industrial manufacture)
to sell or export in order to pay for
their expenditure on imports and
social services (not to mention their
debt repayments).
The solution to the crisis, accord­
ing to the Bank, is also simple: struc­

N

tural adjustment (hat would cut
Government spending, especially on
Unproductive" social services: priva­
tise public sector enterprises: devalue
currencies so that imports become
expensive and exports cheap, thus
aiming to promote domestic invest­
ment and increase export earnings.
Everyone knows that this is no
swan song. The World Bank's panel
of economists has been candid
enough to acknowledge that in many
developing countries a period of
painful macro-economic adjustment
would be unavoidable. This explains
u hy rvlalh ely low interest loans have
been promised to countries agreeing
to accept the rigour of SAP. The car­
rot of increased loans from other
•sources (from northern governments
or Irotn private banks) is also offered
to thos** who undertake structural
reform. The World Bank is optimistic
dial this will become the gospel in
every developing country. Il is no
coincidence that hundreds of thou­
sands ofdollars are being spent by the
Bank on public relations this year.
But not everyone agrees. Indeed
there arc many economists who ques­
tion the Bank’s track record, credibil­
ity and legacy. They are convinced
that what is doled out by way of aid
results only in uprooting poor com­
munities.
The host of minus points about the
multilateral aid is impressive: the
Bank is incapable of using public
money responsibly: the funding
mechanism contributes to further
indebtedness, social inequity and
environmental degradation despite
the rhetoric about concern for
women, indigenous people and the
environment, most of the projects
financed are harmful: that attempts
over the Jaslhalf-u-cenlury to super
impose a make-believe vision of die
world upon the day-to-day lives of
people have had devastating conse­
quences for hundreds of millions of
die poor and the marginalised, along
with untold numbers of non-huinan
species and their habitats. The tail

piece says it all: But all this belongs to
the past and now the detractors are
singing a different lune. They think
that the Bank is turning decidedly
greener in its lending policies; exer­
cising lesser influences over the poli­
cies of developing countries: and also
ushering in the much-needed inno­
vation through SAP for upgrading
Third World economies plagued by
poverty due to faulty strategies pur­
sued
by
their
governments.
Nevertheless, the facts have not
changed and for the better.
The Bank’s initial diagnosis has
not turned from wrong to right. Let us ■
Jlookal this plank ofSAf. The terms pf
trade for almost all primary products./:
particularly cash crops (on which
most developing countries are depen­
dent as export commodities), have
been deteriorating and. more so. for
those developing nations which have
already introduced S/\P. And it is this

The World
Bunk’s initial diagnosis
Ims often proved to be
wrong
dependence on raw commodities
which is the main problem, not the
quantum of goods produced on
grown. This is a legacy which derives
not from faulty "Inward-oriented eco­
nomic strategies" or lhe mismanage­
ment by Third World governments as
the Bank would have us believe but
rather from lhe policies o( earlier colo­
nial rulers. Indeed, during lhe colo­
nial period, much of lhe developing
world was de-lndustriallsed and
resources that might have been used
as capital to Industrialise were
siphoned olT to the coloniser's home­

land. And this explains why. even
today. Third World countries grow at
low rales with Inequitable patterns of
wealth and income distribution.
Yet. it seems as though SAP may
work. Removing minor levies and
certain marketing restrictions, and
enabling small farmers to sell their
crops directly will certainly help them
secure higher prices for their crops
and thus help augment pioductlon.
Bui at the same time, this wall
inevitably lead to a glut ani prices of
crops will fall In lhe International
market. In addition, farmers will still
have to buy clothes-and food, seeds
and fertilisers pay scitool fees for dtelr
childrcn-and so on. Wilh Inflation in
most developing nations tunning In
double digits—with some even boast­
ing of three digits—the devaluation of
their currencies, lhe remc val of price
restrictions and the Increase in edu­
cation and health-care costs (all part

3

of SAP), farmers will find that lhe
gains from higher crop prices are 1
wiped out and they are. In fact, worse
off than before.
Again, while the World Bank’s ini­
tial diagnosis of lhe crisis In develop­
ing countries as one of insufficient
production is dubious, there is little
doubt that the recommended remedy
will become part of lhe problem Itself.
Far from improving conditions in the
developing countries, there is every
possibility that SAP will further com­
pound the crisis. With the painfully
deep cuts in die provision of health­
care. education and other social ser­
vices and In the subsidies on basic
necessities In both urban and rural
areas, there Is bound to be u decline in
the general standard of living.
Moreover.
unemployment
will
increase due to retrenchments from
die public sector and from private
businesses closed down for lack of for­
eign exchange to import the necessary
inputs. And. certainly, al) this w ill be
accompanied by high rales of infla­
tion: and by further polarisation, as
the very rich will become richer while
all other income groups will lose out.
Precisely such things are occur­
ring all over Africa. Already high
rates of malnutrition, infant mortal­
ity. maternal mortality and sickness
rates have increased significantly in
lhe past few years. For example, a
Joint 'study by (’N1CEF. the Federal
Office of Statistics and the Federal
Ministry of Health in Nigeria showed
lhat over lhe years since the structural
adjustment programme began its
innings, the proportion of infants with
low birth-weigh ts had increased by 10
per cent and lhe proportion of mal
nourished under-five had increased
by 14 percent. In addition, in six years
the percentage of cliildren under-five
who were moderalely-to-severely
malnourished (malnourished to the
point of permanent stunting) had
increased by 1 3 per cent to one-third
of all children. Paediatricians feel.
even if conditions do improve, these
children will never recover from their
malnutrition. And these children—a
disproportionate number of them
girls—who have had to leave school.
arc unlikely ever to have a chance to
acquire education and skills later.
Evidently, the future ofa whole gener­
ation of/\frican children has been put
al risk. Therefore, as the African expe­
rience shows, lite strains of SAP are
nol shared equally by all.
Nonetheless, in order to effect a
real transformation of the Indian
economy. Il is imperative io learn
•from r\frica’s> failure. and move from
; an ideology o£ progress and develop­
ment" to a quest for authentic part­
nership. endogenous development.
and an equitable power structure.

Vie author is a Senior Reseanh Fellow
in lhe Department 0/ Sodoluqif
University ofCukuitu

Fin a n c ia l Ex Ckcss

Udayan Majumdar on problems facing developing countries
in the new scheme of things

The emperor has no clothes
SK the constituents of the
By ASHOK MITRA
upper crust. They never
had it so good. The rise in money which had gone out of the
crust. It would be equally futile to
prices does not affect them; on the
country sometime ago through il­ attempt to remind them that the
contrary,' they as a class gain from legal havala operations is being
rate of growth of farm production
the Inflation. None of them are brought back through over-invoic­
has fallen behind the rate of popu­
thrown qut of their jobs when fac­ ing of exports: a substantial part
lation growth in the past decade;
tories close one after another. The of this money is being put to work
this is likely to cause a shift in
comfortable foreign exchange po­ to induce a bullishness in the
prices in favour of agriculture,
sition ensures for them the stock market.
further adversely affecting the de­
smooth flow of Imported goodies,
mand for industrial consumer
Now
that
the
rupee
has
been
the enjoyment of which is the be
goods.
all and end all of their existence; made convertible on the current
Even otherwise, the general pic­
account,
no
risk
is
involved,
the
frequent Junkets to foreign lands
pickings in the share market can ture remains daunting: workers
are rendered equally easy.
are being locked out in their thou­
The Finance Minister, who has easily flow out of tlie country, in sands; investments are declining
supposedly made all this possible foreign exchange, at the first sign in both the public and private sec­
through
his
policy
of of trouble. The rapid rise in port­ tors.
liberalisation, has been, thank folio investments by foreign insti­
God, rescued from the Jaw of res­ tutional investors, which has fur­ Just speculation
ignation. Foreign balances have ther augmented the exchange re­
In the circumstances, any talk
shown a 500 per cent Jump in the serves in recent weeks, has about of an imminent industrial up­
the
same
inspiration.
course of two and a half years,
surge can only belong to the cat­
from barely $2 billion in June, Recessionary conditions continue egory of far-fetched speculation.
to
prevail
in
Europe
and
the
Unit
­
1991 to $10 billion now. Is that not
ed States, where money fetches The behaviour of imports, which
a miracle?
only 5 per cent or thereabouts in have in the current year fallen
even below what they were in
the short term.
Will be Ignored
1992-93, confirms this pessimism.
Now that the authorities in In­ A sizeable part of the imports tak­
Should you try to intercede with
the comment that this transform­ dia have eased up on exchange ing place is of consumer articles
ation is not really much of an control, why not send some of the of various descriptions; imports of
achievement, since tlie accretion idle funds to India to comer prize machinery, spares and intermedi­
of foreign exchange of this order stock which could perhaps triple ate products are only of a token
is mostly accounted for by heavy in value in three to six months. order.
external borrowings, of late sup­ In case there is a whiff of a whis­
The crisis in the domestic caplplemented by unhealthy ingress of per about another crash, wby, the
al goods sector is therefore not an
hot money, your talking out of hot money that has come in will isolated phenomenon; it is related
be quickly withdrawn.
turn would be ignored.
to the deep malaise afflicting the
The country's total external in­
For all one knows, the surge in economy in the wake of the
debtedness is close to $100 billion; share prices in recent weeks is no contractlonist fiscal and monetary
so what. A huge debt servicing healthier than the one which set policies that are an integral com­
burden — something around $18 up the Infamous Scam. Much like ponent of the Finance Minister's
billion — Is going to smother the in 1991-92, the spurt in stock 'reforms'. And the huge drop in
nation during the next three prices has little to do with the customs and excise duties these
years, so what. We are either al­ state of Industrial activity, which policies have brought about has in
ready in a debt trap, or hovering remains in the doldrums. Indus­ fact forced up the fiscal deficit.
very close to it; so what Have not trial output during the first six
The Government, for obvious
our ancient philosophers already, months of the current year has reasons, has to preser.t a brave
several centuries ago, advised us been barely one per cent higher front. Foreign investors, it still
to borrow and borrow and use the than what it was in the corre­ hopes, are going to ball it out. Are
proceeds to gulp distilled butter?
sponding period last year. If the not the signals sufficiently unproBesides, attention will be drawn generation of electricity is exclud­ pltlous though? Institutional in­
to two other seemingly Irrefutable ed from the calculations, the pic­ vestors from overseas are bring­
pieces of evidence of the sunny ture is of total stagnation.
ing in fimds, but only for specula­
days that have arrived. First, ex­
tion in the stock exchanges, and
ports have picked up of late; after Drastic cut-back
not for production. The Ministry
a rather disappointing perform­
of Finance frequently releases gar­
Production of capital goods is rulous data on approvals of pro­
ance in the two preceding years.
they have shown a rate of growth actually down by more than 10 per jects involving foreign capital.
of around 19 per cent in the cur­ cent, reflecting the drastic acrossThere is however taciturnity of
rent year. Second, the stock mar­ the-board cutback in capital for­ a very unusual kind in letting the
mation
as
a
direct
consequence
of
kets are onca more exhibiting an
public know the magnitude of di­
extraordinary buoyancy; hark, the great economic reforms. Min­ rect foreign Investment actually
ing output as well as output of in­ maturing. Such investment from
the nightingales sing.
The enemies of promise, other­ termediate goods are also declin­ the beginning of 1991 till the end
wise known as professional gloom ing. It is only the production of of September, 1993, a recent reply
merchants, are however incorri­ some consumer items that is to a question in Parliament sug­
gible. They insist on putting a dif­ showing a rising trend.
gests, has been less than $750 mil­
ferent Interpretation on tlie rise
There is little point in disturb­ lion. Direct foreign investment
both in exports and in tka Sotisex ing the euphoria of those who be­ could evidently r.ot have amount­
index Some of them would even lieve that this country could usher ed to more than MOO million each
have the cheek to hint at the exist­ in an industrial revolution solely year in the post-'reforms' phase.
ence of a nexus between the two on the basis of the consumption This is hardly enough to effect an
phenomena. According to them, demand generated by the upper earth-shaking industrial revol-

A

■pSCCAN

ac-l-99.

4

ution in the country.
Equally noteworthy is the offi­
cial stance that no industry-wise
breakdown of the capital Inflow
actually taking place is available.
Perhaps the Government is chary
to admit that most of the invest­
ments have been of the Pepsi Cola,
McDonald's and Kentucky Fried
Chicken varieties. And news­
papers have been induced to go
berserk over the tiding of a wellknown firm of cutters promising
to set up a tailoring establishment
bi the country. Nearly one-half of
this nation may go to bed every
night with hunger in their belly.
So what; that should not prevent
them from donning Saville Row
suits.
The situation as it obtains is not
difficult to sum up. Foreigners
rate India as a poor proposition
for long-term investment. They
will not however mind sending
across, on a transitory basis, sur­
plus funds which could make a
killlnv in the short run in the
stock exchanges. The continent of
Circe Is obviously reactivating it­
self. Instead of technology, expert­
ise and capital from the sophisti­
cated West galvanising the inert
Indians intn furious productive
ventures, a phenomenon of a re­
verse nature is unfolding before
our eyes. The ethos of the Indian
bania has captured the foreign im­
agination: avoid like plague In­
vestment in production; put your
money In speculation.

In Sam Goldwyn’s evocative lan­
guage, foreigners too have Includ­
ed themselves out from the arena
of production of material goods.
The prospects of growth in indus­
try and agriculture, from which
the poor and middle classes could
benefit, will therefore continue to
be dim. That will not deter the up­
per crust. They may be a micro­
scopic minority of the national
population; so what: they preside
over the Government, they have
total control over the media. They
never had it so good, it therefore
should follow that the nation nev­
er had it so good.

Herd instinct
A kind of herd instinct l»
work. There was no alternative
the economic reforms, say the rep­
resentatives of the upper erw'
There is no alternative to all-®
liberalisation, echo the parr
who write ponderous letters
newspapers. Few amongst th
dare to.suggest that the anl* _
has no clothes, the so-calle
forms have been, and will '
tinue to be, unmitigated diss
for the majority of the nation.

A fistful of dollars
A nation’s domestic affairs should not be dictated by the IMF-World Bank
ven while countries of the
By VANDANA SHIVA
third world are struggling to
reclaim their sovereign right
to biodiversity, and farmers
As social security is denied to
and conservation groups are fighting
people, the World Bank engages in
for the recognition of “farmers’
the doublespeak of social safety net.
rights”, the World Bank has recently
Social non-sustainability has also
attempted to hijack control over the
been created through SAP interven­
international gene banks and the
tions in the health sector. Health
international agricultural ’research
budgets have been cut drastically,
centres under the Centre for Genetic
even as diseases are spreading.
and
International
Agricultural
As the Madrid declaration states:
Research.
“In several regions of the world, the
At the mid term review meeting of
brutal compression of social expendi­
the CGIAR in Delhi, the World Bank
proposed to establish a steering com­ tures combined with the collapse of
purchasing power has led to a resurg­
mittee chaired by its vice president,
ence of infectious diseases, includ­
Ismail Serageldin, and adopt a full
ing
tuberculosis,
malaria
and
system wide policy for all countries
cholera.
to be implemented by the committee.
The recent outbreak of bubonic
They also proposed that the chair­
and pneumomic plague in India is the
man have authorityto negotiate and
direct consequence of a worsening
enter into agreements with other
bodies. This absolute power and con­ urban sanitation and public health
infrastructure which accompanied
trol of the World Bank over genetic
the compression of national and
resources that come largely from
municipal budgets under the 1991
third world farmers is the price of
IMF-World
Bank sponsored “structurthe CGIAR’s plan receiving addition­
ral
adjustment programme”.
al funding of $ 40 million and $ 2.5 bil­
As food prices rise and diseases
lion fund.
spread, women bear the worst bur­
The World Bank is not a legitimate
den. SAP is an anti-woman policy
custodian or policymaker for genetic
and thus the destructive impact can­
resources donated by developing
countries. Governments and non­ not be covered by the mountains of
gender reports pouring out of
governmental organisations who
Washington.
gathered in Nairobi in June 1994 for
Third world’s women’s rights are
the biodiversity convention made it
also being robbed by the bank’s
clear that they would resist the
bank’s attempted take over of gene
banks.
Social
non-sustainability
and
destabilisation is an intrinsic part of
International Monetary Fund-World
Bank stabilisation and adjustment
plans which involve budgetary auste­
rity, devaluation, trade liberalisa­
tion and privatisation.
Jobs and livelihoods are delibera­
tely destroyed by the economic engi­
neering of the international financi­
al institutions. In India, the “exit poli­
cy” linked to the structural adjust­
ment programme involves putting
more than 10 million more people
out of work. That is the reason trade
unions have had a nationwide strike
on September 29.
In India, as a result of SAP, food
output fell from 176.2 million tonnes
in 1990-1991 to 167 million tonnes in
1991-92. By insisting cuts in food sub­
sidies, food prices of staples were
increased by 30 per cent, increasing
poverty and malnutrition in an
already poor country.
As adjustment programmes force
‘“dollarisation” of the economy, food
jprices rise, and riots are the result —
as in Caracas in 1989 when more than
11,000 people died in Tunis in 1984, in
Nigeria in 1989, and in Morocco in
Dust under the carpetbaggers
1 990.

E

The TELEGRAPH %-10-m

5

involvement in population control.
During 1969-1979 it only spent $ 278
million on population programmes.
In 1987, the population budget was
upto S 500 million. By 1993 it was $
1.3 billion The president of thfe bank
has now offered an annual $ 2.5 bill­
ion by 1995.
The bank’s population program­
mes suggest reducing of medical
screening and regulation of hazard­
ous contraceptives. It even goes as
far as suggesting that medical educa­
tion curricula be changed so that doc­
tors do not concentrate on adverse
side effects of contraceptives, especi­
ally the hormonal injectabies and
implanatable contraceptives.
Denying women’s rights to know
can hardly be seen as part of
women’s empowerment. Imposing
health hazards on women cannot be
accepted as “safe motherhood”.
The World Bank’s most significant
doublespeak is in the area of “good
governance”.
First, the principle of good gover­
nance is fully violated by the bank
itself. As Willi Wapenhans pointed
out in his report of 1992, 37 per cent
of the bank’s projects are failures,
and 78 per cent do not comply with
the bank’ own criteria. More
recent, in a paper prepared for the
Bretton Wood commission, Wapen­
hans states, “It is perhaps note­
worthy that the bank management’s
response to the Wapenhans report
does not yet address the recommen­
dations concerning accountability.”
Second,
the
interference
in
governance in sovereign countries
violates the articles of agreement.
Finally, the IMF-World Bank inter­
ference in domestic affairs of countr­
ies does not lead to democracy or
good governance, but to authoritaria­
nism and social and political break­
down. Structural adjustment requi­
re the strengthening of the internal
security apparatus to deal with politi­
cal discontent, as workers lose their
right to work and organise, as
people’s right to food security is tak­
en away, and as conditions for peace
in society are destroyed.
As export markets and domestic
markets collapse under the econo­
mic engineering of the World Bank
and the IMF, violence and civil war
break out in region after region, coun­
try after country. Whether in Punjab
or Rwanda or Somalia, the global
financial institutions have through
their policies, created conditions for
social disintegration, civil strife and
violent conflicts.
The World Bank and the IMF have
not, and cannot, contribute to sustai­
nability
and
good
governance
because their policies are policies of
genocide.

Worrisome fall-out
of liberalisation
Madhu Dandavate on the yawning gap between
goals set and end results
iberalisation seems to have
become the watchword of our
economy. But as we probe
deeply into the concept of liberalisa­
tion. we find a wide gulf between its
theory and practice. Further, the
concept is viewed differently by
developed countries and the develop­
ing nations.
In the economic field a serious
debate is going on regarding various
aspects of globalisation and liberali­
sation of economy. The proclaimed
objective of globalisation is to inte­
grate economies of different coun­
tries into a world economy. The
professed aim ofsuch integration is to
bring about balanced growth, devel­
opment and trade, avoiding sharp
disparities between the. affluent
developed world and the developing
world plagued by poverty.
The
apparent aim is to evolve a more just
and equitable economic world order.
The declared goal of economic liber­
alisation is to build an economic sys­
tem which will eliminate rigidities.
discriminative bureaucratic controls
and irksome procedures which cause
delays, inefficiency and thereby cor­
ruption and hamper the process of
production.
Against the background of these
professed objectives of globalisation
and liberalisation of economy what
becomes obvious is the yawning gap
between the professing and practis­
ing. When developing countries like
India seek financial assistance from
the multilateral financial institutions
like the International Monetary
Fund and the World Bank, stress is
laid by the latter on greater liberali­
sation of the Indian economy and its
integration with the world economy.
India’s
unfortunate
experience
about liberalisation and globalisa­
tion has been that both these are
viewed by the rich developed coun­
tries and the poor developing nations
in diametrically opposite perspec­
tives. arising out of the conflict of
their economic interests.

L

After signing the GATT treaty at
Marrakesh on April 23 India has
decided to be ’liberal’ in allowing
encroachment on India’s planning

and development. This is quite con­
sistent with the harsh conditionali­
ties which India has accepted as a
price for securing credit facilities
from the IMF and the World Bank.
The Government claims credit for
GATT agreement assuring phasing
out of the multi-fibre agreement
(MFA) that governs exports of tex­
tiles over a 10-year period in place of
alonger period of 15 years suggested
earlier. However, in lieu of this small
concession India gave a commitment
to cut down import duties on syn­
thetic textiles, thus providing US
entry into India’s domestic market.
This will have a significant bearing
on sale of goods of the Indian textile
industry.

The Budget for 1994-95 pre­
sented by Manmohan Singh has con­
firmed these fears. The peak custom
duties for textile and other goods
have been substantially reduced. As
a result, the imports have become
cheaper compared to indigenous
goods. This could ruin the domestic
industries. Quite an innovative liber­
alisation indeedl Another important
development wall also be to the detri­
ment of India's textile trade. The for­
mation of regional groups like
NAFTA is going to be quite harmful.
It will result in the abolition of tariff
barriers for member countries while
retaining for other countries in the
GATT system the quota and the tar­
iff regime. Under such an iniquitous
scheme of ’liberalisation’
the
Orwellian phrase 'all are equal but
some are more equal than others'
will become all the more glaring.
Thus the highly glorified 'libcralisa-

The decision to be
‘liberal’ is in consonance
with the harsh
conditionalities accepted
tion’ will effectively be heavily lean­
ing towards developed countries.
It is difficult to understand how
liberalisation and the multilateral

6

system of retaliation incorporated in
the Dunkel Draft Tan be harmonised.
The provision for retaliation against
developing countries will now be
widened through the device of World
Trade Organisation (WTO). It would
provide the common institutional
framework for the conduct of trade
relations between members of WTO
on matters relating to GATT. TRIPs
and TRIMs. It would provide for cross
retaliation. This would give legiti­
macy to the Special 301 provisions of
the US which so far were a unilateral
instrument of action against other
countries perceived to be resorting to
protectional policies. The new provi­
sion on retaliation is a counterweight
on liberalisation.
The approach document of the
Eighth Plan gave priority to tackling
the problems of poverty and unem­
ployment. The document therefore
emphasised the need to make the
Plan ’employment-oriented’. The
decentralised sector of industry be! ng
more labour-intensive greater stress
was laid on this sector. However.
with the euphoria of liberalisation
the Indian economy will be open to
multinationals without any restric­
tions regarding the field of produc­
tion.
Even the consumer goods
manufacturing sector in which there
is a large presence of small and
medium-scale industries, providing
relatively large employment will be
open to them. These companies will
bring in highly modernised and
rationalised industries needing more
power but less labour. In search of
quality labour will be displaced.
'Entry to multinationals and exit to
labour’ will be the new motto of our
economy. In an unequal competi­
tion between the small-scale sector
and
sophisticated
technology
inducted by the multinationals the
small-scale sector is in danger of
being ruined bringing on its trail
large-scale
unemployment
and
poverty. Thus the glory of sophisti­
cated technology will be built on the
debris of the dignity of man.
A pragmatic approach demands
that neither privatisation nor
nationalisation be treated as a
panacea for all economic ills of soci

commodities. This has the implica­
tion that the customary demand for
remunerative prices to growers of
diverse produce will go unheeded.
The insistence on procurement and
sale of food grains through the public
distribution system at market prices
will harm the poor consumers. The
move to change process-oriented
patent law into a product-oriented
one will result in a spiralling of prices
of commodities. Agriculturists will
face grave difficulties in purchasing
exorbitantly priced high-yielding
variety of seeds. All this will happen
under the garb of globalisation and
liberalisation.
Thus whatever the professions of
the protagonists of liberalisation, in
practice this process will cause dis­
tortions in the economy and harm
the interests of the deprived sections
of society.

ety. However, this perspective is
completely brushed aside and there is
an increasing craze for privatisation.
On the other hand, there is total
neglect of co-operatisation.
In a country like India with inad­
equacy of capital, absence of
advanced technology and large
numbers of unemployed, there is
bound be a co-existence ofpublic, pri­
vate and co-operative sectors and
this has to be fostered. Questions of
availability of resources, expertise
and social obligations are the deter­
mining factors as to which industries
will be in public, private and co-oper­
ative sectors. Unfortunately, a very
unbalanced image is projected to
show that the private sector is the
paragon of all virtues and a symbol of
efficiency, whereas public sector is
the epitome of inefficiency and cor­
ruption.
Coming to agriculture, after the
GATT treaty India will have to accept
obligatory imports of agricultural

The author is a former Finance
Minister.
Financial

Exrpcss

/—

India seeks $ 20 m WB
fioan to pay consultants
by Bharat Bhushan

WASHINGTON DC - In an
ostensible bid to give a fillip to the
privatisation of the power sector.
India is taking a $ 20 million
commercial loan fromthe World
Bank to pay the fees of private
power sector consultants. Given
the experience of the World Bank
in the privatisation of the power
sector, a large portion of the
borrowed money is likely to flow
back as consultancy fee to the
World Bank's own consultants.
The World Bank’s board of
directors will clear this loan of $
20 million to India on Thursday
(June 24).
The World Bank clearly wants a
comprehensive role in the priva­
tisation of the power sector in
India - starting with the concep­
tualisation of the privatisation
process by funding the consultan­
cy needed for this purpose to the
future funding of the private power projects themselves. In other

words, the World Bank would like
to create the very institutional
structures with which it would
have to deal in India later for the
commercial funding of power sec­
tor projects in the country.
The justification for this all
encompassing role has been pro­
vided by the Government of India
itself which has “indicated that
the Bank's involvement in the
implementation of the private
power initiative would help to
ensure the technical quality and
independence of policy advice
and project reviews.” It is not at
all clear how “independence of
policy advice” especially vis-a-vis
the World Bank itself can be
maintained if it is to be so deeply
involved in the process of the
creation of the new institutions in
the power sector in India.
As a matter of policy, up to now
India had tended to use outright
grants or at best concessional
financing from international in­
stitutions for funding consultancy
and training under technical

7

assistance programmes. This was
a sound policy - the argument
being that if there were grants
available for paying for consultan­
cy or training programmes, say
from the UNDP, then why bor­
row commercially for the same
purpose?
Now. however, it is being
argued that there are some “highvalue” consultancy services which
justify taking commercial loans to
pay for them. Clearly, as far as
the Government of India is con­
cerned, privatisation advice in the
power sector falls into this categ­
ory. Thus, with the new technical
assistance loan from the World
Bank. India will for the first time
borrow $ 20 million at commercial
interest rate to fund power sector
consultancy.
The privatisation programme
will be coordinated by the Invest­
ment Promotion Cell (IPC) of the
Indian Ministry of Power. The
IPC itself would be funded out of
grants expected to be made by the
Japanese
Government
Indian express

Open invitation to
exploitation, BoP crisis
by V. Shankar Aiyar &
Raghu Nandan Dhar

BOMBAY
ELIEVE it or not. the Gov­
ernment of India is now prop­
osing to borrow funds interna­
tionally at 16 per cent in dollar
terms when money is available (as on
Friday) al a LIBOR rate of 3.56 per
cent ! This is precisely what the Rao
regime's decision to allow a return of 16
per cent in dollar terms on foreign
investment in the power sector means.
And if the move has stirred a hor­
net's nest in the Ministry of Finance it is
not without reason. According to the
mandarins within the Ministry and the
Reserve Bank of India (RBI), the move
is not only not called for but is in fact a
clear invitation to exploitation and a
Balance of Payments (BoP) crisis.
In fact such is the clout of the lobby
behind the 'brainwave' that neither the.
Ministry which stipulates liabilities nor
the RBI which is responsible for assets
management have even been consulted
informally on the issue and efforts by
these officials to thwart the move has
not yielded any results.
Indeed, officials in the Ministry point
out that a return of 16 per cent in dollar
terms combined with an 11 per cent
annual erosion in the value ot the rupee
(devaluation) takes the icturn to 27 per
cent. Add to this the five year tax
holiday, and the effective returns are 54
per cent on every dollar that the foreign
institution invests. And the rate of
return is maintained even after the end
of the tax holiday since the government
has in its wisdom pegged the returns at
a post tax figure of 16 per cent.
In other words if "X " had invested S
1<M) in 1991 his yield would have been
Rs 747.76 (Rs 2X6 as devaluation and
Rs 461.76 as assured returns) in the first
•year and Rs X29.4K (Rs 317 and Rs
5I2.4X) in the second year. While the
direct yield is around 26 per cent the
effective returns come to around 54 per
cent (given the fact that there is a tax
holiday and the sovereign assurance is
post-tax thence).
Even foreign merchant bankers are
quite surprised at the Indian Govern­
ment's munificence. As one foreign
banker put it: "The Government could

B

have even gone to the World Bank
which lends at eight per cent or raised
bonds m the international market at
nine per cent as they had done in the
case of the IlJBs instead of going in for
this assured returns idea which is clearIv an exploitative situation and has no
parallels in the global context I ven
corporate bonds across the world don't
yield ,i return of pver eight per cent
anywhere."
There are some votaries of the ide i
who present the Chinese experiment as
a parallel Indeed, the Chinese have
been immensely successful in attracting
foreign capital but even they haven't
fallen for such tricks. For the record.
the Chinese agreement stipulates 'a.
return ot less than 15 per cent not in
dollar terms - and unlike the Indian
idea there is no concession in terms ot
tax.
The 'scam', however, doesn't end
here. Going by the estimates of the
Eighth Plan, it should not cost more
than Rs 20.000 per KW - taking infla­
tion into account the figure could be
boosted by Rs 5000 per KW and pushed
to Rs 25.000 per KW. However, the
plavers in this new power game' are
pricing
their
output
differently
According to the figures projected bv at
least two entrants in the Held, the cost
per KW by their estimated is Rs 40.000
that is clearly twice that of the
Government's own estimates But vet.
the Government has agreed to the
'estimates of the foreign investor.
Now place this tact in the context of
the global scenario where companies
have been left with excess capacities
and a near-recessionary situation. In­
stead ot exploiting this aspect, the
.Indian Government has in fact gone
ahead and agreed to inflated or at least
over-priced estimates of project cost.
I low else does one explain the Rs
XOOO-odd crore estimate for a 1900-plus
MW
gas-based
project
being
accepted ?
In other words the already battered
tax payer will now be paying for this
special power project (since the State
Electricity Boards (SEBs) have yet to
learn about profits or staying in the
black) at the rate of 16 per cent Rs 12X0
crore per year for this 1900-MW plus
project for the life of the plant (which
could be between 20 and 25 years)
In other words the tax payer'will in

25 years shell out Rs 32.000 crore (that
is $ 10 billion at today's exchange rate
and $ 3 billion more than the trade
deficit) as just returns on the invest­
ment. And this doesn't take into
account the hidden costs of no-tax
(which the SEBs buying the power will
be paying anyway) or the more impor- ■
tant question of devaluation which will
be borne by the RBI at the behest of
the Government. And that is just one
plant we are talking about.
Little wonder then that both officials
and technocrats in the Ministry of
Power are disturbed at the manner in
which the Government is going ahead
with the avowedly well-intentioned
theme of inviting foreign investment in
power projects. As a senior technocrat
in Maharashtra stated; “The most baf­
fling question is why hasn't the Govern­
ment thought of listing out the areas or
sites of these projects and gone in for a
global tender and invite competitive
bids?"
Besides these aspects there is the
question of the procurement of fuel. Is
it part of the deal ? If not who is going
to foot that bill and who is going to
manage the exchange fluctuation
costs ? And what about pricing ? How
is the Government planning to fund the
"profits" for the foreign investor given
the excellent track record of SEBs ?
Will the bill be footed by the State
Government or by the Central Govern­
ment?
Does the Government realise that
this scheme will be the finest method
for the unscrupulous and also some
prominent industrial houses in the
country to siphon money and stash it
out of the country ? All ’.hat they need
to do is set up a front, borrow at
LIBOR and make a killing
For over three years the country has
battled a crucial BoP war going to the
extent of pledging its reserves It is only
now that there is some semblance of
order and respect. This latest ‘brain­
wave*. however, is designed to take us
back in time. As a senior Finance
MKnistry official stated: "Nothing in
this makes sense."
And. if at all anything is clear, it is
the fact that their has been no applica­
tion of the mind nor any rationale . at
least not one that is clearly visible..
TmpiAN ErtPKFSS

8
f-

■. .

Lakhs court arrest to
protest Govt policies
WHO SAYS WATER IS SCARCE?: Police using water cannons to good effect against demonstrating
trade union workers on the Capital’s Parliament Street on Thursday.
EXPRESS NEWS SERVICE
NEW DELHI

AKHS OF people
courted
arrest
throughout the coun­
try and fought pitch­
ed battles with the police at
many places on Thursday as
they responded to the ‘jail
bharo’ call by trade unions
and mass organisations, in
protest against the economic
and industrial policies of the
Narasimha Rao Govern­
ment.
In the Capital, scores~were in­
jured when police trained water
cannons, lathicharged and teargassed hundreds of trade union
workers and social group activists
who tried to head towards Parlia­
ment House. Delhi Police placed
the total number of detentions at
close to 4,900. Those detained
included eight Left Front MPs and
leaders of several trade unions.
Agitated National Front and
Left Front members staged a
walkout in the Rajya Sabha and
the Left Front stalled business in
the Lok Sabha for over 20 mi­
nutes in protest against the police
action on demonstrators on Par­
liament Street here on Thursday.
While in the Lok Sabha, the LF
members, who rushed to the well
of the House demanding a state­

ment trom tne Home Minister on
the incident, called off their pro­
test after Parliamentary Affairs
Minister V C Shukla expressed
■ regret, the NF-LF membets in tbc
Rajya Sabna walked out saying
that they were dissatisfied with
Home Minister S B Chavan’s
reply.
The trade union leadership la­
ter claimed the jail bharo prog­
ramme was a resounding success
and condemned the police for
resorting to lathi charge and tear­
gassing without making proper
arrangements for arrests
In a statement here leaoers ot
the seven national trade unions
said the protest agitation against
the Government’s
"disastrous
economic and industrial policy”
would continue, culminating in
another all-India strike
on
September 9. Ar.iong those who
signed the statement are M. K.
Pandhe (CITU). B. D Joshi
(AITUC) and V. Tiagi (HMS).
In Bihar, over 30,000 suppor­
ters of Left parties and organisa­
tions courted arrest, while activ­
ists engaged the police in a pitch­
ed battle in Patna. Officials were
among those injured when protes­
tors retaliated by pelting stones on
policemen. In Begusarai alone,
10,000 people courted arrest,
while another 1,000 were rounded
up at Chapra.
In Tamil Nadu, over 27,000
people had been held by the
police by afternoon. Nearly

10.000 people were rounded up in
Madras while picketing Central
Government offices in the city.
Andhra
Pradesh
too
saw
thousands court arrest as part of
the jail bharo programme. Ral­
lies, dharnas and picketings were
organised in almost all districts.
Some 2.000 people were arrested
in Hyderabad
In the Capital, hundreds were
injured in police action. Several
leaders and a number of organisa­
tions condemned “the barbaric
police attack on even women and
children" and demanded stern ac­
tion against the policemen in­
volved. Delhi Con missioner of
Police M B Kaushal. who justi­
fied the action of his men. said 10
policemen - including one from
the Rapid Action Force (RAF) were among the injured. Kaushal
denied the charge that senior
police officials were not on hand
when force was resorted to.
Leading the protestors were
MPs Inderjit Gupta. Bhogendra
Jha. Chaturanan Mishra. Gaya
Singh. N.E.Balrain. Hannan Mollah and trade union leaders
M.K.Pandhe, Swapan Mukher­
jee.
Sushil
Bhattacharya.
B.D.Joshi, Pratap Samal, Harish
Tyagi, Bhim Puri. S.B.Bhardwai.
T.A.Francis and R.K.Sharma.
The trade union workers and
social group activists had assem­
bled in the morning at Jantar
Mantar. carrying placards de­
nouncing the Centre's "pro-multi­

national policies” which they said
had been dictated by the World
Bank and the. International
Monetary Fund (IMF).
Addressing the assembly. CPI
general secretary and AlCCTU
leader
Swapan
MuKherjce
cautioned the people against "the
impending dangers resulting from
the implementation of the new
liberalisation
policy
when
thousands would be rendered un­
employed."
He claimed the Narasimha Rao
Government was hobnobbing
with the BJP and abetting communalisation of policies and mis­
use of religion for political gains.
Immediately after the Rajya
Sabha reassembled after lunch,
the NF-LF members charged that
the demonstrators who were voic­
ing their protest over the Govern­
ment's economic policies were
caned and teargassed without any
provocation The police action
was at the instance of Chavan.
alleged N E Balram (CPI).
Refuting the charge. Chavan
maintained that he had not issued
any directions to the police to
crack down on the demonstrators.
They had crossed the barricades
set up on Parliament Street where
prohibitoiy orders Section 144
had been clamped. "Protests
should be launched within the
parameters of law and Older." he
said. He. however, said that he
was sorry if any MP had been
injured in the incident

Incxan wpress lo-v-n

9

NEW DELHI 14 DECEMBER

THERE is a mounting pressure on the Prime Minis­
ter, Mr P V Narasimha Rao, from Congress members
for a “total review” of the government’s economic
policies. The demand is not for a complete change in
them, but, for their repackaging so that the reforms
are not seen as being anti-poor.
In the last 24 hours, a number of partymen, in
groups as well as singly, have met Mr Rao for discus­
sion on the issue. The common strain in their argu­
ment has been that the Congress needs to take fresh
stock of these policies and re-work their packaging, so
that they appear to be benefitting the people and not
just the foreign and domestic industry. On his part,
Mr Rao is believed to have heard these arguments
and said that he will take note of the advice.
A group of 35 party MPs, including central minis­
ters, met the Prime Minister at his 7, Race Course
Road residence on Wednesday afternoon. Among the
ministers were, Mr Salman Khurshid, Mr Kamal
Nath, Mr Jagdish Tytler and Mr Krishna Kumar.
These MPs, most of whom are considered Rao loyal­
ists, clarified that they were not against reforms per
se, but they were concerned about the way they were
being perceived by the people.
Apart from this, a few senior party leaders, in­
cluding cabinet ministers, are understood to have ei­
ther met or written to the prime minister on the same
issue. Their discussions with Mr Rao, as well as dis­
cussions among party members, show that an opin­
ion is growing that the party has made a mistake by
leaving the implementation of economic reforms to fi­
nancial experts. Instead, it should have involved poli­
ticians who have a feel of the people’s pulse.
While it is not known whether the finance minis­
ter, Dr Manmohan Singh, is included in the descrip­
tion of ‘financial experts', one name that has been
mentioned in this context is that of Dr Raja Chelliah.
It is being said that the pace of the reforms, which is

bound of have an impact on the country’s political
economy, is being set by an apolitical person like Dr
Chelliah (whose report has been the basis for fiscal
reforms), who is a taxation expert.
Known critics of this approach include Mr N D
Tiwari, Mr Jagannath Mishra, Mr Madhavsinh Solanki and proclaimed dissidents. A number of minis­
ters agreeing with this view are demanding setting up
of an AICC(I) committee to look into the pace and the
“anomalies” of the reforms, which have skewed its
image.
>
The basis for this demand is a letter written by Mr
Ajit Jogi MP, to the prime minister, well before the
state polls. In the letter, dated October 20, Mr Jogi
asked for a political committee for determining the
“pace and direction” of reforms.
Of the alleged anomalies in the implementation of
reforms, one is the decision to reduce the average
peak import duty to 65 per cent. It is being said that
while the WTO permits India to have an import duty
of 80 per cent, the reformers have done one better
and reduced it further. As a result, there is an “inva­
sion" of consumer and foreign goods and not the de­
sired level of foreign investments in green-field
areas.
As it is emerging, the demand of partymen are
centred on six suggestions. These are: expand and
strengthen the public distribution system by includ­
ing 14 essential commodities, protect Indian industry
as permissible under WTO, ensure government
funds do not shrink further, allocate maximum funds
on anti-poverty programmes, step up planned alloca­
tions and defer the implementation of the Chelliah
committee recommendations.
In a separate development, Mr Arjun Singh had a
meeting with Dr Manmohan Singh. While the former
impressed upon the need for the reforms to have a
"human face"', the finance minister is said to have as­
serted that they were not anti-poor. If they are being
perceived as such, it was a political failure of the par­
ty that it was not projected in the right perspective.

WB says election result
not verdict on reforms
India Abroad News Service

Washington, Dec, 15: A senior
World Bank official has said it is
incorrect .and misleading to. char­
acterise the results of the assem­
bly elections as a verdict on Prime
Minister P V Narasimha Rao’s
economic reforms.
Louis Derbcz of the India
department, said he found some
>rcss reports in this country *a
ittlc distressing’ because they
judged public support for the
national economic restructuring
programme by the losses suffered
by the ruling party.
' To look at the elections, where
the Congress lost three out of four
States, as a verdict on the econo­
mic liberalisation programme,
showed a lack of understanding of
India, Dcrbez insisted.
‘Anyone knowing India knows
that regional aspects are decisive
factors’, in State elections. Der­

f

bcz emphasised. ‘So equating
State elections to a policy referen­
dum is totally wrong’, Derbcz told
India Abroad News Service in an
interview.
He said New Delhi had im­
plemented the economic changes
’in a consistent wav in the last
year’, which he maintained, ‘has
allowed us to move from the
concept of aid to the concept of
investment’.
The World Bank has been
strongly behind India’s structural
adjustment programme. But Der­
bcz noted it was unjust not to
recognise the amount of work
being.done by New Delhi in the
social sectors with concessional
loans from the International De­
velopment Association (IDA).
‘The Government’s program­
me at the Statfc and national level
clearly emphasises social sectors’
he insisted, .‘we see that as posi­
tive’.
Macro-adjustment
policies

10

had paid off as shown by the
strong industrial recovery and
agricultural productivity which
not be wholly attributed to the
monsoon, DerbeZ said. Credit
must go to good pricing policies,
he added.
The six per cent growth of the
economy, the expansion of the
private sector and the new oppor(unities for investment in the power, infrastructure and social sec­
tors, Dcrbez said, pointed to the
success of the policies.
Even within the last one year,
the level of Government activity
had allowed the country to move
to a more equ* ’ partnership with
foreign investment and national
private investors had become
much more active and able to
tackle foreign investors, Derbcz’
maintained. Heinz Vergin-, head
of the India.Department at the
bank, is currently in India for the
annual review of World Bank
lending to India

•
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T he Economic T imcs

Our Political Bureau

iS-n-B i,.

Ministers demand repackaging
of reforms to assuage poor

Reforms will wear voter-friemffly look, promises lao
very soon.
Without going into the details .
NEW DELHI 15 DECEMBER
of the possible nature of the pro­
RULING out the possibility of posed changes, Mr Rao indicated
abandoning liberalisation, the that the effort would be to ensure
Prime Minister, Mr P V Nara- that the benefits of the reforms
simha Rao, has said the reforms reach the people directly.
He is said to have virtually ac­
would be tailored to give a pro­
knowledged that the current ap­
poor look, soon.
Addressing the general body of proach of routing the benefits of
the Congress Parliamentary Party reforms through an increase in
here on Thursday, he conceded — outlay on community develop­
albeit indirectly — that the re­ ment, rather than directing them
forms in their present form have towards individual beneficiaries,
failed to find popular acceptance could be the reason for the peo­
and that there had to be repack­ ple’s alienation from the govern­
aged. “Economics and politics do ment's economic policies.
The CWC is understood to have
not always go together”, he said.
Mr Rao admitted that the re­ thrown up several ideas. Most of
sults of the elections were an eye- them are proposals for strengthen­
ing the government’s rural devel­
opener for the party.
He told ptrty MPs that new opment programmes.
One suggestion is for finding
package, bring worked out by the
Congress Working Committee funds from allocations already
(CWC' with an eye on the coming made for expanding the food-forelec' ons in the five states, would work programme.
Another suggestion is for iden­
be presented before the people
______ Our Political Bureau______

tifying four most backward areas
in each state and make them model
centres of development.

The emphasis would be on
building roads, developing water
sources, providing loans for self­
employment and so on.
The committee has reiterated
the importance of ensuring that
the sops reach the target groups.
However, the possibility of the
reforms process being jettisoned
has been ruled out by the prime
minister, notwithstanding the crit­
icism that they were pro-rich.
“The reforms are for the
poor", he said. He was categorical
that the repackaging of the i. ■
forms would not be at the expense
of the country’s long-term eco­
nomic interests.
“Tile package should noi, rive

the country to bankruptcy", he
said. “This is a delicate exercise. It
is our duty to see that the finances
of country do not go waste”.
That there was not going to be a
U-turn on the economic front was
also clear from his sharp attack on
the opposition's politics of “reck­
less and irresponsible populism".
In a veiled attack on Mr N T
Rama Rao’s Rs-2 rice scheme, he
said that the opposition parties
make promises and within 24
hours of being elected descend to
Delhi to ask for financial as­
sistance.
He said: "When they promise
the moon, they should know the
state’s financial capacity. Making
promises and then saying that the
Centre was not giving money and
making it the scapegoat was not
fair. People arc already realising
this".
Earlir.-. in an informal chat
with n .1 ty MPs, the finance minis­
ter Dr Manmohan Singh, loo, de­

fended the reforms. “We have giv­
en you the best,” he told them. He
also argued that it was the party
organisation which had failed to
popularise the reforms.
In an interview to a video-mag­
azine, the commerce minister, Mr
Pranab Mukherji, said the reforms
would continue at the same pace.
He said the Congress had failed
to project its various programmes
to the public and explain the ratio­
nale for the reforms and policies it
had adopted.
Even so, it is voter-friendly
considerations which are expected
to influence the future direction of
reforms.
A pointer to this was available
on Thursday itself when the Prime
Minister assured a delegation of
textile workers from Maharashtra
that no NTC unit would be allowed
to be closed down. It is no secret
that the proposed closure of sick
NTC mills will figure in the forth­
coming elections in Maharashtra.

Pranab rises to defence
T

he commerce minister, Mr Pranab Mukherjee, has risen in
defence of the Congress high command by asserting (hat se­
nior leaders like Mr Arjun Singh and Mr N 1) Tiwari should not
have made public statements after the party’s rout in the An­
dhra and Karnataka. "Electoral reverses do not mean no confi­
dence in the economic reforms process,” he said in television
interview with Eyewitness on Wednesday, fhe reforms would
continue, he said. B See also page 2.
Economic, times

it-iS-^h.

Govt may increase
subsidies in Budget
From ARINDAM MUKHERJEE

With the economy moving
more or less on schedule, the
initial gameplan was to start the
process of a phased reduction in
subsidies with the 1995-96 Un­
ion Budget. This was to be a part
of the measures for overall fiscal
correction, aimed at bringing
down the fiscal deficit at least to
the targetted levels, apart from
putting a check on inflation,
which has been rising regularly,
touching the double-digit level
again this week.
However, it is learnt, in view
of the election results and the
political
developments
thereafter, the Centre is. ton­
sidering giving a further boost to
subsidies — specifically keeping
in mind that five States go in for
Assembly elections early next
year — giving a veiled indication
that once again the Budget will
be based on political considera­
tions than economic.
This might, however, go
against the entire strategy of the
Finance Minister, Dr Manmohan
Singh, who advocated a phased
reduction of subsidies and even
indicated a possible retargetting
of subsidies in his Budget
speech on February 28. 1994, to
ensure that the subsidies rea­
ched the poor strata of the
society and not the affluent.
Records show that at present,
out of every one rupee of
subsidy, only 40 paise reach the
poor, while 60 paise goes to the
rich and influential.
In fact, at a meeting of the
Cabinet Committee on Prices

last Wednesday, Dr Singh had
asserted that his stand on the
subsidy issue was clear and the
intention was not to increase
subsidies, but to bring them
down gradually, .with a view to
phasing them out totally. It was
then decided that the matter
would be referred to the Cabinet
Committee on Economic Affairs
for a final approval of the Prime
Minister.
At the’ highest levels now,
political developments seem to
nave outmanouvred economic
compulsions, with the prime
instruction being that the elec­
torate and vote banks should not
be disturbed at any cost. Sources
in the Finance Ministry say that
since subsidies have always
been an important pawn to
checkmate political and elector
al developments, there does not
seem any chance that tightening
measures will be allowed on this
issue this time.
On the other hand, Dr Singh’s
economic calculations have
been bearing fruit, with the
economy performing almost ac­
cording to expectations. A look
at the subsidy level since 1991,
i.e. since the reforms began,
shows that during 1990-91, the
total subsidy level was of Rs
12,150 crores which increased
.to Rs 12,253 crores in 1991-92.
In 1992-93, the subsidy level fell
to Rs 12,043 crores due to
measures taken to induct fiscal

discipline.
Going by this downtrend, the

12

Government substantially low­
ered the Budget estimate for
subsidies for 1993-94. However,
the actual performance during
the period suffered due to politi­
cal disturbances, starting from
the demolition of the Babari
Masjid in December 1992, fol­
lowed by a string of other events
including the securities scam
and the Joint Parliamentary
Committee probe.

As a result, against the Budget
estimate of Rs 8,375 crores, the
actual subsidy level reached a
phenomenal Rs 12,400 crores,
the highest since 1991.
In the current financial year
too, the Government had kept
the subsidy level low at Rs 9,483
crores and sources close to the
Finance Ministry say that with a
satisfactory performance of the.
economy, this level was ex pected to be maintained till the
end of fiscal 1994-95, provided
the economy was allowed to run
at this rate. In fact, due to the
improved tax collections — both
direct and indirect — and im­
proved performance in other
sectors, there was, for the first
time in years, a marginal "fiscal
surplus” rather than a fiscal
deficit
„
It is entirely likely, they say,
that
yielding
to
political
pressure, the Government might
utilize the surplus for feeding
subsidies now, since phasing
out them out has no longer
remained a prime issue in the
financial blueprint for the next
year.

Multinationals flay Rao’s statement on curbing foreign investment

MNCs doubtful over pace of reforms
Sanjeev Sharma & Rakesh Khar
NEW DELHI 16 DECEMBER

fact that foreign investment boosts
any economy, especially one like
the Indian economy. Once your
economy is sound then there is ev­
ery reason to believe that the poor
and the down- trodden would ben­
efit out of it”.

FOR the first time in the three and
half years of economic liberalisa­
tion, multinational companies
have raised a question mark over
the pace and sustainability of re­
"Individuals are not impor­
forms process.
While uncertainty prevails, top tant, what is important is consis­
MNCs are viewing India with mut­ tency in policies. Let me also tell
ed apprehensions. However, there you that the Indian currency is not
is pronounced criticism against strong enough to be on its own
putting any kind of curb on free without any support from foreign
investment," Mr Wei said.
flow of foreign investment.
Brushing aside the election de­
This criticism assumes tremen­
dous significance in wake of the re­ bacle, the Allied Signal president,
cent statement made by the Prime Mr Sunder Mulchandani, said, "to
Minister, Mr P V Narasimha Rao, us, the so called irritants are very
indicating curbs on foreign in­ minor and are not of any major
consequence."
vestment.
Ms Naina Lal of Morgan Stan­
However, most MNCs are con­
vinced about the irreversible na­ ley warned that now there would
ture of Indian reforms which they be definitely more cautious ap­
feel cannot be undone even with proach to fresh flow of funds,
which could, in the short term,
the change in the government.
Reacting strongly to the Prime lead to a slackening of the pace of
Minister's statement, Mr Sung investment.
This can largely be attributed
Young Wei, chief executive of
Daewoo in India said, “We are to a feeling of uncertainty about
very sorry to hear that the Indian the fortunes of the ruling party
government is seeking to put cer­ that is prevailing in the country at
tain curbs on foreign investment. the moment, she added.
Mr R Srinivasan, general man­
We understand that it is being
done to project an image of being ager, corporate affairs, ANZ
pro poor. I think the Indian gov­ Grindlays said in any democracy
ernment should realise the basic anxieties about electoral issue

tend to dominate business news
from time to time.
“The Indian reform process is
at a sensitive phase at the moment
and we believe that given our ex­
periences in over 100 countries,
there is cause for concern when
there is a likely directional shift”,
Mr Srinivasan added. “We believe
that the Government of India is
committed to
reform”,
he
stressed.
A senior functionary of KFC In­
dia said," these political changes
are not going to affect our deci­
sions to put in the committed in­
vestment. Tile plans would remain
as they were prior to these
changes. The doors of liberalisa­
tion have opened in India and it is
not possible to reverse them
now”.

The Flexibox International
managing director, currently on a
visit to India, said, “we perceive
the current political turbulence to
be perfectly normal and therefore
we see no reason for getting dis­
turbed. Changes in government
does not mean a change in the re­
form process. There is nothing to
be concerned about. If such politi­
cal changes are to cause drastic
changes in the reform process, we
will be spending sleepless nights
in Britain where the government

has changed. We will continue
with our activities in the country
as normal”.
A senior executive of General
Motors said, “we are convinced
that there will not be any going
back on investments. Govern­
ments changing here and there
and corruption charges being
raised is no new phenomenon. It
happens almost everywhere. India
is no exception. Therefore, we are
not unduly worried. We believe
the mass consumer upsurge in In­
dia cannot be stopped now. So we
are going ahead with our
projects".
Giving vent to his apprehen­
sions, Mr Baldev Lal, former cochairman, American Business
Council (ABC) said he had re­
ceived a spate of inquiries from ex­
isting as well as prospective inves­
tors in the US.
“We have told all of them that
there is no reason for concern.
However, we have got an impres­
sion that the government is likely
to put a halt on investment propos­
als in the consumer and white
goods sector," he said.
Mr Anuroop (Tony) Singh,
vice-president, American Express
Travel Related Services said, "to
my mind, regardless of which gov­
ernment is in power, the reform
process is irreversible."

•>tr

tints

n ti-Ti

Govt reforms have only helped inflation go up
by R, Sasankan

NEW DELHI
HE three and half years
of reform have been the
crudest period for the
common man in terms of prices
of roti, kapnda and niakaan.
The country has been going
through a double digit inflation
lor quite some time now and with
inflation in terms of wholesale
price index crossing the single
digit figure, all the price indices
arc now in double digits. The
prices may dip to single digit
before the current financial year
is over but the annual average for
1994-95, on present reckoning,
should end in double digit,
making lives difficult not only for
the common man but also for the
authors of economic reform.
For the common man, this is
the worst scenario since
Independence. The prices of food
grain went up by 58.2 per cent
since June 1991 , those of cereals
by 57.8 percent, pulses by 59.5
per cent, sugar by 56.6 per cent.

T

textiles by 42.5 percent, khadi by
165.4 percent, wood and wood
products by 169.4 percent.
chemicals by 51 percent, drugs
an J medicines by 41.9 per cent
and electricity by 63.4 per cent.
In rural areas, the price
increase in terms of consumer
price index for agricultural
labourers has been 44.4 per cent.
Consumer Price Indices for
industrial workers and
agricultural labourers together
cover about 85 per cent of
workers in the country. Inflation
in terms of these indices have
been in double digit for quite
some time now.
According to official figures,
the CPI for industrial workers has
been in double digit since May
this year and that for agricultural
labourers right from February.
The rate of inflation in terms of
CPI for industrial workers stood
at 10.3 per cent in October and for
industrial workers at 11.6 per
cent.
Even in terms of the wholesale
price index, inflation has been
■running at double digit till the end

Differential Price Increases

confirmed figures of the
corresponding period of the
previous year. This, however, is
distorted comparison. If
provisional figures for December
3 this year arc compared with the
provisional data for the
corresponding week of 1993, rate
of inflation works out to 10.2 per
cent, much above the 10.02 per
cent, the officially acknowledged
rate for December 10 this year.

Official Wholesale
Price Index (WPI)
basic 1981-82 =
100

Cool

lEGHAWKS SU1HENCO SEN

of July this year. Later, it dipped
to the single digit. There is a
disparity of opinion as to when
did inflation enter double digit
again? If the government figures
arc to be believed, the rate of
inflation (in terms of the
wholesale price index) crossed
single digit only on December 10.
However, it had crossed to double

digit a week before that, on
December 3 to be precise. This
was concluded on the basis of a
comparison of a provisional data
for December 3 this year with the
provisional data for the
corresponding week last year.
The government normally
compares the provisional data of
the current year with the
Indian Express

Again, if the provisional data
for December 10.1994 is
compared with that for the
corresponding week of 1993, the
rateof inflation should be 10.5
percent.
For the first 50 weeks of 1994,
price rise for all primary articles
worked out to 9.8 percent against
8.3 per cent for the corresponding
period of 1993 and 11.2 percent
for primary food articles against
6.5 percent in 1993 and 13.9 per
cent for non-food articles against
8.7 per cent in 1993. In the case of
non-food manufactured items, the
price rise has been 10 per cent
against 6.8 per cent in 1993.

ST-iS-Ilf

The grapes of wrath
ot a defeat but a debacle—the Con­
gress president is- reported to have
admitted this much at the very first
Congress Working Committee meeting after
the stunning beating that the ruling party
received in its two major strongholds, Andhra
Pradesh and Karnataka. Never before the
Congress in the party president’s home State
has fared so badly, getting so few seats since
■ its formation. This indeed must be a matter of
anguish for Mr PV Narasimha Rao, particular­
ly since he is the first from his State to become
the Prime Minister of the country. Moreso
because the appalling results have come.after
he himself took charge of the election cam­
paign for his party.
The immediate reaction of the Congress
-as provided by the Commerce Minister in a
television interview—was that the elections
were fought on local issues and that the Congress’s ouster at the poll would not affect the
standing of the party at the Centre. This was
obviously a mispresentation of the reality
since the main thrust of Prime Minister’s poll
campaigning was to seek the vote for Govern­
ment’s economic reforms. Laying it thick that
“the whole world is watching these elections
with interest", Mr Rao categorically declared
that "no one will give us loans if there is insta­
bility. Only a stable Government will have cre­
ditworthiness” and that stability, he claimed,
could be ensured only by the Congress winn­
ing at the polls. In other words, the Congress
president himself had made the Govern­
ment's economic reforms the centre-piece of
his electioneering and, therefore, there could
possibly be no two opinions that the poll resul­
ts were in the nature of a mini-referendum on
the Government’s handling of reforms.
Nobody would be so naive as to suggest that

N

the economic reforms alone
decided the voter's choice. Alli­
ed to the economic reforms was
the question of corruption
which the Government has
totally ignored, along with the
Government’s dragging the feet
over the JPC report on the secu­
rities scam, as also the equally
outrageous sugar scandal. The.
cumulative impact bn the
public mind has been that while
crooks and scoundrels perched
at high places could get away
with crores as kickbacks, the
common people are left with
back-breaking burden of soar
ing prices which has hit particularly the fixedincome groups as also the rural poor. It is pre­
cisely on this count that the economic reforms
as they have emerged could prove to be a liabi­
lity for the Government.

NIKHIL CHAKRAVARTTY
Political commentator
and columnist

tion system. All this is cynically brushed aside
by the Finance Ministry mafia who glibly say
that somebody has to pay the price for the eco­
nomic reforms: In other words, the poor must
pay for the reforms while the rich and the
super-rich shall reap the harvest.
Add to this, the Government’s shamelessly
pronounced preference for the foreign multi­
The measure of mass impoverishment as a nationals capturing the domestic market has
result of the market-oriented reforms is being begun to disturb even the bulk of the indigen­
calculatedly kept away from the public by the ous corporate sector, whose demand for an
Finance Ministry’s statistical jugglery about "even playing field” has been rebuffed by the
inflation having been confined to single digit. Finance Minister's homily about the need’for
It is not difficult to see through this dishonesty standing up to global competition. The fact
as the Government knows, as also the public, that the Government has been inviting the
that the prices of essential commodities are MNCs to take over the strategic heights of the
far higher. As the official figures concede, the economy is noticed in the formal guaranteed
price of common rice assold in the fair price' returns it has been offering to the foreign
shops has gone up from Rs 2.89 in June 1990 investor in key infrastructural sectors. This is
to over Rs 5.37 in February 1994 (may be hardly expected to enthuse those who care for
more today) and this too after a series of good the economic independence of the country.
monsoons for the last seven years. This indica­ The Finance Minister’s assurance of lifting all
tes the virtual collapse of the public distribu­ restrictions on imports even for consumer pro-

Hurt self-respect

Their darkest hour

16

Tut PiONEEft It. - IX - T t

ducts has provoked objections within the Gov­ widespread for him to give up the post of party
president. This demand reflects the lack of
ernment itself.
unity within the Congress in facing the crisis.
Already the Congress leaders are worried
about the fate the party would have to meet at
the next round of Assembly elections in two
Despite the elaborate media management
months time. And with such a heavy toll of
by the Finance Ministry mafia, the true face reverses at the State level, can the Congress
of the World Bank prescribed reforms
hold on to Parliament? Already the mood in
is getting clearer to more and more sections Parliament makes it abundantly clear that the
Government is not only put on the defensive
of the people. At least on three counts signs
but may not be in a position to present the
of discontent are evident: First, the growing
impoverishment of the population out side the next Budget, For the first time in three years
affluent circle at the top. Secondly, the spectre the economic reforms are being attacked
from within the Congress itself. The Finance
of ruination that haunts the small- scale in­ Minister and his cohorts are under fire—a
dustrial sector has undermined the confidenceof pathetic situation for a person who has so
large segment of the public in the economic long been busy collecting awards abroad. It is
reforms programme. Thirdly, the country's now becoming clear to the average Congress­
self-respect is hurt by the come-hither blan­ man that the hustling of reforms without a tho­
dishments towards the MNCs and the aban­ rough national debate is part of the hijacking
donment of the policy of self-reliance. It is of the economy by the Manmohan brigade act­
intriguing to find Mr Rao himself tell the FICCI ing as the minions of the Fund-Bank bosses.
If the Prime Minister is in a beleagured
annual session on the very day when he was
confronted with the reports of poll results state, he has only to thank his total reliance on
from the south, that there must not be too the Finance Ministry operators. It is not only
much dependence on foreign investment. Per­ the rising tide of discontent that the Govern­
haps he could divine even at this late hour the ment has to fear, but growing volume of
temper of the public, though one has to frank­ resentment and resistance stretching all the
ly remind him that this craze for large-scale ,way from the campaign against the MNCs led
foreign investment has been sedulously foster­ by Mr George Fernandes, to the tearing expo­
ed by the Finance Ministry of the very Govern­ sure of the new GATT by the Left, to the
“swadeshi” movement of the RSS. Dr Singh
ment over which the PM himself presides.
has to prove he is genuinely the Finance Mini­
ster of this country instead of a dutiful servitor
of the Fund-Bank that he appears. It is the dar­
The shock of the election disaster has kest hour for‘the Congress, thanks to the
already widened the rift within the ruling Con­ thoughtless adventurism into which its servile
gress. As expected, the Prime Minister is economic restructuring is about to land this
under attack and the clamour is getting great country of robust patriotism.

IMPACTON
EMPLOYMENT

orthos*5'
andPoVe‘

Mistakes to

learn from

Tears in the
safety net
y p government
lays off 2S000
casual workers

Privatise or be damned, says
World Bank
ENS ECONOMIC BUREAU

NEW DELHI
y\ y EARLY 20 per cent of
|\\J the 23,000 employees of
I
Indian Airlines (IA),
’ which operates 52 air­
craft, are redundant.

And, it tour staff per bus were to
be adopted as an efficient standard
for public bus operations then ab­
out 3,50,000 public bus employees
(about 47 per cent) of the labour
force would be redundant, says the
World Bank in a report on Indian
economy.
The report says that the major
privately-owned airline in India
has, in about one year, managed to
wrest approximately 20 per cent of
the domestic inter-city market from
the Indian Airlines’ grasp. It pre-'
diets that ’the privatisation of
domestic and international air ser­
vices will gain momentum after the
amendment to the Air Corpora­
tions Act,
Airport development and opera­
tions will move also to a "landlord*
type operation where many of the
facilities will be leased to private
operators to sell their services to
the airlines, the report adds.
In its study on the reforms in the
infrastructure sector, the World
Bank says that the steady privatisa­
tion of state-owned bus systems has
been less dramatic except for the
city of Calcutta where the rapid
financial and physical demise of the
state-owned bus company led to a
reintroduction of private bus ser­
vices into the metropolitan area.
where they now enjoy a monopoly.
At the national level, the process
is reflected in the decline of public
sector buses from 46 per cent of the
national fleet in 1980-81 to 33 per
cent in 1989-90. The pressure for

this reform - has come less from
poor quality service and more from
financial distress. In order to cut
losses of the state bus monopolies
and maitain services, the least pro­
fitable bus routes have been turned
over to the private sector which has
managed to make a profit without
fare increases.
The Bank is of the view that
there is a way to push ahead with
reform despite the concerns of
redundant labour and the power of
the unions. This is what the re­
forms in the infrastructure sector
has so far shown. For bus transport
the average number of employees
per public bus is 7.5 while that for
private bus is about 3. Personnel
costs of the state operations are
about 37 per cent of the total costs
while those for private operations
varies between 6 and 13 per cent of
total costs.
The report says trucking in India

25,1100 to 57,000. Today, there is
no shortage of trucking capacity in
India. The effect of this deregula­
tion and privatisation of trucking
has been to shift India from a
rail-dominated freight market in
the 1950s to road-dominated mar:
ket. in the 1990s.
Commenting on the impact of
reforms, the report says that in
trucking it has meant the mobilisa­
tion of large amounts of private
capital and the provision of sustain­
able. adequate, high quality, de­
mand-responsive freight transport
services.
In the case ot the airlines it has
meant an improvement in the qual­
ity of lA's service because of the
competitive pressures of. the pri­
vate airlines and has brought pri­
vate resources to bear where public
funds are no longer available. And,
It> the case of buses it has meant
the mobilisation of private re­

has never been publicly provided
nor subjected to the sort of detailed
government control that has
proved to be so costly in many
other countries. Under the Motor
Vehicles Act of 1939, attempts
were oeing made to protect the
Railways from competition by res­
tricting trucks to o|>ciations in a
single State thereby limiting them
to short-haul operations.
The World Bank report says
states were allowed to issue nation­
al multi-state trucking pennits sub­
ject to ceilings set by the Central
Government and these expanded
steadily as freight transport de­
mand grew and the railroads with­
drew from hauling privately-owned
goods in favour of public sector
goods and passengers
In 1986. the Central Govern­
ment removed the ceiling on
national permits and in one year
the number permits increased from

sources to provide passenger trans-;
port service in areas where service
might otherwise disappear.
A second lesson, according to
the Bank, is that the private sector
in India is willing to invest in and
operate mobile pieces of capital
equipment that can be removed,
sold or used elsewhere on short
notice. Hence, the risk of facing
the private operator is reduced to
acceptable levels. While aircraft,
trucks and buses are using fixed
infrastructure provided by the pub­
lic sector, they are actually the
providers of services the infrastruc­
ture makes possible.
"With public regulation to pro­
tect from market failure, all air­
planes and all buses in the country
could be provided and operated by
the private sector as is the case with
virtually all trucks on the national

highways and all buses in Calcutta",
says the report.
Tnoi«n Exrpcss

17

Panel suggests sweeping
changes in winding op
process of sick units
NEW DELHI, July 15

The Committee on Industrial
Sickness and Corporate Restructur­
ing has recommended setting up of
five fast track winding-up tribunals
with summary procedures to solely
examine winding-up cases
Simultaneously, the possibility of
barring overlapping jurisdiction of
Civil Courts in the affairs of these
winding-up tribunals should also be
considered by the Government. It
has also suggested that the presiding
officers of these tribunals should
know the Company Law as well as
Commercial litigation. The tribunals
should be situated at Bombay. Cal­
cutta, Madras, Delhi and Banga­
lore.
The Committee, headed by Dr.
Omkar Goswami, submitted its re­
port to the Finance Ministry re­
cently.
The report has also suggested
significant changes in the definition
of sick companies, making it volun­
tary for a sick company to refer its
case to the Board of Industrial and
Financial Reconstruction (BIFR),
changing the Sick Industrial Com­
panies ( Special Provisions) Act
(SICA) to enable it to override the
Foreign Exchange Regulations Act
(FERA), invoking article 252 of the
Constitution to overcome the bar­
riers to land sales created by the
Urban Land (Ceiling and Regula­
tion) Act, increased recourse to
mergers, modifying the provision
relating to prior State Government
approval for closures, changes in the
Companies Act and greater use of
powers under Section 20 (4) of the
SICA by BIFR to sell the assets of a
company to be wound up.
The report says that in the final
analysis, no amount of changes in
the Companies Act or allied laws
can accelerate the winding"up pro­
cess as long as the matter is under
the official liquidator and being con­
stantly adjudicated by the High
Courts.
In addition, the report says, the
Government must strengthen the
process of recovering debt from
working, viable companies. This can
be done by setting up of five recov­

ery tribunals only for recovering
corporate debts to secured creditors
to cover cases exceeding Rs. 50
lakhs There should only be sum­
mary procedures, and a "complete
code for recovery”, which may be.
used to prevent the overlapping
jurisdiction of civil courts
The rpport says that barriers to
restructuring serve only one overrid­
ing purpose of maintaining an array
of inefficient promoters and mana­
gers in the public and the private
sector, who justify their incompetent
existence on the ground that their
firms "protect" employment.
"Irrespective of ideology, indust­
rial and corporate restructuring has
to be thought as methods that maxi­
mise future payments to labour and
to secured creditors. Conversely.
barriers to restructuring help ineffi­
cient capitalists maintain their
stranglehold over the assets of a
company, and encourage them to
renege on their obligations to banks.
financial institution, the Govern­
ment, the workers," the report says.
The report says that for any
meaningful restructuring, the re­
sponsibility of industrial-and corpo­
rate reorganisation must shift from
secured creditors and the State to
the defaulting debtor firms.
According to the report the de­
finitions of sickness in SICA and in
the proposed amendment to it are
serious barriers to reorganising un­
healthy industrial companies be­
cause they primarily identify termi­
nally sick firms. Moreover. SICA
definitions are "backward" looking
and based on the historical book
value of a firm's assets, not its future
earning potential, nor its current
realisable market value.
■> In SICA's negative net worth
criterion, what matters is that the
book value and not market value of
the firm is less than its current
financial obligations. As such the
SICA definition creates a situation
where the "seemingly sick" firms
exceed the quantum of truly sick
ones.
It has, therefore, recommended
that the new SICA should eliminate
the negative net worth criterion
altogether. In its place, the focus
should be on incipient sickness. For

18

this purpose, the Government
should integrate the financial and
industrial sector by using the defini­
tion suggested by Narasimham
Committee. The definition of sick­
ness should change to default of 180
days days or more on repayment to
term lending institution or irregular­
ities in cash credit or working capital
for 180 days or more.
The report says that a sick com­
pany’s own reference to BIFR
should be voluntary and not manda­
tory as required by Section 15 (I) of
SICA. Making the company’s own
reference voluntary will reduce the
number of cases that get registered
with BIFR and lessen the adminis­
trative burden. More signifcantly, it
will give freedom to the firm and the
secured creditors to work out a
reorganisation package outside of
BIFR if they so choose and freedom
to choose is a cornerstone of basic
economic reform, the report says.
Making SICA override FERA,
the report says, will encourage fore­
ign investors to take over potentially
viable sick companies and, if nothing
else, raise the market price and bid
values of these otherwise poorly
utilised industrial assets. Though this ,
sounds like a radical suggestion, it
will attract foreign capital and equity
- investing in existing plant is cheap­
er than sinking funds in a greenfield
location.

The Centre, according to the
report, should take the lead by
. asking the Union Territories to grant
exemption under sections 20 and 21
of the Urban Land (Ceiling and
Regulation) Act (ULCRA), particu­
larly for BIFR schemes. The Gov­
ernment should convene a confer­
ence of states and attempt to per­
suade them to amend these sections
to allow exemption to land sale
recommended by BIFR, subject to
regional master plans. ULCRA is
based Article 252 of the Constitu­
tion, which gives Parliament the
power to legislate for two or more
states, given their consent. As such,
th? Union Government should con­
vince at least the minimum number
of states needed to amend ULCRA
which is a serious barrier to indust­
rial restructuring.

The report says that except in
some states, there is hardly any
evidence of labour force presenting
insuperable hurdles in private sector
restructuring. Nevertheless, there is
a major barrier to restructuring the
work force due entirely to prevailing
practices among State Govern­
ments. Sections 25 (N) and 25 (O) of
the Industrial Disputes Act require
prior permission of the State Gov­
ernments for retrenchment of work­
ers and permanent closure of indust­
rial undertakings.
The Government, the report says,
must try to amend sections 25 (N)
and 25 (O) of the IDA so that there
there should be no need for applying
to the the appropriate Government.
In theory, any retrenchment or
labour rationalisation recommended
by BIFR under a sanctioned scheme
overrides the provisions of sections
25 (N) and 25 (O) of the IDA.
However, this needs to be clearly
notified and publicised since Labour
Commissioners of many State Gov­
ernments seem to be unaware of it.
Furthermore, the report says, the
Government should amend tbe
compensation for retrenchment and
closure from 15 days' wages to one
months’ wages per year of com­
pleted service. Fifteen days’ wages is
a niggardly amount and if the Gov­
ernment wants workers to agree to
being laid off, it must make the
minimum pay-off more attractive.
Chapter VB of the Industrial
Disputes Act, which governs lay-off,
retrenchment, and closure, applies
to undertakings having 100 or more
workers. This should be raised to
300 or more, the report says.
The report says that RBI's guide­
lines for rehabilitation must be
altered to abjure the notion of
sacrifices and instead address the
basic issues in appraisal.
Wherever, write-offs are taken,
these should be in the form of
debt-equity conversion: the financial
institutions should adjust the write­
off against some equity of the sic
company.
rt
In this connection, the reP“
points out, debt-equity conversi
dominates outright writing 0 ’
good future states, the secure
ditor holds profitable equity (

it can sell elsewhere or back to the
company), while in bad states it is no
worse than a write-off.
Mergers and acquisitions, the re­
port says, are the dominant route of
industrial and corporate restructur­
ing the world over, In fact, the
successes of BIFR have been the
merger cases under section 17 (2) of
SICA and not rehabilitation
schemes sanctioned under section 18
(4)-.
Given the importance of mergers,
the report says, the Central Board of
Direct Taxes (CBDT) must play a
more facilitating and positive role.
Merger proposals that are endoge­
nously designed and passed under
Section 17 (2) of SICA must get all
the benefits under sections 41 (1),72

A, 79, and 115 J of the Income Tax
Act. and enjoy the overriding status
of SICA as do the schemes under
section 16 (4).

To aid mergers and financial res­
tructuring of sick companies, the
report says, an additional amend­
ment should be tagged on to the
proposed Companies Bill which
should provide that notwithstanding
sections 110 to 112 in the proposed
Bill, companies should be allowed to
issue share carrying varying rights to
voting and dividend, up to a max­
imum of 25 per cent of their total
paid-up share capital.
The report says that the Com­
panies Act even in its proposed form
and its implementation works

against the simplest type of corpo­
rate restructuring -changing the
management or directors of a sick
industrial company. As such, the
Companies Act should be amended
so that secured creditors can imple­
ment de facto changes in manage­
ment or the Board of Directors in
instances of repeated debt defaults.
There must be a clause that when a
company defaults on repayments to
secured creditors in excess of 180
days, the creditors may, either sing­
ly, or jointly secure a change in
management, which could include
the entire board and appoint a
person of their choice as executive
or managing director or chief execu­
tive.
Financial Express 16-7-15

No permission may be needed
to shut sick units: Sangma
_____ Our New Delhi Bureau_____
NEW DELHI 27 APRIL

THE UNION minister of state for
labour, Mr P A Sangma, has said
the new industrial relations law,
mow awaiting cabinet approval,
■will allow companies to close down
Itheir sick units without taking the
jprior permission of the goveernment.
This is being done by abolishing
ssection 25 (b) of the present Industlrial Relations Act. Under this law,
tat present, labour ministries in the
sstates have the power to withhold
permission to any company that
vwants to close a unit and, as Mr
Sangma pointed out, there has not
yet been a single case where such
permission has been granted. Undler the new law, this exercise of
poower by the states will stand
aibolished.
Mr Sangma said there was no
justification for having such a provrision (introduced during the

situation in the country at present
was.
In response to a pointed ques­
tion, he countered: “Why do you
need such a law? Even under the
present Industrial Disputes Act,
you can retrench workers. In fact,
under the new law you will have to
pay more more than twice the com­
pensation to any worker you want
to remove."
The policy attempts to enforce
discipline among the labour force,
increase compensation amounts to
workers who are retrenched and
replace the current tripartite mech­
anism of dispute settlement with a
bipartite one, the labour minister
disclosed.
"The purpose is to discipline
them (workers) and not to displace
them," he remarked.
Commenting on the controver­
sial new pension scheme, Mr
Sangma said the government had
merely “accepted the proposals" of
the tripartite committee that looked

emergency) when it does not exist
anywhere else in the world. Only
France had a similar law, and even
there the clause merely says that
the government would be "kept in­
formed" of the closure of a com­
pany.
The labour minister was speak­
ing at the penultimate session on
the concluding day of the annual
session of the Confederation of In­
dian Industry here on Tuesday.
The minister said the new policy
was employment-generation ori­
ented and would not lead to putting
workers out of jobs.
What it does emphasise is a new
work and management culture,
where quality, competitiveness and
a wage system linked to productivi­
ty would become the priorities, Mr
Sangma stated.
He was unusually cagey about
when the law would come into
force, indicating how sensitive the
issue was and what the govern­
ment's political judgement of the

into the issue. All the unions were
members of this tripartite commit
tee and they had approved the
scheme, he claimed.
The objective of the new indus­
trial relations bill is also to encour­
age the setting up of labour inten­
sive industries, and not capital
intensive or high technology ones,
he said.
The labour minister said the
new policy was important to create
employment for an estimated 94
million people who will be unem­
ployed by the year 2002. Since the
growth rate of the labour force has
been at a rate of 2.5 per cent and
population growth at a rate of 2.1
percent, this target of near-full em­
ployment could be achieved only by
an employment growth rate of 2.8
per cent.
“The policy has been so de­
signed that India's biggest human
resource, its people, do not become
a liability but an asset," he said.

Economic Times <3 8-9-13.

19

Labour law changes to give
free hand to MNCs
Court, the Ministry felt the best cause of the proposed labour laws
move would be to drastically arc power, steel, textile and oil.
change the existing laws, notwith­ where New Delhi is seeking the
NEW DELHI. Nov 16
standing political pressure- In m maximum foreign investment.
According to sources repre­
The Governmen' is contem­ various quarters
plating major amendments in the
The move, it is reliably learnt. sentatives of a few French and
labour laws, especially those re­ has the blessings of the Prim- Japanese companies, who also
lating to recryitrpent and re- Minister, M> >’ V Narasimba Kuo sailed on the Finance Mimstrv
-tronckraent
soon after the who asserted that economics must officials, were told that the Gov­
Assembly elections that would take primacy over politics - and ernment was undertaking this ex­
give the multinational corpora­ the support of reprecentativ.-s of ercise tc attract more investment
tions (MNCs). a virtual free hand the Bombay Club that recently in the aforesaid sectors, especially
to control the workers in case of met the Finance Minister. Dr fmm companies that have showed
m'ercst but complained about the
joint ventures or takeovers,
Manmohan Singh
country's ngfd labour 'laws.
Hiclilv-plnced industry sources
Sources turthcr sain the Fi
'The representatives, especial­
told financial Express that repc
ated indications to this eir'ect have nance Minister had recently de­ ly the Japanese told the Finance
been given to representatives o! a liberated upon the is-ue with the Ministry olfic’als that despite hav­
number of American and West iobour Mmiste; Mr P A Sang- ing me best technology and better
European MNCs that have called ma. who was averse to any change management practices, the rigidi­
on the Ministry of Finance during in the existing labour laws of the ties tn the labour market posed
major problems for them to oper­
the last six week.' to discuss their country.
But despite such objection­ ate m India". sources said.
investment plans in the country
Interestingly, this is the second
The Finance Ministry was in­ front Mr Sangnta and the coun­
itially in the favour of retaining try's trade unions, the Finance time the MNCs have made a
the old laws for the existing com­ Ministry with the backing of the scries of representations to the
panies and draft new regulations Prime Minister is going ahead Government Earlier, the MNCs
lor takeover and joint ventures by with its plans to redraft the labour had urged the Government to
laws.
introduce further liberalisation in
foreign companies.
The sources furthei said the the financial, public sector and the
But since such a move is likely
to be jettisoned by the Supreme sectors likely to be affected be­ consumer goods indnstrv

By Shsntar.u Guha Ray

Financial express- n-u-S3

Wagon industry reels as railways halt
orders
ore than 10,000 people working in
the wagons industry face an immin­
ent threat of being thrown out of job follow­
ing the total absence of fresh orders from
the railway ministry. Another 15.000 wor­
kers in the ancillary industry are also like­
ly to be rendered jobless.
Since most of these wagon units are
located in the eastern part of the country
and as more than 70 per cent of the wor­
kers belong to West Bengal, Chief Mini­
ster Jyoti Basu wrote to the Prime Mini­
ster and also met himrecently to apprise
him of the gravity of the situation. He is
also leamt to have told P V Narasimha
Rao that labour is getting restive and that
the railways should start placing orders
on these units without further delay.
Minister of state for industry Krishna
Sahl also called upon railway minister C K
Jaffer Sharief to impress upon him the
need for the railways to take immediate

M

remedial action to prevent the labour situa­
tion in the eastern sector reaching a flash
point, especially during the current festive
season.
The situation has arisen since, for the
first time after independence, the rail­
ways, instead of placing orders with these
units for the entire year, asked for its requi­
rements of the first six months only. It
was understood the order for the next six
months would come much before the six
months are over on September 30.The wagon industry, which consists of
six units in the public sector and five in
the private sector, had delivered 10,750
wagons till September 30 against earlier
orders. Though it was expected that an
order for another 10,750 wagons for delive­
ry during the second half of the year
would follow automatically, it is now
leamt that because of the resource crunch
and diversion of funds for gauge conver­

20

sion work, the wagon order may not
materialise.
Industry sources allege that the authori­
ties are paying more attention to gauge
conversion activities because of short­
term political gains. Though the govern­
ment is spending huge sums on procure­
ment of the state-of-the-art electric locomo­
tives from Asea Brown Boveri, all its
efforts would come to nought if these
locos do not have sufficient number of
wagons to haul.
Officials say that though at present
there is slight sluggishness in the econo­
my and the railways fell short of its reve­
nue earning traffic by six million tonnes in
the first six months of the current year,
this is not a good enough reason to_^op
the procurement of rolling stock. Inis.
they say, is a temporary setback because
of restructuring of economy whereby the
government has stepped down its invest­
ment As finance minister Manmohan

Singh has also pointed out, this phase is
expected to be over shortly and the econo­
my will register a growth of around six
per cent per annum.
The government is hopeful of a substan­
tial improvement in the production of
steel, cement, petroleum
products,
foodgrain and fertilisers. Simultaneously,
there an import-export surge is expected.

If transport and power generation do not
pick up during this period, this will act as
a damper on the economic revival effort.
Industry sources point out that keeping
in view this scenario, any action which
stops augmentation of transport capacity,
including railway freight, may have a seve­
re Impact on the country's drive for push­
ing the economy ahead.
Business STANDARD

ll-IO-Tb.

Tears in the safety net
Last June, Daulat Singh, a 47year old
technician in the India Tourism Develop­
ment Corporation (ITDC) run HotelJanpath took voluntary retirement and
accepted Rs 1.25,000 as compensation
money from his hotel. Singh felt that
this was the best option open to him
alter 23 years of service in the hotel.
Today, a year later, Singh has run out
of cash. He used up the entire amount
for his son’s wedding and adding a room
to his house. Having opted for a VRS, he
could not join any public sector firm.
None in the private sector too was will­
ing to employ him. Singh did consider
the possibility of setting up his own busi­
ness but gave it up because he "did not
know what to do or where to begin".
Singh is now faced with the prospect of
having to support the household and fin­
ance his daughter's wedding — all with­
out «a job. And his three sons, who stay
with him. haye refused to help. "I don't
know how long I can carry oh without a
job," he says.
ingh’s story is illustrative of the
way workers taking voluntary reti­
rement in public sector companies
have used their money. With no guidan­
ce from the management or trade union
leaders, these workers have spent their
compensation money on weddings,
repaying old debts and meeting family
expenses.
Only a few have bothered to invest
the money or used to set up their own
business. For instance, Khemchand, a
bar assistant in Delhi’s Lodhi Hotel opt­
ed for the VRS fearing that the hotel
would soon close down. He received Rs
129,000, which he used to help his son
set up a small provision store. Though
only 49 years old. Khemchand decided
not to accept a new job and claims that
he was even offered a job as ‘barin-charge’ at Kwality Restaurants, which
he rejected.
But Khemchand is an exception and
nearly eight months after the National
Renewal Fund was given the final goahead, its promoters can claim few suc­
cess stories. In fact, in most cases the
VRS programmes financed by the fund

S

are achieving results exactly opposite to
that envisaged by the planners.
The NRF was conceived as a social
safety net for workers affected by
industrial restructuring and as a fund
for the retraining and redeployment of
retrenched workers. But the NRF has
so far functioned primarily as a fund for
voluntary retirement schemes in the
public sector: out of Rs 1,529 crore dis­
bursed under the NRF, the entire
amount has been used for VRS. And its
plans for retraining, redeployment and
counselling of workers on how to use
their compensation money have still to
take off.
And the VRS programmes too have fai­
led to meet the targets originally envisa­
ged. One indicator is that last year, com­
panies could not use the entire amount
of Rs 829 crore disbursed for the pur­
pose. Around Rs 179 crore is unused
and has been transferred to the NRF
public account.
This is not surprising. Especially
because few companies have bothered
to follow up the VRS with counselling or
retraining services. Among the public
sector units which have been allocated
money under the NRF programme are:
Bharat Heavy Electricals Limited, the
Steel Authority of India Limited, the
Delhi Transport Corporation. (Rs 90
crore), the Cycle Corporation of India
Ltd, (10 crore), the Hindustan Steel
Works (Rs 60 crore), the National
Industrial Development' Corporation,
(Rs 0.50 crore), the Tyre Corporation of
India Ltd (Rs 8 crore) and the National
Bicycle Corporation of India Ltd (Rs 1
crore).
Workers allege that companies often
use pressure tactics to force them into
accepting the VRS. For instance wor­
kers at the ITDC, the NIDC, and the
NPCC, say that their departmental
heads told them that if they do not take
the scheme they would be transferred
out into remote locations. Some say,
that the management told them that the
unit will be closing down and that the
VRS is the best option for the worker.
Purushottam Rawat, a room attendant
in Lodhi hotel for 23 years, said he

21

accepted
theVRS when his
departmental head called him <and
said
the hotel is to be closed.. If
he did„not i accept, ne would be trans­
ferred Jo a faraway city. By the time
the hotel closed its VRS iniJune 1992.
nearly 1.100 employees had opted for it.
Similarly at the NIDC. When the sche­
me was introduced in May 1990, there
were few takers, which the manage­
ment attributes to suspicion of a new
scheme. But unions allege that the mana­
gement forced people to accept retire­
ment. B.I.. Rawal. head of the NIDC
Staff Association, alleges that he was pre­
ssured, but managed to resist. A.K.
Maitra. GM. human resource develop­
ment. denies this. So far. 48 people have
accepted the VRs ancles 1.40.00fiorihaf
been spent, 'of which -NRF -assistance
amounted to Rs 60 lakhs, he says..
But it is clear that no company-lhas
bothereq to create a safety net for
the worjker Neither ihave the unions
'tried to educate.the workers Ion how
to use
the* money received t is
compensation. Says
D Thankappan,
labour leader. Unions,have traditionally
been
powerless
in pre venting
workers 'from
taking'
VRS
because their association with the wor­
kers stops at the factory gate. They are
not involved in the socio-cultural life of
the workers." His contention is that wor-.
kers will continue accepting, the VRS for
lack of a better option and the manage­
ment’s terrorising tactics.
Some trade unionists however claim
that the workers are to blame. "They
don’t come to us. How can we help them
then?", asks a union leader of one public
sector unit. True, but even if the wor­
kers do approach the trade unions for
help, they say, the unions don't co­
operate. Trade unions do not want to
endorse the VRS programmes and
believe that advising a worker on how to
use his funds or strike a better deal with
the management would go against their
principles say workers.
Thus, without the unions or the mana­
gement to counsel them on life after
VRS, the workers often squander all the

compensation money on sundry expen-'
ses without investing for the future.
Industry ministry sources assure that
this will soon change. The government
will step in with retraining and redeploy­
ment programmes this year, a senior
bureaucrat promises. That is, as soon as
funds are available. Rough estimates by
the ministry show that for training the
40,000 odd workers who have taken the
VRS so far, Rs 60 crore will be needed.
But funds are not forthcoming. The
industry ministry officials blame the fin­
ance ministry for not providing enough
funds for the NRF. Says one bureaucrat
in the industry ministry, "We are hope­
ful that the request for more will be
accepted during the debate on supple­
mentary grants in Parliament in July."
The finance ministry is silent about
where money for the NRF will come
from. The amount allocated, so far, is
short of the targeted amount of Rs 2,400
crore. The shortfall is largely because

the government failed to meet its tar­
gets on PSU disinvestment (Rs 1,913’
crore has been gathered as compared to
a target of 3,500 crore for 1992-93).
Worse, Manmohan Singh recently
declared that around $600 million of
unused IDA (International Develop­
ment Agency) assistance would be used
for a new social safety net Government
officials are not sure what the new sche­
me is. Neither can they explain why the
government is not using these funds for
the NRF which needs additional cash.
Says a senior finance ministry official,
"A .decision on the use of IDA money
will be taken once the loan comes
through. The main purpose of seeking
such an assistance is to ensure that unu­
tilised loans do not lapse."
As for more funds for the NRF. Well,
that depends on whether the Parliament
clears- additional grants for the purpose
in the next session.
Business Stanoa«£>

q_ s-13

MP government lays off
28000 casual workers
FROM BHARAT DESAI

Bhopal,Aug. 3: Nearly 28,000 dai­
ly wage earners employed by the
Madhya Pradesh government
lost their jobs yesterday, in an
austerity drive launched by the
Digvijay Singh government aim­
ed at laying off temporary staff
recruited after a ban on fresh
appointments was imposed five
years back.
Even as diehard supporters of
the state chief minister, Mr Digvi­
jay Singh, were trying to justify
the austerity measure, the
government decided to extended
air travel facilities to employees
earning a basic salary of Rs
2,000. So far, the facility was avai­
lable only to those drawing a
basic of more than Rs 3,000.
The Gwalior bench of the
Madhya Pradesh High Court
today stayed the retrenchment
and fixed August 7 for the next

hearing on a petition filed by the
'trade unions. However, the
government is still justifying the
laying off on the ground that the
appointments were made in
gross violation of the standing
ban orders.
Trade unions, Left parties and
the BJP quickly took up cudgels
on behalf of the sacked workers
and began planning demonstra­
tions, bandhs and rallies here
over the next week.
Copies of the retrenchment
order will be burnt in all district
headquarters and even unions
sympathetic to the Congress(I)
have been forced to condemn the
decision.
The retrenchment
move will particularly affect the
departments of public works,
public health engineering and
irrigation which employ most of
these daily wagers.
The. austerity move is likely to
save the state upto Rs 50 crores
annually. The government has

22

NBT exhibition
FROM OUR CORRESPONDENT

New Delhi, Aug. 3: In the days of
television
and
video-games,
children are fast losing their
reading habit. In order to revive
the popularity of books, the
National Book Trust (NBT) is
organising a series of book exhibi­
tions in the capital this month.
The month-long exhibitions,
beginning from today, will have
childrens’ books written in
Hindi, English, Punjabi and
Urdu. Talking to newspersons,
Mr Arvind Kumar, NBT director,
said, “The earlier exhibition in
Delhi was a big success,” and the
NBT is now engaged in novel
book-promotion experiments.

For instance, the publishing
House will start a system of gift
coupons.

promised employment to Eie
affected workers and has issued
directions to enrol the affected
workers in the employment offi­
ce under a special category whe­
reby they can be provided other
jobs on a priority basis. Instruc­
tions have also been issued to re­
employ these persons under the
Integrated Rural Development
Programme (IRDP) and the Jawahar Rozgar Yojana.
The state government has also
warned that those found violat­
ing the recruitment ban will have
to pay the daily wage workers out
of their own salaries.

The government had issued
orders banning fresh recruit­
ment from December 31 and had

also decided to regularise the ser­
vices of all those who had joined
before the cut off date. Despite
this, appointments in the works
department continued without
government justifying the laying
off on the ground that theappointments were made in
gross violation of the standing
ban orders.
Significantly, Mr Singh had
made the announcement last
week just after a meeting of tfae
state planning board,. which "is
also supposed to have approved
the measure.
The agitation by the trade
unions will be the firs t major chal­
lenge for the Digvijay Singh
government.

Govt considering privatisation
of municipal bodies
by Renu M R Kakkar
FE Bureau
NEW DELHI. Feb 18

Municipal bodies in the country
are sought to be privatised accord­
ing to a proposal being seriously
considered by the Government and
the Planning Commission, official
sources said.
The Government intends to take
up towns all over the country run by
privatised municipal bodies and
serve as model towns for the rest of
the country. The Infrastructure leas­
ing and Finance Corporation based
in Bombay has been in active con­
sideration with the Urban Develop­
ment Ministry to concretise the
proposals to this effect.
The ILFS has been asked to study
proposals to this effect and come in
for discussion with the Urban De­
velopment Secretary.Mr R K Bhargava on February 11.
The Urban Development Minis­
try in its budgetary proposals has
made a provision for a grant of Rs

llx) crore for investment in the four
metropolitan citi.es to cater to urban
transport, waste disposal, sewerage
and slum upgradation.
Another Rs I(X) crore investment
is envisaged for improving the road
capacity of metropolitan and second
order cities having a population of
more than three lakhs for construc­
tion of roads.flyovers overbridges.
street lighting etc.
But the Planning Commission
view is also evident considering
clear indication of its intention to
cut down the annual plan budget
beyond the approved Rs 550 crore
as per a letter to the Ministry dated
January 15.This would mean with­
drawal of funds from such schemes
pushing the sector towards priva­
tisation of these bodies or at least a
majority of their services to gener­
ate the requisite funds.
In fact the first tightening of the
fist over budgetary allocation for
municipalities by the Planning Com­
mission was indicated on Tuesday
with cut in the budgetary allocation
for the next financial year for (he

23

New Delhi Municipal Corporation
of Delhi in the current year.
As per information available.the
Planning commission has cut down
its plan allocation by at least 25 to 40
per cent. In transport sector,
NDMC has been allotted Rs 600
lakh as against Rs 800 lakh de­
manded.
In the power sector, NDMC has
been allocated Rs 800 lakh against
their proposed allocation for Rs
1,000 lakh. The Planning Commis­
sion has given only Rs 100 lakh for
various schemes indicated by the
New Delhi Municipal Corporation
against last year's allocation of Rs
174 lakh.
This in effect is the first indication
that the Government is urging the
municipa’ites to churn out their own
finances as the Government has
hardly any money to dole out. The
whole idea is that the work of
municipalities is actually income
generating and it is only to impress
upon them that they make their own
jobs remunerative.

COVER STORY

Fund-Bank orthodoxy
and poverty in India
Madhura Swaminathan

VER the last 20 years, the Bretton
Woods iustitujjons have disbursed
loans for "stabilisation” and “struc­
tural adjustment” to more than 70
developing countries. These loans
carry tough conditions that cover a
wide range of domestic policies and
institutions in borrower-countries. The
implementation
of
orthodox
stabilisation and structural adjustment
programmes has been disastrous for
the working people and the poor of the
countries in which these programmes
were imposed.
Although different functions were
envisaged for the Bretton Woods pair,
the International Monetary Fund
(IMF) and the World Bank, when they
were conceived, the division of respon­
sibilities blurred over the years. In 'he
1980s, there was extensive overlapping
in the work of the two institutions and
they collaborated explicitly in design­
ing loan-programmes, for structural ad­
justment in specific countries.
In the first 20 years of the IMF,
over one-half of its resources were
used by industrial countries. Over
time, industrial countries stopped bor­
rowing from the IMF, and it became a
source of credit almost exclusively for
developing countries. This process ac­
celerated after the start of the debt cri­
sis in 1982. There is now a clear divi­
sion between borrowing and non-bor­
rowing members of the Fund, a shift
associated with a gradual phasing-out
of low-conditionality loans. By 1981,
financial assistance from the IMF was,
in the words of an IMF publication,
“conditioned on the adoption of ad­
justment fending.” The new types of
loans and ' -the new environment of
lending are associated with new condi­
tions. IMF conditionality now pertains
not just to balance-of-payments or ex­
change rate and price policies but to a
large number of structural features of
an economy. Conditionality has be­
come more wide-ranging and more

O

Madhura Swaminathan is Associate
Professor in Economics at the Indira
Gandhi Institute of Development
Research. Bombay.

stringent.
A similar development occurred
with respect to lending by the World
Bank. Until the mid-1970s, the World
Bank lent money primarily to finance
development projects. The conditions
imposed on the borrower related to
performance in respect of specific pro­
jects. From the 1970s, however, the
World Bank began non-project finincing. In the early 1180s, the World
Bank introduced Structural Adjust­
ment Loans (SALs) and Sectoral Ad­
justment Loans (SECALs) and their
share in total lending has increased
steadily.
This shift in the nature of lending
was associated with a broadening of the
conditions imposed on the borrower
The conditions attached to structural
adjustment loans are economy-wide
and include those on trade policy, pub­
lic finance, the ownersnip and manage­
ment of public sector enterprises, and
agricultural and industrial policy.
With the debt crises of the 1980s,
and with both the IMF and the World
Bank lending for stabilisation and
structural
adjustment,
“cross­
conditionality” came into force. The
World Bank, for example, may not
agree to a SAL unless the borrower­
country has accepted the terms of a
stand-by agreement with the IMF. To
take another example, a borrower may
have to change exchange rate policies
as part of an agreement with the IMF
and, later, change other trade policies,
such as tariff policy, to qualify for a
loan from the World Bank. Together,
the two Bretton Woods institutions are
able to impose a host of conditions on
the economies of developing countries.
In what would have seemed a role-re­
versal in earlier years, the IMF can
now impose conditions on specific sec­
tors rather than on macroeconomic
variables and the World Bank can im­
pose conditions on macro-management
rather than only on specific sectors,
and it is now difficult to distinguish
between the conditionalities of the two
institutions.
The need to study the effects of or­
thodox stabilisation and structural ad­
justment programmes comes from the
fact that they have been implemented
in large parts of the developing world.

Fronllme. Auguat 12. 1994

24

In cut Sriharan sAfrtca alone, in 1990,
nineteen countries, had stand-by or
SAF (Structural Adjustment Facility)
or ESAF (Enhanced Structural Adjust­
ment Facility) arrangements with the
IMF. In 1992, thirty-five countries of
Asia and Africa had SAF agreements
and another 19 countries had ESAF
agreements with the IMF. The countr­
ies of Latin America, of course, were
major recipients of IMF finance in the
late 1970s and the 1980s. With respect
to World Bank lending, 55 countries
had received SALs and SECALs by
1988.
The typical elements of an orthodox
stabilisation and structural adjustment
programme are first, ■ fiscal austerity,
monetarv contraction and devaluation,
and second, a set of policies at the
sectoral and micro level. The second
set of conditions focus on “reform” of
“policies and institutions” and include
privatising public sector enterprises,
deregulating
financial
markets,
deregulating agricultural prices, re­
moving
trade
barriers,
and
deregulating the labour market.
There is now a large literature that
documents
the
consequences
of
stabilisation, and structural adjustment
programmes on the economies and
peoples of developing countries in all
parts of the world.
Orthodox
stabilisation and structural adjustment
programmes have been criticised, in
India as elsewhere, on three major
grounds. The first is that they under­
mine the sovereignty of borrower-na­
tions. The second is that orthodox pro­
grammes have failed to stimulate social
production and economic growth. The
third is that these policies impose a se­
vere burden on the poor.
An unambiguous cbn'cldsion from
the international experience is that the
victims of the process of structural ad­
justment are the poor and the property-less. I shall attempt to illustrate
the impact of structural adjustment on
the poor in India by examining
changes .in the 1990s in income-pov­
erty, expenditures on education and
health and the public food-distribution
system.------

Current evidence suggests that in­
come-poverty probably worsened in

Table 1: Number of unemployed: projections
Base scenario

Year

1991-92
1992-93
1993-94

High growth
scenario

Low growth
scenario

14
18
19

16
22
25

13
14
15

. (in niilliunn)

Nolt. The base scenario refers to (he case without stabilisation, that is, where projections arc
based on the trend observed in the growth of output and employment during the 1980s. After
stabilisation, two sets of growth projections, made by the National Institute of Public Finance
and Policy in 1991. arc used for estimating unemployment in the low growth and the high
growth scenarios.
Sou/xw. S. Mundic, "The Employment Effects of StabiliMtion snd Related Policy Changes in India 1991-92 to
1995-94” in Social Dimensions of Structural Adjustment io India, ILO-ARTEP, New Delhi, 1992.

Table 2: Central Government outlays on programmes
for poverty alleviation (at constant prices, 1980-81 = 100)

1989-90
1990-91
1991-92
1992-93

Outlay as % of

Outlay

Year

In Rs. million

Index

total expenditure

GDP

13610
11890
8940
11340

100
87.3
65.7
83.3

2.98
2.54
2.05 '
2.50

0.61
0.50
0.37
0.45

Source: Deepak Nayyar, Economic Reforms in India, ILO-ARTEP Working
Paper., New Delhi, 1993, Table 2, p 33.

India between 1991 and 1994. Al­
though National Sample Survey data
on consumer expenditure are not avail­
able for the 1990s, scholars have infer­
red an increase in income-poverty
from other types of evidence.
First, the structural adjustment-induced stagnation of the economy over
the last few years resulted m more un­
employment. According to Sudipto
Mundle, the extra unemployment cre­
ated by structural adjustment is likely
to be at least four million persons a
year (openly unemployed) between
1992 and 1994 (Table 1). With a low
growth scenario, Mundle estimated
that “the additional unemployment
created on account of stabilisation
would amount to about 10 million per­
sons.” Industrial growth stagnated
over the last three years, and the
growth of rural non-agricultural em­
ployment is also likely to have been af­
fected adversely by the industrial re­
cession and overall slowdown in the
growth of the economy.

Secondly, inflation has been high in
the early 1990s and, although inflation
decelerated last year, data lor the first
few months of 1994-95 .udicate that
prices are rising again The conse­
quence of inflation is, of course, the
erosion of earnings of people who work
for wages and salaries. Inflation was
relatively high for the major commod-

Tabie 3: Central Government
plan outlay on education (at
constant prices, 1980-81 = 100)
Year

Plan outlay

1989-90
1990-91
1991-92
1992-93

In Rs. million

Index

3194
3010
2923
2983

100
94.2
91.'5
93.4

Source: Expenditure Budget,
different years.

Note: Nominal figures were deflated
with the GDP deflator.

Table 4: Central Government
plan outlay: medical and
public health (at constant
prices, 1980-81 ■= 100)
Plan outlay

Year

1989-90
1990-91
1991-92
1992-93

In Rs. million

Index

1157
1134
1104
1593

100
98.0
95.4
137

Source: Expenditure Budget,
different years.

Note: Nominal figures were deflated
with the GDP deflator.

ities consumed by thoue with low levels
of income. Inflation in food products
was higher than the general rate of in­
flation from 1991 to 1993. As a very
high proportion of household expendi­
ture among the poor is allocated to
food articles, inflation in food prices
erodes their earnings deeply. The rate
of inflation has not been uniform
across socio-economic classes. The
Consumer Price Index for Agricultural
labourers, for instance, increased al a
faster rate than the wholesale price in­
dex from 1991 to 1993.
Together, increasing unemployment
and a reduction in real earnings are
likely to have increased income-pov­
erty in both rural and urban areas in
the 1990s in India.
At the same time, the government
spent less on special programmes that
provide income support to the poor.
There was a steep reduction, in real
terms, in Central Government outlays
on programmes for “poverty-allevi­
ation” in the last few years (Table 2).
The low priority given to these pro­
grammes can also be gauged by the
fact that their share in total expendi­
ture as well as in gross domestic prod­
uct (GDP) declined.
In rural areas, the two major pro­
grammes for the alleviation of income­
poverty are the Jawahar Rozgar Yojana
(JRY), a programme of wage-employ­
ment, and the Integrated Rural Devel­
opment Programme (IRDP), one of
self-employment. There was a decline
in real expenditure on both these be­
tween 1989-90 and 1992-93 The num­
ber of families assisted annually under
the IRDP declined from 3.35 million
in 1989-90 to two million in 1992-93.
The number of days of employment
generated by the JRY also declined,
from 864 million person-days in 198990 to 778.3 million in 1992-93.
Providing food security to the poor
ought to be an important objective of
government policy. Ensuring food se­
curity requires that the system of pub­
lic food-distribution be strengthened.
Even if the public distribution sys­
tem (PDS) were to cater only to the
very poor, it requires large-scale ex­
pansion and restructuring. In a recent
study, S.
Geetha and M.
H.
Suryanarayana calculated the quantity
of foodgrain and associated expendi­
ture required if the PDS were to pro­
vide a minimum amount of food to all
persons below the official poverty line.
Io satisfy a foodgrain requirement of
370 gm per person a day, which is the
intake level recommended by the In­
dian Council of Medical Research, they
estimated that an additional 32.4 mil­
lion tonnes of foodgrain needed to be
distributed. Assuming that the level of
Frontline. August 12. 1994

subsidy prevalent in 1943 was to con­
tinue, the additional cost was estimat­
ed to be Rs. 58,590 million. These cal
c’llalions show that even tv. teach the
poor. the PDS needs to be expanded
The present Government, b\ cot.
trast. aims to reduce the size and
scope of the PDS. A 'eduction in gov­
ernment subsidies is an important
component of an orthodox structural
adjustment programme The Econ­
omic Survey 1992-93 staled that
“while the PDS has to be continued to
help the poor, the burden ol subsidy
on the Central budget has also t.> be
restrained.” The same document sug­
gested that a “phased withdrawal of
food subsidies by targeting PDS”
would help in the control of inflation.
The following year, the Government
made a stronger statement on food
subsidy; Economic Survey 1993-9-1
stated that “whereas elimination of
food subsidy is neither desirable nor
feasible in the short and medium term,
there is a strong reason to contain it.”
(emphasis added >
Many suggestions have been made,
in scholarly work and in conferences
and seminars, on ways to restrict the
PDS. One suggestion is to substitute
the PDS by an employment generation
scheme that provides an equivalent
amount of subsidy. Another suggestion
is that the PDS only be operated in
years of natural disaster, and act, in ef­
fect, as a disaster relief system. A third
suggestion is for the country to stop
holding large buffer stocks, and to pur­
chase grain from the world market in
years of shortage. A fourth suggestion,
from a World Bank economist,, is to
provide inferior varieties of rice and
wheat in order to restrict the use of the
PDS.
While the resources needed to im­
prove basic education and health
among the people of India are massive,
the commitment to enhancing public
health and education and the resources
allocated to these two sectors have his­
torically been low and have remained
low. India is a country with very low
levels of achievement in education, it
has the highest concentration of illiter­
ate people in the world, low school­
enrolment ratios, and great discrimina­
tion against women and girls in the
sphere of education. India has the
world’s largest child labour force. The
Education Survey of 1986 found that
28 per cent of primary schools in the
country were single-teacher schools
and another 32 per cent had two teach­
ers each. Only 56 per cent of primary
schools operated out of some kind of
permanent building. According to an
estimate prepared by UNICEF, the
United
Nations Children’s Fund

Mistakes to learn from
Maohura Swaminathan

HE debate in official circles on
the restructuring of the Public
Distribution System (PDS) has fo­
cussed almost entirely on issues of
targeting, and specifically on how to
exclude regions and persons con­
sidered to be not-poor. There are
important lessons to learn from
countries in which a universal sys­
tem of distribution was replaced by
a targeted system; these lessons are
summarised in a paper by the econo­
mists G. A. Comia and Frances
Stewart.
Universal schemes are associated
with what Comia and Stewart term
“E-mistakes,” that is, mistakes aris­
ing from the inclusion of the non­
poor in the scheme while targeted
schemes are associated with “F-rnistakes”, that is, errors arising from
the omission of the poor. From their
survey of public programmes in nine
developing countries,' Comia and
Stewart conclude: “In a number of
countries, ‘targeted’ schemes have

T

(1991i, if each village in India is to
have at least one school up to the
middle level, an additional 50,000 pri­
mary .schools and 440,000 middle
schools will be required.
This is the context in which changes
in expenditure on education in India
must be considered: long-run changes
and changes in the period of structural
adjustment. Changes in Plan outlay on
education by the Central Government
since 1989 are shown in Table 3Tbere was a real reduction in expendi­
ture on education after 1990.
The long-run underfunding of pub­
lic health services in India continued in
the 1990s (Table 4). The share of
health expenditure in total expenditure
(for Centre and States combined)
peaked at 4.8 per cent in 1983-84 and
declined thereafter. In 15 major States,
real expenditure per capita on medical
and public health increased in the
1980s and fell after 1991. The sharpest
cuts .n expenditure were from preven­
tive disease-control programmes, for
instance, programmes for the control
of maiaria, tuberculosis and leprosy.
In the current situation, the World
Hank - suggestion (in its report on
llca.'t'i Sector Financing in India)

Fronlline, August 12. 1994

26

replr-.eci ‘universal' schemes. In al­
most. i very case, the result has
been a ”>ajor increase in F-mistakes.... (.emphasis added)
In ’amaica, for example, after a
shift trom a general food subsidy to
a targeted food stamp scheme, Ftnistakes rose from nought to 50 per
cent. Secondly, Comia and Stewart
observe that, in most cases, the shift
from a general to a targeted subsidy
led to a reduction in the real value of
the subsidy.
To take the case of Sri Lanka, the
shift from a universal food subsidy
to a, targeted food stamp scheme re­
duced the real per capita food sub­
sidy from Rs. 62 in 1979 to Rs. 21 in
1982.
Thirdly, “administrative costs are
estimated to be higher for the
targeted schemes, ranging from 2 to
5 per cent of the total costs of the
scheme.”
In short, the evidence suggests
that the shift from universal to
targeted schemes can lead to “large
welfare and efficiency costs.” El

to reduce public expenditure on health
and reallocate existing expenditures
will be damaging if implemented. As
Sonya Gill of the Foundation for Re­
search in Community Health has
pointed
out,
“the
long-term
underfunding of the public health sec­
tor cannot be addressed by reallocating
public expenditure from hospitals to
rural public health centres.” It is wellrecognised that successful health care
systems are those that provide public
health services to all individuals and
for a large range of medical services.
The recommendation of the World
Bank, nevertheless, is that a U.S.-style
system be introduced in India, limited
and selective rather than universal and
comprehensive.

★★★

The changes in economic policy in­
troduced over the last few years as part
of the programme of stabilisation and
structural adjutment have further ag­
gravated the problems of poverty and
deprivation in India. Current evidence
indicates that, in the 1990s, income­
poverty worsened, government spend­
ing on health and education stagnated,
and the public food-distribution sys­
tem remained under-supplied ■

IMPACTON

AGRICULTURE
AND NUTRITION

Tripping over
seeds
W Pepsi turns its back
'f
on farm sector

sof pulses.
PncepS loot

rlCe
-<4 ^tio swtesWt*t0.

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M v/heat s e

Major liberalisation package for
agriculture in the offing
massive overhaul of the agri­
culture sector is on the car­
ds following recent discussions
between the government and a
high-level World Bank team.
Among the major proposals
arc:
O An overhaul of the Essential
Commodities Act;
® Witndrawal of the ban on futu­
res trading; and
O Removal of other domestic
controls.
The objective is to extend the
liberalisation process initiated in
the manufacturing sector to
agriculture.
In a scries of meetings over
the past fortnight, the World
Bank team has negotiated the pat­
tern and sequencing of liberalisa­
tion in the agriculture sector
The Bank has also initiated
joint studies with the govern­
ment on the impact of the trade
reforms undertaken so far on
agriculture.

A

A blueprint for reform in the
sector has been drawn out in the
latest World Bank working paper
on liberalising Indian agriculture

written by Ashok Gulati and
Gary Pursell.
Gulati is a director with the
National Council of Applied Eco­
nomic Research and Pursell is
principal economist in the trade
policy division of the World Bank
A major problem, according to
the paper, is the plethora of con­
trols in the domestic rfgriculture
sector which act as hurdles in its
progress towards globalisation.
One such hurdle is the Essenti­
al Commodities Act. which accor­
ding to the paper, must be aboli­
shed. 'Fhe reason is that the Act
places restrictions on the opera­
tion of markets and traders
But given that it nitty be politi­
cally impossible to abolish the
Act. the Bank is negotiating a
compromise with the govern­
ment on the issue.
According to the paper, the
other controls which need to be
axed are:
O The ban on futures trading:
O Inventory controls and selec­
tive credit controls on inventor;
financing:
O Discrimination in favour of cor­
porations such as the Food Cor­

poration of India. National Agri­
culture Cooperative Marketing
Federation of India and the Cot­
ton Corporation of India: and
• Commodity-specific controls
which restrict frt c movement
and trade of commodities.
Besides removing domestic
controls, the paper also wanks
export controls which depress
domestic prices to go — especial­
ly for cotton, wheat and rice. It
wants import controls and high
tariffs on edible oils, oilseeds.
sugar and rubber removed too.
The objective is to remove the
anti-agriculture bias, the distor­
tions in the incentive structure
within the sector and to help it for­
ge links with the global economy.
To that end, the paper sug­
gests that protection to the manu­
facturing sector must be reduced
and agricultural tariffs cut down
to a maximum of 10 per cent.
While the Bank is pressing for
speedy reforms, the government
wants to move more cautiously.
A member of the Bank team said
the government is concerned
about the impact of the proposed
reforms on the ix>or.

States told to change land ceiling laws
Land ceiling laws arc likely to
be amended to allow the corpo­
rate sector to raise plantations on
wastelands for captive raw mate­
rial use.
With forest-based industries
facing supply constraints, the
Centre is pressing the state gov­
ernments to make requisite
changes in land ceiling laws which
have proved to be the hitch in the
plan for involving the private sec­
tor in wasteland development.
The Government scheme to
attract the private sector in waste­
land development has so far found
no lakers primarily due to the
problem of land availability and
inconsistent Government policies.
While the Department of
Wasteland
Development
is
attempting to attract private in­
dustry to use non-forcst waste­
lands for captive plantations, the
industry is more keen on using
degraded forest land This has
compelled some states to givey
extra incentives to private in­
dustry
Maharashtra nas already ex­
empted horticulture projects on
wastelands from land ceiling and

is also considering doing the same
tor private captive plantations.
Madhya Pradesh offer of waste­
lands in Rhind and Morena dis­
tricts to private industry on long­
term lease has received no r"
sponse due to the poor quality of
the land and a perceived law and
order problem. Sources say the
State Government is now con­
sidering of allowing the non-user
industry to set up plantations.
Gujarat anti Karnataka are plan­
ning to involve industry in joint
ventures with the state govern­
ments to develop wasteland for
industrial raw material use
The Department of Wasteland
Development in the Ministry of
Rural Development is currently
giving finishing touches to a
scheme to part finance private
plantation projects on wastelands.
This scheme will be a modified
version of the Margin Money
Scheme which extended Centra!
assistance to farm foiestrs pro­
jects undertaken by Government.
semi- government and other such
organisations The scheme met
with total failuie.

The revised version of the
scheme called the investment
promotion programme will in­
clude the corporate sector in its
ambit. Under the scheme upto 25
per cent of the project cost or Rs
25 lakh whichever is less, will be
given as grant by the Department
of Wasteland Development, 50
per cent of the total cost will be
met by Nabard or any other finan­
cial institution and 25 per cent by
the promoter.
However, despite the corporate
sector having actually pushed for
private involvement in wasteland
development, preliminary feed­
back. fiom industry has revealed
that the scheme would not attract
any investments as long as there
are restrictions or. acquiring land.
Industry has also demanded a
long-term lease of atleast 40 years
on land, oreferably government
revenue land.
Interestingly, wastelands have
yet to be clearly identified.
Wastelands arc defined as de­
graded underutilised land, de­
teriorating for lack of appropriate
water and soil management or on

account of natural causes and
which can be brought under
vegetative cover with reasonable
effort. The major portion of
wastelands in the country is con­
centrated in Rajasthan, .Madhya
Pradesh and Maharashtra.
The quantum of wastelands is a
disputed figure. While non gov­
ernment organisations have esti­
mated that there are ever 175
million, hectares of wastelands in
rhe country; satellite images from
the National Remote Sensing
Agency has revealed that non
forest wastelands cover 55 million
hectares. The Minister of State,
Department of Wasteland De­
velopment, Col Ram Singh hat
constituted a committee to recon­
cile these figures. Meanwhile
State Governments have been
asked to identify wastelands inevery district.
According to estimates the pro­
jected demand for industrial tim­
ber in 2000 AD will be 55 m cubic
metres. Currently, the demand
supply gap is 15 cum.
Financial Express ai-R-IS

UNCTAD to assist commodity futures
The appointment of Kabi a committee to review working of commodity futures markets has not come
a day soon.

group of governmental and non­ changes
cannot
be
over­ and other countries on the use and
governmental
experts.
The emphasised for a large-sized econ­ working of futures market, the
proposals now finalised by UN­ omy like India, which has now- UNCTAD's group of experts ident­
CTAD were in response to this abandoned the socialistic pattern ified three areas in which in-depth
Cartagena commitment.
and adopted the liberalisation pro­ studies seem necessary at the
The group has, therefore, cess with emphasis on market international level to promote par­
“urged commodity exchanges, ofientation.
ticipation in commodity futures.
UNCTAD and other international
Secondly, the entry of invest­
Besides recommending the es­
organisations to study the prob­
ment
funds in international com­
lems involved in developing tablishment of national and re­
modity exchanges in recent years
domestic and regional exchanges gional exchanges, UNCTAD's ex­
has raised many eyebrows. The
(including ways to bring existing pen group has made a number of
influence on markets needs a
exchanges up to the standard of far-reaching policy proposals to
careful study to ensure that their
internationally oriented ones), improve the conditions for en­
entry in a big way does not dis­
and to provide practical advice couraging participation in and
and information on the setting up usage of commodity futures and courage participation by buyers
and sellers of physical com­
of new exchanges or alternative options exchanges.
price
formation
mechanisms
As government policies such as modities. The expert group also
when appropriate." For the de­ foreign exchange regulations, recommended that UNCTAD and
velopment of such modestic and taxation systems, tariff and non­ the World Bank should jointly
regional exchanges, the group has tariff barriers to imports and ex­ undertake work on reporting re­
stressed the need for enhanced ports, price controls and the like quirements by exchanges and
technical and financial support often impede even the proper regulatory authorities “with re­
from international exchanges and functioning of the spot market, let spect to the structure of market
UNCTAD arid the World Bank.
alone the use of risk management participation, including a survey
The UNCTAD proposal on the instruments in the futures market. of existing systems and their limi­
development of national ex­ UNCTAD has proposed that the tation as well as suggestions on
changes has reat significance for technical assistance provided by how such information could be
India, which has large domestic as the international organisations made more useful to market par­
The UNCTAD expert group was well as export markets in many should be strengthened to enable ticipants.
drawn from both the developed commodities like cotton, oilseeds governments to evaluate better
and developing countries and had and oilseed products, jute and jute the impact of their policies on the
Clearly, UNCTAD has now
representatives of not only leading goods, spices, coffee and even present and prospective users of broken a new ground in the field
international exchanges, but also non-ferrous metals, besides food­ commodity exchanges. As most of commodity futures and, in co­
of the World Bank as well as even grains like rice and wheat. To governments of developing coun­ operation with the World Bank,
government organisations of com­ strengthen domestic marketing tries and economies in transitions seems ready to offer both techni­
munist countries like China and and its infrastructre besides im­ have set up controls on capital cal and financial assistance to the
Cuba, besides a few individuals.
proving price discovery in the flows, the expert group has also developing countries in organis­
The group represented both the
ing futures exchanges. The gov­
domestic market, it is essential to recommended to UNCTAD to
producing and consuming coun­ develop national exchanges in draw appropriate guidelines to ernment of India should seize this
tries in both soft commodities and most of these commodities.
assist governments in minimising unique opportunity to develop
new exchanges and upgrade the
metals.
The proposals
Before the Independence, India the possible negative impacts of
finalised by the group will be had a tradition of commodity fu­ such controls on the legitimate use existing ones in as many com­
placed before the standing com­ tures and option trading, which of risk management instruments modities as possible, not only to
strengthen their domestic market­
mittee of UNCTAD on com­ began at almost the same time as in commodity exchanges.
ing but also to enhance their
modities, consisting of govern­ in
USA
and
Uk
around
ment representatives from 87 mid-1990th century. Disappoint­
In order to contain the problem export competitiveness.
countries in the world, including ingly, with the dawn of planning, of manipulation, the group sug­
India already holds a premier
India, in early November.
labouring under the socialistic gested that (a) the opportunities position in several commodities
At the eighth session of UN­ misconception that speculation in for manipulation be reduced by like cotton, oilseed and oils, jute
CTAD held at Cartagena in Febru­ futures markets is injurious to encouraging broad-based partici­ and jute goods, sugar, rice in
ary 1992, Governments had rec­ commodity marketing and pricing, pation in the trading of contracts
terms of output and market size.
ognised the importance of explor­ the government shut down most and ensuring appropriate delivery
In many of these commodities,
ing new approaches to minimising exchanges, permitting only a few conditions including warehouse
India can, therefore, develop re­
the risks arising from commodity minor ones under such stiff regu­ locations; (b) market users be
gional exchanges to serve even the
market fluctuations. Government lations that even these remained assisted by devising suitable
neighbouring countries as well as
had then urged the UNCTAD Sec­ far from useful to the market trading strategies that will mini­
those in South-East Asia. In that
retariat to "explore various mech­ functionaries. As a result, not only mise injur}- from manipulation
event, the commodity exchanges
anisms,
problems of credi­ are the exchanges now in a attempts; (c) rules and regulations
will even prove to be a valuable
tworthiness, and modalities of dilapidated conditions, but also concerning manipulation should
foreign exchange earner for the
overcoming such obstacles."
marketng infrastructure for most be well-defined, strong, fair and country. And, some of the Indian
For that purpose, it had asked commodities has remained un­
transparent to deter manipulators exchanges may gain the statues of
UNCTAD to examine “(a) the con­ developed even after four decades
from holding the market to ran­ international exchanges as well.
ditions, both technical and regu­ of planning.
som; and (d) periodic discussions But will the Indian governent and
latory, for encouraging maximum
In these pathetic circum­
the futures trading mdustry_®c'
participation in, and usage of, stances, the UNCTAD proposals be held in an international forum fast in that direction? UNCTAD
commodity exchanges by both verily offer a helping hand to the to exchange regulatory experience
has already shown the way. Per­
buyers and sellers of commodities, futures trading industry in India. at curbing manipulation.
haps the Kabra committee can
and (b) proposals to address these As it is, the need for well-de­
Even though considerable re­
conditions” with the help of a veloped, organised commodity ex­ search work has been done in USA the gear.
HE appointment ot a com­
mittee by the government of
India under the chair­
manship of Dr Kamalnayan Kabra
to review the working of com­
modity futures markets and the
Forward Markets Commission
with a view to reviving futures
trading in commodities for
promoting their exports has not
come a day soon. The group of
experts convened by Mr Kenneth
Dadzie, Secretary-General of UN
Conference on Trade and De­
velopment (UNCTAD) for improv­
ing the efficiency and use of mech­
anisms for the management of
risks arising from commodity
price fluctuations has concluded:
“well functioning futures con­
tracts are the most transparent
and efficient mechanism for price
discovery and risk sharing for
internationally
traded
com­
modities as well as for com­
modities traded on domestic or
regional markets and should be
promoted where feasible.”

T

?8

ECONOMY TI^S

.s-.o-qa.

At wheat’s end
ne of the important
announcements made by
Mr P.V. Narasimha Rao
during
his Independence
Day
address
to the nation
from the ramparts of Delhi’s Red
Fort related to the proposal to
release surplus wheat to bakeries so
that the price of double roti could,
come down.
His a gument . was that the
country's agricultural production
has grown so much that there is no
space in the godowns to store
foodgrains any more. The embarrass­
ment of riches has been made even
more acute because, despite the
noble resolve articulated over and
over again, India cannot b’ecome a
major player at the moment among
agricultural exporters of the world.
Consequently, while farmers are pro­
ducing more and more, the stocks are
growing and causing a strain on the
government and public sector organi­
sations like the Food Corporation of
India.
The prime minister then went on,
on the basis of this logic, to offer a
part of such surplus grains to the
manufacturers of leavened and bak­
ed bread so that prices of loaves
could be brought down. It is interest­
ing that Mr Rao did not offer to
release this additional amount of
wheat directly to the consumers
through the public distribution sys­
tem or otherwise so that the humble
roti or chapati or its equivalents are
the staple of the ordinary citizen.
Leavened and baked bread may
raise a toast among the urban and
relatively affluent consumers, but
for the rest of the population the
exhortation to eat bakery produced
bread may be as cruel as Marie Antoi­
nette’s remark about the French
sans culottes: “Let them eat cake”.
Indeed, there is an interesting
French sidelight to the issue of
bread. The great historian, Fernand
Braudel, gives an interesting expla­
nation why French bread is so light
and long compared to baked bread in
other countries. The price of bread
has always been an important issue
in France and few governments dar­
ed to survive untroubled if bread
became expensive during their
regime.
Thus, while real inflation did
affect the economy, a pretence was
made to reassure the French citizen­
ry that the bread supplied to it did
not get smaller. Since price was
fixed, the only alternative was to
reduce the flour content and make
the bread look long enough even as it
became lighter.
The Indian case is, of course, differ. ent but it is also not so different after
all. Unleavened bread which is light
and fluffy and rises while it is baked
— double rotis must replace real
rotis in times of inflation. Give us th-s
day our double roti and forgive us
our trespasses!

O

The problem is also that the crisis
of over population which the prime
minister alluded to is-also as unreal
as the vision of India — feasting on
toast and butter. The foodstocks that
Mr Rao finds so great are on account
of abysmal consumption levels in the
country and the problem has been
accentuated by the new economic
policies that he and his indispensa­
ble finance minister have adopted in
the last few years.
It is a fact that food production has
been slowly going up in the country
but the growth is by no means so dra­
matic as to cause unmanageable over
production. The rise in stocks is attri­
butable more to increased procure­
ment, therefore, than to vastly
increased production. And, procure­
ment has gone up because the prices
offered to farmers by a munificent
Mr Balram Takhar have gone up so
much that they should have shot
through the equanimity of Mr Man­
mohan Singh, a man who self confes­
sedly does not lose sleep easily. Over
just the last year, the procurement
prices of foodgrains registered a
sharp rise of almost 52 per cent.
It is therein mat lies the rub. The
increase in procurement prices of
course encouraged the surplus far­
mers enough for them to sell more
and more grains to the government.
While
17.9 million tonnes of
foodgrains were procured in 1992, no
less than 28 million tonnes were pro
cured in 1993. The godowns were
naturally full.
Meanwhile, however, the supply
->ide economists who dominate the
present dispensation also indulged
in reckless subsidy cutting. And,
both. — the increased procurement
price and denial of subsidies to the
pvur consumers — resulted in a
matching sharp increase in the cen­
tral issue price of foodgrains — from
about rupees two per kilogram of
wheat to Rs 4.02.
Indeed, with the PDS being drasti­
cally pruned by the enthusiastic sub­
sidy slashers, there was little differ­
ence left between the open market
and that in the so called fair price
shops. In fact, during large arrivals
of foodgrains, at times the open mar­
ket price becomes even less than
that charged through the PDS.
It should be instructive for those
who bother about accumulating
stocks to notice that, precisely dur­
ing the period when procurement of
foodgrains rose dramatically, the
sale of foodgrains in the fair price
shops came down from 20.8 million
tonnes in 1991 to 19 million tonnes in
1992 to 15.1 million tonnes in 1993
The bald truth, therefore, is what
India is suffering from is not a crisis
of over production as the prime mini­
ster would make out, but a crisis of
under consumption. The granaries
are overflowing because people are
not eating enough. And, the poor

29

‘‘naturally’’ are eating less than even
the low national average. Official sur­
veys show that while the availability
of cereals today is almost 25 per cent
more than the suggested level in the
“balanced diet”, the consumption
levels of the poor remain far below
what is recommended.
The present euphoria about glo­
balisation is premised on-offering
the recession beset West an enorm­
ous number of Indian consumers. It
is important to remember that the
Indian market is by no means homo­
geneous. There are undoubtedly 150
to 200 million relatively affluent Indi­
an consumers who are very attrac­
tive for those in the developed
countries eager to sell their goods
and services. It is this segment that is
being exhorted to march boldly into
the consumeristic cornucopia of the
bewitching 21st century.
However, there are also another
300 million or thereabouts who are
below the poverty line, eking out an
existence somehow, anyhow. And in
between there are the rest, drawn by
the lure of the first and the reality of
the second. A population so fragmen­
ted can hardly provide a stable base
for an economic system that is both
equitable and sustainable

The problem is that those in deci­
sion making positions today treat
this social division of India with dis­
dain. If they address themselves to
this issue at all, they do so with a call­
ous obsession, with symbolism with­
out substance. The double roti
announcement is a reflection of that.
Even when there is occasionally
some seriousness about poverty alle­
viation, exigencies of the status quo
hijack the idea. Thus the Jawahar
Rozgar Yojana, which is meant for
employment generation for the poor,
has degenerated into a mechanism
for providing ways and means of sup­
port to cash starved states. Many sta­
tes use the JRY funds for paying
their staff. The Bihar chief minister,
Mr Laloo Prasad Yadav, even went
so far as to declare that since the sche­
me was to provide rozgar and he was
using it to ensure the employment of
his bloated babucracy, he was doing
no wrong.
Meanwhile the poor continue to
languish While India is not quite
like Benjamin Disraeli's two nations
of the rich and poor, it is united by a
vicious continuity between the two
There is no duality, no two sectors, no
urban-rural divide that is real. What
is real is one segment thrives on the
poverty of the other In the Indian
economy
breakfast
rolls
and
bhakhris, croissants and sattu coex­
ist and are dependent on each other.
The double roti dialogue cannot
gloss over the fact there is much food
for thought in Mr Rao’s India
The TELEGRAPH

gg.c-14

Power reforms in agrarian states
affecting farmers
Special Corr»tpond»nt

New Delhi
FARMERS IN some major agricul­
tural states of the country are
likely to be quite peeved with
what has" happening on the
power front of late, with tariffs
rising and supply declining.
Among these are Haryana. Pun­
jab and Gujarat.
Minister of State for Power P V
Hangayya Naldu recently Inform­
ed the Rajya Sabha. In response
tn an unslarred question, that the
average hours of supply of power
per day to the agricultural sector
hud declined from 16 In 1991-92
to 11 In 1993-94 In the case of
Haryana and from 17 to 13 In the
case of Punjab.
Gujarat too was able to supply
only 15 hours of power per day to
the farm sector In 1993-94 again­
st 19 hours per day In 1992-93.

All these states are among
those that have fallen in Line
with the recommendations ol
the power ministers’ conferen­
ce held In January 1993.

The conference had suggested.
among other things, a minimum
agricultural tariff of 50 palse per
unit. Gujarat adopted this rate in
May 1993 and Punjab In October
the same year, while Haryana
had already done so In June 1992.

In a separate reply, also in the
Rajya Sabha. Mr Naldu said these
and some other states had Imple­
mented the 50 palse per unit
norm for metered supply to the
farm sector
The other stales that have
done so are Madhya Pradesh.
Maharashtra.
Orissa
and
Rajasthan. Karnataka has follow­
ed this norm for farmers using
pumpsets of above 10 HP only
Of these states. Madhya

Pradesh has been able to main­
tain supplies at about 20 hours
per day. Maharashtra has the
near unique achievement of 24
hour supplies to the farm sector
and Orissa has been able to raise
It from an average of 21 hours
per day In 1991-92 to 23 hours
per day in 1993-94. despite a
decline to 18 hours per day in the
Intervening year.

Rajasthan, on the other hand.
has maintained a dismal 8 hours
per day to the farm sector, the
lowest among the 15 slate electri­
city boards.
Karnataka, which has only par­
tly accepted the norm, has done
rather bettor In terms of supplies.
raising them from 18 hours per
day In 1991-92 and the next year
to 23 hours per day In 1993-94
Slates which have not fallen In
line with the 50 palse per unit
norm have, on the whole, done
much better in terms of ensuring

supplies to the agricultural sec­
tor than those that have. In fact in
none of these states Is the supply
position worse off for the farm
sector than it was two years back.
Himachal Pradesh shares with
Maharashtra the distinction of
being, the only states to ensure
day-long supplies in all three
years. Kerala Is not too far
behind and has maintained supp­
lies at 23 hours per day. while
Bengal has been able to raise it
from just 19 hours per day in
1991-92 to 24 hours per day in
1993-94
Somewhat
behind
these
leaders are Andhra Pradesh (con­
stant al 16 hours per day i. 1 until
Nadu tup from 14 to 16 hotter per
tlayl. Lttar Pradesh Hip from 13
to 14 hours per dayl and Hthr.r.
which saw- a decline from 10
hours per day to 8 hours per day.
but was hack to 10 hours |»t day
in 1993-9-.
The Pioneer a-5-tq.

National fertiliser industry in doldrums
he statement of the Fertilis­
er Association of India, the
representative body ot fertiliser
industry in private, cooperative
and public sectors, on the ferti­
liser situation in India in 1994
presents a dismal picture of the
national fertiliser industry and
its gloomy prospects under the
present policy - political dis­
pensation. This vital industry
which was developed, to begin
with, in the public sector on
fully self-reliant basis between
mid-sixties and mid-seventies
and subsequently attracted sig­
nificant Indian private invest­
ment to expand is now visibly in
doldrums.
The most telling indictment in
the FA I statement is that “an'
unhealthy situation” has de­
veloped for the industry in
which there is “high dependence
on imports at a time when
domestic production capacity
remained substantially unutil­
ised”. This is indeed the dis­
astrous consequence of the so-.
called globalisation policy in
which imports of capital goods
and services-and technology has
precedence over domestic effort
and enterprise. It is part of a
wide-ranging process of dc-industrialisation which is casting a
shadow on industry after indus­

T

try - power, fertiliser, hydrocar­
bons.
telecommunications,
transport and so on.
In the case specifically of the
fertiliser industry, a relatively
smaH reduction m the fertiliser

subsidy, together with an in­
crease in the price of fertilisers
for the upper segment of far­
mers was the starting point of
this process. The big farmer’s
lobby, noth inside and outside
the Government, had its own
part to play in it. The upshot has
been a near halt to investment
for the much-needed expansion
.of the national fertiliser indus­
try. This loo has led to increase
in costly imports to meet domes­
tic demand for chemical fertilis­
ers. ironically, the attempt to
cut subsidy for indigenously
produced fertilisers has resulted
in a steady and far larger in­
crease of subsidy from exche­
quer on the sale of imported
fertilisers in the Indian market.
The representatives of the
fertilisers industry, both in pub­
lic and private sectors, have
repeatedly and forcefully flayed
the Government and its policies
for pushing the industry in a.
crisis. The case of the industry is
indeed formidable. What it adds
upto is a charge that the domes­
tic fertiliser industry, which has

30

been painstakingly built by Indi­
an enterprise and skills at p.reatcost, is being undermined.
Needless io say, this is very
much in the interest of rapa­
cious multinationals engaged in
the fertiliser business and seek­
ing to maximise their profits in
the Indian market.
The setting up and expansion
of .the fertiliser industry in In­
dia. given high priority after the
disastrous drought for two years
in mid-sixties, had succeeded in
the eighties to a considerable
extent in plugging the gap be­
tween domestic supply and de­
mand for fertilisers. The need
for impoifs of fertilisers had
thus become minimal, especially
in respect of nitrogenous fertilis­
er, urea. But, curiously, in spite
of the repeated pleas of the
industry that time had come for
stopping large-scale imports of
urea, the Government on the
basis of fanciful demand esti­
mates still tended to go for
large-scale imports of this and
other fertilisers.’ Side by side,
the Government dragged its'feet
so far as price adjustments tnd
assistance to the industry for
marketing domestic and im­
ported fertilisers were con­
cerned. The market too was
regulated In a manner to give

preferential treatment to the
sale of imported fertilisers so
that domestic producers, in pub­
lic as well as private sectors,
suffered huge losses. They have
actually been forced in recent
years to bring down capacity
Utilisation.
With profitability of the ferti­
liser industry seriously eroded,
new investment in the industry
has tended sharply to deceler­
ate. The Government has even
found it necessary and expe­
dient in the face of the budget­
ary crunch to withhold pay­
ments of as much as Rs. 1500
crore to the industry which were
legitimately due to it. Side by
side, the supply of raw materials
for fertiliser production, among
them gas for IIBJ pipeline
which was specifically laid to
serve fertiliser plants has been
curtailed. The Government has
suddenly shifted priority in
favour of power generation in
respect of supply of gas to
attract foreign investment in
power generation. This is an
ill-advised and misconceived
move. The optimal use of avail­
able gas has to be for fertiliser
production and not power gen-

It cannot be fortuitous that
official policy has tended to

obstruct the grdwth of the
national fertiliser industry on
healthy, sustained and scli-rclinnt basis. Excessive imports
together with turnkey'construc­
tion by foreign agencies of new
fertiliser plants in India during
the eighties had already worked
as a recipe made to order grave­
ly to choke the growth of the
national fertiliser industry. I he
Government has not lifted
bureaucratic controls over pro­
duction, prices and distribution
of fertilisers either. This is really
odd when it is committed- to a
wide-ranging market-oriented
adjustment programme for the
entire Indian economy. Finally,
cuts have come in the supply of
necessary raw materials tor fer­
tiliser production. The baneful
influence of foreign vested in­
terests, above all, multinational
corporations, on official policy­
in India has indeed become
stark in the case of the fertiliser
industry.
So far as rising levels of ferti­
lisers subsidy is concerned, the
fcitiliscr industry in India, both
in the public and private sectors,
does not partake from it any
gains for itself. It is entitled only
todhe pricing of its products in
terms of the cost of production
on the basis of fairly high effi­
ciency norms set for it. It is the
sale ol fertiliser to the farmer at
below the cost of production
which is covered by the Govern­
ment subsidy. There is no need
to question the need of fertiliser
subsidy for the farmer cither
unless it is suggested that sub­
sidy should be given to poor
farmers only and the rich far­
mers should not be entitled to it.
It is necessary that pricing of
inputs for fertiliser production
and of output from the use ol
fertilisers should be determined
meaningfully in terms of a desir­
able structure of relative prices
in the context of the income and
consumption pattern at the pre­
sent level and stage of the de­
velopment of the Indian eco­
nomy. This calls for suitable
adjustments in the pricing of
foodgrains as well as fertilisers.
It would seem axiomatic that
the fertiliser selling price should
be affordable for Inc rich far­
mers producing for the market
as well as the poor farmers who
produce foodgrains and other
farm commodities essentially
for their own use and subsist­
ence needs. If the price is too
high, the poor farmer will not be
able to use fertilisers and the
rich fatmer too will reduce .their
use. A low fertiliser price, it
may well be argued, does not
help agricultural production anti
can even endanger food secur­
ity, let alone generate surpluses
for export of farm commodities.
Adequate quantities of fertilis­
ers must be made available at
affordable prices to farmers.
The way out can only be that
while the farmer pays what he
can, the industry gets a price at
which it remains viable.
Indigenous production of fer­
tilisers had increased to over 8
million tonne by 1990-91. Pro­
duction, of fertilisers in the coun­
try as well as investment in
Indian fertiliser industry has
since been stalled. Having
achieved self-sufficiency in nit­

Agriculture
investment
rate declines

rogenous fertilisers, there is a
serious danger of losing this
advantage in a key inputs tor the
growth of agricultural produc­
tion. In the case of phosphatic
fertilisers, however, since India
does not have the necessary raw
materials,
Indian
industry
should aim at value added pro­
duction of phosphatic fertilisers.
Reduction of the fertiliser sub­
sidy,’ in prevailing conditions,
should not be an overriding
policy objective and all that
results in the increasing subsidy
bill, such as the cost of inputs
and the prices of the final pro­
ducts, should be locked at in the
proper perspective Most of the
inputs for fertilisers are under
the regime of administered
prices. These prices should have
a relevance for determining the
cost of fertiliser production.
There can really be no escape
from periodic adjustment of the
selling price ol fertilisers in
order to at least partly offset the
cost increases and contain the
subsidy clement within a man­
ageable limit. The fertiliser sub­
sidy can. of course, be elimin­
ated if fertiliser prices are de­
controlled. But there are con­
sequences of such a step. The
result would be sharp increase
in the prices, and an adverse
effect on the use of fertilisers,
especially by the poor farmer.
The stagnation in agricultural
production during the nineties,
in spite of good monsoon, loo is
to be attributed to deceleration
in the use of fertilisers in the last
three years.
That new investment in the
fertiliser industry has become
slack is indeed disturbing and
unfortunate when high pro­
ficiency for setting up fertiliser
plants has been achieved and
the performance of the Indian
fertilisei industry has touched
international standards. Capac­
ity utilisation. all-India average
in the nitrogenous sector, ex­
cluding the sick plants, at 98’per
cent is comparable to the best in
the world. The sick units in the
industry arc primarily the result
of historical circumstances. But
they can be cured of their
malaise by well-conceived tech­
no-economic remedies. The
labour in these plants has shown
a high degree of willingness as
well as ability to aid any such
effort and full advantage should
be taken of this potent factor.
The official policy for this prior­
ity industry should be more
enterprising than it has been
since the mid-cighlies. It should
not be guided by the sole
criteria ol eliminating fcitiliscr
subsidy which was laid down for
it by the World Bank/IMF com­
bine and which it accepted
under duress in 1991. It is wrong
also to depend on liberal import
of fertiliser to meet domestic
demand for chemical fertilisers.
The global market as regards
supply and pt ices of chemical
fertilisers is already uncertain
and all indications arc that they
will become more uncertain and
volatile in the rest of this de­
cade.

equalling or even surpassing
record level of 180 moillion
tonnes achieved in 1992-93 is a
THE rate of investment in agri­ distinct possibility. The condi­
culture has declined in recent tions for sugarcane were ideal
years. In many areas the existing in the north but not so good in
stocks of public capital assets Maharashtra and hence this
are deteno> ating for want of year’s output at 231 million
adequate funds for operation tonnes would be around last
and maintenance. According to year’s level.
the economic survey if the trend
Punjab and Haryana had ex­
is to be reversed it will require cess rainfall in the month of
shift in the balance of public July causing unusual floods thus
expenditure for the agricultural damaging the cotton and rice
sector from large input subsidies crops. On the contrary. Gujarat
to creation and maintenance of and Andhra Pradesh experi­
public infrastructure.
enced dry spell.
The resources for increase in
Area under rice during 1992agriculture-related
infrastruc­ 93 was 41.64 million hectares.
ture are not available if the the total production of rice was
subsidies provided for water. at 72.61 million tonnes which
electricity and fertilisers are declined by 2.8 per cent from
not scaled down. Bouyancy in the previous years due to decline
agricultural investment will re­ of both area and yield. Kharif
quire a thorough revamping of 1993 Rice area is expected to be
the system of rural credit that at last year's level but production
has been weakened by a culture may be highest at 65.50 million
of non-recovery.
tonnes.The total rice during
The economic survey mention 1993-94 is expected to be 71
that most of the effective policies million tonnes.about two per
in the agricultural sector will cent gain over 1992-93.
need to come from the states.
The production target of wheat
without which progress in over­ for 1993-94 has been fixed at
all economic growth and poverty 58.50 million tonnes.The good
alleviatiopn will be elusive.
spell of widespread rain in Jan
Deceleration in agriculture in­ uary has likely resulted in higher
vestment during the eighties wheat output even though cur­
has been an area of concern. rent estimate of likely production
Gross investment in real terms is 56.9 million tonnes.
in agriculture has declined from
Production of coarse cereals
Rs 4636 crore in 1980-81 to Rs like jowar. bajra. maize, ragi.
4.580 crore in 1991-92 . From 18 sail millets and barley in current
per cent of the total gross year is likely to fall back to its
domestic capital formation in normal growth trend and Kharif
agriculture in 1980-821 it has 1993 out put of coarse cereals is
sharply declined to 11 per cent likely to be 27.40 million
in' 1991-92.
tonnes.With normal production
The decline in capital forma­ of Rabi coarse cereals like jowar.
tion in agriculture by public maize and Barley at 6.30 million
sector has come down to Rs tonnes for 1993-94.the total pro­
1043 crore in 1991-92 compared duction of rabi cereals may be
to Rs 1796 crore in 1980-81. As around 33.7 million tonnes
per the economic survey the against the target of 36million
problem of investment in agri­ tonnes.
culture is not a problem of
Pulses output during kharif
total availability of resources season in 1993-94 may be 6million
but of distribution between cur­ tonnes. The total production of
rent expenditure and capital pulses during 1993-94 may reach
formation.
14.5 million tonnes reducing
In the agriculture credit there the imports.
Sugarcane acreage in!993-94
is a serious problem of overdues
which hasbeen inhibiting credit is expected to decline further
expansion and economic viabil­ by 3 per cent .though the proity of the lending institutions.in . .ductiou is expected to .be around
particular the cooperatives and ■ last year’s level of 230.8 million
tonnes.
■
< ■
the RRBs.
The floods in Punjab and
The economic survey does
mention about the occurrence Haryana in July and deficient
of about 200 swarmlet incursions rains in Gujarat during August
in the district of Jaisalmer, and September, production of
Barmer
and
Bikaner
of cotton during 1993-94 may be
Rajasthan and Banaskantha and just 10.6 million bales.
Kutch districts of Gujrat from
The area under jute in 1993the western border during July 94 is expected to have declined
to October last year.
further as dry weather prevailed
The monsoon turned out to at the time of the sowing of the
be satisfactory but the prospects crop in the jute growing eastern
of this year’s food grains output region.
Observer Economic Bureau
NEW DELHI

1

in
I
i

,

IOO
,

Agri-business getting ready
to take firm root in 995
NEW DELHI - The next
year may be a challenging one
for Indian agriculture. Accord­
ing to Agriculture Ministry so­
urces. 1995 holds promise for
the country’s agriculture sector.
At the same time, the sector
would have to undergo challeng­
ing phases and periods, they po­
int out, reports PTI.
The big prospect is that the
year could mark the break with
the age old concept of farming
as a sustenance activity with the
expected
take-off
of
the
agri-business
concept
being
given to farming.
The concept mooted in the
1993 Union Budget sought to
promote organising marketable
and production of commodity’s
that can be processed in viable
pockets to give a commercial
orientation to farming activity.
In the old concept, farmers were
focusing on growing crops pri­
marily for their domestic use.
The marketable surplus was inci­
dental. Processing at the local le­
vel was unheard of as it was
entirely left to the middlemen
and entrepreneurs elsewhere.
The Agri-business Consor­
tium has been registered as a so­
ciety at the national’ level and
the Agriculture Ministry is
awaiting formation of counter­
part societies at the state and dis­
trict level to organise local
farmers into agri-business units.
The Union Budget, to be pre­
sented to Parliament in Febru­
ary 1995, is expected to contain
several incentives for agri-busi­
ness consortia to take up farm­
ing and commodity processing.
During 1994, the Agriculture
Ministry had initiated several
steps aimed at giving a financial­
ly self-sustain’ng framework for

% increase between October 1993 and I 994

UNI

farming. These include: integrat­ by the country’s signing of the
ing beekeeping in farming to en­ GATT agreement. It is certain
hance productivity, boost to that, given the right policy initi­
aquaculture.
supplementing atives and incentives, the Indian
farming with activities like farm exports could get a substan­
mushroom, poultry and meat ani­ tial boost in the post-GATT re­
mals, promotion of commodity gime.
board to take up ideal crops for ' Already areas like Pune in
a region on a commercial scale Maharashtra (for fruit' produc­
and easier credit availability tion), Bangalore (for cut-flo­
from commercial and cooperat­ wers) and Kerala (for orchids)
ive banks. These activities are have become great success'stori­
expected to get consolidated dur­ es. Exploiting the potential in
other regions will be a major
ing 1995.
The sources pointed out that concern in the new year.
Horticulture is another area
the new year would also mark
the reshaping of the Indian farm­ of major growth expected in the
ing to face the challenges posed coming years.

ITC, Pepsi inspire models for
corporate farming
J Vikram Bakshi
CALCUTTA 12 DECEMBER

THE ASSOCIATED Chambers of Com­
merce & Industry has mooted the idea of
collective corporate farming for oilseeds, on
the models implemented by ITC, Pepsi and
Kissan, to increase yields and resultant con­
sumption in the country.
Recognising for the first time direct sales
linkages with de oiled cakes, instead of ed­
ible oils, Assocham is targetting a market
growth figure for de-oiled cakes close to Rs
5,000 crore from the present level of Rs
2,400 crore.
A discussion paper it tabled has pro­
posed “corporatisation of agriculture"
based on Malayasia's Felda model for oil­
seeds cultivation.
The Malaysian model which utilises the
economies of scale present in large solvent
extraction units is based on a co-operative
farming method (hat makes procurement of
oilseeds easier for manufacturing units
while the concentration on de-oiled cakes
meant for animal feed as the main product,
the units can supply edible oils at lower
prices.

While the proposal is slated to bring
more land into the ambit of oilseeds cultiva­
tion, the concentration will be on increasing
yield per hectare.
The background paper for the third
meeting at Calcutta suggests "the best way
of promoting agricultural productivity of
small and marginal farmers is to link them
up with the corporate sector through 'con­
tract farming”'.
Lauding the successful experience of
farmers who have linked themselves up
with major corporate houses like ITC and
Pepsi, the studv said that the experience
should be replicated in other pans of the
country to reduce regional imbalances in
oilseeds production.
While Gujarat, Andhra Pradesh, Ma­
dhya Pradesh, Maharashtra and Karnataka
are recognised as oilseeds producing states,
the same emphasis on oilseeds production is
absent in states like West Bengal, Bihar,
leading to a gap of about 10 lakh tonnes on
demand and supply.
The Assocham study paper notes that
such corporatisation would not only im­
prove yields by "leaps and bounds" but
would also provide a "steady and reliable"

market for farmers. “Corporatising Indian
agriculture will also solve the problem of
availability of raw materials for the agro­
based industry.
“Further, development of the agro- in­
dustry linkage would give a great fillip to ag­
ricultural development”, notes the study.
With the yield per hectare of oilseeds in
India ranking among the lowest in the
world, at an average 800 to 900 kg per hect­
are as against 1,500 kgs in Europe and
2,500 kgs per hectare in USA, the apex body
is looking for more associations between
corporates and fa’rmers to step up oilseeds
production in India.
The draft Agricultural Policy Resolution
of the Government has resulted in an up­
surge in exports of agriculture and allied
products since 1993-94.
Removal of farmer's subsidies which
tend to be higher than the stipulated 10 per
cent in Western economies will present the
Indian producers with greater export op­
portunities. In this context, the study ob­
serves the agro-industry linkage will facili­
tate transfer of technology to agriculture
while creating the basis for modem man­
agement systems in oilseeds cultivation.

Pepsi turns its back on farm sector
Pepsi is diverting its energies towards soft drinks and getting out of agriculture, says Devinder-Sharma
epsi h.us finally made lhe ject was set up. even lhe Govern­ tion with the Punjab Agricultural
University While there is mi sign
ment had reluctantly u< < opted
rigid choice. With all ryes
of the research centre that was
that all was not well with Pepsi
focussed on the great cola
proposed al the time of seeking
and as an immediate step set up a
war. Pepsi. if news reports ure to
clearance. Pepsi had also gone
b* believed. is quietly negotiating
high-level enquiry committee
with the global food processing
Another three years have pass­ back on its promise of bringing in
ed since the committee submitted
improved varieties of fruits and
giant, II J Heinz, for lhe sale of its
vegetables into India. /Mid on lop
tomato paste plant in Punjab.
its report, highly critical of the
I Ins may well he the beginning of Pepsi project, sometime in lhe ■of it. what the company was pay­
the end for the horticultural revo­ beginning of 1991 l-'or some
ing tu its 400-odd contract far­
lution that Pepsi had promised all
mers for lhe tomato produce was
strange reasons. Pepsi’s lop
brass had preferred to answer
a pittance.
along
If Heinz is able to acquire Pep­ lhe allegations against it through
In any other country, including
si s paste plant, negotiations for
lhe media rather than presenting
lhe US. such anomalies on lhe
which arc ir. the final stages.
its case before lhe committee.
part of a private company would
Pepsi would feel relieved to lake
have invited punitive anion But
l anner leaders from Punjab.
on lhe challenge posed by the
who had initially extended an
in India, the government has
entry of its soft-drink rival. Cora
unequivocal support for the
delivcralely tried lo look lhe
Cola, into the Indian market.
I’epsi project, are today a dis­ other way to prevent sending any
signals
lo
foreign
Mthough Pepsi denies it. the sale
gruntled lol "There is no sign of wrong
of the slale-of-lhe-url tomato
investors In fact, for quite some
the ’second' green revolution
paste plant would solve yet ano­ ih.it Pepsi had promised." says
lime a neat cover-up was provid­
ther problem for the multination­ the president of the Bharliyo
ed lo Pepsi for ils glaring lapses
al giant, in that Heinz will
Kisan Union, Mr Bhupinder
in agricultural research and
gradually lake tare of the con­ Singh Mann. His former collea­ development when the Govern­
trail farmers as well as lhe toma­ gue. and now president of lhe
ment repeatedly questioned lhe
to crop. Mier this it may be lhe
company for its food processing
breakaway group of Punjab BKL,
turn of lhe potato chips plant.
Mr Ajmer Singh Laklmwal. is
and export commitments.
Mid with that would enJ Pep­
mure categorical when he says
But Pepsi's failure lo prop up
si s commitment to usher in a
horticulture in Punjab may be
that lhe company has taken lhe
"secund" green revolution in
harmful in other ways. Pepsi's fai­
Punjab farmers for a ride.
India
But all this was contested by
lure will hit at lhe credibility of
Il is now abundantly clehr that
lhe former managing Director of lhe corporate sector, which
Pepsi’s entry into India was pri­
Pepsi f oods. Kamesh Vangal.
claims to have built considerable
marily aimed at capturing lhe
who claimed mat contrary lo the
technical and managerial skills.
Luge soil-drinks market. Agricul­ criticism. Pepsi had revolutionis­ and has just begun lo extend ils
tural research and development
activities tu agriculture in areas
ed tomato cultivation in Punjab.
were apparently used as a ploy to
extending the harvesting season
such as horticulture, acquacullugain entry l-.ver since the project
lo winter
re. mushroom production and
was cleared in 1988. Pepsi hud
What irks the farmers' leaders
sericulture, all with high employ­
felt uncomfortable about usher­ is that lhe company has not lived
ment potential in lhe rural areas
ing in a new phase in Indian agri­
up to its commitment of selling
Simply put. if a giant like Pepsi
culture. I'hree years after me pro­ up a research centre in collabora­
finds agriculture an unattractive

P

33

proposition who else can be
mic trials conducted to make an
expected to bring a change in the
assessment
of 'yield
and
villages’
production
I he corporate sector is in a
Pepsi hud instead .worked hard
position to help small farmers
on transferring ihd lechnolngywith new management tech­
that was already available with
niques. to improve productivity
the Indian scientists The techno­
and earn more. This assumes
logy for nurseries in 'plastic tun­
nels' and the ridge cultivation of
significance at a lime when lhe
investments in agriculture sector
tomatoes was already (proven
have gone downhill.
Mid so were other technologies
Pepsi's exit from lhe farm
like deep placement of seedlings.
scene and that too al a lime when
frost prevention with lhe help »»f
farming is in dire need of invest­ 'sarkanda' grass.
ment. both public and private.
Pepsi hud very cleverly passed
will certainly discourage other
on these as 'research' achieve­
companies tu pump money in the
ments through lhe ignorant and
rural sector.
gullible media personnel Pepsi's
Since a meaningful partner­
experiment with 'research', the­
ship between lhe farmers and lhe
refore. went on lo cast a shadow
industrial sector could well serve
over lhe future of privatisation ul
as the launching pud for the com­
agricultural research in lhe
mercialisation of Indian agricul­
country.
ture it becomes essential lo ensu­
Private companies will find ii
re that industrial houses do not
much easier (as well us economi­
look
for
greener
pastures cal) lo portray lhe available
elsewhere
research as something conductIn the case of Pepsi, agricultu­ ed by them.
ral activities were sidelined not
because they were considered an
Since lhe bureaucrats in the
unaliractive prupusiliun. but due
agriculture ministry failed t<>
tu lhe company's unwillingness question Pepsi on ils 'research'
to operate in rural areas when
claims they are unlikely lo com­
lhe soft-drinks market is a more
prehend the ulterior designs of
profitable option.
numerous other private compa­
I’hr company had. therefore.
nies. .Mid therein lies a grav e dan­
not made any elTort to select or
ger for Indian agrh ullure
identify improved varieties for
Il is lherefore imperative fur
food processing Contrary lo its
the Government lo ensure that
claims, no research effort was
Pepsi is nul allowed lo abandon
launched to improve the quality
agricultural research \fter all. n
of fruits and vegetables for post­
was a commitment made by the
harvesting Xor were any agrono­
multinational giant

H.E FiOHttR

A multinational9§ hoax
**7VT ULTINATIONALS" was still a dirty
JLTJL word when the Pepsi project was
cleared by the government in 1988. Bitter
controversy had preceded this decision. The
goverment of Punjab had produced a volumi­
nous, very high cost propaganda material as a
part of its effort to convince the opponents of
the project. Special meetings of political lead­
ers were convened for the purpose. Even
ex-legislators like this writer were mailed the
very attractive printed literature to sell the
project.
The main argument in its favour was that it
would herald a horticultural revolution in
Punjab and would result in the much needed
diversification in Punjab agriculture. It was
emphasised that Pepsi cold drinks was not the
main content of the project. It was further
stated that under terms of the agreement,
India would earn considerable amount of
foreign exchange from export of agro-pro­
ducts as well as cold drinks.
Consensus amongst the farmers and politic­
al activists was that the rosy picture which
was drawn to sell the project had turned out to
be grossly exaggerated if not a mirage
altogether. Even the representative of the
management conceded that the project had
not led to any increase in area under the
tomato crop in Hoshiarpur district - a back­
ward area of Punjab, which was supposed to
benefit the most The factory works only for
about two months in the year. The maximum
strength of the workforce during this period is
about 200. Permanent staff Is less than dozen
— at the moat. Generation of 50,000 jobs had
been promised.
In the beginning, the factory 1 eased-in-1 and
from land-owners for a period of one year to
three years to grow its own tomatoes with its
own seeds prepared in the district itself,
besides buying tomatoes from farmers. Their
own tomatoes were of ordinary size, only
slightly better looking. Yield was also a little
more. Mr Joginder Singh Randhawa of Kaloa
village told us that he had leased 50 acres of
the family land for one year to the factory
management even though the company
wanted a three year lease agreement. Mr
Joginder Singh did get more lease money than
the prevailing market rate per acre. However,
he did not renew the lease after one year
because he discovered that the family could
earn much more by self cultivation of sunf­
lower and/or sugar cane. Later on, practice of
leasing land to grow its own tomatoes for the

factory was given up by the company itself.

Mr Joginder Singh was emphatic: “Pepsi
has not resulted in any special development
for our district. There has been no perceptible
increase in land under tomatoes but land
growing sunflower has been going up”.
The sarpanch of another village said: “All
tall promises made have turned out to be false.
The real aim of the project is not to help our
agriculture but to sell us Pepsi Cola under
some Indian name”.
Dr G.S. Nijjar, a retired Deputy Director,
Horticulture, Punjab, told us the story of his
own disillusionment. He said: In horticulture,
processing is very important. Selling fresh
fruit cannot be profitable for peasants. In
Europe, 80 per cent of grapes are processed. In
the USA, 75 per cent of citrus is processed ....
In Europe and the USA 25 per ceflt to 30 per
cent of land under cultivation grows fruit and
vegetables. In Punjab the correspond 1 ng fi­
gure is only 1.5 per cent. Pepsi held out many
promises and I had a good opinion of the
project. Factories were promised not only for
processing tomatoes but also pears, mangoes
and apples. Some experimentation was made
with some fruits in the beginning The same
was, however, given up very soon even though
the Chairman of the Pepsi Technical Commit­
tee had certified that pears situation sei’med.
good from the view-point of the company.
Promised research institutes have not come up
and no technological revolution for horti­
cultural crops in Punjab has taken place. Now
I think that their real aim was to captun’ the
vast Indian market for their soft drinks. Nor is
this all. I was in the USA for sometime during
1991 and it was there that I learnt how the
company was “fulfilling" its promise for earn­
ing foreign exchange for India by exporting
horticultural products and cold drinks '.
Like many others. Dr Nijjar was emphatic.
“No advantage has accrued to any area in
Hoshiarpur district from the project." He
criticised the government too for not intro­
ducing a proper insurance scheme for tomato
growers which he said was very necessary in
view of high risk involved in tomato produc­
tion since one heavy rain is enough to destroy
the crop.
The representative of the managment who
met me was very courteous and polite but was

very miserly in giving information and in
some respects at least was not at all staight
forward and open.
I was told: “The factory is fully automatic..
It covers an area of 25 acres. This land has
been taken on lease from the panchayat. It is
the biggest plant in Asia. Tomato growers
have gained. Best tomatoes go to big cities.
What cannot be sold there 4s sold to the
factory here. Tomato season is from May 1 to
June 30 every year. Quality has improved.
Area growing tomatoes has grorzn consider-*
ably "
However. no figures were given It was
conceded that this had not happened in
Hoshiarpur district. I was informed that
tomatoes were mainly coming from Rampura
Phool area of Bathinda district and also from
parts of Amntsar, Jalandhar and Gurdaspur

district When I asked him 11 it was true that
only some big landlords of Rampura Phool
were supplying tomatoes to the factory, he
replied: “It is better to deal with a few people
than many". Incidentally, one of these Ram­
pura Phool landlords is a former Akali Minis­
ter and a close relation of a former Vice
Chancellor of the Punjab Agricultural Uni­
versity at Ludhiana No legal agreements are
made with the farmers. Only there is nursery
supply and some guidance or advice. Some
rejection of tomatoes brought to the factory is
also there. Price is paid to the farmers after a
gap of 15 days or so.
Daily average supply of tomatoes to the
factory during the season is 600 to 700 tonnes
Tomato sauce produced is 1/8 of the weight of
the tomatoes used. A part is exported mainly
to Australia. Another part is sold in India
itself. When I asked whether there was any
plan to go in for chillie sauce also, there was a
half-heated “yes”, in reply conceding that the
machinery had still to be brought
Soon after I returned to Amritsar from
Hoshiarpur, I read an article by M.V. Kamath
entitled: “The Pepsi experiment". His conclu­
sion that “this whole thing has been a big
exercise in cheating the Government of India,
and particularly Punjabi fanners” seems to be
not at all uncharitable. I would only like to
add “Perhaps the Pepsi and the Government
of India with the help of the state government
concerned, together cheated the farmers of

Punjab.” - IPA.
The TRibuNC

l-T-m.

PepsiCo plans may pose hazards
India Press Agency

WASHINGTON, November 6:
Pepsi-Lchar soft drinks in India
may soon be served in plastic
bottles, creating serious en­
vironmental problems as well as
lokicity hazards for workers and
consumers, say environmentalists
and experts here.
PepsiCo is currently shipping
thousands of tonnes of used
plastic soda bottles from the
United Slates to India for repro­
cessing. Most of the used bottles
aie shipped to the Futura In­
dustries factory near Madras.
Nearly a third of the plastic waste
shipped to Futura is unfit for
recycling. The plastic waste that is
recycled is processed into poly­
ester under quite hazardous con­
ditions.
PepsiCo has now received per­
mission to build a virgin plastic
bottle manufacturing plant near
Madras. Plastic bottles, with their
toxic manufacturing byproducts,
arc to be produced in India. The
bottles will be shipped to Europe
and US. Some of the plastic waste
that returns to India will be
dumped or burned as garbage.
The remainder will be reprocess­
ed. Environmentalists arc con­
cerned with this, since unlike in­
dustrialised nations, India does

not have strict laws and regula­ known to science.
ingredients in glass production
tions to protect its environment
RECYCLING DANGERS: En­ are sand, limestone, soda ash and
or workers from pollution caused vironmentalists here have pin­ feldspar, all naturally occurring
by virgin plastic production or pointed the recylcing dangers. materials. Unlike the chemicals
plastic recycling, as well as other The majority women labourers, used in plastic production, these
toxic or pollutant materials.
who sort and wash the plastic materials arc solid, inert, non­
Already the social, environmen­ bottles, arc paid a very meagre flammable, and largely non-toxic.
tal "and economic impacts that sum, approximately Rs 10 or 30 The production of a 16-ouncc
multi-national beverage com­ cents a day. Futura docs not glass bottle results in 100-timcs
panies arc taking in India are of provide them protective clothing less pollution that is produced by
great concern to many en­ or masks to protect them from one plastic polyethelene
vironmentalists and other con­ either scalding water or contami­ terephthalate (PET) container of
scious citizens. The multi­ nants, or even exposure to the the same volume.
nationals’ recycling scheme; toxic fumes released during the
Environmentalists are demand-.
PepsiCo, Coca-Cola, Seven UP. recycling process. Skin and ing that PepsiCo suspend its In­
and some other plastic producers respiratory ailments have been dian operations for switching
and users have set up the Plastics associated with exposure to over plastic instead of glass bot­
Recycling Corporation of Cali- plastic recycling discharges.
tles. In the US, a campaign to
lorpia (PRCC) to facilitate the
Recycling statistics show that in write protest letters and faxes to
export of plastic waste. Based in the past 30 years, the amount of Mr Wayne Calloway, CEO,
Los Angeles, PRCC buys plastic discarded plastic waste in the US PepsiCo has begun.
waste from municipal recyclers in alone increased from 400,000
Indians have to ask Mr
me US and sells it at a reduced tonnes to more than 16 million
puce to Asian markets.
tonnes. By the early 1990s, more Calloway to respond to charges by
Financial contributions from than seven billion plastic soft environmentalists that PepsiCo is
PepsiCo and the other firms drink containers were being exporting polluting technologies
from the US to India. He has to
subsidise the transactions. In produced in the US.
1993, PepsiCo exported more
Virgin plastic bottle production be reminded that plastic bottle
than nine million pounds of contains toxic by-products, in­ production and reprocessing
plastic waste from California to* cluding ethylene oxide, benzene, produces dangerous chemicals
Madras. The plastic waste that and xylenes. These toxic and places and additional burden
Futura cannot reprocess is dis­ chemicals can cause cancer, birth on India’s already threatened en­
posed of in massive heaps outside defects and damage to the ner­ vironment; and urge PepsiCo to
the plant. When burned, plastic vous system, blood, kidneys and take a leadership role in returning
to the use of safe, non-toxic,
can release' dioxin, one of the the immune system.
On the other hand, the major refillable glass bottles.
most poisonous substances

Agriraltoral exports up to
ll?000 crore: Jakhar
______ Press Trust of India______
NEW DELHI 21 DECEMBER

AGRICULTURAL exports have
grown to the level of Rs 11,000
crore as against Rs 7,800 crore
last year, the agriculture minister,
Dr Balram Jakhar,. said on
Wednesday.
“The country today has the
highest ever buffer stock of food­
grains with a phenomenal growth
in the production of pulses, oil­
seeds, fish and milk," the minister
said while inaugurating the annu­
al general body meeting of Nation­
al Agricultural Cooperative Mar­
keting Federation of India (Nafed)
here.
He lauded the role played by
Nafed.in the marketing of agricultpral produce, noting that it had
achieved a record turnover of Rs

631 crore, with exports of Rs 328
crore during 19S3-94.
Nafed had also helped in the
development of the member soci­
eties in the cooperative sector, he
said.
Dr B M Sarin, chairman of
Nafed, said that during 1993-94
the organisation had a turnover of
Rs 631 crore, showing an increase
of 42 per cent over the previous
year.
He said a new record profit of
Rs 26 crore has been earned,
which is 144 per cent more than
the previous year. The export
turnover of Rs 328 crore has also
been a record achievement with
an increase of 62 per cent over the
past year.
The country was able to earn
foreign exchange of Rs 250 crore
in the export of onions alone,

35

which is canalised through Nafed.
Nafed has utilised the system of
canalisation of onions exports for
establishing a separate research
and extension organisation, Na­
tional Horticultural Research and
Development Foundation, from
out of the revenue generated from
onion exports, he said.
Onion exports, which was less
than one lakh tonnes in 1978-79
and, has now reached 4.5 lakh
tonnes.
Mr Mahendra Singh, managing
director of Nafed, said that in
1993-94 under the price support
scheme, Nafed provided market
stability in the interest of growers.
Under this scheme agricultural
commodities valued at Rs 35 crore
were procured. Under market in­
tervention scheme, items valued
at Rs 14 crore were covered.
Eccncmic Tme$

M-IS- 33.

■World Bank funded
fishery project in AP
RS. 5.61-crore World Bank-funded pro­
ject is underway in Andhra Pradesh for
developing aquaculture over 15.300 hectares
of water spread. Fiftyone 51 fishermen's coop­
erative societies will participate, according to
the Minister for Fisheries. Mr. Malladi Swamy.
The Minister inaugurated on Tuesday the fish
hatchery' of Sagar Seafoods (Pvt.) Limited. In a,
technical collaboration with China, the farm is
located at Umda Sagar near here. The hatch­
ery has been promoted by a group of NRIs
headed by Mr. Saleem Khan with an invest­
ment of Rs.2 crores in the first phase.

A

The hin6v

U

as-9- nq .

Pitfalls of export-oriented
agriculture policy
crucial component of all
stabilisation-cum-structural
adjustment packages recom­
mended by the IMF and the
World Bank is agricultural
exports. The operative word is actually
‘exports’, but since the third world
countries supposedly enjoy a comparative
advantage In agriculture, the emphasis.
it is argued, must be on exports from
this sector.
The Indian government has adopted
and put into operation this aspect of the
package with considerable zeal. Trade
in agricultural commodities has been
liberalised significantly and special in­
centives are being given to farmers for
the production of exportable crops. This
thrust has begun to pay dividends. In
1993-94, agricultural exports increased
by about 40 per cent.
What is not adequately realised is
that in the long term the pursuit of
such a strategy has adverse implications.
While the rate of growth of total agricul­
tural output depends on a host of
technological and Institutional factors, a

A

cause for worry in an export driven agri­
cultural scenario^- is that what our
farmers grow will be increasingly
dictated by demands from.the external
markets, particularly those emanating
from the West.
The export market which lie largely
in. cash crops; horticultural and dairy
products, commands fabulousiprices
in the western countries. Consequently
the margins which the domestic producer
is likely to get if hemndertakes prod­
uction of these commodities are very
much higher than the margins obtaina­
ble foodgrains grown presentlycfor the
domestic market. i
(99) Quite clearly, such . export
preferences are set to alter the compo”
sition of the country's agricultural output
radically .'In fact.such a|trendhs already
becoming evident in a number of aread
across the country. Sunflower seems to
be replacing millet in Telengana, parts
of Marathwada and in Gujarat. Horticul­
tural production is beginning to make
inroads into areas of foodgrain production
in Haryana and Punjab. And such

36

shifts can be expected to become all the
more rapid if MNCs in agri business are
allowed to set up shop in the country.

The first, and clearly the most impor­
tant. casualty of this change in cropping
structure will be the long cherished
objective of foodgrains self-sufficiency.
Exports will also reduce the domestic
availability of a number of agricultural
products and thereby increase their
prices in the domestic market. It may
be argued that if total' agricultural
output increases sufficiently, we can
meet domestic requirements even as our
exports Increase. It may even be argued
that the country can import its require­
ments of foodgrains with its enhanced
export earnings. Both these arguments
are invalid for reasons cited below.

Agricultural development since inde­
pendence has been extremely lop-sided
This is an aspect which many have
commented on. Productive investment
has been concentrated in the northern
region, particularly in the states of

{

'I

Punjab. Haryana and western Uttar
Pradesh. This concentration has been
so great that the share of the northern
region in total agricultural output in­
creased from 24 per cent in 1962-65 to 32
per cent in 1980-83, while the shares of
the eastern, southern and western regions
declined over the same period.
Quite clearly, a quantum jump in
total agricultural output requires a
broadening of the agricultural base. But
such broadening depends critically on
non-price factors like stepping up invest­
ment, technological change, conservation
of land and water resources, credit
reform and decentralisation of manage­
ment. And the government, and in
particular public investment, has to
play a dominant role if these non-price
factors are to become effective.
However, if recent developments are
any indication, the government is simply
not prepared to play such a role.
Firstly, there is its dogmatic belief in
the virtues of the free market. And
secondly, there is pressure on the gov­
ernment from multilateral lending insti­
tutions to reduce fiscal deficit. Since
the government is finding it increasingly
difficult to raise more revenues and cut
unproductive expenditure, the brunt of
the fiscal correction is falling on produc­
tive expenditure.

Fixed capital formation in the agricul­
tural sector has been decelerating quite
sharply in recent years. Gross investment
in agriculture in real terms was Rs 4,636
crore in 1980-81, but came down to Rs
4.580 crore by 1991-92. It is, therefore,
not surprising that the period 1990-94,
though characterised by above average
monsoon, saw agricultural growth aver­
age at only 1.1 per cent per annum
against a more than 2 per cent increase
in population. In such a situation, it is
highly improbable that overall agricul­
tural output will see any significant
growth in the foreseeable future.

That brings us to the option ofimporting
food? An important point that needs to
be noted in this context is that primary
goods exportables of third world countries
have witnessed a continuously deterio­
rating terms of trade vis-a-vis manufac­
tured goods importables. This has much
to do with the historical origins of
international trade and the nature of

international commodity markets. Given
this, and the fact that the capital and
technology starved third world countries’
need for manufactured importables is
considerable, the scope for food imports
is limited.

This has been the experience of a
number of countries in Latin America
and sub-Saharan Africa, when they at­
tempted to give an export thrust to
their agricultural products. Their ex­
perience has also been that the require­
ment of food imports tends to increase

T

JL he export-led'
agricultural growth model
tried in Latin America has
shown that food imports
tend to increase rapidly
and that the net impact on
balance of payments is very
often negative

rapidly and that the net impact on the
balance of payments Is very often nega­
tive.

The significance of all this cannot be
lost on anybody who is familiar with
the food situation in the country. It is.
of course, well known that the foodgrain
self-sufficiency which we have supposedly
achieved is a consequence of the low
purchasing power of the people. What
Is not so well known Is that the Increase
in foodgrain output since independence
has done little more than arrest the
continuous decline in per capita output
that was taking place in the pre-indepen­
dence period.
The rate of growth of nor capita

yi

foodgrain output was a mere 0.26 per
cent per annum between 196061 to 198687. And this rate was positive only for
the northern region. Per capita output
stagnated in the eastern region and
declined in the southern and western
regions over the same period. Further,
there is no evidence to show that non­
foodgrain output in the latter three
regions compensated for the deficiency
in foodgrain output.
Trends in per capita availability of
foodgrains are even more revealing.
The surplus production of the northern
region, far from enhancing availability
in the deficit regions as a whole, are
channelled almost exclusively into urban
enclaves through the public distribution
system or into building up of government
stocks. Over 60 per cent of the fair
price shops are located in urban enclaves.
The present move to reduce the food
subsidy will only reduce the spread of
the PDS, despite all the rhetoric about
better targetting.
Nor is there necessarily a correlation
between levels of consumption and pro­
duction of foodgrains. A 1975 UN study
has concluded that, in a situation of
regional disparities in income and prices.
the market works in such a way that
surpluses tend to remain in the surplus­
producing regions and deficits in other
regions left uncovered.
Manifestly, for the vast mass of poor
peasants and agricultural labourers, es­
pecially in peninsular India, access to
foodgrains remains below what it was
at the time of independence. This pre­
carious existence can only become.more
so as agricultural exports pick up. the
benefits going largely to the rich peasants
and landlords, particularly in the north­
ern region. And their earnings will not.
to any great degree, flow back into
agricultural investment in the absence
of public investment.
In the 1990s, a number of districts
across the country have already reported
starvation
deaths
—
Wavar
in
Maharashtra.
Sarguja
In
Madhya
Pradesh. Kalahandi in Orissa, Varanasi
in Uttar Pradesh. Palamau in Bihar, to
name just a few. If the situation is not
to worsen, the government has no choice
but to reverse many of Its present
policies. This story on a much larger
scale has already been enacted in Latin
America and sub-Saharan Africa, which
have adopted the IMF-World Bank type
adjustment packages. The government
would do well to study these experiences.
• The o85E.R9eR 15-&-IA

The violence of the blue revolution
VANDAMA SHIVA

ver the past decade, inter­
national
agencies have
promoted intensive aquaculture*
development in many Asian
countries, shrimp farming has
been an important part of these
development projects. The jus­
tification has normally been the
removal of protein deficiency
among rural communities by in­
creasing productivity beyond
those obtained in marine eco
systems. However, the ecologic­
al and economic impacts of the
Blue Revolution indicate that
such aquaculture projects have
actually aggravated the poverty
of fishing and farming families.
In addition, the aquaculture in­
dustry exists at the expense of
marine fisheries and does not
enhance overall fish production
when diverse species, diverse
producers, and diverse consum­
ers are fully taken into account.
Intensive shrimp farms with
stocking rates of a 100,000 to
300,000 prawns or shrimps per
hectare have to be maintained
through artificial feeds, inten­
sive energy for pumping water
and
intensive
water
use.
Maintenance of optimum water
quality, salinity, temperature,
dissolve oxygen is critical be­
cause of intensive stocking and
iollution caused by excessive
eeds, faeces, and other organic
wastes. Regular pumping of sea
water of 30 to 35 ppt salinity
range has to be mixed with
pumped ground water to keep
the 15-20 ppt range required for
intensive ponds. Estimates show
that roughly 6600 m3 of fresh
water are needed to dilute full
sea water in a one hectare pond
at one metre water depth over a
cropping period of four months.
Since the shrimp farms are set
up near the coast to pump sea
water into the ponds, they have
a major ecological impact on the
coastal zone ecosystem as well
as on coastal communities in­
volved in fishing and in paddy
cultivation. The farms are often
set up in delta regions which are
usually very fertile. The Thar
javur delta is the granary <
South India with phenomen;
paddy yields. The ‘kuruwai
crop brings in 6.5 tonne per ha
and the ‘samba’ crop 4.5 tonne
per ha. However, due to the
environmental impact of shrimp
farming, the granary is becom­
ing a graveyard according to
local people. In India, the most
rapid expansion of shrimp farm­

O

f

nically the aquaculture company
responsible for the drinking wa­
ter destruction of that region is
called ‘Carewelf.
The richest ground wa.ter
source in the entire country, the
coastal region, has therefore
been struck by water famine.
each shrimp exported from the
country thus amounts to an ex­
port of large scale aquifers if the
costs .of ground water destruc­
tion are internalised in shrimp
production.
As ground water salinity in­
creases, paddy fields are des­
troyed. A survey conducted by
the Chittagong University Eco­
nomics Department showed
that the Satkhira region in
Bangladesh where intensive
shrimp cultivation has been in­
troduced, could only produce 36
ton of rice in 1986, compared to
40,000 metric ton of rice in
1976. In Ban Darsa Sangnam in
Songkla in Thailand, a farmer
Im theocah could only harvest
150 sacks instead of the usual
300 sacks within a year of im­
pact of shrimp farming in the
region.
Shrimp farms flush their
effluents and wastes directly
into the sea and neighbouring
mangrove
and
agricultural
lands. The waste water from the
ponds carries pollution in the
form of excess lime, organic
wastes, pesticides, chemicals
and disease microorganisms.
The release of such byproducts
affects estuarine and marine
organisms.

ing is in the districts of Nellore
(named after ‘nellu’ or rice) and
Tanjore, the rice bowl in the
Cauvery delta.

Environmental impact
The first impact of shrimp
land and forests in the coastal
region when the land is bull­
dozed and excavated for making
the gigantic fish farms. I have
seen"the shelter belts of casurina, prosopis, palmyra being cut
to make pumping stations,
aquaducts and fish ponds. In
Philippines; in Thailand, in In­
donesia, mangrove destruction
is a major impact of prawn
farming.
The destruction of mangroves
has further environmental im­
pacts. Since mangroves play
crucial ecological role in coastal
ecosystems, they export organic
matter, providing nutrients to
adjacent estuarine and marine
ecosystems. Mangroves also
contribute to offshore fisheries
by acting as nurseries and shel­
ter. Prawn and shrimp catch at
sea has been found to be direct­
ly proportional to mangrove
area.
The destruction of coastal
vegetation destroys the buffer
zone against destructive wind
and water action, increasing
cyclone and flood vulnerability.
This vulnerability will be further
aggravated in light of climate
change which will increase the
occurrence of cyclones and
floods. A decreased coastal
zone bugger capacity caused by
shrimp farming in the light of
farming is on the destruction of
increased vulnerability caused
Dy atmospheric pollution cre­
ates the potential of new scales
of environmental disaster.
The large scale pumping of
sea and ground water into the
fish farms is the most serious
environmental impact of shrimp
farming. The massive extraction
of fresh water from under­
ground aquifers for salinity con­
trol in the ponds poses a serious
threat to the salinity control of
the coastal ecosystems. Emptied
aquifers are subject to salt water
intrusion. Seepage from the
tanks also increases salinisation
of ground water. In the village
of Kurru in Nellore district,
there was no drinking water
available, to the 600 fisherfolk
due to salinisation of the drink­
ing water. After protests from
the local women, drinking water
is now supplied in tankers. Iro­

The waste stifles the growth
of aquatic organisms and causes
water quality to deteriorate. In­
tensive coastal fish farming has
also been linked to ‘red tides',
an explosive growth of toxic
algae that can kill fish and fatal­
ly poison people who ear con
taminated sea food.
Another reason for depletion
of marine shrimp is the capture
of juvenile shrimp from the
mangroves for hatcheries.
Prawns occupy about ten
different habitats in their life.
They breed at sea, but grow and
shelter in mangrove areas dur­
ing jevenile stage. When ma­
ture, they move from the lowmedium salinity zones to the

estuary and reefs to spawn.
Prawns and shrimps do not
breed in captivity. The stocking
of the shrimp farms is therefore
done by capturing larvae and

38

juveniles caught on the coast
and in the mangroves, and by
capturing egg-bearing females
at sea each of which can stock 1
to 2 ponds and therefore fetch
high prices. Both these sources
increase shrimp availability for
intensive fish farms by depleting
wild stocks at sea. Captive
spawning of shrimp is done in
hatcheries by callously cutting
the eyes of females, to increase
sexual activity. (Nora Ibrahim,
1991)
The capture of juveniles in
the mangroves and back waters
prevents the renewal of the wild
shrimp at sea. The aquaculture
industry thus exists at the ex­
pense of existing marine fisher­
ies which have supported tradi­
tional fishing communities over
centuries.
Intensive shrimp farming is
based on dense stocking rate
and overcrowding, which in­
duces stress problems and in­
creases susceptibility to dis­
eases. Overcrowding leads to
poor water quality due to de­
creased oxygen level, high
accumulated metabolic products
and excreta, rapid growth and
transmission of noxious para­
sites,
microorganisms
and
pathogens.
Fish farmers normally expect
losses from disease of 25 to 30
per cent.
In 1987 Taiwan became the
largest prawn producer in the
world. A year later disease
struck and production dropped
by 70 per cent. Shrimp exports
declined from 50,000 million ton
in 1987 to 8.000 million ton in
1988. In addition the excessive
ground water pumping led to
land subsidence which caused
two storeyed houses to become
one storeyed houses. The
Taiwan’s Government had to
ban setting up of the new shrimp
farms for this reason. (Pri­
mavera 1991). Agencies and
corporations which cite Taiwan
as a miracle to be followed in
the area of Shrimp exports
should also learn from the eco­
logical collapse of shrimp fisher­
ies exports.
(Rangaswamy,
1994). Similar non-sustainability
due to infectious diseases and
deterioration of the environ­
ment caused by self pollution
from intensive aquaculture is
affecting the Philippine and
Thailand prawn industry.
Intensive shrimp farming is
thus a non-sustainable foim ot
shifting cultivation, with com-

panies moving from one country
to another in a matter of a few
years as production becomes
non-sustainable in each loca­
tion. As a result of their shifting
cultivation they create Blue Re­
volution refugees in each coun­
try where intensive aquaculture
takes away land, water and
fisheries resources from local
communities.
The Social Impact
Since
coastal
ecosystems
where shrimp farming is being
introduced are regions which
support the lives and livelihoods
to millions of fisherfolk and
farmers, the environmental des­
truction caused by shrimp farm­
ing immediately transforms into
social impact.
The enclosure of the beaches
for pumps and powerhouses has
pushted fishing communities off
their ancestral homes. Fishing
communities call themselves
‘pattapu raja’, the kings of the
coastline. Today they are re­
fugees of aquaculture develop­
ment, with no place to spread
and mend their nets or park
their catamarans (the traditional
fishing vessel used by small scale
fishermen) and no access to the
sea from their villages.
The depletion of marine fish
due to environmental impact of
fish farming has destroyed their
resource base. Kantamma of
Ramachandrapuram
where
Rank Aqua and Siraga shrimp
farms have just started to oper­
ate says that the shrimp catch of
the fisherman which used to be
Rs 50,000 per catamran per
month is now down to Rs. 5,000
within one year of impact.
Not only are fishermen dis­
placed, local communities no
longer can consume fish. Since
intensive farms are export
oriented, they do not supply
local markets. The cost of fish
locally has risen worldwide as a
result of commercial fisheries.
For example, in Kerala, India’s
number one fishing State, prices
for shrimp jumpedfrom US $50
a ton to $1,300 a ton between

1961 and 1981. Because of the
price rise per person consump­
tion of shrimp fell from 19 Kg
per person to 9 Kg. (Peter We­
ber) While aid programmes put
money into aquaculture de­
velopment to boost world food
production to help feed the hun­
gry, the shrimp farming experi­
ence in India shows that they
take away from the poor the
little they have.
The destruction of clean
ground
water
immediately
translates into increased work
burden for women. At a public
meeting in village Kurru, orga­
nised on the impact of aquacul­
ture, water scarcity in the water
abundant coastal belt was iden­
tified as the main problem. Af­
ter protests the companies own­
ing shrimp farms were forced to
spend Rs. 5 lakh a month to
transport potable water to the
village. The water is supplied by
tankers, with each household
getting only 2 pots to drink,
wash, clean with. “Our men
need 10 buckets of water to
bathe after their fishing trips.
What can we do with 2 pots”.
Women say they are working
4-6 hours extra to collect fuel
and water as a result of the
environmental
destruction
caused by shrimp farms.
As the shrimp farms render
the fertile coastal region a salin­
ated waste land, there is des­
truction of agricultural liveli­
hoods and food production.
Very soon there will be famine
in the rice bowls of Andhra and
Tamil Nadu.
The fishing communities of
Ramachandrapuram used to
grow enough “ragi” for them­
selves. The “doruvu", the small
ponds for irrigating ragi are all
saline and there is no ragi pro­
duction any more. There is no
food from the sea, nor from
land. There are no livelihoods
on sea, nor on land. Rice cul­
tivation on 40 hectares of land
need ’50 labourers but shrimp

raising in the same area needs
only five workers. Each job in
aquaculture needs an invest­
ment of Rs. 2 lakh. As Govindamma of Kurru said, “We
were displaced from the sea, we
went to agriculture for jobs.
Now they are building prawn
farms on agricultural lands. Salt
farms are a'so being converted
into aqua. There too we will
loose labour. Where will we
earn our living?”
As people's resources and
livelihoods
are
destroyed
aquaculture development be­
comes a new source of social
conflict. In Andhra Pradesh, the
villagers of Kurru attacked the
aquaculture farms uprooting
pumps used for drawing sea
water. They also breached the
bunds of the ponds. In Tamil
Nadu, the Gram Swaraj Move­
ment has taken up the issue of
shrimp farms. ’Don’t bring
saline water into our lands' and
‘don't take away our livelihood'
are the slogans of the landless
peasants in the movement.
Women have been blocking the
work of the bulldozers brought
in to make the shrimp farms.
When these social and ecolo­
gical costs are internalised, in­
tensive prawn farming emerges
as a highly wasteful and ineffi­
cient technology for ecological
and equitable utilisation of land,
water and fish resources.
Intrinsic to the revolution are
value judgements that devalue
nature's productivity in the sea
and the productivity of fishing
communities dependent on the
gift of the sea. They tacitly set
up an heirarchial ordering that
puts the luxury consumption of
shrimp by rich northern con­
sumers and the profits of cor­
porations. above the need for
drinking water, food, and liveli­
hoods of local fishing and farm­
ing communities. Shrimp farms
embody an assumption of the
dispensability of coastal ecosy­
stems and the fishermen and
farmers thev support.
RA7A3THAN PaTRIKA

NCW rules against prawn
farming in Tamil Nadu
ings at the public cnquiiy of the to warrant such a ban.
Justice Reddiar also called for
Commission
for
MADRAS - The l<tgal bench National
at the National Corimussion for Women (NCW) in the City on the urgent adoption of a statute
Women’s public hearing on the Tuesday, Justice V.R. Krishna abolishing the contract labour
condition of women working in Iyer and Justice Krishnaswami system. This was because, de­
the unorganised sector, has Reddiar separately observed spite the existence of a host of
ruled in favour df an immediate ■that the deleterious effect of this laws on minimum wages, the
ban on prawn fanning in the activity, as reported by the agri­ government was unable to
State.
cultural workers and fisher­ guarantee a just implementation
Handing down a couple of women from the coastal districts of these laws by the contractors.
independent quasi-judicial rul­ of the state, was grave enough He also ruled that as an itnmedi-

39

gt-ll-tQ.

ate measure tn<v government

must, at the very least, ensure
continuity and regulanly of
work for the contract labour.
And reacting- to numetous
complaints of exploitation of
women workers' ignorance of
the laws by unscrupulous con­
tractors, he said it was the duty
of the Labour department to
make sure that the • workers
were kept fully informed-and
aware of their rights before en­
tering into an agreement with
the contractors.
Giving his ruling on the gnevances aiicd by the domestic
workers, he noted that the diffi­
culty in dealing with the ex­
tremely
unsatisfactory
and
pathetic working conditions ex­
perienced by these women was
that they were the most widely
dispersed group; and entirely
employed by private indi­
viduals. He suggested the un­
ionisation of these workers in
order to enable the negotiation
ol their minimum wages and
other rights.
Commending the state gov­
ernment's pilot scheme to pro­
vide one van to every fisher­
women's association, he said the
need to give tliesc women access
to the market through alterna­
tives to the public transport
system was paramount. 'Hie
problem of pollution of the seas
by industrial wastes needed to
l>e tackled on a war footing, he
added.
Justice Krishna Iyer ruled
that in the case of beedi workers
the elimination of .child labour
input would help in reassessing
and revaluing the contribution
of adult labour (mainly wornen)
in the industry, ibis revaluation
effort needed to be accompa­
nied by proper maintenance of
records, with identity cards
given to all women workers.
And at the policy level, he
commended the Kerala model
of establishing co-operatives for
emulation, lie added that the
NCW could also explore, speci­
fically in the case of beedi work­
ers, remedies such as public
interest litigation.
The judge recommended that
in the case of agricultural work­
ers, the government should con­
fer patlas for land directly on
the women.

Prawn farming
boom may end
in bloody conflict
irnm d v

the landless labourers, especially
thc womcn lheir traditi'o,J mejny
of livelihood. Landless farm labour
MAYILADUTHURAI, July 11 comprise nearly 60 per cent of the
An ambitious plan to turn the population of the worst affected Sircoastal areas of Tamil Nadu’s Quid- kali taluk.
e-.Millat district into a major centre
Mr Jagannathan charges that the
for Drawn farming in the cunntry has praw n companies had violated the
suffered a major setback, with agi- lav by taking over cultivable land
fating landless agricultural labour- which had yielded two crops of paders bringing to a grinding halt work dy and one crop of cotton, ground
in all but two of the 150 prawn farms nut or pulses. “At least 30 per cent
there
of the lands taken over were cultiThe agitators, mainly Dalits led vated the previous year.' said
by an 82-year-old Gandhian. are Veeraswamy, secretary of TNGSM
also threatening to grab in about 20
According to Mr Jagannathan.
days' time, nearly 5.000 acres of the prawn companies had enticed
land already acquired by the prawn landowners by offering very high
companies and start cultivating rates. And whenever they found it
them Both the agitators and the convenient to corner some pororncompanies seem to dc bracing them- boLe. vil.age (common or govcinselves for a bloody confrontation.
ment lard), they grabbed with imMr S Jagannathan. the octogena- puniis Attempts by the Governnan chairman of the Tamil Nadu ment to stop this had been stoiK walGrama
Swaraj
Movement led by court injunctions, thc agita(TNG.SM), which is spearheading tors said.
the agitation, warned of thc possibilLAND POLLUTION: The en­
its of another "Keelavenmani”, vironmental angle to the campaign
when 44 labourers in Keelavenmani is the alleged seepage of salt water,
were burnt alive.
which has polluted the land and the
On his pan. Mr V. J. Chandaran, subsoil water. Bad water is believed
vice president of Prawnex and a to be the cause of jaundice and -.kin
leader of thc Aquaculturrsts* Asso- diseases now supposedly spreading
ciatio.i of Mayiladuthurai and Naga- in the area The charge is that this
puttiiiuin .-.aid: 'I he agitators are seepage is being allowed only to turn
plauiiiHu nloodshed and our villa- vultivable land mlo wasteland so
gers who stand to gain by the that this can be bought oil cheaply
growth ol prawn farming here, will
But all this is rebutted by the
fight back " Die prawn companies prawn companies, whose argument
stoutly rebut the claim of the agita- is that the land acquired had tor long
tors that they are peaceful satyagra- been salty and therefore uncullivhis.
able
Tn the Magna farm fracas, they
Jobless workers had begun seek­
beat up two innocent contractors ing work in far away places like
black and blue. Die women threw Kerala years ago. It was with the
chilli powder on company staff’, intention of giving thc unemployed
said Nir Chandaran.
here an alternative source of hvcliIT)1,1('E DILEMMA: The |x>lice hood nearer home that thc Congress
arc in a tight spot. If the agitators MP for Mayiladuthur.il Mani
complained that thc police had been Shankar Aiyar had moved heaven
brutal, acting purely at the behest of and earth to get prawn farmers from
the prawn companies and their sup- all over India to invest here. I le had
posed patrons in the State Chief also promised to stop salt water
Minister’s household, the prawn seepage by introducing french tech.•ompames felt that the police had all nology.
hut dropped them like a hot potato.
According to Mr Chandaran. per
I he |x»licc. the companies felt. acre, prawn farms employ more
seemed to want to avoid trouble in people than agriculture “In agriculthe area at any cost, since they lure m a 90 day crop, there is work
feared that the clash could turn into only for 10 days But we have year
a 1 Jalil-Vanniyar caste war The round work al double the rales. And
Varmiyars bad sold land to the when processing and packaging
prawn entrepreneurs, reaving tncir come here, t/icfv would be work for
D.i’it farm labourers high and dry
mans more, especially women
I hk gram swaraj and Land tor I II1 lie pi awn companies say that the
Ivix tJalti) movements have been agil.c »rs gave themselves away by

brom P. K. Balachanddran

’••am), the scltiiQ'up of :he prawn

offering Io buy and run the prawn

l.a .io t,i, noth cconon:.’. ,juu en'uLnincnial gruunds fney fee! that
the lonvcision of farm Lad into
prawn breeding grounds would denv

lai ms themselves. I learl). the issue
is ownership rather than environ
ment. or employment. the com
panics feel

40

Hindustan time5

IBRD warns against worsening terms of trade for exporters
SUKUMAR SAH
NEW DELHI. DEC 8

The terms of trade for Indian
exporters have worsened. Given the
turrent rate of inflation, export incenives and a stable exchange rate, export
profitability has come under tremen­
dous strain.

This note of caution has been struck
ay the World Bank saying that with the
stability in the nominal exchange rate
at about 31.4 to a dollar since March
1993. and inflation hovering around
nine per cent, there has been a gradual
ncrease in recent months in the real
affective exchange rate..
With exports high
on
the
Sovernment's economic agenda, the
-eal effective exchange rate will need
monitoring bv the Reserve Bank, it

points out.
In its analysis of export incentives in
India and the impact of recent policy
changes, the Bank says that although
there has been a significant narrowing
of the differential between export and
domestic profitabilities that existed in
the pre-reform period, there is danger
that the domestic market may become
relatively more attractive than the
export market.
If exporters start looking at the
domestic market, the Government s
aim of hitting an export growth target
of 2 5 percent in 1994-95 may go unre­
alised. In fact, the Government is
already talking in terms of reaching a
level of 17 percent to 18 percent tn dol­
lar terms.
With inflation still at nine per cent.
"the Government will have have to

compensate the exporters through
incentives for at least two to three years
and remove irritants in the way of
exports like delays at customs, airports.
rationalise labour laws and ensure that
export deliveries are not marred by
strikes by port workers, truckers and
airlines staff, says K N Memani. ofS R
Batliboi & Company and immediate
past-president of the Federation of
Indian Export Organisations (FIEO).
The Federation of Indian Chambers
of Commerce & Industry (FICCI) has
called for a policy with an in-built mech­
anism that reins in the inflation rate to
al least on a par with competing nations
and incentives to compensate exporters
for the difference between the domestic
and international prices of inputs going
into export production.
Given the high import intensity of

exports, a lowering of the tariff barriers
is an alternative. But this, obviously,
cannot be done overnight on consider­
ations of revenue.
FICCI suggests that a certain incen­
tive level will have to be granted in the
form of cash compensatory support of
the International Price Reimbursement
Scheme (IPRS) till such time as the
rupee starts depreciating in tune with
the market forces.
Domestic profitability has indeed
improve considerably with a revival of
growth and demand at home, confirms
Memani. The export growth in the first
seven months of the current year has
basically from from areas of high prof­
itability and not from manufactured
products.
The World Bank states that while
some exporters claim that exports were

more profitable for them in the pre­
reform regime owing to product-spe­
cific incentives its analysis shows that
export profitability deteriorated for
most export sectors in the dual
exchange rate regime introduced in
March 1992. This adverse movement
has. however, reversed in most of the
export sectors with the advent of the
unified exchange rate regime in March
1993.
This, it says, is true of all sectors
Even with severe assumptions on infir tion rates, import intensities and dollar
price increases, export profitability
declines only in the case of engineering
goods, textiles and carpets.
If the severity off assumptions is
relaxed slightly, then even for these
items the export profitability change
would be positive.

>./;>viAL EcfAtss

."I-/C

19

Govt rejects striking
fishermen’s demand
By Business Times Bureau

NEW DELHI. November 24:
The government today rejected
the striking fishermen’s demand
to cancel licences for joint ven­
ture fishing vessels in deep seas
and described the strike as “un­
called for".
A spokesman of the Union
ministry for food processing said
there was no basis in the strikers'
argument that these vessels were
threatening the livelihood of
small fishermen.

The catch of these vessels and
chartered trawlers accounted for
less than one per cent of the total
catch off the Indian coast, he
argued.
Pointing out that only 2.6
million tonnes of the 3.9 milliontonne potential was being ex­
ploited annually from the country’s exclusive economic zone
(EEZ). the spokesman said the
resources could not be left un­

tapped. especially in view of the
export potential. A small country
like Taiwan has 200 vessels and
in China, one company alone has
120 vessels. The EEZ extends up
to 200 miles in the sea. he added.

In fact, having accepted an ex­
pert committee's recommend­
ations in the interest of small
fishermen, the goxernment has
decided to set up a “three-milecorridor" beyond the territorial
waters so that joint venture ves­
sels operate only bey ond 15 nauti­
cal miles, he said.

CAUTIOUS : "But we are going
very slowly. Being absolutely
cautious, wc decided not to allow
more than 200 joint venture ves­
sels till the end of the eighth Plan
though experts had said up to 500
vessels should be allowed." the
spokesman said.
At present only 19 joint venture
vessels arc operating and the
number is not expected to cross
50 bv the end of the Eighth Plan.
though 147 licences have been
granted, he added. Besides this.
11 chartered vessels arc also oper­
ating. but these would be phased
out in the next two years.

The spokesman dismissed as
“erroneous" the fishermen's ap­
prehension that the government

On the fishermen's grouse that
joint venture vessels poach in the
territorial waters (up to 12 nauti­
cal miles) where they are not
allowed, the spokesman said the
government had been asking fish­
ermen for specific complaints, but
no such complaint had been re;
cicved so far

“The government is committed
to protecting the interests of tra­
ditional fishermen and has
directed the Coast Guard re­
peatedly to ensure that deep-sea
fishing vessels do not encroach
upon the area resen cd for coastal
fishermen." lie said

plans to introduce 2.600 vessels;
The apprehension has arisen be­
cause this number was mentioned
in a report prepared before the
current plan. "Wc neyer accepted
the report." he asserted.

Licences have been granted for
joint ventures so that Indiancompanies could acquire thelatest technology, the spokesman
said, pointing out that they were
all operating under the Indian flag
and most of them were
technological collaborations.
IMPRACTICAL: The fish­
ermen's demand that a zone cx-k
tending up to 100 km from- thecoasl should be reserved for them
was impractical, as they did nothave the technological sdphisti-cation for fishing in such deep
waters, he said, and added that
even now there was no ban orr
fishermen fishing beyond the ter­
ritorial waters.
toi

as-u-H^.

Dairy decanalisation on cards
NEW DELHI. Aug 31 (UNI)
Cabinet Secretariat.
According to experts, while
— Decanalisation of dairy­
exports is on the cards.
decanalisation
would
be
welcomed by a number, of pro­
It is understood thai the highpowered committee of sec­ ducers. there was.a lurking fear
retaries. which recently con­ that in the long-term it might’
sidered
the
question
of open a pandora s box. under­
decanalisation of dairy exports.
mining what would otherwise be
gave its verdict in favour of a bright export future for dairy
commodities.
decanalisation.
The committee of secretaries is
Cooperative
sources
said
understood to have favoured under canalisation, the NDDB
.decanalisation subject to alloca­ had ensured thai Indian exports
tion of quotas and compliance (three million dollars worth of
with any European Community skimmed milk powder (SMP)
conditionalities with respect to last year anil a projected S 10
million this year have met the
donated commodities
However, the committee of strictest international quality
secretaries (COS) is not the final sta ndards.
authority and its re'eontmenThe
sources
said
with
dations have to be approved by decanalisation the door would
the Union Cabinet to be adopted be thrown open to any exporter
as a policy.
to ship his product abroad.
As of now all dairy exports are Quality would, thus, take a back
subjected to the strict canalisa­ seat to pricing.' giving rise once
tion regime of the National again to criticism about Indian
Dairy
Development
Board products failing to meet inter­
(NDDB). but decatlralisation has national standards.
been in the offing ever since
The cooperative sources said if
delicensing of the dairy industry canalisation was to be done away
in 1991 by the Narasimha Rao with it should be followed by a
Government
strict export quality control sys­
The high-powered COS is
tem managed by the NDDB.
understood to consist of the sec­
"If the government simply
retaries of Civil Supplies. Food. opens the door, the long-term
Commerce.
Agriculture
and benefit of exports would be
Industry Ministries and headed short-circuited by short-sighted
by secretary (coordination) in the • manufacturers whose goal sint-

42
I
i

ply is to make a quick buck."
they said.
When approached for com­
ment the NDDB said there was
evidence that often milk powder
produced in India was manufac­
tured under highly unsanitary
conditions.
Canalisation was essential to
ensure that every gram of milk
powder and other dairy com­
modities exported met the
highest international standards.
it said.
The NDDB also pointed out
that as much as 30 percent of the
milk powder that might other­
wise have been exported during
the last two years was. in fact..
unfit for export .
"We all know of the cases
where Indian exporters in their
quest for a fast buck have
damaged the country's long-term
potential through export of low
quality products. We do not wish
this to happen with dairy com­
modities". the NDDB said.
It was also claimed that at least
in one respect the on-going
General Agreement on Tariffs
and Trade (GATT) negotiations
were likely to prove beneficial.
The advanced agricultural
nations were expected to dis­
mantle their extensive subsidy
systems which at present under­
wrote both farmer production

and exports
According to OECD figures
milk has been a highly sub­
sidised commodity with the 1992
producer subsidy equivalent
(PSE) ranging from 36 per cent
in Australia, to 58 per cent in the
united states and 61 per cent in
the
European
Community
countries.
With the dismantling of this
subsidy system, combined with
the growing production of
India's dairy industry, it was
likely that the country would
enjoy both a comparative advan­
tage and a growing share of SMP
exports in the region.
national HERALD

l-T-721.

Proposal to import high-priced rotton to stir hornet’s nest
Suresh Shah
bocat is oecsMstH

EVEN betore the oust raised by
the sugar scandal could settle, the
Union textile ministry's proposal
to subsidise cotton growers over­
seas at the cost of Indian cotton
farmers is all set to raise another
storm.
Tbe textile ministry’s move
seems to be directed towards pre­
venting cotton growers from rea­
lising prices at par with those pre­
vailing in- the international
market
And now it proposes to ask the
Cotton Corporation of India to im­
port 5 lakh bales of cotton valued
at over As 600 crore.
The proposal was mooted by
the Indian Cotton Mills Federation
when the leading mill owners held
meeting with the textile minister,
Mr G Venkat Swainy, in New Delhi
on December 15,1994.
It had also pleaded for bringing
down the cost of polyester and vis­
cose fibres, to make them morecompetitive to cotton.
Cotton is the only one major ag­

ricultural commodity over which
the Union agriculture ministry has
no control
The item is being controlled by
the Union textiles ministry, which
in the process of looking after the
interest of the industry imposes all
sorts of credit and stock restric­
tions to compel the farmers to part
with their produce at lower prices.
“Such stringent stock and cred­
it controls during the beginning of
the season are unheard of in thecotlon history when farmers are
yet to market 75 to 80 per cent of
their produce,"- says a leading
dealer. Further, the Union govern­
ment has taken a policy decision to
allow a minimum export of 5 lakh
bales of cotton with a view to en­
sure regular supply to overseas
buyers.
However, the ministry has so
far issued export quotas for one
lakh bales only, while keeping the
doors open' for the floodgate of
imports.
Mercifully, the ministry has
not imposed any stock restrictions
on cotton growers. Probably it did
not dared to do so in view of As­

sembly elections.
Some of the mills were waiting- pected to harvest a record cotton
Again, the ministry has not yet far the demesne cotton prices to production of 19.5 million bales.
-bought it fit to reconstitute the come down.
Now even if CQ imports this
Cotton Advisory Board (CAB)
No doubt, the mills would have higb-priced cotton at the instance
which is only forum where farm­ rushed for import of cotton, if It of textile ministry, the question is
ers' representatives could venti­ was available cheaper abroad, but who will lift it when local cotton is
late their grievances.
since most of the varieties of indig­ available cheaper.
The CAB last met in August enous cotton are still 7 to 10 per
Again, if the Corporation has to
1994. Past experience show that cent cheaper, they prefer to buy lo­ dispose of this cotton at lower
even in that meeting, representa­ cally.
prices, who will subsidise it
tives of the industry carries more
This raises a moot question as
The government had allowed
weight, though representatives of to why the textile ministry should cotton imports under OGL since
cotton growers, trade and co-oper­ how agree to the industry’s pro­ March 1994 and it had also per­
ative marketing federations had posal for asking CQ to import 5. mitted imports of viscose fibre at
the platform to express their lakh bales of high pripe cotton, concessional customs duty in view
views.
when leading milk do not consider of the sharp spun in indigenous
Cotton imports are neither can­ the supply position that panicky cotton prices last season.
alised nor it figures in the list of re­ necessitating any such indiscrimi­
However, if last season's poor
stricted or banned items. The gov­ nate imports.
response to these imports is any
ernment has not only allowed its
What is interesting to note is guide, there will be hardly any tak­
imports under OGL it has also that like before the sugar imports ers for cotton to be imported by
waived a hefty import duty of 44 were placed under OGL, the price CQ.
per cent with a view to ensure tex­ in the London sugar market had
The reasons are not far to seek.
tile mills their basic raw material jumped, and similarly, even be­ Price consideration will be one the
at international prices.
fore Mr Venkat Swamy agreed to major constraint in selling highSome of the mills have already favourably consider the Indian priced imported cotton, particu­
opted for import and they are un­ Cotton Mills Federation's propos­ larly when the price difference
derstood to have contracted for al to ask CQ to import 5 lakh may widen further with the addi­
the import of nearly 3 lakh bales of bales, the New York cotton futures tional supply of 5 lakh bales of im­
cotton and others are in the pro­ loomed to a new high of the season parted cotton.
cess of doing so.
despite the fact that the US is ex­
Again, when imports are under

OGL, the ministry will not be in a
position to force the mills'to lift
whatever cotton CQ imports and
that too at a price higher than
those prevailing for equivalent in­
digenous cotton.
Cotton prices are ruling high
no doubt, but they are still lower
than those prevailing for similar
varieties in international markets.
Again, supply position is not that
precarious to warrant any indiscriminate imports.
Indigenous cotton production
is estimated at 127 to 129 lakh
bales and with carry forward stock
of 31.78 lakh bales and expected
imports of at least 5 lakh bales by
the mills directly, the total supply
is likely to be 163.78 to 165.78
lakh bales.
Against this, mill consumption
is estimated at 117 lakh bales, that
by small scale mills 5 lakh bales
and non-mill requirement 8 lakh
bales, totalling 130 lakh bales.
Thus, even after allowing the
agreed exports of 5 lakh bales of
cotton, it would leave a carry for­
ward stock of 28.75 to 30.78 lakh
bales at the end of the season.1

Economic times

43

I9-I3-81|.

Pass the sugar, please
A

T A superficial level, the pre­
sent sugar policy muddle is a
reflection of the Governmen­
t’s increasing ineptitude on
the 'economic management’ front. The
confusion in sugar supply management
also appears, again superficially, the re­
sult of inadequate communication be­
tween politicians and bureaucrats on the
one hand, and the bureaucracy in differ­
ent departments on the other. On a more
careful analysis, the muddle would ap­
pear to reveal the hollowness of the en­
tire economic reform policy.
Let us take a brief look at the figures
of production and import of sugar over
the past decade or so. While doing so. let
us also remember that the “sugar year"
runs from November to October. (See
chart) *
India exports small quantities of
sugar once in a while. In 1991-’92 and
1992-’93, the combined exports of
sugar and molasses were 4.46 lakh
tonnes (valued at Rs 157 crore) and 2.11
lakh tonnes (valued at Rs 107 crore) re­
spectively. (Unfortunately, readily
available data treat sugar and molasses
as one 'item’ of export. The value of
molasses export would be in any case
quite low, though the overall quantity
figures may get distorted by it.)
Reportedly (there is no authentic ba­
sis for this statement) sugar import dur­
ing 1994 may involve a "subsidy" of
something like Rs 500-600 crore, no
matter how the Government purports to
provide this subsidy—from within or
outside the outlay already earmarked
for the Food Ministry. The only other in­
formation of importance in the present
context is the increase in the open mar­
ket wholesale price of sugar from Rs
11.26 per kg in May 1993 to Rs 17 per
kg in May 1994.
How do these data indicate that our
sugar policy is muddled and, secondly,
how that is a function of the “hollow­
ness” of the present policy of economic
reform? To understand this, one has to
go into the nitty-gritty of sugar pricing
and the policy-making
Sugar prices, obviously, depend very
largely on the price of sugar-cane. The
problem is. in India, there are a mini­
mum of 22 prices of sugar-cane—one
for each State! What’s more, these
prices being widely divergent Conse­
quently, what the Government pays to
sugar factories for the "levy’’ sugar
used for public distribution—linked as
it is to the sugar-cane price—varies
from State to State
Not only that: the Government has a
number of other formulae for "pricing”

as well as excise duty rates and reliefs.
For example, new factories are vari­
ously exempt and pay a lower excise
quty on sugar. Duty concessions are an­
nounced from time to time on sugar pro­
duced from sugar-cane crushed after a
specified cut-off date (usually March).
And there is a whole series of duty con­
cessions for (sick) mills which need to
be revived, small mills which have “ap­
proved" plans of expansion, etc.
Way back in 1983. the Bureau of In­
dustrial Costs and Prices had found that
with the system then existing, there was
a different “levy" sugar price for almost
every single factory! Again, releases of
sugar are controlled, not only under
PDS, but also in the "free sale” cate­
gory. There are. in effect, no free sales of
sugar. From cane production to sugar
distribution, there is no free market for
sugar.

There are numerous political prob­
lems involved here, sugar-cane is a
highly valuable cash crop and the farm
lobby producing sugar-cane is quite
strong. Equally powerful is the sugar
lobby. Indeed, in Maharashtra, succes­
sive government decisions have re­
flected the influence of the sugar
lobby. Of late, this has become the
Story even tn Gujarat where an increas­
ing acreage of farm land is comtng un­
der sugar-cane cultivation. The other
important point to remember about
sugar-cane is the enormous quantity of
irrigation water required for this
crop—more than ten tiroes the quan­
tum of water required for, say. irri­
gated wheat. In interior Maharashtra
one sees the poorest fanners, who have
no access to irrigation facilities, strad­
dle the countryside next door to the (ir­
rigated) sugar-cane farms. Their own­
ers—the sugar barons (formally, sugar
co-operatives)—have amassed enor­
mous wealth through sugar produc­
tion. and of late, potable alcohol made
from the residue molasses. Irrigation
in Maharashtra is used almost entirely
for growing sugar-cane. This is the
likely scenario in southern Gujarat, af­
ter the Sardar Sarovar dam is com­
pleted. Already, many sugar factories
are coming up in south Gujarat, which
is switching from oilseeds production
to cane growing.
Since we have long had a policy of a
uniform all - India procurement price for
wheat, rice and other major crops BICP
had recommended in 1983 that over a
penod of years, sugar-cane prices—
linked to the sugar content of cane —be

44

reduced gradually from 22 State-level
prices to eight zonal prices, and then to
four, to two and later, to a single all-India price. That price should be deter­
mined by the Commission on Agricul­
tural Costs and Prices.
BICP had also recommended that: (a)
there should be no exemptions in duty—
other than to “sick mills"; (b) there
should be no restrictions on the setting
up of new units/expansion of existing
ones, except that there should be a mini­
mum distance between sugar mills to
ensure that aU mills have access to
sugar-cane, and operate up to capacity;
(c) there should gradually be no "levy"
rvgar, the sugar industry being decon­
trolled; and (d) the Government should
maintain a buffer stock of sugar to elim­
inate wild fluctuations in open market
sugar prices, particularly because the
monsoon can have a large distorting ef­
fect on year-to-year yield rates of sugar­
cane. Tlte total supply of sugar would
thereby be governed by the remunera­
tiveness of cane growing vis-a-vis othe'
crops (as determined by CACP); and tlx
buffer stock policy would eliminate un
due fluctuations in sugar prices.
The rationale of these recommends
tier.' was simple. The oublic distribu
tioo system supplies sugar only to urban
households. The villagers—more than
70% of the population even today—
consume only gur and gur prices today
are (and then were) actually higher than
the price of sugar sold to urban con­
sumer under PDS.
The increase in the open market
wholesale price of sugar (from Rs
11.26 per kg in May '93 to Rs 17 per kg
in May ’94) is a speculative increase
helped by the Government's incapacity
to take a timely decision regarding im­
ports. Sugar output went down from
i34 lakh tonnes in 1991-’92 to 106
lakh tonnes in 1992-'93. And it's now
expected to go down to 96 lakh tonnes
in 1993-’94. This steep decline is,
equally, the result of changes in policy
concerning duty concessions and duty
exemptions which the sugar industry
has been used to.
But basically, the Government has
done nothing to reform and restructure
the sugar industry. The reason is simple
Where there is sugar, there will always
be flies. Economic reform is not syn­
chronous with the structural adjustment
policy currently in force.
B

Tmoiaw exPPtss

Farmers fear auction
of their gold
by R. Pridhvl Raj

VIJAYAWADA - For about
30.000 cotton growers in Guntur
and Praksam districts who had
taken loans from banks and could
not repay, the day of reckoning
seems to have arrived.
These farmers are panicky now
as the banks have begun issuing
notification in newspapers that
gold jewellery pledged by them to
secure loans would be auctioned
off. The matter has become sensi­
tive as most of the gold pledged
with the banks consists of mangalasutrams.
No auctions have as yet taken
place but resistance to them is
building up in the villages Irate
farmers at Pasumarru.near Chilakaluripet in Guntur district mob­
bed the Indian Bank t.*rt*nch re­

cently and forced the staff to defer
the auction for two months when
they were about to go ahead with
the sale.
In Guntur district one lakh far­
mers had taken crop loans
amounting to Rs 60 crore while in
neighbouring Praksam distnct,
50,000 farmers availed Rs.30
crore. More than half of this was
obtained by pledging gold. Cotton
is grown in four lakh acre in
Guntur district and two lakh acres
in Prakasam district.
ALWAYS

DEFAULTING:

Bank officials allege that the far­
mers rarely honour their commit­
ment to repay the crop loans soon
after the harvest But Telugu Desam MP Yelamanchih Sivaji says
the banks swooped on the farmers
because their coffers were de­
pleted by their involvement in the

stock scam.
On the other hand the farmers
say they find difficult to repay
loans because their crops are lost
year after year.

The farmers’ leaders allege that
those who were ready to repay the
loans and redeem their gold could
not do it because banks were
insisting on clearing their other
crop loans obtained by mortgag­
ing land though there is a court
ruling that the two should not be
clubbed They also allege that
banks are insisting on clearing
loans for which they stood surety
before their gold is released.
HIT FROM ALL SIDES: The

farmers have had to contend this
year with falling cotton price
which went down to Rs 1,000 a
quintal from last year's Rs 1,500.
The farmers had to put up with a

decline of 50 per cent in produc­
tion and an increase of 50 per cent
in the cost of inputs. Dr Sivaji
suggests that the government
should waive the portion of the
interest that exceeds the principal
amount.
The Andhra Pradesh Congress
Kisan Cell convener Somepalli
Sambaiah says the government
should waive the entire interest.
“It is better than harassing the
farmers for repayment of loans
with interest which they anyway
cannot.” he says.
Sambaiah says the fanners who
had taken loans in 1976 were the
hardest hit as there was a cyclone
next year. Since then every year
there has been one disaster or the
other. Threats of auctioning the
gold will lead to socio-economic
tensions, he warns.
Tmqiam Express, it-i-ib_____

Cattle feed units hit in
molasses decontrol move
___________ Asha Rai___________
BANGALORE 28 MAY

THE UNCERTAINTY regarding
the proposed decontrol of molasses
has caught the Rs 750-crore cattle
feed industry in a bind, with some
sugar mills withholding supplies in
anticipation of higher realisation.
In cases where supplies are
made, sugar mills are asking for a
deposit or an undertaking to pay
the differential in the price with
retrospective effect in the eventual­
ity of a hike in the price of molasses.
According to the Compound
Livestock Feed Manufacturers’ As­
sociation of India (CLFMA) chair­
man, Mr Anand Menon, the pre­
sent uncertain situation is causing
many units to close shutters, while
others are on the verge of produc­
tion stoppage.
Molasses is an essential ingredi­
ent in compounded cattle feeds, as
it is used not only as a binder, but
also as a provider of palatability to
the feed.
Moreover, there is no afford­
able substitute for molasses as far
as the cattle feed industry is
concerned.
The association says that the in­
crease in prices of molasses by Rs
250 to Rs 500 per tonne would
spell a "death knell” for the cattle

feed industry. The immediate up­
ward impact on cattle feed prices is
expected to be around 15 per cent
per kg on an average.
In India, cattle feed is tradition­
ally a home mix prepared by the
farmers. In fact, 95 per cent of the
feed intake in the country is home
mix with the organised industry ac­
counting for only 5 per cent.
Compounded cattle feed costs
vary according to the grade, with
the popular variety costing be­
tween Rs 2 to 3 per kg, the medium
range between Rs 3 to 4 per kg and
the premium about Rs 4.50 to Rs
5.50 per kg.
Even at these prices, it is diffi­
cult to make the farmers switch
from traditional mixes to com­
pounded feeds, so the question of
passing the higher molasses prices
on to the consumers will be a diffi­
cult proposition.
So, if the prices of molasses
were to double, the industry would
be in a real fix, argues the associ­
ation.

The cattle feed industry is also
worried that if molasses decontrol
is implemented, there will be a
large scale diversion of molasses to
the country liquor industry.

45

The annual requirement of mo­
lasses by the cattle feed industry is
estimated at 5 lakh tonne out of the
total molasses production in the
country of around 50 lakh tonnes.
The size of the cattle feed indus­
try is projected to be around 25 to
30 lakh tonne per annum.
The CLFMA members’ produc­
tion accounts for about 14 to 15
lakh tonne, with the production
from manufacturers who are not
members of the association ac­
counting for an equivalent amount.
Premature announcements of
decontrol without considering the
jurisdiction of the state govern­
ment, and without adequately con­
sulting industrial users, has en­
abled the sugar industry to either
suspend dispatches to registered
cattle feed manufacturers or de­
mand higher prices which are un­
warranted, argues the association.
It says that both the Central and
state governments have to come up
with a clear and unambiguous poli­
cy about molasses supply, and also
take strict action against sugar
mills which refuse supply against
allocation released by the state gov­
ernment or demand a price differ­
ential as deposits or undertaking
from feed manufacturers.
Economic 7iMC3

aS-B-RH.

Molasses
shortage hits
ICDS scheme
The Times of India News Service

BERHAMPUR (Orissa). August
16: With the mushrooming of
liquor factories in various parts of
the country to meet the growing
demand for Indian made foreign
liquor (IMFL), the demand for
molassess has gone up and has
nesulted in its acute shortage in the
open market.
The shortage for the past several
months, has affected the nutrition
programmes taken up for children
under the Integrated Child De­
velopment Scheme (ICDS)
especially in the southern districts
of Orissa.

According to ICDS authorities
the Anganwadi centres in the dis­
trict. which distribute protein
foods made of wheat and molasses.
have not received the supply of
molasses. The supply made
through the Orissa Consumer Co­
operative Federation, was stopped
in March.
The food is being prepared
without molasses, which sweetens
it. and children are refusing to eat
it.

The Centres are unable to
purchase molasses from the market
Since pnees are exorbitant, said the
official.
of India,

n-3-83

Worms found in imported sugar
By A Staff Reporter

complaining of insect-infested sugar. The preven­
tion of food adulteration department, say officials.
NEW DELHI. December 15.
elhi chief minister Madan Lal Khurana wants lifted 300- to 340-g samples from Batra Stores in
“inferior-quality” imported sugar supplies to Indra Nagar on Monday. Sugar bags bore the legend
city ration shops withdrawn. Their sample testing “EEC II Brtish sugar, current crop.”
shows a disturbing number of live and dead worms. The report said that there were three live and 25
Mr Khurana - has written to Prime Minister dead insects in one sample, two live and two dead
Narasimha Rao and minister of state for food ones in a second one and six live and six dead
Kalpnath Rai. expressing concern at the supply of insects in the third sample. The verdict was that
“adulterated” sugar by the Food Corporation of “due to the presence of insects, the sample is
India.
adulterated." Samples were then lifted from two
more places, both in south Delhi.
He wants replacement with good Indian sugar.
And further “guidance” whether ration shops But the samples met all other specifications. As
should be told to stop distributing imported sugar. evep live insects were found, officials suspect
They have already been asked not to sell the poor "something basically wrong with storage (not so
quality sugar.
much the sugar)."
On storage. Delhi supplies minister Lal Bihari
The CM also wanted a senior judge to probe how Tiwari said just three of six FCI city godowns had
infected sugar was supplied. “The Union govern­ stocks, with stuff lying in the open. "But even the
ment has already formed a committee on the FCI is under (Mr Kalpnath) Rai."
(imported) sugar scam. Supply of insect-infested
Worse, said Mr Tiwari. sugar bags supposed to
imported sugar is even, more serious."
“This (imported) sugar was forced on us. and have a net weight of 50 kg are each short by 3-4 kg.
should be withdrawn.” The CM accuses Mr Rai of Weighing each bag has meant much slower lifting.
Even wheat and rice supply is unsatisfactory, with
avoiding the issue, and him.
A few days ago. ration shop owners met the CM. rates so high, that lhev arc comparable to the open
market.

D

46

lines of jjjoiA

14 - ia - °lh.

S per the 1991 Census, more
than 70 per cent of the Indian
population still Ilves In villages
and approximately 65 per cent of the
workforce—111 million cultivators
and 75 million agricultural labourers
out of a total workforce of 286 mil­
lion—Is still directly dependent on
agriculture. These are sobering data;
and in the euphoria of “market-led”
investments in a globalised frame­
work. we—the beneficiaries of
amenities provided by the metropoli­
tan authorities—are likely to forget
that even as of today, the majority of
Indians live In rural ureas under
increasingly distressing conditions.
The number of those who subsist
below the “poverty line" become
available only with a considerable
time lag. and National Sample Survey
data on the subject are available only
upto 1987-88. There has been some
controversy on this issue because the
"official"* estimate of poverty—based
on NSS data, but with the income of
all classes adjusted upwards by a fac­
tor by which total consumption esti­
mates given in the National Income
Accounts exceeds the total consump­
tion estimates derived from NSS
data—Indicated that only some 30
per cent of the population was below
the poverty line, whereas a detailed
and painstaking study by three emi­
nent scholars—B S Minhas. S D
Tendulkar and L R Jain—found 43
per cent of the population below the
poverty line in 1987-88. Since then.
a Planning Commission wording
group under VM Dandekar has come
to the conclusion that some 38 per
cent of the population may be deemed
to subsist below the poverty line. If
this percentage is accepted, for a pop­
ulation of some 900 million odd as of
today, the number of persons below
the poverty line would be a colossal
342 million.
And very recently. Kirit Parikh
(Director of the Indira Gandhi
Institute for Development Research)
has staled that the average per capita
consumption (net uvailabilily)offoodgrains—as derived from the annual
"absorption" of foodgrains in the
Indian economy (derived as net pro­
duction adjusted for net exports and
official stock changes)—has declined
from 510 grammes per day in 1991 to
465 grammes per day in 1 993. a fact
also acknowledged in the latest official
Economic Survey. 1993-94.
Parikh has also indicated (in a
Mid-Year Review of the Indian
Economy discussed at the India
International Centre. New Delhi).
quoting, presumably official figures.
that foodgrains stocks with the
Government (Central and slates) had
touched a peak level of 31.9 million
tonnes (al the end of May 1994) and.
according to him. there was every
prospect of the stocks increasing fur­
ther. (No doubt, over the 12 months
ended July 1994 as also August 1994

A

Poor go to bed hungry
under reform
Arun Ghosh on the neglect of the majority of
population dependent on agriculture

slock of foodgrains with the
Government (Centre and states) has
recorded increases of 6.1 5 and 6.11
million tonnes respectively).
Recent official data, however, tell
a different tale. The overall slock of
foodgrains with the Government
(Centre and slates) had come down.
despile lower offtake from the public
distribution system during the first of
half of the current fiscal year com­
pared to 1993-94. to 27.46 million
tonnes by end September, presum­
ably because of large open market
sales ofwhcal. and at marginally sub­
sidised rates to bakeries to .enable
them to supply sul]sidisc^t br(cad for
the relatively poor
Let us look al the piUbleni dfilcrenlly. If lhe average per capita con­
sumption (meaning net availability)
of foodgrains in 199 1 were the same
as in 199 1. for 900 million heads, we
would haw had to provide for an
additional 1 5 million tonnes over the
year: and the Finance and Food

recent
Planning Commission
study puts the number of
people below the poverty
line at 38 percent of
the population
/I

Ministries would not be worried
about the mounting costs of food­
grains storage. (The fad that part of
these large slocks becomes unfit for
human consutvpliop because of the
poor quality cf storage, is another
matter that should concern us. but let
us pass on to the main issue rather
than dwell on lite peripherals).
No matter how much euphoria is
generated by the bullish trend in the
slock market, or how much peace of
mind—to the extent of compla­

47

cency—our
policymakers
have
because of the huge and still increas­
ing Ibreigi currency assets, lhe star­
tlingly distressing evidence that we
gel of the impact of economic reforms
on the poor is the decline in the aver­
age per capita food consumption (net
availability).
Not much reliable data are avail­
able on employment: and it could be
that overall employment opportuni­
ties arc shrinking. It could also be—
since there are no reports ofstarvation
deaths- that fitful employment at
low wages and inflation have com­
bined to make a sharp dent even in
regard to such r basic human need as
foodgrains consumption by the poor.
(One can dismiss the Idea—as Kiri!
Parikh rightly did—that this indicates
a shift of consumption demand away
from foodgrains to meat. fish. eggs.
milk, fruits and vegetables.)
But how is the on-going economic
reform process linked to the obvious
increase in poverty (as indicated by

that, of late, because of high interest
rates and relatively poorer returns on
investment In agriculture relative to
that in large industries, or even in real
estate or in financial assets, rural sav­
ings get diverted to metropolitan
areas. The latest break-up in regard
to deposits (raised f?o n rural and
urban areas) are not av diable, but. of
late, the credit: deposit ratio of banks
has been declining sharply, while the
financial investments: deposit rates
has been increasing equally sharply.
Long term credit k»r agricultural
Investments by all financial institu­
tions was Rs 5.242 crore (Reserve
Bank data, as per Annua) Report for
1993-94). As against this total, long
term assistance to industry by public
financial institutions, by way of dis­
bursements
during
1992-93.
amounted to Rs 1 3.907 crore.
Here, we see the priorities and the
emerging scenario
Ixirgc and
medium industries in India employ
around 6.3 million people (taking

the data on, food consumption)?
There are a number offuclors al work.
First, since 1978-79. investment in
agriculture (Ln real terms) has been
steadily declining over time. Since
the CSO has changed the base year to
'1980-81 for the latest series, let us
compare the latest data with that of
1980-81. Gross capita! formation in
agriculture (al 1980-81 prices)
declined from Rs 4.6 36 crore in
1980-8 I To Rs.4.567 crorc in 199293. These figures include all invest­
ments made by both the Government
and the fanning community. As a
percentage of total gross capital for­
mation In the economy, that In agri­
culture declined from 1 5 per cent in
1980-81 to 7.9 percent in 1992-9 3.
More Importantly, such Investments
as are being made (even in agricul­
ture) have been such us to require less
labour for obtaining an increase in
agricultural output.
There Is also increasing evidence

both the public and private sectors
(RBI data on employment): this sector
received financial assistance worth Rs
1 3.907 crore for investment, from
public fmani
istitutions. Agricul­
ture. employing some 186 million
people, obtained Rs 5.242 crore for
investment, from public financial
institutions. The money raised by
large industry from the capital market
is additional: but then, we must also
consider direct investments on farms
by the farming community. The latter.
as we have seen, has been declining.
The present euphoria on die suc< css of economic reform docs not allcct
the lives of some 65 per cent of the pop­
ulation dependent on agriculture
Rural development is not on the
agenda of the Government. Nor indeed
•s employment generation a part oi
irogramme of economic reform

author is a fonner Membci
Pluuuintj Commission
Financial Express

■

JAYSHREE SENGUPTA

How is it that we
are still seeing
news items like
"5,000 die of mal­
nutrition every day
in India" as report­
ed by the UNICEF
recently? Did we
not attain selfsufficiency
in
foodgrains and are we not one of the big­
gest milk producers in the world? We
read on, "As many as 400 children die of
malnutrition every day in Rajasthan
alone." It seems that India’s performan­
ce is at the very bottom in child care,
behind countries like Bangladesh, Mau­
ritania, Pakistan, Nigeria and Niger. The
real reason for such glaring aberrations
in the seemingly-comfortable situation
of having doubled our grain output since
the 1960s, and, the Green Revolution
spreading all over India, is that in the last
few years, the sad plight of the poor has
worsened due to a rise in foodgrain

prices.
First, there was the devaluation of the
rupee in July 1991 by 25 per cent, that
made many ofour agricultural commodi­
ties cheaper in the international markets.
Fanners found it profitable to export the
rice consumed by the common people.
The government, which has been buy­
ing surplus rice from the fanners in
order to supply to the poor through the
public distribution systems, found it dif­
ficult to do so because the government's
’procurement’ price was not high

.n-in-qq.

F0RHH
■THOUGHT

enough, in order to coax the farmers to
sell to the government, the procurement
prices for both rice and wheat were rais­
ed in January 1993, with a further hike
soon after. Secondly, the procurement
prices were also raised to appease the
big farmers’ lobby, which wanted high­
er market prices for foodgrains.
According to researchers S.P. Pal and
D.K. Pant of’the National Council of
Applied Economic Research, New
Delhi, the rise in foodgrain prices, result­
ing from an increase in the procurement
prices, led to a decline in the per capita
foodgrain consumption, in the last three
years. It declined from 510 gms per day
in 1991, to 466 gms per day in 1993. Pal
and Pant also point out that except for
Kerala and Punjab, the real wage rates,
i.e. the actual amount of goods and servi­
ces money wages can purchase, in rural
areas have also shown a decline between
1989-90 and 1991-92.' Because, bet­
ween 1989-90 and 1993-94, food and
non-food prices increased by 63 per cent
and 45 per cent respectively.
The only gainers were farmers, who
had marketable surpluses of foodgrains.
All the others have had to spend more on
foodgrains. Therefore, one should not
be surprised to see the indicators of pro,
tein energy, malnutrition and infant
mortality deteriorate in the last few
years for the low-income groups. When

48

food prices rise, the poor try to make
ends meet by eating less or eating poor­
quality food that are low in protein and
other nutrients. In such situations, childr­
en are bom underweight because the
women are eating less than they should
during pregnancy. Such underweight
children need additional nutrition to
grow normally, but unfortunately in
hard times, they are not likely to get it.
This could be one of the reasons for
malnutrition.

here has been another alarming trend
in recent years, which is stagnation
in foodgrain production. As part of the
structural adjustment programme, the
government announced-in August 1991,
a substantial reduction in the budgetory
subsidy on fertilisers, and the fertiliser
prices increased by 30 per cent. When
foodgrain prices increase along with
fertiliser prices, then according to
experts, there is not much adverse effect
on foodgrain production. The profitabili­
ty of foodgrain production, in fact, did
increase from 1991-92 to 1993-94 .in the
prosperous states of Punjab and Harya-,
na. The big farmers could pass on the
rise in the price of fertiliser’to t k eon
sumers But the sharp rise in fertiliser pri­
ces was fell adversely by many smaller
and marginal farmers. The) were no

T

producing for the market, and so they
were buying less of fertilisers, as a result
of which productivity suffered. Taking
all-lndia production figures, one notices
a fall in foodgrain production and near
stagnation of many crop outputs during
the last three years, which could be attri­
buted to the rise in fertiliser prices.
Stagnation could also be explained by
another phenomenon — a decline in
investment in the irrigation and rural
infrastructure — by both the govern­
ment and the fanners. The Plan outlay
for irrigation and flood control shows a
negative growth. When public invest­
ment is not increasing, then farmers
themselves also postpone investing
because they wait for the big invest­
ments to come first from the govern­
ment. Dr Pal warns, "If this trend conti­
nues, then the growth in the total area
under foodgrain production may decline
in the future, which in turn would adver­
sely affect agricultural production and
rural employment."
The Dunkel proposal will also cause
problems, because it calls for less
governmental control in the fixing of
input-output prices. So. there will be
less government involvement in the fix­
ing of procurement prices of foodgrains,
which could result in a slump in their pri­
ces and a decline in procurement. Far­
mers would then shift to producing non­
food crops. This tendency is being
encouraged and amplified by the recent
market-friendly food policies and the
opening up of agro business and process­
ing to multinationals. The multination­
als find it profitable to operate from the
villages in India because of the cheap
access to raw materials.

From
Himachal
Pradesh
to
Rajasthan, Karnataka and Andhra
Pradesh, a shift in the cropping pattern is
evident as more and more land is being
devoted to the cultivation of sunflowers.
roses, tomatoes, fruits and vegetables.
Along the coastal areas in the east —
from Orissa to Tamil Nadu — paddy
land is being taken over for shrimp culti­
vation, making that land useless for culti­
vation of rice because the fanners are
pumping in sea water for the shrimps.
This will result in salinity of the soil and
is ecologically dangerous. The produc­
tion and processing for exports and for
domestic
consumption - of
non­
foodgrain crops by the multinational
companies can therefore damage our
food security.
Of course, we can always import
foodgrains instead of producing them
and we may be forced to do so with the
freeing of the world trade in agriculture
under the GATT agreement. With a
stagnant output in foodgrains, this will
mean that a nation as big as ours will
have to depend on the outside world for
our food requirements. Il will very much
suit the interests of the industrial countr­
ies to be able to export to us some of
their huge grain and butter 'mountains'.
Through years of protection and subsidi­
sation of agriculture, Europe and North
America have accumulated such mas­
sive surpluses. As soon as they start dum­
ping their surplus grains or meat on the
developing countries, the prices of such
products produced locally plummet.
making it unprofitable for farmers to pro­
duce them any longer for the domestic
market. •
Tut_y 31 -

49

1°!^.

Reforms spell risk to nutrition plans
By Bharat Dogra
T is well known that even
in normal times malnutri-.
tion
and
undemutrition
exists in India. According to a
Seventh Plan document a
dietary
survey
by
the
National Nutrition Monitor­
ing Bureau revealed that
nearly 50 per cent of
household surveyed in dif­
ferent states of the country
consume food which is quite
inadequate either in calories
or proteins or even both.
It is in these Conditions that
the impact of structural
reforms or adjustment of the
national economy now in
progress has to be examined.
This is likely to have a further
worsening impact on the nut­
rition in the following
ways: (1) There will be a rise
in unemployment; (2) there
will be a rise in prices in
general; (3) more specific will
be the rise in the prices of sta­
ple foods; (4) a big increase in
the exports of some food pro­
ducts will have an adverse
impact on domestic availa­
bility: (5) in the long term
good agricultural land and
irrigation facilities will be
diverted from staple foods to
export crops; and (6) at least
in the short run the govern­
ment may reduce expenditure
on drought relief works and
in the relief works for other
disaster, even poverty allevia­
tion. as part of the overall
efforts to reduce governmen­
tal expenditure in general
Rise in unemployment is
T related to structural changes
T in industry, liberalisation of
imports, curbs on govern­
ment expenditure and other
factors
Despite
some
deflationary policies being a

I

Natioaj AL he.?a

part of the structural adjust­
ment inflationary trends are
nevertheless built into pro­
cess due to the increase in the
price of oil coal steel fer­
tilisers and other such com­
modities which have a
spill-over effect on a wide
range of consumer goods In
addition, the increase in the
price of public utilities again
as a part of structural reform
of removing the Tosses' and
curbing the subsidisation of
such utilities also adds to the
inflationary trend.
The increase in fertiliser
price raises the demand for
the increase in the procure­
ment price of foodgrain and
the subsequent effort to curb
the food subsidy as well
(again a part of the structural
reforms' insistence on ending
or reducing such subsidies).
The pressure for raising the
price of the staple food items
specially foodgrain supplied
through the public distribu­
tion system (PDS). In recent
months not only PDS rates
increased substantially, in
addition there have also been
several reports of the PDS
allocations being decreased
so the people have to depend
more on the open market
where the prices are even
higher.
For already hard pressed
people the year 1992 started
with the distressing news of a
nearly 30 per cent rise in the
issue price of wheat and
nearly 20 per cent in rice
price.
Land and People, a journal
brought out by the Society for
Participatory Research in
Asia, reported in a recent
issue, "The quota of wheat

has been reduced to 3 kg per
month per unit from 10 kg
per month per unit in
Bikaner district of Rajasthaa

Allocation of wheat per
family per month is cut down
from 20 kg to 10 kg in
Gujarat In Sidhi district of
Madhya Pradesh, it has been
reduced from 12 kg to 3.5 kg
per card-holder per month
and in Maharashtra, the
trend is no different "This is
merely the reduction in

Structural
adjust­
ment policies call for
an all out effort to
increase exports, and
in this effort a lot of
weight is being given
to the
drive to
increase farm ex­
ports. This can have
a
very
adverse
impact
on
the
availability and price
of some staple and
nutritious
foods
within the country.

government budgets for 199293 where there has been a
12.28 per cent cut in nominal
terms in the 1991-92 revised
budget for food subsidy. The
fact that there has been a cut
in the JRY (Jawahar Rozgar
Yojna), a rural employment
scheme, the budget also
indicates
the
coming
hardships on a population
already under pressure”.

Structural
adjustment
policies call for an all-out
effort to increase exports, and
‘in this'effort a lot of weight is
being given to the drive to
increase farm exports This
can have a very adverse
impact on the availability
and price of some staple and
nutritious foods within the
country. Already such exports
are being sent in quite big
quantities as is evident from
the tyble given below.
Export 1989-90
(Provisional data)
•

(Rs Crores)
Commodity
Value

L Rice
427
2. Sugar and molasses
32
3. Oil cakes
546
allocation, which has been a 4. Fish and fish
687
result of the cut in the food
preparations
subsides. Another direct 5. Meat and meat
114
result which operates on the
preparations
demand side, is the increase 6. Fruits and vegetables 208
in the price of items sold
and pulse
i,
through the PDS.
7. Misc processed
160
Alleging that the 'last safety
agricultural goods
valve’ in the form of PDS is
(including processed
being curtailed by the govern­
food and juices)
ment this report says by way
of evidence. "This is clear
The Director General of
both from the ground level Indian Council of Agricul­
reports and also various ture Research. Dr V.L Chop­

ra. claimed on August 29.
1992. that the export of princioal
agricultural
com­
modities by India had
witnessed
a
three-fold
increase in the last six years
front Rs 1.908 crore in 1985-86
to Rs 6.195 crore in 1991-92.
Moreover, this trend is per­
sisting further as all sorts of
concessions and facili’ ’S arc
being made available for
increasing farm exports. The
Union Agriculture Minister
recently said in Hyderabad
that a 50 per cent rise in
export of agriculture and
marine products was expec­
ted during the current year.
In this brisk pace for trying
to increase farm exports one
should not be surprised if the
safeguards for protecting the
interests
of
adequate
availability within the coun­
try are somewhat forgotten.
A longer term da tiger is
that good quality agricultural
land and irrigation water will
be shifted from staple food
crops to cash crops, a trend
that has already picked up to
some extent As staple foods
get shifted to less productive
land, a serious food shortage
may emerge
Here it is important to
stress again that India's food
position has remained pre­
carious despite the green
revolution, and the stocks at
the stores have looked adeqaute only because of the low
purchasing power of a large
number of people to buy
food. Therefore, it cannot be
said that the drive for food
exports is being accelerated at
a time when the basic food
needs have already been met
satisfactorily.

PDS sugar price hiked by
20%; package for new units
Our New Delhi Bureau_____
NEW DELHI 16 FEBRUARY

THE GOVERNMENT has an­
nounced a 20-per cent hike in the
price of retail sugar sold through
the Public Distribution System, and
an attractive incentive scheme for
new units and expansion projects..
Announcing this at a press con­
ference here, the Union minister of
state for food, Mr Kalpnath Rai,
also disclosed that a proposal to de­
license the sugar industry was un­
der active consideration, but he
added that the existing licensing ar
rangement would continue "in the
meanwhile”.
The price hike, from Rs6.90 per
kg to Rs8.30 per kg from Wednes­
day, will have a marginal affect of
0.015 per cent in the Wholesale
Price Index (WPI), the food minis­
try has estimated.
Mr Rai said the government was
taking a series of policy initiatives
for the sugar industry to encourage
sugar mills to optimise their sugar
production and improve their via­
bility. He said that the ratio of levy
and free sale ration had been
changed to 40:60 from the earlier
45:55. Also, a buffer stock of
500,000 tonnes of sugar will be

created with effect from April 1 this
year and sugar factories will be re­
imbursed the storage interest and
insurance charges from the Sugar
Development Fund.
The minister stated that the
Statutory Minimum Price (SMP)

for sugarcane for the year 1993-94
had been set at Rs32.50 per quintal
linked to a basic recovery of 8.5 per
cent. The SMP for 1992-93 season
was raised to Rs31 per quintal
linked to a basic recovery of 8.5 per
cent as against Rs26 per quintal for
the previous season.

The revision of the SMP, the
minister said, required a higher re­
tail price for levy sugar supplied
through the PDS. He said the SMP
had been revised twice, the prices
charged from customers had not
been raised. This led to the accumu­
lation of substantial arrears iji the
levy price account maintained by
the Food Corpration of India. The
increase in sugar prices would re­
coup the earlier deficit and com­
pensate for the increase in the sup­
port price of sugarcane.
Mr Rai also announced incen­
tives for the new sugar factories
and expansion projects licensed
during the period September 7.
1990 and March 31 next year.
These are: (a) New units in High
Recovery Area would be entitled
for 100 per cent freesale quota of
sugar produced by them for eight
years while units located in Other
Recovery Area would be entitled
for incentive for 10 years compris­
ing 100 per cent freesale for nine
years and 66. per cent freesale for
one year.
(b) Expansion projects in High
Recovery Area would be given in­
centives at 100 per cent freesale for
five years and those in Other Re­
covery Area, for six years. The

quantum of incentive will be
worked out with reference to the
excess production achieved by the
expansion projects.
(c) All sugar factories and ex­
pansion projects which have been
licensed during the Seventh Plan
period up to September 6, 1990,
and which commence production
on or after September?, 1991, will
also have the option to avail of in­
centive under the above, new
scheme or the earlier scheme.
The minister said these incen­
tives were worked out in view of
the situation of the industry. At pre­
sent, licences granted for establish­
ment of 94 new sugar factories and
for the expansion of 177 factories
are pending implementation. Fi­
nancial institutions have not been
providing necessary assistance to
the sugar factories for completion
of the projects due to the non-viability of the projects. The institu­
tions requested the government to
review the old incentive scheme in
view of the increase in the project
cost and other escalations.
Economic, times

Prices ofpulses
rice shoot up
A HUGE hike in prices of basma­
ti rice and pulses at controlled
rate outlets has made a major
dent in house budgets of people
residing in the Capital.
At Super Bazar outlets, price
of basmati rice has risen by
almost 50 per cent within a
month, while most of the pulses.
which registered a hike from 20
to 45 per cent, have gone
beyond reach of a common per­
son. No dal is available for less
than Rs 20 a kg in the market
barring arhar. chana and
moong (washed).
According
to
wholesale
traders at Naya Bazar, a major
supplier to Super Bazar, fa the
Walled Chy the hike in prices of
pulses and rice was artificial as
there was no dearth In stocks of

pulses in the open market.
except white chana which was
imported less from Turkey, and
basmati rice which was hoarded
by the exporters.
General secretary of the All
India Rice Exporters Associa­
tion Padam Chand Gupta said
there was no panic in supply of
basmati rice before Diwali last
month, as the wholesale price
was only Rs 14.50 per kg.
“In fact, the problem was
started by big rice exporters.
who In anticipation of large
export contracts, picked up
paddy from thd markets in Pun­
jab and Haryana by paying
more prices and hoarded it.” Mr
Gupta said.
He further said the so-called
"mill exporters" paid Rs 18 per

51

kg for basmati rice which was
only Rs T4.50 before Diwali.
"Basmati rice vanished from
the market and this created
panic in the market, as most of
the rice traders started hoard­
ing whatever quantity of basma­
ti rice they had,” he added.
However. Mr Gupta said, the
mills exporters, who were
expecting to get a high price for
basmati rice from countries like
Saudi Arabia and USA, have fail­
ed to get any contract.
"Tliey had quoted a figure as
high as 800 US dollar per ton (nor
mal price is 300 US dollar per
ton) for selling basmati rice to
these countries, saying that.the
rice crops were destroyed due to
bad monsoon this year in our
country. Since Saudi Arabia ,apd

it-a-13.

the US had enough stocks of
basmati rice with themselves,
they told our mill merchants that
they will wait till the normal pri->
ces restored in India.” he said.
According to the Exporters
xssociation, India had already
exported 3.7 lakh ton of basmati
rice till November this year.
Mr Gupta feels that the normal­
cy in basmati rice’s price will
soon be restored, as the
exporters will now take out the
hoarded paddy since they could
not get good response from the
foreign market.

The reason of hike in pulses is,
however, altogether different. A
major pulse trader. Mr Joginder
Kumar, said of late there is a
downtrend in the pulses' prices
barring Urad washed due to poor
crops in Maharashtra and white
chana, which is being imported
from Turkey:
Dy general manager. Super
Bazar. R D Shrivastava, who was
officiating in absence of general
manager on’ Monday, refused to
comment on massive hike in pri­
ces of basmati rice and pulses.
The pioneer,

No funds to combat
hunger in Orissa
The Times of India News Service

BHUBANESWAR, March 2.
HE Orissa government today
expressed its helplessness in
combating poverty and recurrent
starvation deaths in the state citing
dearth of money as the main
stumbling block.
Making a statement in the state
assembly on an adjournment mo­
tion regarding starvation deaths in
Kalahandi, the revenue minister,
Mr Surendra Nath Nayak, did not
deny starvation deaths in the state,
but pointed out that due to limited
resources, it was not possible to
check them. The state government
had been asking the Centre for the
last three years to come to its help,
but nothing had happened yet, he
added.
The minister, however, said that
the alleged starvation deaths at
Salenga and Mesinga villages in
Bhabanipatna block in Kalahandi
district were not due to starvation.
He also rejected the demand for
the formation of a House commit­
tee saying that it would not solve
the problem. Only a lot of public
money would be spent, he added.
Mr Nayak said the government
had instructed officials to im­
mediately attend to complaints re­
garding starvation and assured the
House that action would be taken
on any lapse on that front. He
urged members of all parties to.put
up a united effort against poverty
and starvation deaths.
The ruling Janata Dal member,
Mr Surendra Nath Mishra, alleged
that on December 8, he had

T

52

brought to the notice of the
Khurda sub-collector how mem­
bers of four families in his consti­
tuency were starving. But no action
was taken immediately. On Febru­
ary 28, one Raghunath Bhola (65)
of Khahkote village died of starva­
tion leaving behind his wife. The
condition of the old woman was
still precarious, he added.
Mr Mishra told reporters later
that he had written a let.er to the
chief minister, Mr Biju Patnaik,
urging him to undertake a com­
plete survey of people starving in
his area and provide relief to them.
He also said that two months ago,
an old man of Dhalapathar village
had died of starvation. The
authorities had given Rs.250 to
meet his funeral expenses, he
added.
PTI adds: In his reply, the rev­
enue minister, Mr Nayak, denied
that Madua Majhi of Salegan vil­
lage and Natha Harijan of Masinga
village had died of starvtion. Both
were regular recipients of old age
pension and had died of old age,
Mr Nayak contended quoting of­
ficial reports.
The minister said he was not
denying that starvation deaths had
occurred in the stte, but the ques­
tion was how to initiate remedial
measures.
Mr Nayak regretted that even
though the government wanted to
create permanent assets to fight the
drought conditions and the pover­
ty of the people, it was not possible
due to paucity of resources.

Toi

Sucking dry the gene pool
PRAFUL BIDWA1

f the finance minister, Mr Man­
mohan Singh, had set out in
July 1991 to deliberately under­
mine India’s long term potenti­
al for development he could not
have done a better job than he has. In
the name of liberalisation, globalisa­
tion and reducing excessive state
intervention he has permitted the
unfettered penetration of internatio­
nal capital into India in three criti­
cal areas. And that on inequitous
terms, in ways inconceivable only a
few years ago.
The three areas are plant genetic
resources, energy and technology
development. These are important
measures of a nation’s resource
endowment as well as its ability to
use the same for true long term
growth.
The first of these has been
appropriately called the “last fron­
tier”. It is an irreplaceable gift of
nature in the form of genetic materi­
al, evolved and conserved in interac­
tion with human beings through
centuries.
India is one of the world’s richest
reservoirs of plant genetic resources.
Thousands of varieties of cereals,
vegetables, grasses and trees origina­
ted here thanks to its specific geolo­
gy, geography and climate. It is one
of the “Vavilov centres” or great
clusters of genetic diversity on which
the world’s food economy and very
survival depends.
It would not be an exaggeration to
say modern agriculture would have
been impossible without the contri­
bution of these centres. Most of them
are located in the South.
India is allowing the plunder of
these resources by multinational
seed, pharmaceutical and cosmetic
companies. It promotes hideously
unequal relations of exchange bet­
ween ordinary peasants and plant
breeders. All in the name of moderni­
sation and growth.
At the heart bf this inequity is theft
of precious genetic material for
which not a soul is paid on the pre­
text that it is the “common” heritage
of “humanity”. Unlike, say, bauxite
in Canada, iron ore in the United Sta­
tes or timber in Sweden, which are of
course “national” resources.
Once stolen the material is manipu­
lated in the multinational’s seed labo­
ratories and sold back to third world
peasants for enormous profits. The
effects of its promotion in the form of
hybrid seeds through monocultures
can be ruinous.
Over the past few years India has
allowed, even encouraged, this plun­
der at the cost of enormous damage
to its genetic resources base. It is now
about to sign a wholly unequal trea­
ty, the Dunkel draft of the the Gene­
ral Agreement-on Tariffs and Trade,
which will institutionalise these
resources as intellectual property.
This will make Indian agriculture vul­
nerable to international capital.
The Dunkel proposals have rightly
been criticised for their bias against

I

the South in general and Indian

industry in particular. It is not
adequately appreciated their impact
on agriculture will be even more har­
mful. They will at one fell swoop ren­
der irrelevant and unachievable the
entire agenda of balanced, sustaina­
ble agricultural development.
Indians can forget about food secu­
rity. India which has long opposed
private monopolies of natural resour­
ces and an intellectual property regi­
me in seeds is about to cave in.
GATT will open up possibilities of
exploitation that could make the mis­
deeds of Cargill and W.R. Grace —
now patenting various products from
Indian neem — look like an innocent
prank. In return India will not even
get crumbs in the shape of significant­
ly improved access to the West’s pro­
tected markets.
If the plant gene story is depres­
sing, India’s invitation to foreign com­
panies to take over the power sector
is no better. Electricity is a form of
energy which unlike most goods can­
not be transported. It is not textbook
tradeable. That is why even Western
nations follow a policy of energy inde­
pendence, based on national resour­
ces and technologies. Except for in
the US, power generation is in the
public sector everywhere in the
world. Its distribution is universally
handled by national, regional, or
municipal bodies.
A similar policy in India helped cre­
ate a national grid, build an industry
that makes a range of power genera­
tion equipment and install a'generating capacity of 65,000 MW. All this
despite the notoriously corrupt and
inefficient electricity boards. That
policy is now being jettisoned lock,
stock and barrel.
New Delhi is about to hand over
power distribution to a private com­
pany with no experience in the field.
All because of a mistaken assump­
tion a private company will b.e able to
manage a public domain task. In
.other words balancing competing
demands on the basis of sqfjl|l, 90t
commercial, priorities.
-;
■
Mr N.K.P. Salve is roping i^'aljman­
ner of foreign firms, the identity of
which he refuses to disclose
set up
power stations. He is offering.terms
that leave even the greediest gaping
in disbelief — a 16 per cent after tax
return, a handsome debt equity
ratio, minimal promoters" capital
requirements and an absurdly low
plant load factor.
These terms will give us gold plated.electricity. Peasants in Bihar will
now be ruined not so much by sneez­
ing on the Chicago commodities
exchange but by manipulation of the
rupee’s exchange fate with the dol­
lar, the currency in which the price of
power is to be denominated.
Proposals for tens of thousands of
megawatts are said to be in the pipeli­
ne. A single US consortium wants to
build 4,000 MW. Thus deals like
Enron, a $ 2.5 billion 2,015 MW pro­
ject that will burn scarce imported
gas in Maharashtra’s Ratnagiri dis­

53

trict, are being struck. Mr Sharad
Pawar iS lobbying the Centre hard
for this.

The project is so inappropriate
and cost ineffective that even the
World Bank has refused to finance it.
But Mr Pawar continues to plead for
it on the basis of spurious projec­
tions. His calculations overstate futu­
re demand for power by assuming
efficiency of use will stagnate even
as aggregate growth rates rise.
Then there is the Narmada pro­
ject’s semi-bankrupt Sardar Sarovar
Nigam which is trying to find a fore­
ign buyer for its proposed Rs 29 bill­
ion power system. There have been
few takers thanks to the poor interna­
tional reputation of the Narmada
dam. SSN is unlikely to find adequa­
te funds in the domestic market. So it
can be expected to improve on its
foreign offer making for a white ele­
phant to place beside the ecological
disaster of the dam project.

In the third area, technology deve­
lopment, the government’s policy
could not have been more unhelpful.
Mr Manmohan Singh has repeatedly
sent out the message he is in no way
committed to promoting indigenous
research and development. Last
month he termed all non-commefcial
sources of energy as “useless”.
He is starving research and deve­
lopment laboratories of funds in criti­
cal areas. This encourages the
import of readymade technology
packages. Most institutions under
the Council for Scientific and
Industrial Research, Indian Council
for Medical Research and Indian
Council for Agricultural Research
have not been able to buy equip­
ment, books or even maintain jour­
nal subscriptions for the past two
years.
The government’s technology poli­
cy draft now in circulation has
further demoralised Indian scien­
tists and engineers. This class
already has to generate half its
resources from a private industry
encouraged by other official policies
precisely to spurn indigenous R&D.
This is happening against a backdrop of decreasing in R&D intensity
— that is, the ration between R&D
expenditure and sales turnover — in
Indian industry. The rations have
gone from 1.13 per cent in the early
Eighties to 0.81 per cent in the “libe­
ral” mid-Eighties.
There is an inverse relationship
between size and R&D spending
which speaks of poor industry leader­
ship. Technology imports are rfsing
even though most are repetitive
packages or technologies only doubt­
fully
appropriate
in
Indjan
conditions.
The effect of this trend is already
being felt in technologically strong
sectors such as capital goods. This
sector is reeling under the burden of
inadequate
protection
against
imports,
particularly
agtrfnst
dumping.
L

Even areas of basic research are
being so starved of funds that many
institutions are looking to foreign
sources. This is a dangerous trend
exemplified by a recent instance of
unequal collaboration in high energy
physics between the US’s Brookhav­
en National Laboratories and Delhi
University. The Indian researchers
were drafted in to do all the lowly
repetitive work while the US team
did the quality tasks, reaping huge
benefits.

Something similar is on the cards
in several biology and biotechnology
related fields. India’s institutions
are on the verge of being turned'jnto
supplies of cheap, sources of labour.
In the name of liberating India
once proud researchers and innova­
tors are being transformed into
hewers of wood and drawers of water
in bondage to the North. The effect
on Indian science and technology is
disastrous. India is being transform­
ed not into an Asian tiger but a Latin
American style banana republic.
The telegraph as-io-95.

Tripping over seeds
VANDANA SHIVA

he
conclusion
of
the
Uruguay round of the Gene­
ral Agreement on Trade
and aTariff
negotiations
poses
major challenge
to
people’s movements for protecting
nature and the diverse cultures of
the third world. The trade related
intellectual property rights treaty of
GATT can become the most powerful
tool for the ultimate colonisation of
biodiversity and indigenous systems
of knowledge.
If this has to be prevented on ethi­
cal,
ecological
and
economic
grounds, TRIPs’ clauses on living
resources must be converted into a
zone of contest where movements
working to protect biodiversity and
indigenous knowledge act as a coun­
tervailing force to the corporate
drive for monopoly control.
The intellectual property rights
regimes being pushed by GATT deny
innovation by millions of farmers
and tribals in the third world where
biological diversity is most abundant
and where knowledge of its use is
most evolved.
Third world governments are
already being forced to immediately
change IPR regimes for plant varie­
ties. Thus while the Indian govern­
ment announces a transitional per­
iod of 10 years for such changes, it is
also rushing to introduce legislation
in the budget session of Parliament
for plant and seed varieties.
The test for governments in evolv­
ing sui generis legislation is whether
the law protects multinationals or
rights of local communities who have
been the original innovators in utilis­
ing plant diversity.
At the government level there are
two imperatives for evolving new
legislation to protect biodiversity.
One comes from the biodiversity con­
vention, which is now an internation­
al treaty for the protection of
biodiversity.
The other comes from GATT. Arti­
cle 27.5.3(b) of TRIPs states, ‘‘Part­
ies may exclude from patentability
plants and animals other than micro­
organisms, and essentially biological
processes for the production of

T

plants or animals other than nonbiological and micro biological pro­
cesses. However, parties shall provi­
de for the protection of plant variet­
ies either by patents or by an effec­
tive sui generis system or by any com­
bination thereof. This provision shall
be reviewed four years after the
entry into force of the agreement
establishing the World Trading
Organisation.”
The second part of this article will
most directly affect farmers’ rights
as innovators, plant breeders, and
their community ownership of seed
and plant material. TRIPs recognises
the Western industrialised model of
innovation but has failed to acknow­
ledge the more informal, communal
system through which third world far­
mers produce, select, improve and
breed diverse crop varieties.
Seeds produced by farmers reflect
their ingenuity, inventiveness and
genius. However, the protection of
collective intellectual property of
third world farmers does not find
place in TRIPs.
The challenge now is to use the
clause to evolve a free standing or sui
generis system to push for the protec­
tion of collective innovation and the
creative potential of local people.
The farmer’s movement in India
has been resisting TRIPs because of
its far reaching implications. Govern­
ment statements that India will
evolve a breeder’s right system
which will allow farmers to save and
exchange seed non-commercially
are quite unsatisfactory. For far­
mers, the right over their seed is fun­
damental, not a concession.
Farmers have started to assert
themselves through common intel­
lectual property rights. The first
public demonstration of this new atti­
tude was on Independence Day, 1993
when farmers declared their know­
ledge and biodiversity to be protect­
ed by a samuhik gyan sanad. Accor­
ding to this, any corporate use of
local knowledge or resources with­
out permission from local communit­
ies would be intellectual piracy as in
the case of the patents on neem.

54

The positive assertion of CIPRs
creates an opportunity to define a sui
generis system centered on farmers’
rights. The commerce ministry has
stated that India is free to set up its
own sui generis system. It is time for
the government to take some con­
crete steps protect India’s resources
and knowledge.
The government also has to inter­
pret “effective” in Article 27.3(b) in
a way that suits the national interest.
In the absence of an adequate defini­
tion India is most likely to be forced
into accepting the International New
Varieties of Plants, a monopoly sys­
tem for protecting corporate interest.

The term “effective” was inserted
by the United States in the biodiversi­
ty convention and TRIPs to achieve
this. The same phrase is also in sec­
tion 301 of the Trade and Competi­
tiveness Act of 1988 which has been
used to retaliate against countries
whose IPR laws do not conform to US
standards.
The use of the term in all negotia­
tions related to IPRs and biodiversi­
ty is an US attempt to globalise its
IPR regime which allow patenting of
all life forms. In the Dunkel draft, the
phrase “effective sui generis” imp­
lies such a system will not be deter­
mined by countries but by GATT.
But before the implementation of
the Article 27.3(b), its precise conno­
tations have to be decided — for
whom it is to be effective and for
what.
In GATT the only concern is protec­
ting corporate interests. However
another multilateral treaty has also
been signed by states which makes
biodiversity conservation obligato­
ry. It also guarantees sovereign
rights of states to biodiversity and
the patterns of its utilisation through
articles 3 and 4. In addition, the con­
vention recognises the role of local
farmers
and
tribals
in
bio-conservation.

In the preamble, the convention
states that contracting parties reco-

The
Indian
government
has
decided to change the Seeds Act to
set up a central seeds agency. How­
ever the changes are intended “as
part of the TRIPs section of the
recently-concluded GATT talks”.
These shifts Slight actually be limi­
ting India’s options for a sui generis
system. People therefore have to
remain vigilant about the manifold
possibilities that can force the coun­
try into accepting the INVP.
There is also a possibility the bio­
diversity issue will be used to dis­
mantle India’s patent system. India
needs a two-pronged strategy to pro­
tect national patent legislation while
creating new alternatives for bio­
diversity conservation and utilisa­
tion which should be beyond the
scope of patentable subject matter.
It is imperative for countries to
have strong legislation to allow exclu­
sion of patents on life on grounds of
public morality. Areas excluded
from patentability need to be govern­
ed by non-monopoly regimes which
protect people’s rights to creativity.
Equal recognition needs to be
given to creativity in different cultu­
ral setups. An IPR system is required
which would recognise indigenous
innovation and prevent piracy of the
knowledge.
It is also peremptory to provide all
members of the society with health
and nutrition. Indian patent laws in
fact do not allow patents for- living
resources. New and complimentary
legislation to protect victims of bio­
piracy have to be evolved.
If the government fails to come up
with a sui generis system that pro­
tects India’s biodiversity and indige­
nous knowledge, and merely puts for­
ward legislation to facilitate seed
monopolies, farmers will be forced to
violate laws that go against the spirit
and legacy of Mahatma Gandhi and
the freedom movement.

gnise “the close and traditional
dependence of many indigenous and
local communities embodying tradi­
tional lifestyles on biological resour­
ces”. Article 10(c) and 18.4 encoura­
ge use of biological resources in
accordance with traditional cultural
practices and technologies compati­
ble with conservation or sustainable
use requirements. The convention
thus offers avenues for the protec­
tion of farmers’ and national rights
to biodiversity.
However, this will raise certain cru­
cial issues—whether effectivity will
be determined by the respective sta­
tes or by the WTO. It also has to be
seen whether priority is given ro pro­
fits or to protecting national inter­
ests, community intellectual rights,
and biodiversity.
All the states had agreed to the
upkeep of the latter set of principles
in the biodiversity treaty as well as
the Food and Agriculture Organisa­
tion undertaking on plant genetic
resources.
In the March 1987 meeting of FAO
third world delegates argued if plant
breeders had ownership rights over
the new varieties they had deve­
loped from third world genetic
resources, third world farmers also
had similar rights since they nurtur
ed the biodiversity that breeders and
the seed industry used as raw
material.
Farmers’ rights as defined by the
FAO arise from their past, present
and future contributions in conser­
ving, improving and making availa­
ble plant genetic resources, particu­
larly those in the centres of origin.
There is thus ample legal ground
to go beyond the INVP to evolve a sui
generis framework for protecting bio­
diversity. It is also the only alterna­
tive to the INVP for protecting com­
munity intellectual rights.

NATIONAL

1-9-95.

Farmers’ Privilege Is
Not Farmers’ Rights
By VANDANA SHIVA
HE impact of the ‘seed satyagraha', the movement for the
protection of farmers’ rights and
indigenous seeds can best be gauged
from the fact the director-general of
GATT. Mr Peter Sutherland has
had to intervene in the Indian de­
bate with his article “Seeds of
Doubt" (March 15). However, no­
where in his article has he referred
to farmers’ rights. All he has offered
is an assurance on farmers' privi­
lege, which is not the same as
farmers’ rights.
Farmers’ rights are derived from
the recognition of farmers as
breeders. Thcv are the equivalent of

T

breeders’ rights sought by corporate
breeders under UPOV. Farmers'
rights, as defined in the text of the
International Undertaking on.Plant
Genetic Resources of the FAO
means “rights arising from the past,
present and future contributions of
farmers in conserving, improving
and making available plant genetic
resources particularly those in the
centres of origin/diversity”. Farm­
ers’ rights are an intellectual right,
based on the recognition of the
intellectual creativity and in­
novative capacity of farmers. Farm­
ers' rights challenge the myth that'
innovation only takes place in west-

55

em labs and research stations.

Western Interest
The dominant paradigm of IPRs
only protects innovation in the in­
dustrialised West. Centuries of in­
novation in the Third World are
totally devalued to give monopoly
rights to plant material to trans­
national corporations which make
minor modifications compared to
the evolutionary changes that nature
and third world farmers have made.
IPRs thus place the contribution of’
seed companies over and above ths
intellectual contribution of gen-

erations of third world farmers in
the areas of conservation, breeding.
domestication and development of
plant and animal genetic resources.
As Pat Mooney has indicated, the
argument that intellectual property
is only recognisable when performed
by white people in laboratories with
white lab coats is fundamentally a
racist view of scientific develop­
ment. Two biases arc inherent in
this argument. One, that the labour
of third world farmers has no value
while the labour of western scien­
tists adds value. Secondly, that
value is a measure only in the
market. However, it is now fully
recognised that ‘the total genetic
changes achieved by farmers over
the millennia is far greater than that
achieved by the last hundred or two
years of more systematic science­
based efforts’. Plant scientists are
not the sole producers of utility in
seed.
Third world biodiversity has so far
been treated as an open access global
resource though it is local common
property. Farmers' rights are essen­
tial for recognising the common
property and national sovereignty
regimes governing the utilisation
and conservation of biodiversity.
and for ending the regime of
biopiracy based on treating these
resources as freely available, belong­
ing to no one.
Farmers' privilege is not a right. It
is a mere concession given to farm­
ers by seed corporations who alone
have property rights derived from
innovation with biological re­
sources. Besides failing to recognise
farmers’ innovation, the concept of
■farmers’ privilege' is also mislead­
ing because it falsely gives the im­
pression that farmers can save seed
as a right. However, IPRs in ptent
material arc primarily based on the
taking away of the fundamenal
right of our farmers to conserve, ise
and produce seed by multinational
seed companies which sec farmes’
rights to their own seeds as in
obstacle to their market expansion.
Hans Leenders, secretary general
of the world seed houses, and their
breeders, had in fact proposed to
abolish fanners’ rights to save serf.
According to him,“cvcn though it
has been a tradition in most cointries that a farmer can save sc<d
from his own crop.it is under tie
changing circumstances ntt

equitable that a farmer can use this
seed and grow a commercial crip
out of it without payment of a
royalty... the seed industry will ha-c
to fight hard for a better kind if
protection."
The frantic cry for intematioml
property protection of seeds aid
plant vancues is for protection fron
farmers, who arc the original
breeders and developers >f
biological resources in agriculture.
In India particularly, where nearly
80 per cent of the seed supply aid
production is still controlled jy
farmers, farmers arc the main conpetitors of the seed industry in terns
of innovation and rights to
biological resources. Breeders’ riglts
are aimed at displacingthe farmcras
competitor, and makining him/ler
totally dependent on the industrial
supply of seed. ’Farmers privilege is
a concession within this moiopolising system.
Varieties developed by modirn
plant breeders in international re­
search centres or by transnational
seed corporations are called ad­
vanced’ or‘elite’. Thus the northhas
always used third world germplism
as a freely available resource and
treated it as valueless. The advarced
capitalist nations wish to retain free
access to the developing wold’s
storehouse of genetic diversity. It is
this double standard in the neat
ment of innovation and rights ir the
area of biodiversity that the corccp
of farmers’ rights is meant U
challenge.

Rights And Privileges
The forest experience should Vaclf
us what happens. vkhen rights are
replaced by privileges. During the
reservation of forests by the Brtish
regime village communities vho
were IoSing4heir community foiests
started ’’forest saiyagrahis"
throughout the country in defence of
their forest rights. These rights were
reduced to privileges in the forest
laws. Forest privileges arc given at
the whim and fancy of functionaries
of the forest department. The or­
iginal owners of the forests were
thus reduced to being criminal and
thieves. A similar process is now
under wav in the area of biodiversi­
ty.

Times of India

56

tq-q-

IMPACT ON
ENVIRONMENT

Life is not for patenting
. , t^roed in Bhopal gas
Union Cark*d? % ^fong way off
case, but justice

XX
’

foragn *
in

K°^ Newtrade policy will

aggravate India's
ecological crisis
Govt to woo pvt sector for
wasteland investment

New trade policy will
aggravate India's
ecological crisis
THE new Export-Import policy an­
nounced on 31 March is a prescription
for accelerating the existing environ­
mental crisis.
The list of items deleted from the
negative list of exports and included
under licensed and canalised exports
is primarily a catalogue of natural re­
sources. the environmental capital of
the country, which is already severely
depicted. Encouraging natural resource
exports will aggravate their scarcity.
and deepen the ecological crisis that
the current scarcity entails.
The encouragement given to export
of minerals will lead to the expansion of
mining, which has already had disas­
trous environmental impacts in differ­
ent regions of the country. Movements
against
bauxite
mining
in
Gandhowardhan and limestone mining
in Doon Valley had created a widespread
awareness of the disastrous ecological
consequences of mining. The Su­
preme Court judgement that led to
the closure of most mines in Doon
Valley states that when economic
activities become a threat to life­
supporting ecological processes, they
must be stopped. These reasons are

being totally forgotten in the new min­
eral policy announced on 5 March which
has thrown the mining sector open to
multinational corporations. In addition.
the new thrust to export of pig iron, iron
orc. rock phosphates, rare earth met­
als. asbestos, magnesite, lignite.
laterite, bauxite, coal basically amounts
to a free licence to rape the land and
minerals of this country. Special men­
tion has been made of Meghalaya coal.
which incidentally was also given a
five-year tax holiday in the budget.
Export of natural resources in this way
destroys the environment, robs people
of their means of livelihoods, creating
poverty and destitution. The people get
poorer, but the country does not ben­
efit either because the exploiting cor­
porations enjoy 'tax holidays'. Besides

Vandana Shiva
India’s new trade policy
which encourages natural
resource exports will, argues the
author of the article,
aggraeate the country's
ecological crisis.
minerals, the new EXIM policy is pro­
moting the export of our vital living
resources, which will inevitably lead to
further erosion of biodiversity and ge­
netic resources.
Livestock is already in short sup­
ply in the country, and livestock scar­
city is becoming the limiting factor
preventing a transition to sustainable
agriculture. By permitting free export
of livestock and animal products
without a policy for their replenish­
ment. the EXIM policy is sounding the
death knell for our animal genetic re­
sources. Camels, mules, donkeys, live
sheep and goats, meat of buffalo (both
male and female) and of Indian sheep
including heart, liver, lungs, brain.
tongue, kidneys, offals and other or­
gans. can all be exported, creating a
crisis of animal energy and animal
manure in rural India, two inputs es­
sential for sustainable agriculture.
Cows and their parts are not men­
tioned because the cow is supposed to
be sacred in this land. But who will
guarantee that the sacred cow stays
unaffected by the new export policies?
Livestock depletion will also take
place because the export of resources
on which our cattle population is de­
pendent. Groundnut cake and cotton
seed cake are essential aspects of the
animal diet in India. Their export will
further deprive our animals of food.
The most suicidal depiction from
57

the negati' e list is the export of straw or
hay. In my book The Violence of the
Green Revolution I have shown how the
non-sustainability of agriculture today
is fundamentally linked to the scarcity
of straw. Straw is essential for main­
taining the nutrient and water cycles in
agriculture. 'Green Revolution' varie­
ties reduced straw production because
they were primarily dwarf varieties.
This in turn reduced the organic matter
relumed to the soil, leading to increased
occurrence
of
drought
and
desertification and soil deficiencies and
diseases.
Fukukua's 'One Straw Revolution'
is a testament of the ecological value of
straw. At a time when the entire world
is waking up to the need to increase
organic matter production for soil fer­
tility renewal, our Commerce Ministry
is exporting this primeval source of
fertility -for cash. Ecological wisdom
demands that straw exports be banned.
since our agriculture is already in a
critical condition due to scarcity of
straw. While straw is ecologically nonsustainable for sustainability of agri­
culture. the little price it will fetch in
exports can never compensate for the
breakdown of ecological processes re­
sulting in the expenditure of millions
for drought, floods and famine relief.
The new EXIM policy has also given
an open permission for export of seeds
and plant and plant portions and
derivates obtained from the wild. Wild
plants of economic value have already
been over exploited, and many are
threatened with extinction. Seed of wild
rice and wild wheat varieties has been
allowed to be exported. Further, the
free export of seeds totally ignores the
complex, controversial and unresolved
issue of intellectual property rights
which has been highlighted through
the Dunkel Text of the GATT treaty.
Such exports could violate the
Biodiversity Convention to which India
is a signatory and which is committed

to prolix t biodiversity.
; their homes .md their environment
siriu iur.il adjustment-induced ENIM
In a \eiv real sense, the ENIM
Since the slate refuses to perform its
policy With the new ENIM policy, we
policy is tr.-iding away the very sure aval
environmental duty, communities ot ■ do not need to wail for Dunkel io
of the people and the •■nvirontnent of tribals and peasants arc being loreed
dismantle all environmental and
India. The freedom io export wheat.
to take over the responsibility. It is ' human rights .is barriers to free trade’.
riee. barley, maize, bqjrci. joivar. rai/i their actions that are attempting to I Our government is implementing the
from a country ridden with poverty and
protect our futuie while the gov­ GAIT treaty even before it has been
malnutrition amounts to condemning ernment barters it away through the signed.

it to the condition of Ethiopia and So­
malia'.
The Commerce Ministry has stated
that instead of resisting the agriculture
treaty in GATT, we arc supposed to
welcome its prescriptions, in fact, the
policies prescribed in the Dunkel Draft
arealready being implemented through
the new E.XIM policy by focussing on
agricult oral exports.
India, it is stated, is adopting the
strategy of the CAIRNS group in GATT
negotiations. This is a fallacy. The
CAIRNS groups include countries like
Canada. Australia. New Zealand and
Argentina which have small populations
and surplus land. In India, the situa­
tion is the reverse. We have a large
population, and not enough land.
Agricultural exports front India can
only come at the cost of people s sur­
vival and a rising debt burden for food
imports. The Bengal Famine which
killed 2 million people was also the
result of putting exports above people’s
survival. Exports boomed but people
died. The only difference was that the
’free export' policy of 1942 was under a
colonial regime while the 'free export’
policy of 1993 is being written in socalled independent India.
Projects which have a potential
environmental impact are subjected to
environmental impact assessments
(EIAs). We now need ELAs for policies.
In particular, we need to subject trade
policies to environmental impact as­
sessments. .
In a period when trade determines
production and use of natural resources
rather than sustainable use of natural
resources determining trade patterns.
trade and environment must necessar­
ily become a new area for environmen­
tal activism. Movements like Natc-naraj Andolan (pur rule in our village)
become necessary' for survival as the
state withdraws from its regulatory
functions and seems to exist only to
give tax holidays and unrestricted ac­
cess to natural resources to corpora­
tions.
In Bastar. In Gadchiroli, in Kolhan.
in Narmada Valley. communities arc
refusing to allow the devastation of '

Union Carbide charged in Bhopal gas
case, but justice long way off
EIGHT years after the Bhopal gas disas­ years to file a charge-sheet in a Bhopal
ter, the transnational Union Carbide has court.
been charged with criminal misconduct.
However, in February 1989 the gov­
but justice is still a long way off. say ernment and UCC reached a settlement
Indian legal experts.
1 exempting the TNC from all criminal liA Bhopal city court charged the i ability in return for S470 million as com1 chairman and eight employees of Union j pensation for the victims.
Carbide India Ltd with homicide not
Prosecution was revived after the
amounting to murder, under section 304
Supreme Court ruled in October 1991
(2) of the Indian Penal Code (IPC). They
that the 1989 settlement did not give
can be jailed for life, if found guilty of
UCC criminal immunity.
causing the world's worst industrial mis­
Bhushan says there was ample time
hap.
■ between the filing of the CBI charge­
The Union Carbide Corporation
sheet in December 1987 and the Febru­
(UCC), its Hong Kong-based subsidiary.
ary settlement but the prosecutors were
and former UCC chairman Warren
'staying their hand under instructions from
Anderson have also been named ac­ the government.'
cused and declared absconders for their
The government then in power was
refusal to answer earlier summons by the led by ex-Prime Minister Rajiv Gandhi of
court.
the Congress party.
In March 1985, the Gandhi-governThe trial is scheduled to begin in
May. Charges of voluntarily causing
ment had enacted the controversial
grievous hurt and of mischief by poison­ 'Bhopal gas leak disaster (processing of
ing and killing animals have also been claims) act' which gave it the exclusive
right to claim compensation for the vic­
framed under the IPC.
tims. More than half a million people are
More than 3,000 people were killed
waiting for monetary relief.
and half a million afflicted by severe
While the prosecution is trying to nail
ailments after inhaling toxic fumes of
the charges by proving negligence on the
methyl isocyanate which leaked from
Carbide’s pesticide factory in Bhopal on
part of the accused, UCIL's lawyers are
the night of 2 December 1984.
arguing only the Bhopal plant staff can be
But critics say inept prosecution and held liable.
In its latest 34-page order, the court
slow-moving courts will prolong a deci­
sion. These are certainly the strongest said the accused were guilty of negli­
charges that can be framed under the gence in causing the death of more than
law. But the way things are going the 3.828 people 'by allowing the highly toxic
case will take many more years,' says gas (methyl isocyanate) to escape from
Prashant Bhushan, a well-known lawyer the storage tank at the UCIL plant,
knowing that it was likely to cause death
in India’s Supreme Court.
Under ideal conditions the case or grievous hurt,' the reports add.
In his order. Judge Wajahat All Shah
should now be over within six months, he
said.
noted he had information that the Bhopal
plant was running at a loss and UCC had
The fact that it has taken eight and a
half years between the first criminal com­ directed the Indian subsidiary to disman­
plaint and the framing of charges shows tle and move to either Indonesia or Brazil.
Preparations for this were underway
that the Indian legal system has failed
in November 1984. The judge ruled that
thoroughly', says Bhushan
A criminal case was registered at a | under these circumstances, the directors
Bhopal police station on 3 December I cannot claim to have been disassociated
1984. Three days later prosecution was J with the Bhopal plant al the time of the j
handed over to India's Central Bureau of j disaster, which turned out to be the world s |

Investigation (CBI). It took the CBI three

58

worst industrial accident. - IPS

■

Third world yesuR&ENCg no- 54.

Majority foreign holding in mining soon
redent
in the mming Act.
______ cnanges
___
In fact, the sources said, several inter­
national mining giants were taking interest
A proposal allowing majority foreign in setting up shops In India, particularly
equity participation in mining companies for exploration and mining of "precious"
is being considered by the government metals. While two of them — Australian
following amendment of the Mines and New Guinea Mining Company and CRA
Minerals (Regulations & Development) — have already signed up with the stateAct which paved the way for entry of owned Hindustan Zinc for joint ventures,
private sector into exploration of 13 talks are on between several other
minerals, including precious ones.
multinationals and Indian public and
The foreign equity holding was recently private mining companies for collab­
increased from 40 per cent to 50 per oration.
cent. The capping, however, did not
While the New Guinea Mining company
apply to joint mining projects set up on is joining hands with the Hindustan Zinc
captive basis for mineral processing units. for exploration of gold, the CRA is
Already the Foreign Investment Promo­ planning a similar project with the public
tion Board (F1PB) has been given the sector for exploration of base metals
power to waive the 50-per cent condition such as lead, zinc and copper.
in exceptional cases such as proposals
Among the other major foreign mining
envisaging massive foreign investment or gianis. which are holding talks with
use of of advanced technology.
leading Indian public as well as private
According to official sources, the move sector mining companies, are Australian
follows the realisation that without raising BHP and B H Peko and American Cyprus
the ceiling on foreign equity holding it MX. The prospective Indian partners
would be difficult to attract any additional include Hindustan Copper. Kudremukh
foreign investments in this sector. The Iron and Steels, National Mineral Devel­
ministry of mining is now hopeful of opment Corporation (NMDC) and Mineral
large-scale foreign investment after the Exploration Corporation in the public
James Mathew

NEW DELHI

sector and the Tatas and the Goa Iron
Ore from the private sector.

Interestingly, bow ever, according to
mining ministry sou trees, foreign firms

are more worried ab out the “processing

time" of their propos als, than lifting the
equity limit. As a response to this, the
ministry has set up an 'international co

operative cell’ under the chairmanship of
Mr D V Singh, a director in the ministry,
to co-ordinate trade q ueries and proposals
from foreign mining firms.
The sources said that foreign mining
firms were showing particular interest in
exploration and mining of gold and dia­
mond because of lower capital cost and
risk element in this segment, compared
to huge investments needed for setting
up processing facilities in case of other
minerals and metals.
Gold mining is also preferred due to
the vast market In India for the yellow
metal. Against an annual requirement of
250-300 tonne (about 30 million carats) of
gold, the country produces a paltry 1.7
tonne (18,000 carats) currently.
Interestingly, the oi>?ning up has pro­
vided a ray of hope for the sick PSUs in
this sector also. 3

me

o&sekveR

10-5-34.

Govt to woo pvt sector for
wasteland investment.
By R Bala5!iani-::a-

for wasteland development. 'the

NEW DELHI, Nov 24

barons of industry sectn to !tav<_shown keen interest r.nd the ba-:

The Government is. planning to

Secure corporate investment in
wasteland development in a big
way.
The response of industrial
houses to tnc scheme has been
quite encouraging, giving a boost
io the plan. About 100 investment
proposals are now under li-e con­
sideration of the Ministry.
Col. Ram Singh. Minister of
State for Wasteland Develop­
ment. has already held about a
dozen meetings with the FICCI,
PHDCC1 and other apex cham­
bers to explain the Government's
investment promotional scheme

hrs (Ims been sei rolling.
The Minister disciosed that
there was a ptripostd from Israel
to develop the loioba plantation
in the desenlaarL ef Rajastlian as
part of the Government': overall
wastekind icclamation plan. This
is a plant witr, its seeds yielding an
oily extract used n cosmetics and
as a lubricant tor automobiles.
Since’ this is a profitable propcs:
tion. private sector interest is
rated high. Presently, saplings for
plantation of jojoba are being
imported from Mexico. California
and Israel.
Ever since the creation of a
.separate Ministry for the purpose

59

of i.“Claiming the huge 100-ntiliiv
hectic wastedlanrt the Govctnm: ::i has been desperately trying
t-j woo corporate investment in
this area with a number of aura-.live- schemes. The efforts seems to
have started yielding results of
late with a good number of prop­
osals pending approval with the
Ministry of Wasteland Develop­
ment.
Col Ram Singh, told /•nr.wir.U.'
Express that he was hopeful of
getting substantia! corporate in­
vestment in the area 1 he Ministiy Lai- a whole lot of schemes foi
the purpose but the one which is
essentially meant for corporate
finance is the - Investment Prom­
otional Scheme. Under this
scheme, the Government would

Using GATT to link
trade, environment
VANDANA SHIVA

HIi GOVERNMENT is
trying to lull Indians
into
believing
that
GATT will not undermi­
ne the country's interests and
sovereignty, and that its multi­
lateralism is essential to coun­
ter the North's unilateralism.
On the other hand, the US
has made it clear it will conti­
nue to use instruments of unila­
teral trade action and will
extend GATT in the fields of
environment,
labour
and
human rights.
The. threat or recourse to
these powers has been used to
expand the ‘economic and poli­
tical space’ in the world for its
transnational
corporations
(TNCs). In the process, the
powers and rights of nation sta­
tes, particularly of Third World
countries, get dismantled and
diminished.
The basic thing that the
Third World is supposed to
gain by GATT is the establishment of a rule-based system
where the powerful will under­
take and obey the international
law, giving up unilateralism
and threats of.trade sanctions.
But even before the treaty is
ratified by participants, the US
Administration has asserted its
determination and right to con­
tinue such sanctions. The bid to

T

link trade and environment
through GATT has to be seen in
this context.
There are two aspects of
trade and environment in
GATT. First, the inevitable envi­
ronmental impact of increased
international
trade
which
requires intensive production
and distribution of resources.
The second aspect relates to
the proposals coming from the
North
to
increase
GATT
powers by including environ­
mental policy on its agenda.
The first aspect requires an
ecological audit of GATT and
ways to minimise the environ­
mental costs of trade.
The second aspect will allow
the increased use of the envi­
ronment as an excuse for "gre­
en protectionism”, and as an
instrument of unilateraliftm
and "green imperialism". It is
the second option that the
northern countries are promo­
ting, while leaving the question
of the environmental impact of
GATT unaddressed.
The Trade Negotiations Com­
mittee of GATT has proposed a
Trade and Environment Work
Programme which says while
there should be coordination
and environmental policies,
this should be done "without
exceeding the competence of

62

the multilateral trading sys­
tem, which is limited to trade
policies and
these traderelated aspects of environment
policies which may result in
significant trade effects for its
members”.
The GATT contracting parl­
ies have thus recognised that it
is important to ensure that the
treaty does not exceed its com­
petence in trade and environ­
mental matters.
However, the industrialised
nations
and
some
non­
governmental voices from the
North are pressing for a GATTAVTO Committee on trade
and environment and are
already talking of a "green
round”, which would legitimise
protectionism for so called
“green" objectives. But the
"Green GATT" proposal is not
guided by green politics or
economics.
Firstly, the countries now
demanding the "greening of
GATT" are the very forces that
pushed into the new areas
which have a serious impact on
the environment of the Third
World. The introduction of agri­
culture and intellectual proper­
ty rights into GATT and their
removal from sovereign domes­
tic policy making, goes against
the diversity of socio-economic
conditions’, institutional struc­
tures and cultural priorities in
different countries.
The monocultures and inten­
sive resource use in agricultu­
ral production and trade and
the uniformity of the I PR regi­
me resulting from GAIT will
have high social, economic and
ecological costs for the Third
World.
In their proposals for a “Gre­
en GATT", the northern countr­
ies are not suggesting ways to
reduce
the
environmental
impact of the free trade propo­
sals of GATT. They are merely
finding new ways to introduce
protectionism under a green
guise.
The lack of an environmental
commitment of the North is evi­
dent in its having put pressure
within GATT on the issue of
trade in domestically prohibit­
ed goods.
This issue has become

important to environmental
movements and policy making
in the South, as the export of
hazardous goods, substances,
technologies and wastes to the
South (usually without the
South’s knowledge) is a major
mechanism by which environ­
mental damage is taking place
in the South.
Since 1989. more than 500
attempts have been made to
export toxic wastes from OECD
countries
to
non-OECD

would most likely serve to legiti­
mise the, use of trade weapons
which the North and the power­
ful can use against the South
and the weak. But the South
will be unable to use them
against the North.
There is thus the danger, if
not likelihood, that through
particular and narrow defini­
tions of the trade-environment
link, the powerful nations will
try to shift the economic burd­
en of ecological adjustment to

North, and to beg for market
access from a defensive, weak
and hopeless position.
The second option is to
expose the Northern double
standards and also move into a
"managed trade” paradigm,
and retrieve from GATT these
aspects of policy that are best
left to the domestic domain.
These include the environ­
ment, agriculture, intellectual
property rights, employment
etc. The citizens movements

countries.
OECD
members
generate 98 per cent of all
hazardous wastes. Internalisa­
tion of these environmental
hazards is an urgent environ­
mental imperative.
These
double
standards
make clear that it is not the
environment but protectionism
that is real objective in propo­
sals for a green GATT.
Given the decision-making
process in GATT and the curr­
ent state of the international
political and economic power
relations, any rules developed
in this asymmetric forum

the weaker parties in order to
preserve and expand their own
unsustainable
consumption
patterns.
In the present context where
the Third World governments
have accepted GATT with its
associated social and ecologi­
cal costs, and the North Itself is
moving into a regime of "mana­
ged trade”, there are basically
two options available to the
South.
The first option is to let the
North maintain its double stan­
dards of open markets in the
South and closed doors in the

clearly reflect this option.
The US has also made no
secret of its Intention to use the
"trade-related"
negotiating
process to preserve and main­
tain US military and economic
power against the Third World.
This is to be achieved through
new negotiating agendas to
expand the trading system's
mandate, forge new norms and
trade instruments to hit the pro­
duction systems of the Third
World on two counts: facing
unfair competition within their
countries and new obstacles in
their export markets.

The Southern agenda in
resisting this double onslaught
is to roll back this concept of“trade-related", and to insist
that an international trade
organisation should deal With
international trade, not with
issues that are better left to
domestic policy making.
The green agenda for the
South can only emerge from
reducing the powers of GATTAVTO, not by increasing
them. Thus. GATT needs to
assure the authority and free­
dom of governments to regula­
te natural resource exports
through price controls for con­
servation or community deve­
lopment, and to regulate fore­
ign investment in natural
resource sectors and industries.
In agriculture, GATT needs
to recognise the right of all
nations to establish import con­
trols. when imported commodi­
ties are sold at prices below
their cost of production, and to
establish export controls in
order to ensure food security
for their peoples. Trade in
domestically prohibited goods
should be banned. Export of
wastes and hazardous pro­
ducts externalises ecological
costs.
Regarding
IPR.
absolute
national sovereignty must be
recognised. GATT must allow
all parties the freedom to ban
patenting of plant and animal
varieties or biological and
microbiological processes for
producing plants and animals.
It must guarantee the authority
of governments to require com­
pulsory licensing for all patents
free from the threat of trade
sanctions.
It is up to the NGOs in the
South, and citizens groups in
the North, to eqsure that green­
ing of trade is achieved by redu­
cing the powers of GATT and
increasing the decision making
capacity of local communities.
national parliaments and con­
sequently national govern­
ments in all areas of trade poli­
cy that have a major impact on
natural resources.
Democratic decentralisation
is a green imperative. Without
it, we will have neither sustai­
nability nor justice.
Toe Pioneer

63

51- 3-99.

Life is not for patenting
nitially nobody worried about
the General Agreement on Tarif­
fs and Trade. It was after all
about
global
and tohence
assumed
to betrade
best left
com­
merce and trade ministry officials.
Then rumblings were heard from the
pharmaceutical lobby that GATT
would destroy our indigenous capaci­
ty to produce drugs at reasonable pri­
ces. By 1992 the thundering voice of
farmers’ movements and their “seed
satyagraha” made it clear GATT
would affect our very survival. And
esoteric terms like “intellectual pro­
perty rights” were life and death
options for our people.
The environment movement in
India, however, is yet to take up GATT
and the Dunkel draft as the most signi­
ficant environmental issue of our
times. Since the agreement on “trade
related intellectual property rights”
also relates to plants, animals and
micro-organisms the GATT treaty is in
fact a rewriting of our relationship
with these species. It is just not a trade
treaty. It is also an environmental trea­
ty. Accepting it in its present form
amounts to accepting the ethical fra­
mework that all species are only for
human use and exploitation, and their
value is defined by how much some
human 'groups can profit from that
exploitation.
It also condemns people and all
societies to the abhorrent position of
accepting that the living diversity of
this planet can be reduced to patented
private property. These implications
go against all notions of an environ­
mental ethic and should be of concern

I

By VANDANA SHIVA

to all.
Environmentalists have left this fun­
damental issue to the hands of the
bureaucrats of the commerce ministry generis system or by any combination GATT-TRIPS pushes us into making
which has been misleading the people thereof. This provision shall be review­ all living organisms property of a hand­
with its reports and statements. The ed four years after the entry into force ful of corporations.
On first reading it appears the arti­
commerce minister, Mr Kamaluddin of the agreement.”
The problem with the TRIPS text is cle is about the exclusion of plants and
Ahmed, told the consultative commit­
that
while
it
appears
to
be
an
agree
­
animals from patentability. However,
tee of Parliament attached to his mini­
stry that India would not accept GATT- ment about excJusion of living organ­ this phrase also exists in US patent
TRIPS if it goes against the country’s isms from patentability it is in fact on laws. The existence of this phrase has
interests. In contrast, a few weeks the slippery slope of patenting of life however not prevented the US from
earlier the commerce secretary said forms that has already been travelled allowing patents for plants and ani­
India will accept GATT as it is and in the United States patent office and mals. The problem is that the phrase
anxiety on IPR issues was misplaced.
courts. It is in any case a tragedy that “plants and animals other than micro­
The Indian government has been an issue that is directly related to the organisms” does not cover parts of ani­
vacillating on the IPR issue ever since ecological and ethical fabric of our mals and plants, nor does it include
the Dunkel draft became a subject of society and to the economic options of altered plants and animals. It therefo­
popular debate and farmers started survival of our people, should be left re allows the patenting of biological
directing action against the patenting to the ministry of commerce. GATT- organisms.
of seed and plant material. The govern­ TRIPS is just not about trade. It is also
ment’s inputs in the debate have been about the ethics of how we relate to
Further the words “other than
largely misleading.
other species and what we hold as micro-organisms” excludes the exclu­
Article 27-5-3 (b) of the TRIPS text moral and cultural values of our civili­ sion of micro-organisms from patenta­
of the Dunkel draft of GATT refers to sation. It is about how our biodiversity bility. It therefore makes patenting of
the patenting of life. The article sta­ is used and controlled by local commu­ micro-organisms compulsory. Since
tes: “Parties may exclude from paten­ nities who protect it or by corpora­ micro-organisms are living organisms,
tability plants and animals other than tions which have found new ways to making their patenting compulsory is
micro-organisms, and essentially bio­ exploit and own it.
the beginning of a journey down what
logical processes for the production of
In our culture and according to our has been called the slippery slope that
plants or animals other than non- patent laws life cannot be patented leads to the patenting of all life.
biological and micro-biological proces­ because it cannot be owned and it is
The best example of this slippery
ses. However, parties shall provide for not manufactured. GATT will force us slope can be seen in the recent history
the protection of plant, varieties. ■ to give up our moral values, our econo- of US patent law where the granting
either by patents or-by an effective sui •,mic priorities and our sovereignty. of patents to micro-organisms signall-

64

ed the taking of a first step to granting
patents to so called higher life forms.
In 1971 General Electric and one of
its employees, Ananda Mohan Chakravarty, applied for a US patent on a
genetically engineered pseudomonas
bacteria. Taking plasmids from three
kinds of bacteria he transplanted
them into the fourth. As he explained,
“I simply shuffled genes, changing
bacteria that already existed”.
The application was rejected on the
basis that animal life forms were not
patentable. The case was appealed in
the court of customs and patents
appeals office and in the US supreme
court nine years later. Mr Chakravarty was granted his patent on the
grounds that the micro organism was
not a product of nature, but his inven­
tion, and therefore patentable. As Mr
Andrew Kimbrell, a leading US
lawyer, recounts, “Incoming to its pre­
cedent shattering decision, the court
seemed unaware that the inventor
himself had characterised his ‘crea­
tion’ of the microbe as simply
‘shifting’ genes, not creating life”.
On such slippery grounds the first
patent on life was granted and in spite
of exclusion of plants and animals in
US patent law the US has since then
granted patents on all kinds of life
forms.
On April 12, 1988, the US patent
and trademark office issued the first
patent on a living animal. Patent num­
ber 4736866 was granted to the Har­
vard professor, Mr Philip Leder, for
the creation of a transgenic mouse con­
taining a variety of genes found in
other species, including chickens and
humans. The licencing rights for the
patent are held by Dupont Company,
the great multinational that financed
the Harvard research which was res­
ponsible for creating the genetically
engineered mouse.
Through this Dupont has the patent
ownership of any animal species be it
mice, rat, cat or chimpanzee whose ger­
mlines are engineered to contain a
variety of cancer causing genes. Cur­
rently over 190 genetically engineered animals — fishes, cows, mice and

pigs — are figuratively standing in
line to be patented by a variety of
researches and corporations. Accord­
ing to Mr Kimbrell, “The (US) supre-_
me court’s Chakravarty decision has
been extended and continues to be
extended up the chain of life. The
patenting of microbes has led inexora­
bly to the patenting of plants, and
then animals.”
It is this inexorable rush for patent­
ing all life forms that will be extended
to our country through the openings
the GATT-TRIPS in its present draft
provides. In an informal dinner with
Mr Arthur Dunkel, Indian officials sug­
gested a footnote to article 27-5-3 (b)
which states, “It is understood that
naturally occurring biological materi­
al such as chromosomes, plasmids,
DNA/RNA sequences/segments or par­
ts thereof,..are not patentable subject
matter”.
But as the Chakravarty case illustra­
tes the term “naturally occurring” is
ambiguous. All that genetic engineers
really do is “shuffle genes around”.
They do not create life. Therefore lite­
rally speaking no life forms should be
patentable. However patent offices
and courts have interpreted modifica­
tion as creation. This allows the owner­
ship of any altered biological materi­
als. It is in fact vacuous in preventing
the patenting of biological organisms
and materials.
To ensure life is not turned into a
patentable commodity, the Internatio­
nal Biodiversity and Biotechnology
Network, a grouping of independent
and eminent scientists, lawyers and
activists, has recommended that arti­
cle 27-5-3 (b) be redrafted to exclude
all living organisms from patentabi­
lity. This is an ecological, ethical and
economic imperative.
It is time the environmental move­
ment in India also took up the issue of
protecting life as an important con­
cern. Our culture and civilisation can
help us in this movement to protect
the integrity of all life forms and to
keep the living diversity of this planet
“free” and “wild”.
7T <29-3-93

65

MADRID DECLARATION
OF
THE ALTERNATIVE FORUM

THE OTHER VOICES OF THE PLANET
For an egalitarian and self-reliant coexistence

at peace with the planet

Madrid, October 1,1994

Summary
Preamble
50 years of Bretton Woods:
From structural adjustment to economic genocide

1.

The IMF-world bank policies contribute to global poverty, environmental destruction and civil war

2.

Autonomy and freedom for all women

3.

End the market economy growth

4.

Protect peoples and communities from economic and financial globalisation

5.

Face the worldwide ecological crisis using autonomy and local responsibility

6.

Cancel foreign debt

7.

Rethink international aid

8.

Abolish the international economic institutions

We, men and women from all over the world, have come here to defend an equitable and autonomous coexistence at peace with
the planet, and we want to declare our firm conviction that it is necessary to construct a different language and reality. We already
know some words. We know that by naming this Forum “The other Voices of the planet" we are saying that hundreds of thousands
of men and women living on this earth have chosen to speak up. We know that when we speak the names of men and women
of the worid, we bear in mind the demand for a system of freedom which allows both genders to know each other. We know
that every time we speak about self-sufficiency, equity, or self-reliant communities, we are defending the possibility to live, of being
just and happy. And every time we point to the right to cultural diversity, we proclaim our trust in the wisdom of all men and women
who have chosen to watch, to listen and to wonder, encouraged by their respect for the earth surrounding them. From here and
now, we declare our willingness to prevent this wisdom from being destroyed, so that it might be, on the contrary, the ground for
any action. There is a world to come, a world that we name with other words. We are not willing to leave to anybody the
responsibility of these words being thought. That is why we have spoken at this Alternative Forum, and today we have a few
proposals to make. That is why we will unmask the old discourse of exploitation and greed, and we will fight it.

50 YEARS OF BRETTON WOODS:
FROM STRUCTURAL ADJUSTMENTTO ECONOMIC GENOCIDE
1.

THE IMF-WORLD BANK POLICIES CONTRIBUTE TO GLOBAL POVERTY, ENVIRONMENTAL DESTRUCTION AND CIVIL
WAR

There is little to rejoice as the international community commemorates the fiftieth anniversary of the Bretton Woods agreement which
led to the founding of the International Monetary Fund (IMF), the World Bank and the GATT. The "structural adjustment programme”
imposed by the Bretton Woods institutions has led to famine and the brutal impoverishment of the developing World while contributing
to the “third worldisation” of the countries of the former Eastern block.
Contrary to the spirit of the Bretton Wood Agreement which was predicated on “economic reconstruction" and the stability of major
exchange rates, the "structural adjustment programme” has largely contributed to destabilising national economies, ruining the
environment and destroying civil society. In this context, the Bretton Woods institutions are also responsible for distorting the root
causes of the economic crisis as well as the falsification of social and economic indicators

While the World Bank's mandate consists in "combating poverty” and protecting the environment- its actions have contributed
to the dismantling of health and education programmes. Its support to large-scale hydroelectric arid aqro-industrial projects has
sped up the process of deforestation and destruction of the natural environment, leading to the forced displacement and eviction

66

of several million people. In the Soulh and the East, hundreds of millions of undernourished children are denied the fundamental
right to primary education. In several regions of the world, the brutal compression of social expenditures combined with the collapse
of purchasing power, has led to a resurgence of infectious diseases including tuberculosis, malaria and cholera. The recent outbreak
of bubonic and pneumonic plague in India as the direct consequence of a worsening urban sanitation and public health infrastructure
which accompanied the compression of national and municipal budgets under the 1991 IMF-Worid Bank sponsored “structural
adjustment programme".
Trade liberalization imposed under World Bank loan agreements has been conducive to the destruction of domestic agriculture and
manufacturing. In Sub-Saharan Africa, famines have erupted as a result of the disintegration of the entire agricultural system:
earnings from cash crops for export have fallen below the farmers costs of production as a result of periodic devaluations and
plummeting world commodity prices. Concurrently, food production for the domestic market is destroyed as a result of the dumping
of subsidised food surpluses by the European Union and North America.
The destruction of all forms of economic livelihood (based on both internal and external markets) combined with the dismantling
of public services and the freeze on public investment (under the World Bank's “Public Investment Programme") create conditions
favourable to the outbreak of civil strife ethnic conflicts and the criminalization of economic activity.
In Rwanda, the deterioration of the economic environment following the collapse of the international coffee market in 1987-89 and
the imposition of sweeping macro-economic reforms by the Bretton Woods institutions served to exacerbate simmering ethnic tensions
and accelerate the process of political collapse.
In Somalia, the IMF-World Bank programme was conducive to the demise of thee livestock export economy while also contributing
to the destruction of small famers through the influx of US grain surpluses into local markets.

Throughout Asia and Latin America, World Bank programmes since the "Green Revolution” have contributed to the destruction
of bio-diversity and the encroachment of farmers' rights. The World Bank's recent attempt to take over all seed collections in the
international gene banks further derogate farmers’ rights.
Moreover, the recent GATT agreement signed at Marrakesh further violates fundamental peoples' rights, particulariy in the areas
of bio-diversity and intellectual property rights. Several clauses of the “structural adjustment programme" are now permanently
entrenched in the articles of the new World Trade Organization (WTO). The WTO's mandate consists in regulating world trade
to the benefit of the international banks and transnational corporations as well as "supervising" (in close collaboration with the IMF
and the World Bank) the enforcement of national trade policies.

In the developed countries of the North, similar socially oppressive economic policies are now being applied by national governments.
The consequences are unemployment, low wages, and the marginalization of large sectors of the population. Social expenditures
are curtailed and many of the achievements of the Welfare State are repealed. State policies have also encouraged the destruction
of small and medium sized enterprises.
In the South, the East and the North, a privileged social minority has accumulated vast amounts of wealth at the expense of the
large majority of the population. This new international financial order feeds on human poverty and the destruction of the natural
environment. It generates social apartheid, encourages racism and ethnic strife, undermines the rights of women and often
precipitates countries into destructive confrontations between nationalities.
The Madrid Declaration of citizens’ groups and non-governmental organizations forcefully denounces the policies of economic
genocide implemented by the IMF and the World Bank. The participating organizations of the Madrid Forum reassert the rights
of people to livelihood, national economic sovereignty, sustainable and democratic development and social justice..

The Madrid Forum denounces this destructive "economic model” and calls for the cancellation of all debts. It also calls for an
end to the interference of the Bretton Woods Institutions in the internal affairs of sovereign countries.
The Madrid Forum also calls upon national parliaments and people's organizations around the world to oppose in the months ahead
the ratification of the GATT agreement and the proposed establishment of the World Trade Organization.

FOR AN EGALITARIAN AND SELF-RELIANT COEXISTENCE
AT PEACE WITH THE PLANET
2.

AUTONOMY AND FREEDOM FOR WOMEN

The concept of economic progress even more so the global dominant occidental vision of “economy" is based on the hierarchization
of the processes of production and reproduction. This vision of the economy conceals the conditions and the quantity of work
that women must undertake in order to ensure their survival and that of their families, which is mainly their responsibility. This
contributes to the devaluation of the social and financial compensation received by working women, who are expected to
simultaneously tend to both productive and reproductive tasks.
The recent economic cycle, its crisis and subsequent processes of restructuring, have exposed the extreme vulnerability of women.
In the all societies, but principally in the most destitute ones, the feminization of poverty is already in evidence.

Trade regulated by GATT and Structural Adjustment Policies are meaning to reduce food resources, increase dependency on
transnational companies, and cut social spending in health and education. Women are lhe primary victims of these policies. They
are prevented from gaining access to property and financial systems. It is even worse for those displaced through the impact of
the World Bank megaprojects. Millions have been forced to migrate to cities or to other countries, where they struggle to survive,
having to accept the most marginalized jobs. There are attempts to resolve the problem of limited global resources by imposing

67

population control at the cost of the reproduction rights of each and every woman.

The combination of responsibility for the family and social and economical subordination is supported through social, cultural and
ideological structures, and through many forms of violence (sexual, corporal, reproductive...). But meanwhile, the international
discourse on individual human rights continues to ignore these issues or dares not to expose them due to a systematic manipulation
of the right to cultural specificity brandished by many religious and political elites to perpetuate their power.

The World Bank and IMF employ policies that appeal to the rights of women and that they take their part in “progress" maintaining
and strengthening the framework of existing inequality. Economic and social policies should eliminate the inequalities that serve
as pretext for many of the ruling elites to maintain the dominant patriarchal structures.
Consequently, to overcome the present inequality we must achieve an equitative and autonomous co-existence. This is a pre­
condition. The international solidarity organizations must make this their main objective, supporting women in every cultural aspect
in their struggle for freedom and autonomy.

3.

END THE MARKET ECONOMY GROWTH

The unlimited growth of the monetary economy, the continued expansion of consumption on the part of the privileged from all over
the world, and the continuation of neo-colonial exploitation are the mam causes of the worsening in the rift between peoples and
social classes, of growing poverty, and in the deterioration of the natural resources. The possibility to achieve, through technological
advancement and economic restructuring, a new model of unlimited growth of the monetary economy, socially equitable without
eroding the basis of natural resources, is but a myth without empirical evidence, and refuted by experience This being the only
way to overcome poverty, solve the problem of labour, and prevent the destruction of Nature is a proven falsehood. These types
of false alternatives, usually proposed by the World Bank and the International Monetary Fund, only benefit the powerful, and the
privileged sectors that are defended and represented by both institutions.

Hence, as a starting point to overcome social, environmental and economic imbalances, the growth of the monetary economy must
be stopped. In order to overcome poverty and marginalization, it is necessary to redistribute present wealth, intensify social resistance
to the commodification of people’s lives, and implement fair, solidary and respectful alternatives in relation to Nature.
4.

PROTECT PEOPLES AND COMMUNITIES FROM ECONOMIC AND FINANCIAL GLOBALIZATION

The "globalization of the economy" is the current stage of a centuries-old expansion process of the capitalist system. It implies
the commodification of people's productive and creative capacities and their natural and socio-cultural resources, at a higher rate
than ever before. This facilitates their connection with the global economic spheres, which are dominated by transnational
corporations and the international financial system. Economic globalization results in cultural devastation and leads, sooner or later,
to worsening living conditions. The process of globalization is unsustainable from an ecological point of view, as it causes an
exponential growth in transport and the consumption of non-renewable energies. The demands of world market competitiveness
force the non-sustainable use of natural resources, displacing traditional uses, which have been adapted to local natural conditions.
The internationalization of the financial system is closely linked to that process of globalization. After the processes of liberalization
and deregulation, and the massive incorporation of technological resources, it is the financial system that have now become a giant
instrument to globally manipulate savings, prices, currencies, and the wealth of the world's peoples, in favour of a few privileged.
The wide majority of financial transactions have become merely speculative, with no links whatsoever to physical, productive or
territorial values. Actions considered as illegal and liable for prosecution are undertaken on a large scale, and with total impunity.
Meanwhile, there is a proliferation of tax havens and shelters for every kind of financial flow, camouflaged by so-called "banking
secrecy". The ideological, political and technical intervention of the Bretton Woods Institutions— created to guarantee international
financial stability—has been determinant in achieving this chaotic situation, in which the risk of a worldwide financial catastrophe,
with unpredictable results for international peace, becomes more and more evident every day.
An unfair system of international trade is still growing, controlled by transnational companies and the governments of Northern
countries and organized for the exclusive benefit of the privileged classes of the whole world. International trade is no longer a
means to address real needs that can not be met locally. Rather, it has become a big business, exchanging more and more
superfluous goods from the Northern countries for less and less goods needed by the Southern countries. This is the result of
the GATT policies. The World Trade Organization seeks to extend these policies to areas that are of great social and cultural
importance, such as intellectual property and genetic resources. Fair trade, which is aimed at the preservation of the socio-cultural
and ecological balances of those communities involved, can only be developed amongst nations with similar productive and
technological skills, or amongst groups and communities living in solidarity.

As a consequence, to insure the survival and facilitate the recovery of self-dependent structures, based on self-sufficiency and
proximity, the process of globalization of the capitalist economy must be stopped.
New ways of social control upon the international flows of capital must be imposed. They are; a compulsory linking of financial
transfers and the exchange of goods or services, the closing of “tax havens", the elimination of banking secrecy and the international
prosecution of fraud, and monetary and financial offences. International trade must be included in a new institutional frame which
does not regard the growth in trade as a goal in itself. It should favour trade amongst Southern nations, and allow peoples to
freely protect their resources, their lifestyles and their cultural identity, without being exposed to pressure nor retaliation. Peoples
from all over the world must mobilize to prevent the ratification of the World Trade Organization.
5.

FACE THE WORLDWIDE ECOLOGICAL CRISIS WITH AUTONOMY AND LOCAL RESPONSIBILITY.

Global ecology cannot be uncoupled from local ecological problems. The global administration of the ecological crisis, as established
at the Rio Summit, is unable to solve environmental problems. This has led to the gradual set-up of worldwide “ecocracy" that

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manages natural resources in the name of economic globalization by reproducing and aggravating ecological conflicts. The Bretton
Woods Institutions, and especially the World Bank, have become the main defenders of these destructive environmental policy and
at the same time claiming for themselves the lead role in it's management. Thus, the economical globalization and the ecological
globalization stand out as two inseparable sides of the new shape of the capitalist system. The latter intends to adapt itself to
a serious deterioration of the natural conditions of production al the local and global levels. Should this model of ecological and
economical control and management, coordinated from above, be imposed, we shall witness immense destruction of Nature, and
an even greater deterioration of the living conditions for the weakest communities and social groups of the world.
Consequently, it is necessary to oppose this process. The communities and peoples of the world in their full capacity must decide
for themselves on the responsible use of their natural resources. The administration of ecological problems must be taken away
from a technocratic framework and restored to a political one, from which it should have never been taken away. Those problems,
which go beyond the local level, must be address bottom up, through the collaboration and consent of the affected communities,
in an open and democratic forum.
6.

CANCEL THE FOREIGN DEBT

Without a definitive solution to the foreign debt problem, there is no possibility of achieving fairer international relations. The
immediate cancellation of the so-called "Southern countries debt" is the indispensable first step in moving towards a solution. A
great deal of the loans, which make up the foreign debt were acquired under doubtful political legitimacy of the lending institutions
and borrower governments Huge somes have already been paid back as a consequence of the debt that governments acquired
from the financial institutions of the rich countries, through payment of interests, repayment of principal, capital flight, and in the terms
and conditions of purchase of Northern products. Many analysts estimate that capital and interest payment overexceed the amount
of the outstanding debt. Northern countries have a debt still to be paid to Southern countries, due to the continued supply of
raw materials by the latter at cheap prices - which have been downpriced by Northern corporations. On the whole, the available
facts suggest that what really exists is a giant economic debt from North to South, aside from other social and ecological debts.
The unconditional cancellation of the whole foreign debt with equal treatment for all categories of debt is an urgent first essential
step in achieving equitable international relationships.
7.

RETHINK INTERNATIONAL AID

Given the seriousness of social, economic and ecological imbalances accumulated in the last decades all over the world, solidarity
today is more necessary than ever. Official aid has contributed, in many ways, in aggravating the problem instead of solving it.
Many companies from rich countries have been able to make big business deals and to receive large camouflaged funds under
the guise of aid, with active support of their governments. Regularly despicable operations, like arms supply and even advisory
or direst collaboration with political and social repression have often been presented as aid. Aid is often lost, on both sides, through
labyrinth-like corruption and incompetence. The debt burden has increased to the detnment: of the most vulnerable groups, such
as minorities, indigenous communities, women and children. The Bretton Wood Institutions, and particularly the World Bank, have
failed in their protected objectives of reducing poverty. They are only able to articulate top-down aid and cooperation programmes
which ignore the voices and the needs of local groups.

The Alternative Forum 'The Other Voices of the Planet" urges the necessity of deeply revising not only in conjunction with
intervention, which is undertaken within the framework of official aid, but also the whole concept of “Aid". The Forum urges
the organizations targeting these problems to study them in depth and develop alternatives. They should stress autonomy, focus
on avoiding dependency and preventing the effects of adjustment policies from being concealed, and self-management by the
communities concerned. Aid cannot be an opportunity for business deals for donor countries or institutions.

8.

FOR THE ABOLISHMENT OF INTERNATIONAL ECONOMIC INSTITUTIONS

For a growing number of people all over the world, the social, cultural, and ecological aspects must again take priority over the
economic one. For them, the Bretton Woods Institutions—and their twin partner GATTA/VTO— are definitely outdated. The internal
structure of the WB and the IMF, in which decision-making power is proportional to the money contributions by each member country,
is a paradigm of capitalist ideology, that gives priority to economic variable over human, social and ecological values. The
consequences of their interventions can be summarized in the ecological, social and political crisis prevailing in many parts of the
world. This crisis is dominated by increasing inequality and poverty. Nothing else can be expected from such bureaucratic systems
which are not subjected to any kind of democratic control.

It is now time to put an end to the existence of these types of institutions. The only thing that now needs to be discussed is
the schedule and social control in dismantling the Bretton Woods Institutions. This process must be initiated with the immediate
reduction in their funding. It is urgent to refuse every demand to enlarge IDA-11 These programs currently administered by the
World Bank group, must be put under the immediate control of other institutions, to facilitate a rapid reorientation of their management.
In the threshold of the turn of century, the distressing history of the Bretton Woods Institutions should merely be an unpleasant
memory, a lesson not to be forgotten in the future.

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Third World Network
(India)

Dossier on
Trade liberalisation in India

The Third World Network, a grouping of organisations and individuals involved in J'hird World
issues, has been monitoring the impact of trade liberalisation through World Bank / IMF
structural adjustment programmes and the General Agreement on Tariffs and Trade (GA TT)
in Latin America, Africa and Asia.

The Third World Network (India) has now prepared its second dossier on the social,
economic and ecological impact of these policies in India covering diverse-aspects:
1.

Impact of Trade Liberalisation Policies in India:
An Overview

2.

Impacton Employment

3.

Impact on Agriculture, Food Security and Nutrition

4.

Impact on the Environment

5.

Madrid Declaration of the Alternative Forum: For an Egalitarian and Self-Reliant
Coexistence at Peace with the Planet

The dossier is an indispensable aid to citizens, movements, policy makers, NGOsconcerned
about the rapid pace at which majoreconomic decisions are being made without democratic
participation.
The dossierexpresses its thanks to all the newspapers andjournals from where the news and
articles included here are taken.

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