Debating India

Powerless farmers

Jayati GHOSH

Friday 9 April 2004, by GHOSH*Jayati

Ongoing agitations in Madhya Pradesh highlight the growing problems faced by farmers across the country, as hikes in power tariffs add to other costs and make cultivation unviable (...)

FOR some time now, it has been evident that agriculture in the country is facing a serious crisis. Since the late 1990s, the combination of trade liberalisation and reduced public protection to farmers, in an increasingly volatile climatic environment, has created a pincer movement of rising input costs and falling or stagnant output prices. This has forced many cultivators, especially small and marginal farmers, into debt with growing inability to repay. The farmers’ suicides, which periodically find mention in the inner pages of our newspapers, are only the more dramatic expressions of the wider desperation and misery that now characterise the countryside in most parts of India.

One of the more surprising features of the national polity is that this severe crisis has not found greater political expression through agitation and unrest. It is true that the increasing resentment and anger of farmers does occasionally spill over into significant protests - such as in Andhra Pradesh in 2000, when power tariffs were raised by N. Chandrababu Naidu’s government. But the nationwide upsurge of farmers’ movements, such as those witnessed in the late 1980s, has not yet developed in the current phase.

There are signs, though, that this relative quiescence may be coming to an end. In many parts of India, recent events point to a translation of more generalised despair into actual mobilisation for change. One of the States where this is clearly happening is Madhya Pradesh, where the resentment against large power tariff increases and forcible disconnection of power supply for about 50 per cent of farmers, played an important role in dislodging the Congress government of Digvijay Singh in the recent State Assembly elections.

Remarkably, the Bharatiya Janata Party, which came to power using this as an election plank, has followed exactly the same disastrous policies with respect to the power sector, and has so far disregarded the critical situation of farmers in the State. This has led to renewed agitation, currently organised by the Nimad Malwa Kisan Mazdoor Sangathan, a nascent association of farmers and workers and the Jan Sangharsh Morcha, a forum of people’s organisations.

In early March, farmers and other protestors marched in the streets of Bhopal, and filed a petition before the Madhya Pradesh Electricity Regulatory Commission (MPERC), asking for the slashing of tariff hikes on the grounds of a total lack of paying capacity by the farmers. However, the Uma Bharati government has thus far not moved to redress these complaints.

What explains this lack of sensitivity of the State government to the genuine concerns of cultivators, who make up by far the greater proportion of the working population in the State? Apart from basic ideological predilections, there is the constraint created by the State government’s agreement with the Asian Development Bank (ADB), which has insisted upon conditions of power sector "reform" that have these unfortunate results.

The conditions are similar to those accepted by the Chandrababu Naidu government in Andhra Pradesh as part of an agreement with the World Bank, and call for a sharp shift towards accepting commercial profitability considerations in the power sector. To understand these, it is necessary to go a little further back to the original agreement with the ADB and its implications.

In 2000, the ADB gave the Madhya Pradesh government a loan of $350 million for the restructuring of the power sector. The main objectives of the loan were to fragment the power sector into generation, transmission and distribution components; to corporatise these segments prior to their privatisation; and to increase the power tariffs hugely on the grounds of commercial profitability.

Towards this, the power sector loan stipulated certain goal posts and conditionalities. In order to withdraw the power sector from public control, the ADB loan document stated that an Energy Reforms Act must be passed, to be followed by the setting up of an Electricity Regulatory Commission. This Act was passed in 2000, the Regulatory Commission constituted and the process of annual tariff increases begun. In addition, the process of systematically disconnecting "defaulters" was initiated. As a result, low-paying and previously subsidised segments like the farmers and the poor were effectively thrown out of the grid. The purpose of all this was to make the power sector amenable to eventual privatisation by developing a small but high-paying consumer base.

OVER the past three years, the people of Madhya Pradesh have faced three huge shocks in the electricity sector. In 1999, immediately after the Assembly elections, the State government took a decision to sever all single-point connections and the Electricity Board enhanced the tariff with effect from March 1, 1999.

The second tariff shock came in 2001, with an average increase in tariffs of 18 per cent. This may not seem like very much, but the combined impact of the tariff increase and the non-tariff charges to the consumer, as well as the financially fragile situation of agricultural consumers who had faced four years of drought, meant that thousands of consumers were no longer able to pay their bills. Huge numbers of electricity connections, in some cases of entire villages, were cut because of non-payment of bills.

On November 30, 2002, the MPERC increased the power tariffs again, this time by as much as 800 per cent! This was done by decreasing the number of hours of power supply to six hours in the place of 24 hours and by increasing the tariff by two times. Coming on top of all the other financial pressures, the impact of this on farmers was hugely adverse. A last minute attempt by the State government in late 2003 to exempt small farmers was disallowed by the Election Commission, although the newly elected government was forced to provide this relief.

However, the basic damage has been done. Even according to the White Paper issued by the Madhya Pradesh government in June 2003, six lakh power connections of farmers out of a total of 12 lakh connections had been severed in the previous two years because of non-payment of dues. Effectively, half the farmers who were availing themselves of energised irrigation had to leave the grid because of their inability to pay. The lakhs of other farmers of Madhya Pradesh, who had stood at the margins waiting to be included in the grid, and have been relying on more expensive diesel power, would now be unable to partake of the benefits of energised irrigation.

Incidentally, the power loan of the ADB has operated in conjunction with other ADB loans to public sector enterprises, which have led to privatisation and large increases in the prices of other public services such as water supply. Both the ADB and the World Bank have expressed interest in providing loans for the privatisation of water supply in the State.

In the context of the agriculture of the State, the power tariff hikes have come at a particularly bad time. A recent study on the paying capacity of agricultural households in Madhya Pradesh, has revealed the stark financial conditions of farmers in the State.

The study, conducted by the economist Smita Gupta for the Nimad Malwa Kisan Mazdoor Sangathan and the Krishna Bharadwaj Memorial Trust, is based on a sample of 101 farmers (ranging from small to medium to large) from different districts in western Madhya Pradesh, which is the more prosperous agricultural region. The study has revealed that there is large-scale indebtedness among all the surveyed farmers - with debts ranging from Rs.1,200 to Rs.2,700 an acre - with the marginal farmers burdened with larger debts per acre compared to the larger farmers. The debts have emerged because farmers are confronting huge deficits even without imputing the costs of family labour, both at prices reported for 2002-03 and at average prices for the previous five years.

The study also finds that power costs are very significant, coming to around 14 per cent of total costs (excluding imputed labour costs) and are the single largest expense for farmers after labour costs. The survey finds that small farmers also use a significant proportion of monetised inputs, thus challenging the common myth that subsidies on monetised inputs only benefit large farmers.

According to the study, small and marginal farmers have been increasingly excluded from power-based irrigation through the combined effects of a number of factors. First, smaller cultivators who practised irrigation were often dependent upon energised extraction of groundwater from shallow tubewells, which dried up during the years of drought in the early years of this decade. Second, small farmers used to buy surplus water from their larger neighbours with irrigation infrastructure, but the increasingly erratic, unreliable and expensive power supply undermined this source. Third, and possibly most important, the electricity tariff hikes over the past three years have tremendously and disproportionately lowered the access of small and marginal farmers to energised irrigation.

The difficulties created by power price hikes are part of the larger difficulties faced by farmers because of the withdrawal of the State from various aspects of protection, such as provision of credit, extension services and an effective system of support prices for crops. The consequent exposure to the vagaries of world market prices, which are volatile and already greatly distorted by the operations of multinational companies and continuing large subsidies provided by governments of rich countries to their own farm sectors, has left cultivators in India in a vicious circle of lower profitability and higher indebtedness.

The reason that State governments such as that in Madhya Pradesh are unable to assist their own farmers caught in this crisis, is because they are themselves trapped in a mindset and a policy web determined by neoliberal economics and the conditionalities of multilateral institutions. This means that they can only think in terms of ensuring commercial profitability to public utilities with an eye to future privatisation.

But the real options are to ensure the viability of power utilities by cutting down on losses in transmission and distribution and power theft, and to increase the possibilities in cross-subsidisation. But this is only possible if the basic principle of public ownership and control is retained, since private operators will not be interested in cross-subsidisation.

In addition, as long as farmers face a plethora of rising costs and volatile international prices, there is a case for considering the provision of per hectare subsidies to ensure the viability of a sector that continues to provide livelihood for nearly two-thirds of our population.

See online : Frontline


in Frontline, volume 21, Issue 07, March 27 - April 09, 2004.

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