Punjab farmer MUST be FREE to sell his wheat and rice at world market rates which are currently running at double the government’s Minimum Support Price

Badal government MUST take an honest stand on ending Minimum Support Price (MSP) racket to help the Punjab farmer to sell his wheat wherever and to whomsoever he wants



Washington, D.C., Wednesday, April 23, 2008 - In a Leader (Editorial) headlined, “The silent tsunami – Food prices are causing misery and strife around the world. Radical solutions are needed,” the Economist, London, (to its eternal credit) has given a wakeup call to the world in general and  Indian occupied Punjab, the Sikh Homeland, in particular, where the government continues to play games, (really cheating the farmers) under cover of the so-called Minimum Support Price (MSP) for wheat of Rs. 1, 000 when world price is nearly double that figure and rising. (>  http://www.economist.com/opinion/displaystory.cfm?story_id=11050146   <)

The above Economist article goes on to quote Josette Sheeran of the World Food Programme, a United Nations agency, who says that, “This is a silent tsunami. A wave of food-price inflation is moving through the world, leaving riots and shaken governments in its wake. For the first time in 30 years, food protests are erupting in many places at once. Bangladesh is in turmoil, even China is worried. Elsewhere, the food crisis of 2008 will test the assertion of Amartya Sen, an Indian economist, that famines do not happen in democracies. Famine traditionally means mass starvation. The measures of today’s crisis are misery and malnutrition. The middle classes in poor countries are giving up health care and cutting out meat so they can eat three meals a day. The middling poor, those on $2 a day, are pulling children from school and cutting back on vegetables so they can still afford rice. Those on $1 a day are cutting back on meat, vegetables and one or two meals, so they can afford one bowl. The desperate—those on 50 cents a day—face disaster.”

The Economist article goes on to say that, “In general, governments ought to liberalize markets, not intervene in them further. Food is riddled with state intervention at every turn, from subsidies to millers for cheap bread to bribes for farmers to leave land fallow. The upshot of such quotas, subsidies and controls is to dump all the imbalances that in another business might be smoothed out through small adjustments onto the one unregulated part of the food chain: the international market. For decades, this produced low world prices and disincentives to poor farmers. Now, the opposite is happening. As a result of yet another government distortion—this time subsidies to bio-fuels in the rich world—prices have gone through the roof. Governments have further exaggerated the problem by imposing export quotas and trade restrictions, raising prices again. In the past, the main argument for liberalizing farming was that it would raise food prices and boost returns to farmers. Now that prices have massively overshot, the argument stands for the opposite reason: liberalization would reduce prices, while leaving farmers with a decent living… There is an occasional exception to the rule that governments should keep out of agriculture. They can provide basic technology: executing capital-intensive irrigation projects too large for poor individual farmers to undertake, or paying for basic science that helps produce higher-yielding seeds. Agriculture is now in limbo. The world of cheap food has gone. With luck and good policy, there will be a new equilibrium. The transition from one to the other is proving more costly and painful than anyone had expected. But the change is desirable, and governments should be seeking to ease the pain of transition, not to stop the process itself.”

The Economist in another article, in the same April 17 issue, headlined, ‘The new face of hunger. Global food shortages have taken everyone by surprise. What is to be done?’ says that, “Last year wheat prices rose 77% and rice 16%. These were some of the sharpest rises in food prices ever. But this year the speed of change has accelerated. Since January, rice prices have soared 141%; the price of one variety of wheat shot up 25% in a day… But the food scare of 2008, severe as it is, is only a symptom of a broader problem. The surge in food prices has ended the 30 years in which food was cheap, farming was subsidized in rich countries and international food markets were wildly distorted. The era of cheap food is over. The transition to a new equilibrium is proving costlier, more prolonged and much more painful than anyone had expected… “We are the canary in the mine,” says Josette Sheeran, the head of the UN’s World Food Program, the largest distributor of food aid. Usually, a food crisis is clear and localized. The harvest fails, often because of war or strife, and the burden in the affected region falls heavily on the poorest. This crisis is different. It is occurring in many countries simultaneously, the first time that has happened since the early 1970’s. And it is affecting people not usually hit by famines. For those on $2 a day, (80.4% of India’s population - or over 912 million Indians - according to UNHD-2007/2008 Report live on under US$. 2 a day) it means cutting out meat and taking the children out of school. For those on $1 a day, (read 34.1% or 345 million Indians) it means cutting out meat and vegetables and eating only cereals. And for those on 50 cents a day, (there are over 250 million Indians in this category) it means total disaster. The poorest are selling their animals, tools, the tin roof over their heads -making recovery, when it comes, much harder.” (>  http://www.economist.com/world/international/displaystory.cfm?story_id=11049284   <)

Reports from our sources in Indian Occupied Punjab say that while there is no overt official ban on corporate buying of wheat but Food Ministry officials have been verbally (covertly) telling some corporate representatives to stay away from the Punjab to help the Food Corporation of India (FCI) mop up stocks required for the public distribution system. Last year when a similar ‘ban’ was imposed, Punjab Chief Minister Parkash Singh Badal had taken up the issue with the Central government. Agriculture Minister Sharad Pawar had then flatly denied there was any such ban. The main private companies, like Cargill, ITC, Britannia and Delhi Flour Mills that buy wheat in the country also avoid Punjab due to high taxes and pick up their requirements from Madhya Pradesh, Bihar and Gujarat, where the levies on food purchases are low. The Punjab government charges 11 to 12 per cent taxes on wheat. In comparison the levy is only 1 per cent in Gujarat and Bihar, 1.5 per cent in Maharashtra, 2.2 per cent in Madhya Pradesh and 3.6 per cent in Rajasthan. In Punjab a private player has to pay 2.5 per cent commission to a “kacha arhtiya”, 1 per cent to a “pakka arhtiya”, 2 per cent market cess, 2 per cent cess for rural development, 4 per cent VAT and 3-4 per cent expenses on labor, freight and loading and re-loading. This season the Punjab government is reported to have imposed another 2 per cent cess on food grain purchases to raise money for repairing canals. Cess is the latest tool governments employ to raise money for specific purposes.

Malpractices apart, the inefficient manual handling of food-grains, pilferage, poor storage and wastage as well as middlemen and the taxes raise the cost of food for the ordinary buyer. According to media reports in the past one year (April to December) the wheat price has shot up by 88 per cent in the country. Though the government has raised the Minimum Support Price for wheat to Rs 1,000, it is still below the market rate and far below the global prices of wheat. The Minimum Support Price (MSP) which was introduced to prevent distress sales by farmers, is now used to buy produce cheap. The worst-sufferers of the government policy to buy food grains under the Minimum Support Price (MSP) are small Punjabi farmers. Sixty per cent of the country’s farmers own less than one hectare and many of them are forced to sell all their produce to repay their loans and meet social commitments. They are forced to buy food for personal consumption later in the year when prices are high leading to farmer suicides and misery. Large farmers and traders hold back their surplus stocks and dispose them of, as prices rise.

It is about time the Badal government stopped talking from both sides of its mouth and stood up for the Punjab farmer. The most pragmatic way to help the Punjabi farmers, big and small, is to END the phony and illegal, MSP (Minimum Support Price) racket and let the farmers sell their produce wherever and to whomsoever they want – NO RESTRICTIONS.

The Punjab government has been charging 11 to 12 % taxes on wheat, to raise money, as compared to the small charge of 1% by Gujarat and 1.5% by Maharashtra on the sale of their wheat. Instead of this 12% unfair tax on wheat, Punjab Chief Minister Parkash Singh Badal ought to take a firm stand, and pass legislation in the State Assembly to start charging fees for Punjab’s river water Rajasthan and Haryana have been ‘stealing’ for decades – free of any cost - via huge canals, like that canal which carries Punjab’s river water to non-riparian Rajasthan, named after the Evil One, Mrs. Indira Gandhi. Punjab Chief Minister Parkash Singh Badal ought to also seek relief from the Indian Supreme Court to make sure that the Food Corporation of India (FCI) stops it’s illegal ‘Minimum Support Price’ activity in the Punjab, and pays the market price for wheat, whatever it may be, like the private buyers do, if it wants to lift food-grains from Punjab for India’s national food reserve.