The role of India's export policy in farmer suicides

With onion prices shooting up, its export has again been restricted. Understandably , food cannot be treated at par with other commodities. In times of food scarcity , prices escalate and restrictions on the export of food need to be imposed.
But when prices fall in the years following such a ban -as it has for potatoes this year -the government does a Houdini act, disappearing and leaving farmers in the lurch. Arbitrary and reactive decisions of export restrictions are a form of regressive taxation.It is only fair to demand government interventions when farmers are distressed. But this is interpreted as the whining of an overindulged child.

Most farm subsidies are availed of by farmers in irrigated areas. But if a dot were to be placed for every farmer suicide on a map of India, most would fall over areas where farming is dependent on the rains. They are normally attributed to seeds, absence of credible crop and price insurance, wanton use of pesticides and fertilisers, lack of farm advisory services and institutional credit, drought and extreme weather events, etc. In reality , a combination of many factors and collapsing social structures trigger farmer suicides.

In most cases, poverty is a precursor to farmer suicides. The role of India's export policy in inducing poverty and contributing to farmer suicides is never discussed. In the international market, commodity prices are cyclical in nature. Every year, commodity prices spike, but each commodity spikes only once every few years. Invariably when prices spike, governments ban export of the particular commodity and farmers growing it are compelled to sell at prices that are kept artificially low by restrictions.

Wheat export was banned in 2007 for four years. During that period, the prices in the international market shot up to approximately $440 a tonne, while the prices in the domestic market at that time hovered at around $276 a tonne. Rice exports were banned in 2008.The government permitted exports of non-basmati rice in September 2011.

Within the first year of the ban, the Indian prices wavered around $310 a tonne, while the average monthly price in the international market was more than double, at about $762 a tonne. Government, rather than fill godowns with grain and partake an additional annual revenue loss of over . 20,000 crore, would have been better ` off taxing grain exports in the period.

The maths isn't difficult. If these bans had not been enacted, each of the wheat-rice-rotation farmers would have raked in, on an average, four times the profit for each of those `ban' years and no one would be in debt and committing suicides today . When prices do rise, farmers have an opportunity to make a profit. They use it to repay their past obligations. But since they are denied the opportunity to realise a higher price due to export restrictions, farmers remain burdened with old debt and owe years of compounded interest to moneylenders.

In the ensuing years, when production is hit by weather calamities or when prices tank -last year, production and prices tanked simultaneously -the farmer's financial burden aggravates. An existing crisis becomes terminal, triggering a larger number of farmer suicides. Compensation packages can never make up for such policy shortfall.

Restricting exports of non-food items like cotton makes even less sense.Cotton price climbed to ` . 7,000 a quintal in 2010-11. The government stepped in and did what it does best: mess things up by changing the cotton export notification 17 times in one-and-a-half years to subdue prices and, for all practical purposes, force exports to cease.

When China, having built an inventory of many years of cotton requirement, banned cotton imports, high prices in India came crashing down to about ` . 4,000 a quintal. The Indian farmer's window of opportunity to profit was shuttered in subsequent years.

It was rumoured that this discretionary use of power at the behest of the textile industry was not without the greasing of palms. That's how the inefficient textile industry is subsidised at the expense of the lives of farmers.

Farmer suicides, specifically in Vidarbha, can also be attributed to decisions made by the ministries of textile and commerce. It does not require any formal education to notice the connections between farmer poverty , loan default, distress and suicides, and India's import-export policies.

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Ajay Vir Jakhar (In economic times, 27th Aug 2015)