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    Traders make a killing while people starve
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    NEW DELHI, May 10, 2002 (IPS) -- In India's continuing paradox of overflowing granaries and starving people, the only smiling faces these days are of those of middle-men traders. At the moment private traders are slavering over the government's grain procurement policies, which have the laudable motive of supporting farmers but which will result in government grain stocks swelling to a record 75 million tons - with nowhere to store it.

    "The only buyers of wheat in post-harvest wholesale markets of (northern) Punjab and Haryana states at the moment are the Food Corporation of India (FCI) and other state agencies," said Banwari Lal, a grain exporter based in Delhi. "We will buy only when the government offloads the stocks at subsidized rates," said Lal.

    For traders like Lal, it is a simple waiting game and the longer they are patient, the better, because there seems no end to the glut of grain. But neither the farmers, many of whom are already in debt, nor the government can wait to get rid of perishable stocks. Already, open-market prices for rice and wheat, the main staples, are way below the minimum support prices announced by the government in a pattern depressingly similar to that in the previous years, when traders rather than starving people benefit from a massive $3 billion subsidy.

    "This is a crazy situation -- the government is actually subsidizing the grain trade instead of ensuring that food supplies reach vulnerable people," says Jean Dreze, visiting professor of economist at the prestigious Delhi School of Economics. He is a close associate of Amartya Sen, the Nobel prize-winning economist who demonstrated the real relationship between poverty, entitlements and famines. Sen's celebrated theory -- that famines could be caused by economic factors other than changes in food supply -- seems to have special relevance to the current Indian situation, one where enormous strides in food production have not dented shortages.

    Last year, several hundred starvation deaths were reported from Orissa despite the fact that granaries were creaking with rotten stocks. That prompted rights activists to petition the Supreme Court to get grain released to people who desperately needed it, but could not afford to buy it. Newspapers and television channels repeatedly reported grain rotting after being allowed to lie exposed on airport runways and even highways covered with flimsy plastic sheets. Large portions ended up getting devoured by rats and other vermin.

    Officials in disaster-prone Orissa, which has special relief mechanisms, quickly identified the problem as one of "rapacious traders and moneylenders cornering subsidized grain leaving the intended beneficiaries to grub on roots and poisonous seeds." This is the third year that the phenomenon of continuing bumper harvests and overflowing granaries amidst food shortages has been both a topic of academic discussion and newspaper reportage, but the problems seems only to be worsening.

    Even India's Planning Commission has admitted that more than 30 percent of grain meant for the public distribution system (PDS) is misappropriated yearly by private traders and contractors. So entrenched is the nexus of traders and the FCI bureaucracy that it thwarted a National Storage Policy announced three years ago, which invited foreign investors with modern technology to help move grain from farm gates to consumers efficiently.

    Economists from the left-wing political parties, such as Biplab Dasgupta, have argued that it was pointless trying to get the right-wing, trader-friendly Bharatiya Janata Party (BJP)-led government to crack down on the nexus in favor of the starving poor. Last year, some of the grain was exported as cattle feed at prices lower than those fixed under the heavily subsidized, but corruption-ridden, public distribution system (PDS). Iraq and Indonesia, coping with problems of their own, rejected Indian grain as being of poor quality.

    Over the last decade, grain distributed through the PDS had dropped from 20 million tons to less than 10 million tons, a fact that economists have connected with increasing poverty levels and the decreasing capacity of ordinary people to buy food. India's Agriculture Minister Ajit Singh, an engineer trained in the United States, admitted publicly that the country's granaries were brimming only because "our people do not have the wherewithal to purchase foodgrain."

    By November, the Supreme Court, acting on public interest litigation filed by the People's Union of Civil Liberties (PUCL), which argued that access to food was a fundamental right, ordered as an interim measure the conversion of existing public nutrition schemes into legal entitlements. Fresh directives from the court are expected this month.

    In a separate petition to Prime Minister Atal Bihari Vajpayee, Dreze and his colleagues at the Delhi School of Economics pointed to massive public resources of up to $2 billion being used annually to actually procure, handle and then store food out of the reach of the poor. Dreze calculated that if all the sacks of grain lying in FCI godowns were lined up in a row, the line would stretch for a million kilometers -- more than twice the distance from the earth to the moon.

    According to the government's own National Family Health Survey, released last year, about half of all Indian children are chronically undernourished and half of all adult women suffer from anaemia. The Food and Agricultural Organization (FAO) says a fifth of India's billion people are "chronically food insecure."

    In the recently passed budget for this year, the government has earmarked $4 billion for food subsidies. But actual spending may far exceed that, going by the current trend in which nobody but the government is picking up grain pouring into the market. "When the government is ready to buy wheat at prices higher than that in the open market and also store it, no trader can be expected to block capital buying stock," Lal said.

    Ranjit Devraj
    May 2002

    Ranjit Devraj is a correspondent with Inter Press Service, a global news resource faciliating south-south and south-north dialogue on important economic, social, environmental, and other issues. IPS is distributed in the U.S. by Global Information Network