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The food industry in India and its logic

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Tractor on a road to the city, Kanpur district, Uttar Pradesh

Tractor on a road to the city, Kanpur district, Uttar Pradesh

The Economic & Political Weekly (EPW) 09 October 2010 issue carries a commentary I wrote as a backgrounder to the price rise of food staples. Here is part of the commentary:

On multiple fronts, the union government is proceeding to forge new compacts with the private sector food industry, whether global, regional or national. There is a new set of investors whose claims in the emerging food industry are being staked, and which are being encouraged by state governments eager to display their foreign direct investment (FDI)-friendliness. These are investors, promoters, asset management professionals who have learnt the patterns of the 2007-08 commodities (food included) boom and who are now well equipped to take positions, both financial and real, in the emerging food industry.

An indication of the size and scale of the national market for food (production, collection, processing, distribution, retail) being envisaged can be gauged from a “discussion paper” circulated by the Department of Industrial Policy and Promotion (DIPP) in July 2010. The paper, “Foreign Direct Investment (FDI) in Multi-brand Retail Trading”, has been circulated to “generate informed discussion on the subject” which will “enable the Government to take an appropriate policy decision at the appropriate time”. As this article shows, these decisions have already been taken and investment in the direction revealed by the paper has been rolling out for months.

Supported by the Ministry of Agriculture, the top echelons of India’s national agricultural research system and dedicated agricultural trade and investment bodies, the union government has tackled the arguments against FDI in retail by describing the “limitations” of current conditions in the Indian retail sector. That there has been a lack of investment in the logistics of the retail chain, leading to “an inefficient market mechanism”. The point is made that India is the second largest producer of fruit and vegetables in the world (about 180 million tonnes or mt) but has “very limited integrated cold-chain infrastructure” with only 5,386 stand-alone cold storages which together have a capacity of 23.6 mt. It points out that post-harvest losses of farm produce – especially fruits, vegetables and other perishables – have been estimated to be over Rs 1,00,000 crore per annum, 57% of which is due to “avoidable wastage and the rest due to avoidable costs of storage and commissions”.

A couple working in their paddy field, North Goa

A couple working in their paddy field, North Goa

From 2009, the Ministry of Agriculture’s approach to its subject has shifted perceptibly – from its stated protection of the interests of the farming household and the rural and urban consumer – towards the food industry. Employing the reasons listed above, all of which contain some reflection of actual conditions, the massive apparatus of the ministry and its appurtenant research system is now ushering in private participation and control of areas that were hitherto in the public domain. When read with the rapid movement of finance between the money markets and the commodity markets, with the extension of infrastructure and property conglomerates into the processed food “value chain” domain, and with new alliances between agricultural research institutes and market entrepreneurs, the outlook for India’s small and marginal farming households is bleak.

The concentration of funds, food handling and transport systems and growing corporate control from farm to fork can clearly be seen in an address by the Union Agriculture Minister, Sharad Pawar, at the Indian Council of Agricultural Research (ICAR) – Industry Meet on 28-29 July 2010. The meet focused on four theme areas: seed and planting material; diagnostics, vaccines and biotechnological products; farm implements and machinery; and post-harvest engineering and value addition.

Pawar said that the ministry recognises the role of the private sector in critical areas of agricultural research and human resource development. The conventional approach of public sector agricultural R&D has been to take responsibility for priority setting, resource mobilisation, research, development and dissemination. He then explained that agricultural extension, which has been neglected for several years now, is “no longer appropriate”. It is here that the impact of the Indo-US Agricultural Knowledge Initiative, now in its fifth year, can be recognised. The alternative, Pawar advised, is public-private partnerships through which public sector institutes (such as those in the ICAR network) can “leverage valuable private resources, expertise, or marketing networks that they otherwise lack”.

Coconut trees along a bund between field and stream, North Goa

Coconut trees along a bund between field and stream, North Goa

This is the undisguised merchant reasoning behind the creation of “Business Planning and Development units” in five ICAR institutes (Indian Agricultural Research Institute, Indian Veterinary Research Institute, Central Institute for Research on Cotton Technology, National Institute of Research on Jute and Allied Fibre Technology, Central Institute of Fisheries Technology). These units will tackle intellectual property management, commercialisation of research, find investors and begin businesses. India’s national agricultural research system, therefore, has decided to now become a broker of its own output (publicly funded) and a speculator seeking profits from the country’s agricultural and food price crises.

If the Ministry of Agriculture has its way, rural India will be a patchwork not of villages and hamlets but of “intelligent agrologistic networks combining consolidation centres, agroparks (agroproduction and processing park) and rural transformation centres”, which is how the MTMs and their typical built-up footprints have been described by one enthusiastic bank. The techno-industrial idiom cannot conceal the union government’s intention to encourage a dangerous new dimension to urbanisation, by provisioning infrastructure to support an internal trade in agricultural products, and doing so by allocating a greater share of scarce funds to support favoured business and trading constituents rather than to the rural constituents who need it most, the smallholder farmer and local agro-ecosystems.

Supported by the vast and powerful machinery of the Ministry of Agriculture, emboldened by the global trading successes of commodity cartels which learned their tactics in the Multi Commodity Exchange of India (Mumbai), the National Commodity and Derivatives Exchange (Mumbai), and the National Multi Commodity Exchange of India (Ahmedabad), the new entrepreneurs in India’s agribusiness sector are promoting MTMs as potentially attracting “leading foreign retail chains to anchor and plan their supply chain at and through the agrofood parks” and exploiting the MTMs’ “township model approach to attract Indian MNCs and foreign food processing companies”.

Green Hunt, red money and a forest war

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If this is a war in India, then the 76 Central Reserve Police Force personnel who were killed on Tuesday, 6 April 2010, were misled by their final commanding superiors, the senior officials and planners in the Ministry of Home Affairs, Union Government of India. The terrible attack, which took place in the central Indian state of Chhattisgarh, is being considered the worst loss in recent times in the long and bloody history of the Indian state versus leftist guerrillas. Why is India at war with itself? And what prompts the government, less than a day after the deadly ambush, to intensify its bellicose proclamations of “we will take the offensive to the Maoists” and indications that it will call in the army and even air force?

A part of the answer lies within a published comment by a political prisoner in New Delhi’s Tihar jail. “The trouble with India’s budget and economic planning is that the funds allocated to social welfare are basically geared to the vote bank needs of the ruling parties. Instead of long-term capital development towards increasing the welfare of the people, sops are handed out on a yearly basis to garner votes. Thus, while the expenditure on infrastructure is geared primarily to meet the long-term development needs of the business community, the social welfare expenditure is not oriented towards the ultimate extrication of the masses from poverty and misery. The social welfare allocations are more in the form of a dole for immediate political gains. Besides, even by the official count, only 10% of such allocations really reach the needy while the rest are swallowed up by intermediaries – officials and politicians.”

That direct telling of the facts as they are come from Kobad Gandhy, a well-known Maoist intellectual and now prisoner. Gandhy’s short comment is only one amongst many – from academics, activists and even conscientious bureaucrats – who have understood the reasons that give rise to armed Maoism or Naxalism in India, and in particular in those states which have high poverty and are also host to natural resources (forests and minerals, particularly). The bald truth, unpalatable to the Union Government of India but a truth which is lived out every day by tens of millions in the country, is that the possible benefits of economic growth have passed them by. Denied rights, ignored by development work, marginalised by a combination of bureaucratic neglect and rank opportunism of the politician-business combine, Indian citizens in states like Chhattisgarh, Andhra Pradesh, Orissa and Jharkhand live miserable lives in heart-rending conditions.

[Gandhy’s article can be found in the (Economic and Political Weekly, Vol 45, No. 14, April 03-April 09, 2010]

These are also the states in which the Maoist and Naxalite groups are active. Why can the central government not make the connection when most others do? Even India’s Planning Commission, its foremost development policymaking body, has considered the special needs of “disturbed areas” with a specific economic and social development programme aimed at remving the root causes of militancy. But that has not been the approach of the state. Instead, it has piled one counter-insurgency operation upon another in a spiral that is ever more expensive in terms of lives and money. The operations mounted by the central government in these areas have led to unprecedented bloodshed, massacres of civilian populations and rampant violations of constitutional rights in the area. Unmindful of many independent commissions of inquiry over the last two decades, the central government with fanfare announced its latest campaign, named Operation Green Hunt. In this – as in many other campaigns before it – the central government insists on treating the affected areas as a “war zone”, and has shown little inclination towards tackling the huge backlog of tribal oppression that has created fertile ground for such violence.

Writing in the 10 March 2010 issue of the journal ‘Liberation‘ (published by the Communist Party of India (Marxist-Leninist) Liberation), Arindam Sen warned: “The UPA government is clearly preparing the ground for a full-scale intensification of Operation Green Hunt. To begin with, the government has embarked on a massive propagation of its new found doctrine of security which singles out Maoism as the biggest threat to national security. The government is also busy cobbling a grand political consensus around this doctrine and it has already achieved a good deal of success in this regard. If Narendra Modi (Gujarat chief minister) is effusive in praising Chidambaram’s clarity and firmness, Buddhadeb Bhattacharjee (West Bengal chief minister) too clearly speaks the same language as Chidambaram.”

The CPI-ML also warns that whoever is not ready to join this ‘coalition of the willing’ (a menacing throwback to former US president G W Bush’s terminology) or dares question the wisdom of this approach is being branded a Maoist sympathiser. Time and again Chidambaram has blamed intellectuals and the civil society, bracketing them all with Maoists. It is not just a case of branding; many are already being harassed, hounded out and persecuted. Himanshu Kumar, a practising Gandhian, of the Vanvasi Chetna Ashram of Bastar saw his ashram in Chhattisgarh ransacked and razed to the ground; fact-finding teams trying to make an independent assessment of the actual situation have all been debarred from visiting ‘conflict zones’ whether in Chhattisgarh or West Bengal. Meanwhile, the Unlawful Activities Prevention Act (UAPA) is being invoked on a daily basis to arrest people across the country, states Liberation.

In his analysis, ‘1000 rebels & none saw? Blood spills a home truth‘, in The Telegraph (Kolkata), Sankarshan Thakur wrote: “A senior Chhattisgarh police officer admitted as much to The Telegraph today, affirming that the site of the massacre is not remote enough for nearby tribal settlements to have been unaware. “We get very little information from tribals, and that is a fact and a huge disadvantage,” the officer said, “and what little we get is often stale or even tainted information, but those are the odds we work against. We have not been able to build networks, we are still deeply mistrusted by people, whereas Maoists have access either because of fear or genuine support.” Palpably rattled, he pleaded that today’s was an avoidable tragedy, but having said so, he added a chilling note: “Let me tell you it is neither the first nor the last, such disasters are built into the framework of Operation Green Hunt.”

While the Indian government has the tax payer as the source of its funds for such counter-insurgency operations, how do the Maoists find the money to take on armed units of the state? Ajit Kumar Singh and Sachin Bansidhar Diwan of the Institute for Conflict Management have provided some answers in their explanation of the Indian Maoists’ funds flow, entitled ‘Red Money‘. The evidence has come several seizures of documents and electronic evidence made since 2007 in the Maoist-affected states.

The Maoists target road contractors, contractors for forest products like ‘tendu’ leaves, bamboo and wood. They have reportedly made deals with poachers, smugglers and liquor and timber runners in the forests. In the areas under their control, including district towns, Maoists levy a ‘tax’ on small enterprises such as spinning mills, tobacco units, rice and flour mills, grocery, medical, cigarette and liquor shops, and private doctors. All ‘illegal’ operators, including private schools operating in villages and district towns, are also coerced to pay. The Maoists also secure large revenues from iron and coal mining companies. Apart from abductions, extortion and looting, Maoists also set up unofficial administrations to collect ‘taxes’ in rural areas, where the official government apparatus appears largely to be absent.

How much money can they and have they collected? In November 2009, Chhattisgarh Director General of Police Vishwa Ranjan claimed that the Maoists annually extort up to 20 billion Indian rupees all over India (Rs 2,000 crore, about US$ 447 million). In the states of Bihar and Andhra Pradesh their collections ranged from 2 to 3 billion rupees a year, and this was in 2007. Other states that are important for the Maoists monetarily are Maharashtra (where they have been active since the 1960s in the eastern part of the state), Chhattisgarh itself, Tamil Nadu and Karnataka (the northern part of which contains iron ore mines).

A major source of funding for the Maoists, say Singh and Diwan in the South Asia Intelligence Review of the South Asia Terrorism Portal, is poppy or opium cultivation. Portions of Jharkhand and Bihar are reported to be the principal pockets of poppy cultivation exploited by the Maoists. Opium fields are screened and hidden behind peripheral maize cultivation. The Union Finance Ministry in its annual report for 2009-10, released in March 2010, said that the Central Bureau of Narcotics destroyed at least 1,443 hectares in 2009 alone. How much do the Maoists make from such cultivation? The illicit crops destroyed two districts alone in the state of West Bengal were estimated to have a value of over 12 billion rupees, if diverted to drug cartels for the manufacture of heroin. In India, opium is cultivated under strict licensing in select pockets of three states – Rajasthan, Madhya Pradesh and Uttar Pradesh. The entire opium crop is bought by the government and processed in public sector factories for their further use in pharmaceutical industries.

That is but a small aspect of the Maoist organisation in India. What happens now, after the 6 April massacre? The reactions of the Ministry of Home Affairs, judging by the statements of its minister, P Chidambaram, are not encouraging. Chidambaram rejected one opportunity to depart from the spiral of violence in February, when the Maoists made an offer to begin talks on the condition that the central and state governments suspend their anti-naxalite operations for 72 days. At the time he said: “It was a somewhat bizarre offer. Many weeks ago, I had offered to facilitate talks with the CPI (Maoist) provided they abjured violence. There was no meaningful response to that offer. Nevertheless, on February 23, 2010 I responded that if the CPI (Maoist) made a short, simple and unconditional statement that they would abjure violence, Government would be prepared to hold talks with them. I have received no response to my statement.”

This has been seen as a mistake by several who have been following contemporary Maoism and Naxalism in India. “We welcome the announcement by the Communist Party of India (Maoist) to observe a ceasefire and enter into talks with the Government of India,” said a joint letter to the Government of India written by a number of prominent citizens including Justice Rajindar Sachar, Randhir Singh, B D Sharma, Arundhati Roy, Amit Bhaduri, Manoranjan Mohanty, Prashant Bhushan, Sumit Chakravartty and S A R Geelani. “Given the government’s expressed willingness to engage in talks, we hope that this offer will be reciprocated. This necessarily requires an immediate halt to all paramilitary armed offensive operations (commonly known as Operation Green Hunt). It is also imperative that there should be complete cessation of all hostilities by both sides during the currency of the talks.”

There was no halt and there was no reciprocation. For many, the reasons are not far to seek. Any meaningful dialogue and solution will require that compulsory acquisition of tribal lands and habitats be stopped; that tribals should not be displaced by infrastructure and industrial projects (as is happening on a large scale in the affected states). This is because the central government is bound under law to comply with the Fifth Schedule of the Constitution which safeguards manifold rights of the tribals, including their ownership over land and resources.

“There is a common pattern to the emergence of Maoist violence in many areas,” stated a joint letter written by academics and activists Aditya Nigam, Dilip Simeon, Jairus Banaji, Nivedita Menon, Rohini Hensman, Satya Sivaraman, Sumit Sarkar, and Tanika Sarkar. “First a non-violent mass organisation like the People’s Committee against Police Atrocities (PCAPA) in West Bengal or Chasi Muliya Adivasi Sangh (CMAS) in Orissa arises in response to marginalisation, displacement or violence against tribals by the police and paramilitaries. Then the Maoists step in, attempting to take over the movement and giving it a violent turn. The state responds with even more violence, which is directed not only against the Maoists but also against unaffi liated adivasis. At this point, some adivasis join the Maoists in self-defence, their leaders like Chhatradhar Mahato, Lalmohan Tudu, Singanna are either arrested or gunned down in fake encounters and large numbers of unaffi liated adivasis are branded Maoists or Maoist sympathisers and arrested, killed or terrorised by the state.”

This is the crux of the matter, which cannot be solved by Operation Green Hunt and its tragic failures.

[My comment in the Khaleej Times is an abridged version of this posting]