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Business Commentary/Ashok Mitra

Onion crisis may be a precursor of a 'grand' future

Not so many years ago, a minister, in charge of the fisheries department in a state government, had occasion to really go to town. For one full decade, his state -- he was exultant -- had been the preponderantly leading exporter of shrimp and prawn among all states.

Wham, as a result of this grand performance, it was the top foreign exchange earner from marine exports. He did not, of course, pause to consider whether or not any part of the foreign exchange thus earned was coming to his state for purposes of economic development. In fact, at about the time he was gloating over record marine products exports from his state -- thereby enabling the country to earn lots and lots of foreign exchange -- his chief minister was grumbling about the Centre's reluctance to permit the state to take on hand projects with a high foreign exchange content.

The minister also seemed not to comprehend the other significant reality; the greater the export of prawn and shrimp, the higher was bound to be the level their prices reached within the state. And once prices of prawn and shrimp rose, the price of every other fish was also bound to skyrocket. The state the minister belonged to had basically a fish-eating populace. Therefore, record export performance in prawn and shrimp exports also meant record hardship for the local populace. The rising price spiral soon spreads to other commodities. The innocent minister could not, however, be restrained from persisting ad nauseam with his single point peroration.

That pattern of rising exports contributing to rising price is being eerily repeated on a national scale this year, with the focal point on onions. No use blaming nature. A few unseasonal showers notwithstanding, there has been of late enough onion production in the country to meet the normal needs of the population. Without question the cause of the present difficulties lies elsewhere. Last year and in the earlier part of this year, the government looked the other direction even as interested parties stepped in to arrange for export of large quantities of this basic vegetable.

Some official quarters were actually jubilant at this grand act of export promotion. A much-blessed theory of economic reforms in any case has been at work: all trade barriers deserve to be dismantled: no worthwhile reason existed why Indian farmers should not receive global prices for their produce, including for onions. To speed up the process, American advisers, right from the '60s, had closeted with the farm lobby in the country. The lobby gathered fresh encouragement since the beginning of the current decade, given the fact most major political parties, barring the Left, have shown allegiance to the globalisation thesis.

Onions therefore went out of the country -- in large quantities -- in search of higher prices. Unfortunately, 90 to 95 per cent of the nation is in no position to afford global prices either for vegetables or for other products, for the straightforward reason their incomes have not yet attained global levels. The per capita income in India is barely one per cent of the per capita income in the United States.

The inevitable has happened. With liberal exports of the vegetable and a trade friendly government installed at the Centre, onion prices have soared and soared. By the end of September onions cost 10 times as much as they did six months ago. The rich farmers who exported were happy beyond measure, so too the commission agents who shepherded the exports. And mind you, the income from exports is tax free; that is another thoughtful measure to promote globalisation.

None of the political combinations that have successively reigned in New Delhi in recent years has been able to effect the miracle of raising Indian income levels to the neighbourhood of American per capita income. Little wonder, therefore, that hullabaloo has followed the explosion of onion prices: globalisation si, high onion prices non: there is no logic in the manner the mind of the consumer operates. But, then, elections were round the corner in four states. The authorities faced the prospect of some embarrassment.

A decision has accordingly been taken for large-scale import of onions on an emergency basis. The emerging symmetry invites plaudits: the same commission agents who were in charge of exports a while ago are now signing contracts to import onions.

A formidable argument has, of course, been seeking to beam a cheery note of assurance across: in democratic systems shortages -- any shortage -- cannot be of long duration. Democracy has a strong press and a near perfect mobility of both information and transport. If, in certain parts of a democratic country, shortage develops of foodgrains or of other basic commodities, news travels quickly to, let us say, the location from where the national administration functions. Once the information gets posted, immediate action is taken to tackle the problem. Quantities of the commodity or commodities perceived to be in short supply are rushed by marshalling of emergency transport.

The proposition is near enough, and yet, it may not necessarily work every time. A time lag could develop between the arrival of the information in the nation's capital and the adoption of measures to reverse the situation. Moreover, those who run the system may have their class or other biases. Their scales of priority with respect to the specifics of capacity utilisation of the transport network could differ from those of a conscience-stricken social scientist. Who knows, the leading lights in this functioning democracy could be extravagantly absent-minded on matters that do not touch the core of their daily living.

India, the chances are, will override the present crisis. But should such a thing as has occurred with onions this year happen with a major foodgrain in a not too distant future, the possibility of a major disaster would loom large. This prognosis is by no means the product of a far-fetched imagination at work.

Multinational corporations are knocking at our doors. They are at our doors with their seeds, pesticides and insecticides. They want to collaborate with some of our rich farmers and take charge of a substantial proportion of our agricultural holdings. They plan to use the high-yielding seed varieties patented by them to promote mega-scale production in these holdings and raise wheat and rice in huge quantities.

The World Trade Organisation will see to it that all tariff and non-tariff barriers to farm exports are dispensed with. The overwhelming majority of Indians would continue to remain poor; unable to offer the American level of prices the multinational corporations would demand for the grains they produce. The bulk of the cultivated grains would be, in the given circumstances, exported to the international market.

Food produced in the country would be co-owned by the seeds-supplying transnational corporations. The disposal of the crop would also be collaterally decided by them. Some of the seeds supplied would be of the self-destructive 'terminator' breed, so that our farmers would have no chance to build a seed bank of their own. Their dependence on foreign suppliers would be total.

Should a domestic shortage of grains rear its head because of excessive exports, the government could be forced -- on account of the fact it is a vibrant functioning democracy -- to arrange for emergency imports. Imports might however take a while. In the meantime, some people could die in Koraput or Latur.

Nor should the sight of an additional complication be lost. The WTO provisions frown upon subsidies to both producers and consumers. Such subsidies, in the organisations' lexicon, act as disincentive to production and trade.

Any proposal to distribute imported and locally procured foodgrains at subsidised prices to the stricken people could be objected to by the transnational corporations. They could even haul our government before the disputes settlement panel of the WTO.

The crisis with onions may thus turn out to be only a precursor of a grander future that awaits us. The authorities nonetheless know their onions. The Essential Commodities Act is proposed to be amended in order to make punishment less harsh for hoarders, profiteers and blackmarketeers infringing the laws. Under liberalisation, these specimens have every right, after all, to try to maximise their rate of return.

Ashok Mitra

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