Elements of Optimal Farming Policy
November 5, 2006

(See postscript for some prompt government response.)

November 5, 2006

To:   The Honorable Prime Minister of India

Sub:  Crucial elements of optimal farming policy for India

I. Why it is urgent to enhance India’s farming sector?

It was not surprising to me to see the news published in Times of India on October 19: “It is official: India's dazzling growth fails to dent poverty.”  About a year ago, CFD had pleaded with you and Parliamentarians to found our governance on truth. Then the CFD forum was discussing a possibility of food shortage in India.  We have to import three million tones of wheat.  I am sure you too apprehended this problem when you called for a second-green revolution sometime back. 

You have rightly asked for an urgent perusal of the status of farming in five states: Orissa, UP, Chattishgarh and Bihar and West Bengal.  These states possess some of the most fertile lands on earth that had once attracted the Europeans to India which was then contributing about 22% of global GDP.  These fertile lands have been denuded, scorched and in some cases mostly abandoned.  Why?  People are facing acute poverty and running to factories in Western India by abandoning their agricultural farms.

A state like Orissa is being ravaged by cycles of flood and drought as the rains continually wash away top soil to the ocean.  Some researchers have accumulated data to show that this state will become a desert soon. 

II.  Major source of problem: Governance

A.   Facts show unambiguously that Central and state governments have failed states like Orissa, notwithstanding the wastage of massive sums of allocated resources.  Printing or borrowing vast sums of fiat money that mostly recycles back to the system of governance is like robbing the vast majority of people.  It is not KBK alone where Rs.4000 crores have not reduced poverty or enhanced heath care and education of people. 

B.    A statistic published today in a major Oriya daily, Sambada, shows an unseemly difference between a figure of 27 lakh acres of irrigated land on the books of Orissa’s Water Resource Department and another figure of 16.75 lakh acres of irrigated land from which Revenue Department collects revenues.  My prior belief, based on first hand information, that public funds allocated for irrigation are being looted while increasing the irrigated acreage on paper is now vindicated, unless there is some other major goof up in government data.  We should take this reported discrepancy in Orissa seriously and tally similar statistics in other four states under your scrutiny. 

C.   As per news reports in major national dailies, most farmers that have committed suicide are entrepreneurs with sufficient education, who had borrowed funds at exorbitant rates of interest to acquire land for farming but could not survive financially.  Why?  The prime reason is the usurious stamp duty idea of a recalcitrant, greedy, monopolistic, arm-chair style system of governance that is hell-bent in raising stamp duty collections for its own well-being by punishing the productive and creative people of society.  This system has artificially jacked up land prices simply to collect more stamp duty.  For example, in certain areas of Orissa official price of farm land is 400% of the market price.  Such land price-fixing in this case raises stamp duty from 12% to 48% on the going market price.  But such dictatorial decrees of the government raises the cost of ownership of agricultural land exorbitantly by an extra 336% of the market price and kills the new farm entrepreneur. 

D.   The 12% stamp duty is itself insane, as compared to less than one percent charged in most developed countries for government registration and recording of land transfer.  Our system of governance is basically killing the new entrepreneurial farmers and is effectively biting the hand that feeds. The system of governance is totally nonchalant about the country going hungry or the PM begging abroad for food aid.  The exorbitant stamp duty does not induce the officials in the revenue departments to provide better service; they demand kickbacks to accept revenues or even to return a recorded sale deed, let alone issue official land title on duly registered land.

E.    The other serious problem facing Indian farmers and entrepreneurs is rooted in our Imperial Bank of India which has been rechristened as the State Bank of India after independence.  The entity that chokes Indian entrepreneurship the most (next only to government) is the SBI.  How?  SBI does not permit easy clearance of pre-paid drafts issued by other government banks, let alone clear checks of other banks on time. This poses so much inconvenience and loss of opportunity to Indian entrepreneurs, especially in rural areas, that they are forced to open accounts in the SBI despite the stifling they face by this bank.  I can narrate my own experience but the space here is limited.  

III.  Elements of Optimal Farming Policy

1.     Abolish state governments’ power to fix prices of agricultural lands to let these lands be sold at prevailing market prices dictated by the willingness of owners to abandon their holdings and the desire of new entrepreneurs to buy the same for farming.

2.     Lift the restriction on citizens of India, who are earning valuable foreign exchanges for India by toiling abroad, on their ownership of agricultural land. The system of our governance does not discriminate–any productive and creative people including the so-called NRIs–in applying its principle of biting the hand that feeds.  CFD is immensely grateful to you, Dr. Singh, for removing many discriminations against the NRIs including on airfare and voting rights.  But despite the new policies you have enacted on removal of such discrimination, the offices across the country (like airlines and government hotels) are still maintaining differential tariffs that no other government organization anywhere else in the world has. 

Our officials should feel confident, smell the coffee and wake up.  It is not NRIs, nor farmers that officials should willy-nilly penalize.  They should strive hard to enhance the system of our governance everywhere to make the nation a welcoming land for the productive and creative individuals from not only India but also the world.  Only higher exports than badly needed imports can build up foreign currency reserves and enhance rupee value to enrich Indians relative to their counterparts everywhere.  The policy on SEZ is thus very welcome as long as it does not encroach valuable farm lands.  A strong rupee will automatically induce NRIs to return and motivate fewer Indians to go abroad.  It will also induce talented and skilled foreigners to come to reside in India!  CFD has a stake in making our officials as well as all Indians richer than their counterparts abroad.

3.     Provide incentives to land owners directly to plant horticultural crops in catchment areas of all rivers like Ganges and Mahanadi that are causing flood due to surface soil erosion.  CFD has indeed written a month ago to Orissa government on precisely this issue.  The Water Resources Department has already convened a meeting with its engineers following CFD’s proposal.  Our engineers should design a fool-proof system of transferring resources directly to land owners in riverine belts based on plantation of horticultural crops.

4.     Abolish land ceiling laws to let true agricultural entrepreneurs thrive on economies of scale and compete globally.  Land ceiling laws have basically made the cartel of government officials and ministers the virtual owners of the excess land.  This cartel lacks the wherewithal for efficient utilization of such lands.  Abolishing land ceiling laws will lead to development of economically viable farms, rather than keeping small parcels of land with individuals who abandon that land due to their inability or unwillingness for farming.  Only agricultural entrepreneurs can help India stem the tide of food shortage and possible famine.  Government officials in states like Orissa cannot even utilize all the allocated funds.

5.     Abolish stamp duty on sale of agricultural land as long as the status of the land is unchanged.  This will automatically retard the government’s desire to fix land prices at much higher level than dictated by supply and demand for land.  If vast stretches of agricultural lands in states like Orissa remain abandoned, then what is the use of jacking up the government land price artificially? 

6.     Limit the loan interest rate on farming to 2% plus cost of funds to banks. 

7.     Force banks to adopt a system immediately to clear each others’ checks by electronic verification across the country.  This will make our banking system more efficient and competitive.  Only competition breeds efficiency which is vital for capital to reach the needy farmers cheaply.    

8.     Mandate that top decision makers, before being appointed to such posts, do farming profitably for 5 years in rural India like in China.

9.     Remove the “C” form requirements for purchase of tractors and tractor attachments. Why should a farmer pay 10% CST as opposed to 4% VAT to order a tractor out of state?  In fact no one should be required to pay CST when VAT is the norm for inter-state selling of merchandise.

It was nice to hear you, Dr. Singh, ask the NRIs to return to India on the day the most prominent NRI–Mahatma Gandhi–had staged his profoundly successful Satyagraha.  You have perhaps done the most of any prime minister in lifting discriminations against NRIs.  But please remove all quotas (land, education, jobs and promotions) as birth rights (based on birth to certain religion or caste or tribe).  Such birth rights bred inefficiency to make India weaker and subjugated in the past.  We need to offer relief based on economic deprivation because that is what is lacking among many groups of people including the so-called Brahmins.[†]

NRIs will automatically return and new talent will not emigrate if rupee rises in value. Rupee value has been decimated because of our inability to compete to produce as much of exports as the imports needed for India to thrive.  Yes, the U.S. too has a massive trade imbalance.  But the system of governance in USA is perhaps the best (not ideal) in the world.  This induces many individuals across the world to sell off their assets in their home countries to emigrate to USA.  Even some of our best bureaucrats are emigrating to USA whenever they see opportunities. 

The system of governance in the U.S. has made the dollar the most bloated currency of the world and the rupee one of the weakest.  We should therefore improve the system of our governance.  This is what CFD has been pursuing for.[‡]  For this, the above proposed elements of an optimal farming policy for India are crucial and urgent.

With profound regards,

Sankarshan Acharya

    Citizens for Development and Pro-Prosperity.Com

    Pro-Prosperity.Com is rated as number one by Yahoo! for information on: optimal governance for prosperity

    [†] CFD’s website pro-prosperity.com is inundated by visitors for information on wisdom of ancient India’s caste system.  I am not a follower of existing religious philosophies like Hinduism, Islam, Christianity and Buddhism.  As a follower and scripter of Universal Religion, however, I naturally have deep respect for humanity and for the constitutional rule of law which is a fundamental tenet of my Universal Religion.

    [‡] We have visitors from around the world.  This has made CFD’s website (pro-prosperity.com) the most visited based on Google’s ranking of it as number one for information on varieties of topics on optimal governance and prosperity.

    [ 11 Nov, 2006 0138hrs ISTTIMES NEWS NETWORK ]

    NEW DELHI: The Prime Minister's Office appears to have capped the controversial issue of caste-based reservation in private sector by getting the social justice ministry to focus on skill development for SCs/STs rather than seeking to enforce a quota.

    Sources said Meira Kumar's ministry is looking at a three-point agenda in skill development and suggesting technically equipped candidates for placement to improve representation of SCs and STs in industry.

    The suggestions, to be made to a committee of secretaries headed by principal secretary to the PM, will not talk of reservation in any way, a far cry from the ministry's consistent quota pitch.

    Debate on quota in private sector has been dominated by Meira Kumar's campaign to get assured employment for SCs/STs in the private sector. The argument was that private sector should accept it voluntarily or else it would be enforced through a legislation.

    The PM's intervention, though primarily a response to resistance from business houses, has also been influenced by the upper caste backlash against the Congress in the wake of Arjun Singh-inspired OBC quota in Central institutions.

    That it is a determined attempt by PM to tone down the all-round quota debate is reflected in setting up of a committee of secretaries to decide on the subject which was being examined by a Group of Ministers headed by Sharad Pawar.

    The issue has been lying in cold storage with PMO since MSJ sent a cabinet note on GoM's conclusions.

    With the MSJ replaced by Department of Industrial Policy and Promotion as "servicing"ministry for the T K A Nair committee to decide on affirmative action, the agenda has been wrested away from Meira Kumar.

    The message is not lost on the minister. For the first meeting slated for November 15, sources said the MSJ will suggest only programmes in "skill development"for industry as part of affirmative action for the SCs/STs.

    It will advocate regular supply of lists of meritorious, technically qualified SC/ST youth for employment by industry.

    MSJ, in May 2005, gave the CII a list of 100 engineers for absorption. After over an year of inaction, a chamber representative in October assured the ministry to follow it up.

    The ministry wants the industry to replicate the initiative of Infosys. The software giant has decided to train 100 SC/ST engineers on their campus at their own cost.

    Ministry wants industry to train lower-level workforce in ITIs to upgrade their skills to make them employable in private sector.

    While industry's demands for workforce remains unfulfilled, there is a huge army of unemployed workers on account of their technical inadequacies.