Wednesday, September 10, 2008


Subsidy is a dirty word for everybody though it is the most sought after favor from the governments world over. The belief that only developing countries indulge in handing out massive subsidies to their people as a political prop is totally misconceived as there exists a pernicious system of direct and indirect subsidies in many developed countries under one pretext or the other. The collapse of the Geneva conference in June this year on free trade was ascribed to the stand taken by countries like China and India to force the well to do countries with rich farmer families to stop subsidizing their agriculture making their produce dirt cheap in the global market.

United States of America (USA) is one of the countries in the world which pampers their agriculturists with huge land holdings through cash subsidy in various forms. It is understandable that governments extent financial support to the farmers through distribution of subsidized agricultural inputs like fertilizer, water, energy etc to ensure that farming operations remain sustainable with sufficient margins to the growers. The minimum support price scheme for government procurement of food grains is a price stabilization mechanism to protect the consumers from run away inflationary pressure due to high open market costs and the Public Distribution System (PDS) is the tool for the government to deliver the staples like rice and wheat to below poverty line segment of the population ensuring freedom from starvation.

It is a travesty of justice that highly affluent farmer families in USA with large land holdings of thousands of acres are encouraged to keep their land fallow without any cultivation for which government doles out huge cash incentives. The pretext for such a program is land conservation. Under such a program each farmer is supposed to lease out a portion of the land to the government to keep them idle under a 10 years contract for which they are paid huge sums from the treasury. Breaking the contract will make the farmers liable to return the funds with a penalty equivalent to 25% of the cash received for leasing land under this program. This scheme also keeps the price of the commodities at high levels in the market and prevent production gluts that can depress the prices. Even if the farmers are able to recover just the cost of operations in their free hold land, government cash subsidy will be the net profit which is substantial. Many
farmers do break the lease agreement when the prices shoot up for some of the crops and willingly refund the government the principal amount with the fine as they ensure their returns are much higher from the market.

A rich country like USA only can afford to keep cultivable land fallow while the whole world is struggling to increase agricultural production by expanding the area under cultivation and increased productivity. Currently 34.7 million acres of private land is with the government under the land lease and subsidy program and one can imagine how much is the production depressed because of this. In a country like India where land was being cultivated for thousands of years, such land reclamation schemes are highly relevant but it is a luxury that the country cannot afford due to recurring food shortages and the consequent strain on the PDS. Rewarding for not cultivating the land and exporting the crops produced under this unethical policy at prices lower than that incurred by the farmers of poor countries can only accentuate their miseries. Is this the compassionate conservatism promoted by USA or a slow genocide being perpetuated for self
aggrandizement of an affluent country? Time only will unfold the truth.  

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