WikiLeaks cable -Import tariff on cotton worried US
NAGPUR: A WikiLeaks cable on country's handling of farm crisis in Vidarbha shows that probably the real concern of US government in that tragedy was India imposing duties on US imports.
In a report following the Prime Minister Manmohan Singh's visit to Vidarbha in June 2006 when farm suicides were at its peak, a report by US consulate expressed relief that despite pressure from all quarters, PM did not hike duties. No matter that it came at the cost of expensive relief measures by the government, says cable put on WikiLeaks.
Winding up his Vidarbha visit on July 1 that year, PM declared a special package for 31 districts including six in the region spelling out sops like interest waiver. The government did not raise either the cotton procurement price or the import duty which could have otherwise pulled up the domestic rates.
The cable also remarked that despite having some incentives for farmers, Vidarbha has been neglected as against western Maharashtra.
As Vidarbha farmers struggled to survive during farm crisis, US government in that tragedy was worried about India imposing duties on US imports.
"To his credit, the PM did not mention any plans to increase import tariff on cotton although it would have silenced the opposition and provided tangible political benefits. Reversing such an important liberalization measure such as systematic lowering of India's import tariff would have sent all the wrong signals towards government's commitment to reforms, and divert the attention from complex political, economic and social reason," reads the cable.
The cable notes further that political compulsion of maintaining a hold on rural vote bank may lead UPA to come up with more lavish relief schemes. This came true as two years down the line, government came up with a 70,000 crore debt waiver scheme. Eventually its scope was further increased.
"The state has a track record of inefficient and distorting support schemes for farmers such as power and water subsidies. However, much of the state's attention goes to the wealthier sugar and wine industries, that have the cash flows to support state's politics," the cable says.
Local cotton prices can increase if import duty on cotton is hiked. Experts differ on how much imports matter in cotton prices as currently the country is a net exporter of the commodity. Farm activist Kishore Tiwari from Vidarbha Jan Andolan Samiti (VJAS) said India being a net cotton exporter, import tariff may hardly have any impact on domestic prices. But veteran leader Vijay Jawandhia said situation keeps changing and there have been times when millers have preferred imported over domestic cotton.
In 2012-13 India imported 3% of its total consumption of 374 lakh bales, according to data from Cotton Corporation of India (CCI). However, an analyst said the number may go up this year, though not enough to impact the domestic market.