Indian Agrarian Distress and Regional Comprehensive Economic Partnership: A Study on India’s Trade Deficit and Plant Variety Protection Laws

By: Mohit Turakhia and Tanvi Chavan


ABSTRACT
Agrarian Distress has been a constant concern for Indian farmers and has been a driving force for major policy decisions of the Government. After the Green Revolution, India has been successful in achieving food security. However, low-income of farmers continues to be a problem that we need to deliberate upon to ensure their livelihood security. One needs to look into the recent policy developments that India has made to elevate the agro-economic conditions. Having said that, India had been negotiating to be a part of the Regional Comprehensive Economic Partnership (RCEP) which is a Free Trade Agreement between ASEAN members and six other nations. However, this step would have been counter-productive to India’s agro-economic goals. This paper is an effort to highlight key issues with the RCEP Agreement namely the market access granted to other members, especially China, even while India has a huge trade deficit with most of the negotiating member nations. The surge in imports will act against the interest of domestic farmers as India will be getting into a lopsided trade agreement. The authors also look into the seed sector and the protection of plant varieties which form the backbone of Indian agriculture having regard to the fact that the agricultural practices in India continue to be traditional and informal. However, the RCEP agreement suggests certain amendments in the country’s domestics laws which conflict with the extant domestic laws on the Protection of Plant Varieties (PVP). The paper concludes with pointing out vices of RCEP for agriculture and whether India should keep agriculture out of it in case it chooses to sign the deal.

INTRODUCTION 

This is the best of times, this is the worst of times for farmers in India. Best because sustainable agriculture is now on top of the global development agenda. Worst because it is no news that India is the second most populated country in the world. More than 50% of this population has its livelihood dependent on agricultural produce. Agriculture is the primary source of income for these people yet inequalities and inefficiencies persist and progress is stalled. This has led to thousands of farmers committing suicide every year, the poverty-stricken families which they were to support are put in worse conditions than before. The farmers who commit suicide thinking that it will end all their miseries are delusional because nothing changes even after they sacrifice their lives. The adversities remain pronounced. In the years since independence, India has made immense progress towards achieving food security. Its population has tripled, but food-grain production has more than quadrupled; there has thus been a substantial increase in available food-grain per capita. Despite this increase, the livelihood security and income of India’s farmers remains a major issue. This is when the Regional Comprehensive Economic Partnership (hereinafter, ‘RCEP’) treaty signed by India imposes an extra additional burden on the farmers. Taking into account the national circumstances, the effects of RCEP are expected to be disastrous in the sector of agriculture. The nation has to make investing in the health and welfare of its people a priority. Thus, this paper is an effort to analyse the need for agriculture to be a part of RCEP in the first place and other plausible solutions as envisioned by India. The authors have made jottings of those clauses of RCEP in which our farmers are most likely to be interested. For this, not a lot of focus has been put in the past. The authors are rather keen on looking at the present situation and future prospects. The authors have also attempted to suggest modifications that are out of the box yet within the confines of international trade laws and regimes.

Understanding the vast breadth of the issue, the authors have opted on not making it full of explosive facts but more like a journey on which our readers will embark and have something to learn from. Keeping the acerbity of an academic paper we first start with the current agrarian distress. 

PLIGHT OF FARMERS 

India being a nation of 1.2 billion people, with its Prime Minister claiming 50% of its children remain underweight and malnourished, food policy is a vital matter, to say the least, for means of living and self- respect. Farmers in developing countries like that in India are preponderantly resource-poor, small and marginal ones. In India, these two classes of farmers account for 82% of farm households. A majority of the farmers practise subsistence farming for household consumption. Their produce seldom enters the supply chain and the ones with marketable surpluses are barely able to make a living off selling produce. The National Sample Survey Office (hereinafter ‘NSSO’) data on Consumption Expenditure Survey for 2011-12 reveals that more than one-fifth of rural households with self- employment in agriculture as their principal occupation were having income less than the poverty line.

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Fig.1.1. Source: Estimated from unit-level Consumption Expenditure Survey data 2011-12, NSSO.

This disparity is quite large and one of the main reasons why agriculture should be kept out of RCEP. The country also witnessed a sharp increase in the number of farmer suicides. Climate change is also a factor here. For instance, unseasonal rain in October 2019 ruined kharif crops on over 54 lakh hectares of the 140 lakh hectares under cultivation in Maharashtra for the first time in a decade. This ‘wet drought’ claimed lives of two farmers in one day. Dharma Jadhav consumed pesticide in his paddy field in Dharampur, Dahanu taluka. Jadhav’s suicide was followed by another farmer taking his own life in Yavatmal district. Distressed over crop loss in the unseasonal rain, the debt-ridden farmer, Gajanan Ramji Shiradkar (47) hanged himself from a tree in his village Malkinhi.

Realising the need to pay special attention to the plight of farmers the Central government changed the name of Ministry of Agriculture to Ministry of Agriculture and Farmers Welfare in 2015. Indian agriculture contributes to 8% global agricultural gross domestic product to support 18% of world population on only 9% of world’s arable land and 2.3% of geographical area. Also, 80% of the landmass is highly vulnerable to drought, floods and cyclones.

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Fig.1.2. Source: Doubling Farmers’ Income – NITI Aayog

In light of this, signing up for the RCEP seems to be counterproductive to the idea of reducing agrarian distress. Also, the emerging challenges and opportunities call for a paradigm shift in the extant policies in the agricultural sector.

RCEP AND INDIA’S CONCERNS

RCEP is a trade agreement where associating countries are deliberating upon reducing or completely eliminating tariff and non-tariff barriers on imports and exports. The RCEP negotiations were first launched at the Phnom Penh on 20th November 2012 at a summit between the leaders of the Association of South-East Asian Nations and its six partners who occupy the spot of remaining members of the RCEP. It is being considered as an alternative to the other important multilateral treaty named Trans-Pacific Partnership (hereinafter ‘TPP’). The RCEP includes two of the important regional powers – China and India. RCEP’s trade agenda is quite broad as well as deep covering not only entry-level trade liberalisation of goods and services but also negotiations on higher-order liberalisation issues like intellectual property rights, competition and e-commerce. It carries the potential of becoming the largest Regional Trade Block (hereinafter ‘RTB’) as the arrangement covers more than 3 billion people of the world, having a combined GDP of $17 trillion and accounts for 40% of world trade. 

India already has bilateral trade agreements with ASEAN, Japan and South Korea and talks are underway with Australia and New Zealand, who are also the member nations of the RCEP. Taking this into consideration, India’s participation in RCEP would pre-dominantly be an opportunity for India to negotiate an agreement with China. China desperately needs access to India’s markets. The onslaught of Chinese duty-free goods is expected to gradually increase over the next three decades and India is doing very little to prevent this onslaught. The authors intend to put forward the negative impacts of this agreement via highlighting the key issues like India’s trade deficit with China. The RCEP Agreement would become a cover for duty-free trade into India for Chinese goods. 

There has been an underlying concern that the agreement requiring the gradual elimination of tariffs, would open up the country’s domestic markets to an inflow of cheap Chinese goods and agricultural produce from Australia and New Zealand posing a threat to local producers.

Farmer group representatives, citing an example, said that dairy cooperatives in India now earn about Rs.280 to Rs.300 a kilogram of milk powder. They are worried that milk powder from Australia or New Zealand might become available at Rs.180 to Rs.200 a kilogram.

Secondly, it is imperative to highlight the importance of Farmers’ Rights with respect to the extant Plant Variety Protection (hereinafter ‘PVP’) laws which extend protection to all farmers and the possible impact of the impending RCEP deal on these rights. Member nations of RCEP are proposing the enactment of an all-inclusive International Convention for the Protection of New Varieties of Plants (UPOV 1991 Convention) Act which is essentially an act for the protection of breeder’s rights. This is inconsistent not only with WTO laws but also India’s domestic laws. The authors intend to throw light upon the devastating impacts of such stringent policies which may add to the agrarian distress which India has been trying to solve since long.  

INDIA’S TRADE DEFICIT WITH THE MEMBER NATIONS OF THE RCEP.

Agriculture and allied products along with petroleum products accounted for nearly 85% of India’s export basket in FY17. A breakdown is given below which is an extract from NITI Ayog’s report on Free Trade Agreements.

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Fig.1.3. Source: NITI Aayog’s ‘A note on Free trade Agreements and their costs.

In this context, we would like to state the concern of India. Regional Trade Agreements (hereinafter ‘RTA’) have become increasingly prevalent since the early 1990s. RTAs cover more than half of international trade and operate alongside global multilateral agreements under the World Trade Organization. The first eleven years (1995-2005) of the WTO were paralleled by a tripling of RTAs from 58 to 188. In India, 14 RTAs are in force with a dozen more under negotiation. It is imperative to note that India’s exports to countries with which it has signed Free Trade Agreements (hereinafter ‘FTA’) have not outperformed overall exports to the rest of the world. The FTAs have led to increased imports and exports, although the former has been greater. India’s trade deficit with ASEAN, Korea and Japan has widened post-FTAs. The utilisation rate of RTAs by exporters in India is very low (between 5 and 25%). Analysis of the growth rate of India’s exports to countries and trade blocs with whom India has a trade agreement and also with rest of the world with which India does not have a trade agreement paints a clear picture. Since 2006 (India has signed most of its RTAs after 2006), India’s exports to RTA partners increased by 13% y-o-y. The trend to non-partner countries was no different with exports increasing at the same pace. Thus, export to RTA countries has not outperformed overall export growth, in fact, export to RTA countries parallels the trend growth as with other exports. Thus, India’s export surge could be attributed to diversification of India’s export basket both in terms of destination and commodities and favourable global conditions and less to RTAs. However, we would like to show what NITI Ayog found when it analysed India’s FTAs with ASEAN, Japan and South Korea. They found Bilateral Trade increased but India’s imports increased more than its exports to these countries post-FTAs. 

This has resulted in India’s trade deficit to shoot up. The overall trade deficit with ASEAN, Korea and Japan doubled to $24 billion in FY17 from $15 billion in FY11(signing of the respective FTAs) and $5 billion in FY06. The trade deficit with Korea grew from $5 billion in FY10 to $8 billion currently. With Japan, deficit grew from $3 billion in FY10 to $6 billion currently and with ASEAN deficit doubled to $10 billion from $75 billion in FY11. India’s primary market access issue has been with China, its second-biggest trading partner with whom India had a $53-billion trade deficit in 2018-19.

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Fig.1.4. Source: NITI Aayog’s ‘A note on Free trade Agreements and their costs.

That said, none of these FTAs seem to have any positive impacts (except for Sri Lanka) since these arrangements saw the greatest reduction in Indian import tariffs. 

In a nutshell, what are we trying to achieve out of RCEP? India’s trade deficit with the bloc has risen from $9 billion in FY05 to $83 billion in FY17, of which China alone accounts for over 60% of the deficit. India already has bilateral FTAs with ASEAN, Korea and Japan and negotiations are underway with Australia and New Zealand. Most RCEP countries see India as a huge potential market for their exports. However, we are in no position to accommodate them when our own farmers are in disdain. RCEP negotiations, especially with China, need a second thought. Trade agreements are a way to promote bilateral trade, with the objective of benifiting both the parties. With RCEP, India’s trade seems to be very skewed and Australia, New Zealand and China’s capacity overhanging in most sectors may lead to an uncontrolled inflow of imports into India with Indian farmers having very limited access into the international market. 

Trade Deficit in the Seed Sector 

The days of economic policies run by the principles of laissez-faire are numbered. The erudite of Adam Smith has taken a back seat with conservative economics, nationalism and protectionism coming to the forefront.  India’s seed sector is vital to the agricultural economy of the country. Seed is indeed the most basic and a critical input for sustainable agriculture and efforts in the direction of policy reforms for ensuring sustainable use and development of seeds are imperative. The response of all other inputs depends on the quality of seeds to a large extent. The direct contribution of seed quality alone is about 15 – 20% of the total production and it can be further raised with efficient management of other inputs. In the last thirty years, the developments in the seed industry in India have been very significant. Over the last few years, the private sector has started to play a significant role in the seed industry.  At present, the number of private companies engaged in seed production or seed trade is of the order of 400 or 500.

Foreign Direct Investment up to 100% is permitted in specified activities of the agriculture and allied sectors. There was FDI inflow of $94.71 million in ‘Hybrid seeds & Plantation’ Sector, which accounted for 37.8% of total FDI inflow in Agriculture from 2013-14 to 2016-17. Though India allowed 100 per cent FDI to foreign entities in the seed sector, Indian companies are not allowed to operate in major RCEP member countries like China and Indonesia. For practical purposes, India’s membership in RCEP would tantamount to a trade agreement with China since trade agreements with the other members are already in place. India’s signing of the RCEP would have paved the way for foreign companies who already have a strong base in the Indian seed sector, particularly from Thailand and China. 

ANOMALY IN THE PLANT VARIETY PROTECTION LAWS

Agriculture in India is characterized mainly by small scale farming with 82% of farmers being small and marginal. Under agricultural setups, like that of India, the reliance is on informal methods of farming rather than the formal ones. The objectives of agriculture in India are predominantly domestic, and not commercial. Under these premises, it is a natural deduction that informal and traditional seed systems play an important role in the Indian agriculture and is the basis of the farmers’ livelihoods and national food security in the country.  Having said that, in the light of the subsisting plight of farmers in India and having regard to the fact that 70% of its rural households still depend primarily on agriculture for their livelihood,  it is imperative for the purpose of our study too look into the farmers’ rights in India vis-à-vis right to own seeds and access food. The scope of our study is to evaluate these rights w.r.t the RCEP Agreement. Under the RCEP negotiations, which went underway in 2012, majority of the RCEP countries pushed for the implementation of tighter IPR laws in the form of insistence on provisions for rights in plant varieties. The IP protection of all plant genera and species has been demanded along with an effective plant variety protection (PVP) system.  Such a system should be in line with the 1991 Act of the International Convention for the Protection of New Varieties of Plants (UPOV 1991 Convention).  This was highlighted in the letter sent to the Prime Minister, signed by 41 farmer and civil society organisations.  It further said that this demand is “WTO-Plus” i.e. it makes RCEP go beyond the World Trade Organisation (WTO).

INDIAN OBLIGATIONS UNDER THE WTO AND OTHER INTERNATIONAL AGREEMENTS/TREATIES 

WTO, Agreement on Trade Related Aspects of Intellectual Property Rights

WTO, of which India is a member, provides for certain rules for the protection of plant varieties. The TRIPS Agreement, entered into by the members of the WTO, specifically provides for this under section 27.3 of the agreement which deals with whether plant and animal inventions should be covered by patents, and how to protect new plant varieties.

Thus, what the TRIPs agreement provided was for the enactment of the PVP laws either by patents or by an effective sui generis system. The patent system lacks flexibility in a way that it does not provide for certain exemptions such as breeder’s exemption, which allows the further breeding of certain protected varieties. Due to the concerns that the patent system would hinder the breeding of new varieties, most of the WTO member nations adopted sui generis (unique; one of its kind) system for the protection of protected plant varieties. The TRIPS, however, has mentioned nothing as to the specificity of the system to be adopted and it is upon the individual members to adopt a system better suited to their socio-economic conditions. Most of the members of the WTO are the signatories to the UPOV regime, however, India adopted its own set of PVP laws in the form of Protection of Plant Varieties and Farmers’ Rights (PVPFR) Act, 2001. 

The PVPFR recognizes and makes provisions for a number of specific rights for farmers. Firstly, the PVPFR Act provides farmers the right to register farmers’ varieties. Secondly, farmers have the right to ‘save, use, sow, re-sow, exchange, share or sell’ farm produce including seed of a protected variety. However, this right does not include the right to sell a seed of a protected variety which is branded. Thirdly, farmers are entitled to a reward in cases where the genetic material they preserved or improved is used in developing new varieties. Fourthly, if the variety they purchased fails to perform as per the disclosure made by the breeder, farmers have the right to claim compensation from the breeder. 

This is a deviation from UPOV as neither UPOV 1978 nor UPOV 1991 recognizes farmers’ rights. UPOV 91 does not allow farmers using a PVP-protected variety to freely use, exchange and sell farm-saved seeds/ propagating materials.

Convention on Biological Diversity: Benefit Sharing Regimes

India is a party to the Convention on Biological Diversity (hereinafter ‘CBD’) and its sub-treaty the Nagoya Protocol on Access and Benefit Sharing (ABS). What the treaty purports to do is to ensure that farmers get their due when their know-how or technique is accessed. To give effect to its obligations under the treaty, India has enacted another national legislation – the National Biological Diversity Act, 2002 and has also issued the ABS Regulations, 2014 which is in line with the Nagoya Protocol. Under these regimes, one has to take a prior informed consent of the local seed keepers. If the seed material is taken from them then the source is to be acknowledged. And, after the source has been acknowledged, the farmers would be legally entitled to a share of the benefits that accrue to the user upon the commercialisation of farmers’ material/knowledge. There is a high probability of these rights getting hampered if breeder rights, as provided for in UPOV 1991 are granted to the seed industry. Adopting UPOV would mean giving preference to IP-protected seeds in the market which would be deleterious to the farmers’ livelihood security. 

International Treaty on Plant Genetic Resources for Food and Agriculture

India is also a party to the International Treaty on Plant Genetic Resources for Food and Agriculture (hereinafter ‘ITPGRFA’), 2001. The UPOV system conflicts with requirements of Article 9 of the ITPGRFA. 

Article 9 of the ITPGRFA talks about government’s responsibility to take measures to “protect and promote” Farmers’ Rights including farmers’ right to save, use, exchange and sell farm saved seeds, their right to the protection of traditional knowledge and equitable participation in sharing benefits arising from the utilization of plant genetic resources.

A human rights impact assessment of UPOV 1991 also concluded “…if implemented and enforced, UPOV 1991 would sever the beneficial inter-linkages between the formal and informal seed systems”, and its “restrictions on the use, exchange and sale of protected seeds could adversely affect the right to food, as seeds might become either more costly or harder to access” as well as “other human rights, by reducing the amount of household income which is available for food, healthcare or education.” Thus, UPOV 91 restrictions on the use, exchange and sale of farm saved PVP seeds will serve as nothing but severe impediments for resource-poor farmers to access improved seeds.

For India, signing the RCEP agreement would mean a direct blow to the extant PVP laws. Since most of the RCEP countries are signatories to the UPOV 1991, India could be compelled to make special provisions for UPOV member-states. This might lead to the dilution of the Indian legislation and farmers’ rights will take a back seat.  

 Moreover, the 2015 version of draft IP chapter of RCEP which was leaked, exclusively states under Article 1.7, clause (j), that the member nations should accede to the UPOV convention. Additionally, Article 5.18 which deals with New Varieties of Plants also states that each party shall provide for the protection of all plant genera and species by an effective plant varieties protection system which is consistent with the 1991 UPOV Convention. In 2019, with the wave of protectionism taking over International trade relations, India should think about its own national interest. Food, seeds and farmers’ rights are of vital importance to our sovereignty, and we shouldn’t compromise on them.

RECOMMENDATIONS

 Taking the above stated facts and estimates into consideration, the authors would like to suggest the following recommendations:

  1. As discussed above, the FDI policy that India has in the seed sector needs urgent restructuring to take into consideration the national interests. Indonesia also modified its FDI policy a few years ago, allowing FDI to be below 49 per cent in field crops and below 35 per cent in vegetable seed companies. It is suggested for India to follow a similar policy so as to prevent dumping of seeds and take control of plant genetic resources (PGR). 
  2. Further, India’s National Biodiversity Act, 2002 encourages use of biological resources by Indian seed companies with a prior approval of the State Biodiversity Board concerned. The Act further provides for the use of biological resources without prior approval only for the local people and communities of the area, including growers and cultivators of biodiversity, and vaids and hakims, who have been practising indigenous medicine. There is, therefore, an anomaly caused by the FDI policy wherein the prohibition for use of biological resources by a foreign-owned entity is automatically removed for a seed company with foreign ownership. Once the RCEP is implemented, it will further strengthen this anomaly and this may again hamper the growth of the Indian seed industry, especially small and medium companies.
  3. Emphasis can be laid on the development and regulation of autonomous bodies for the purpose of recording and encouraging innovations in seeds at the grass-root level. In this context, The National Innovation Foundation (NIF) can be highlighted as one initiative that aims to promote benefit sharing in India. The NIF is an autonomous body of the Department of Science and Technology, Government of India. It attempts to promote benefit sharing by pursuing avenues for commercialization of innovations and channelling the royalties back to the farmers/communities.
  4. Since agriculture in India is an issue of livelihood rather than a commercial business, there should be no restrictions on the Framer’s rights to sell. The authors suggest the development of a body of rules wherein the farmers complying with a certain requirement criterion can be provided with a certificate for the selling of seeds. This, in addition, will also help in regulating the business of the seed industry. 

FURTHER RECOMMENDATIONS

Since the issue of agrarian distress is being discussed, we would like to conclude this paper with some further recommendations that may help the Government in elevating and uplifting the standard of farmers by securing their livelihood and income. The recommendations go as follows; 

  1. There is a need to make qualitative progress in the agro-economic sector of India. It is urged that in the field of agricultural education, there can be an introduction of skill-based courses to develop entrepreneurial skills amongst youth. Moreover, there stands a need for an emphasis on research to develop policies regarding agriculture, economics, markets and state inventions to harness the advances in agro-biological research.
  2. There is a need to set up Water Users Associations (WUAs) for all developed irrigation projects. Water Users Association is a cooperative association of water users for undertaking water-related activities such as supply, distribution and optimum utilisation of water for the mutual benefit of all. States such as Andhra Pradesh, Tamil Nadu and Maharashtra have already been successful in bringing about this change. Learning from that experience, a moratorium should be imposed on new projects for making the maximum funds available for projects, in the pipeline.
  3. Addressing market risks through improved market intelligence and insurance products is necessary for secured market access for resource poor farmers. Moreover, in the wake of the current global climate crisis, policies and institutional arrangements to address climate change impact; disaster relief and bio-security are imperative. 

CONCLUSION

Taking the above stated estimates into consideration, we have critically analysed the RCEP Agreement and the havoc it can create on Indian agriculture. Sure there are opinions that not joining of RCEP would affect India’s exports and investment flow by cutting off the country from the trading bloc comprising 15 other nations in terms of preferential access. However, if India signs the RCEP deal then she will be inviting end number of difficulties regarding the already stalling trade deficit of India with ASEAN and other members of RCEP. Other countries want India to be a part of the deal because India will provide a huge market to their products. We are in no position to override our domestic agricultural produce and be a dumping ground for cheaper International goods. Moreover, being a part of RCEP will also lead to scrapping of our domestic laws on Plant Variety Protection and other policies in the seed sector that exist to aid and support farmer’s rights. If these legislations and policies are no longer applicable then we will suffocate our farmers not only economically but also legally and ethically. Seconding the opinion of Hon’ble PM Narendra Modi of backing out of the RCEP agreement, when the authors measure the RCEP agreement with respect to the interests of all Indians, we do not get a positive answer. It neither goes with our conscience nor the Talisman of Gandhiji. 

The research for this paper began in October 2019, a month before Hon’ble PM Mr. Narendra Modi chose to back out of the RCEP trade agreement and made the following statement: “The present form of the RCEP Agreement does not fully reflect the basic spirit and the agreed guiding principles of RCEP. It also does not address satisfactorily India’s outstanding issues and concerns. In such a situation, it is not possible for India to join the RCEP agreement.” However, the remaining fifteen participating nations have released a joint statement on November 04, 2019, stating that the negotiations will continue and efforts will be made to accommodate India’s concerns.


(Mohit and Tanvi are currently law undergraduates at SVKM’s Pravin Gandhi College of Law, Mumbai University. They may be contacted here and here, respectively.)

Cite as: Mohit Turakhia and Tanvi Chavan, ‘Indian Agrarian Distress and Regional Comprehensive Economic Partnership: A Study on India’s Trade Deficit and Plant Variety Protection Laws’ (The RMLNLU Law Review Blog, 26 June 2020) <https://rmlnlulawreview.com/2020/06/26/indian-agrarian-distress-and-regional-comprehensive-economic-partnership-a-study-on-indias-trade-deficit-and-plant-variety-protection-laws > date of access.

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