THE POLITICAL ECONOMY OF AGRARIAN POLICIES IN KERALA: A STUDY OF STATE INTERVENTION IN AGRICULTURAL COMMODITY MARKETS WITH PARTICULAR REFERENCE TO DAIRY MARKETS VELAYUDHAN RAJAGOPALAN Thesis Submitted for the Degree of Ph D Department Of Government London School O f Economics & Political Science University O f London April 1993 UMI Number: U062852 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Disscrrlation Publishing UMI U062852 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 P ”7 <ü i o ABSTRACT This thesis analyzes the nature of State intervention in agricultural commodity markets in the Indian province of Kerala in the period 1960-80. Attributing the lack of dynamism in the agrarian sector to market imperfections, the Government of Kerala has intervened both directly through departmentally run institutions and indirectly through public sector corporations. The failure of both these institutional devices encouraged the government to adopt marketing co-operatives as the preferred instruments of market intervention. Co-operatives with their decentralised, democratic structures are^ in theory, capable of combining autonomous decision-making capacity with accountability to farmer members. The Government of Kerala believed that this institutional mechanism would aggregate the interests of peasants and thereby transform them into powerful market agents. We, however, argue that the nature of the interest group process, both within the organisation and in the larger polity, significantly, distorts policy outcomes. First, the nature of the intervention - the deployment of massive financial resources, the top-down approach with its commitment to the achievement of quantitative targets and the capital intensity of many of the projects- afford 2 opportunities to powerful groups such as professional politicians and State bureaucrats to maximise their own interests. Second, groups within the organisation such as farmer-politicians with their proximity to decision-makers and trade unions with their links to political leaders are able to divert an increasing share of the organisation's resources to themselves. In the process, farmers, in whose name these policies are initiated, experience negative consequences. The above hypothesis is tested by analysing the implementation of Operation Flood- India's dairy development programme. Operation Flood (OF) was launched by the Government of India with the avowed aim of increasing farm incomes through an institutional framework( the Anand Pattern Co-operative of Gujarat) in which farmers would have control over their own resources. This research, however, finds that owing to interest group processes, the programme has produced sub-optimal results in Kerala. Producer prices have remained stagnant, while production costs have soared. Farmers have responded by restricting supplies, which has led to massive shortages in the market. Meanwhile the fiscal foundations of the organisations have been undermined, as powerful groups appropriated an increasing share of the organisations' resources. An intervention intended to optimise benefits for farmers, in fact, resulted in the dominant interest groups within the polity maximising their benefits. 3 The thesis is based primarily on unpublished material gathered directly from institutions in charge of implementing the programme.The author was associated with the implementation of OF in Kerala during the period 1988- 90.1 had, therefore, access to confidential materials such as minutes of Board meetings, internal memos, balance sheets and audit reports of OF institutions in Kerala. Moreover, as an officer of the Government of Kerala, I also had access to government documents and files. Documentary evidence was supplemented by interviews with key actors such as V.Ramachandran,the former Chief Secretary of Kerala, Secretaries to the Government of Kerala and officials of the departments of Animal Husbandry, Co­ operatives and Dairy Development. A sample survey was also conducted to ascertain the response of farmers to the programme. TABLE OF CONTENTS Title Page Abstract ........................................... 2 Acknowledgments .................................... 6 Abbreviations ....................................... 8 List of Ta b l e s .................................... 11 Introduction ....................................... 16 The Development Paradox of Kerala................. 63 Dairy Markets in the Pre-Operation Flood Period • 124 Interest Groups and Operation Flood in Kerala . • 166 Performance of Operation Flood in Kerala • . 223 The Politics of Milk Pricing ............. 267 Operation Flood as a Role Model ...... ... 312 C o n c l u s i o n .................................... 360 Appendix I .................................... 393 Appendix I I .................................... 395 Appendix I I I .................................. 403 Appendix I V .................................... 407 Bibliography ....................................... 408 ACKNOWLEDGMENTS A number of people have contributed to this thesis. I have drawn heavily on the resources of the Kerala Co-operative Milk Marketing Federation (KCMMF) , Trivandrum. The staff of KCMMF and its affiliated unions, have extended considerable assistance to me during my field trip in Kerala. I thank them all. While it is invidious to single out any individual, I must put on record my appreciation of the help given by A.Raja, Manager, Computer Cell, KCMMF and his assistants. During the field trip, I interacted with the presidents and board members of a large number of dairy co-operatives. I shall always be grateful for their candid and earthy comments on the implementation of Operation Flood in Kerala. Officials of the Dairy Development and Animal Husbandry Departments, the Bureau of Economics and Statistics, the Coconut Development Corporation, "KERAFED” and "MATSYAFED" have all extended to me a great deal of assistance. I wish to thank the officials of the NDDB at Bangalore, Madras and Anand who went out of their way to furnish me with up to date information on the status of OF in India. I also thank Dr; V.Kurien, the Chairman of NDDB and V.Ramachandran, the former Chief Secretary of Kerala, both of whom, granted me interviews at very short notice. My thanks are also due to the officials of the Tamilnadu 6 Dairy Federation who extended considerable assistance during my trip to Madras in April 1991. I wish to thank the Governments of India and Kerala for giving me permission and the necessary leave to write this thesis. My thanks also to the London School of Economics, the LSE 1980s' Scholarship Fund and the British Council for funding my studies in London. My thanks are also due to Rosie Gosling for her support and Sanjay Bakshi for his computer wizardry. My supervisors - Tom Nossiter and John Harriss have been my greatest source of strength. Tom has lavished a great deal of attention and affection on me. His encouragement, warmth and above all confidence in me made this thesis possible. John has been a tower of strength and his belief in me has helped me through many a dark moment. I do not know how to acknowledge my debt to my wife Geetha. To satisfy my whim of studying in London, she accompanied me here leaving our children in Kerala. Her love, support and belief in me made this thesis possible. V.RAJAGOPALAN ABBREVIATIONS 1) AI: Artificial Insemination 2) AIML: All India Muslim League 3) AITUC: All India Trade Union Congress 4) APCO: Anand Pattern Co-operative 5) CDS: Centre for Development Studies. Ulloor,Trivandrum. 6) CITU: Centre for Indian Trade Unions 7) CMS: Calicut Milk Supplies Union 8) Congress-I: Congress- Indira 9) Congress-S: Congress-Socialist 10) Congress-U: Congress-Urs 11) CPD: Central Products Dairy 12) CPI: Communist Party of India 13) CPM; Communist Party of India (Marxist) 14) EEC; European Economic Community 15) ERCMPU: Ernakulam Regional Milk Producers ' Union 16) GB: General Body 17) IAS; Indian Administrative Service 18) IFS: Indian Forest Service 19) IPS: Indian Police Service 20) ICDP: Integrated Cattle Development Project 21) INTUC: Indian National Trade Union Congress 22) lUML: Indian Union Muslim League 23) KC: Kerala Congress 24) KC(J): Kerala Congress- Joseph Group 25) KC(M): Kerala Congress- Mani Group 26) KCMMF: Kerala Co-operative Milk Marketing Federation 27) KDCMPU: Kheda District Co-operative Milk Producers' Union 28) KERAFED: Kerala Kera Karshaka Shakarana Federation 29) KFC: Kerala Fisheries Corporation 30) KLDMMB: Kerala Livestock Development and Milk Marketing Board 31) KPCC: Kerala Pradesh Congress Committee 32) LDF: Left Democratic Front 33) LPD: Litres per Day 34) MATSYAFED: Kerala State Co-operative Federation for Fisheries Development 35) MD: Managing Director 36) MDCMSU: Malappurum District Co-operative Milk Supplies Union 37) ML: Muslim League 38) MLA: Member of the Legislative Assembly 39) MLPA: Million Litres per Annum 40) MRCMPU: Malabar Regional Milk Producers' Union 41) NABARD: National Bank for Agricultural