Foreign Relations of the United States, 1964–1968, Volume XXV, South Asia

253. Telegram From the Embassy in Italy to the Department of State¹

Rome, November 26, 1965.

1381. Dept pass Texas White House—Eyes Only for President From Secretary Freeman. Embtel 1373.²

Begin text:

Title: Agreement between Secretary of Agriculture Orville L. Freeman and Minister of Food and Agriculture C. Subramaniam, November 1965, Rome, Italy. End title.

It was agreed that it was very much to the benefit of both India and the United States to reverse the disturbing downward trend in per capita food production.

It was agreed that the quantity of resources allocated to agriculture has not been adequate in recent years.

It was agreed that:

1. Investment in agriculture during the fourth Five Year Plan (1966–67 to 1970–71) would be 2,400 crore rupees (nearly 5 billion dollars) or more than double the investment levels during the third plan period ending this year.

2. Investment in agriculture during the coming year (1966–67) would be increased by at least 40 percent above the current year even though the emergency might require cutbacks in other areas of investment.

3. Investment in agriculture next year (1966–67) will be 410 crore rupees as against 304 this year.

It was agreed that:

1. The Government of India will publicly announce and endorse the fertilizer consumption targets for the next 5 years agreed to by the Indian Ministry of Food and Agriculture. These quantities of fertilizer, to be made available through imports, if domestic production is inadequate, are as follows:

	N	P205	K20
	(million metric tons)
1966–67	1.00	0.37	0.20
1967–68	1.35	0.50	0.30
1968–69	1.708	0.65	0.45
1969–70	2.00	0.80	0.55
1970–71	2.40	1.00	0.70

2. Basic policy changes encouraging foreign private investment in the manufacture and distribution of fertilizer will be implemented.

A. The Government of India will announce a plan before January 1, 1966 to purchase any fertilizer produced in excess of market demand at world market prices.

B. The government of India will announce the removal of any geographic constraints on fertilizer marketing before January 1, 1966 to take effect as soon as fertilizer supplies are adequate, now expected in 1968–69.

C. The Government will reduce the role of the central nitrogen pool from its present near-monopoly position to one in which it handles only a minor part of the fertilizer supply. All manufacturers of nitrogenous fertilizer will be authorized to establish their own distribution arrangements.

3. That steps would be taken by the government to operate its own fertilizer plants at full capacity by allocating enough foreign exchange to ensure adequate supplies of raw materials and spare parts and by carefully reviewing periodically the level of management effectiveness.

4. That if modifications in the procedures for approving and licensing foreign private investment in the manufacture and distribution of fertilizer do not sufficiently shorten the time required for negotiations that further administrative and procedural changes will be made.

5. A cabinet level committee, now chaired by the Prime Minister will make a continuing effort to see that bureaucratic procedures do not hinder or discourage private foreign investment in fertilizer production and distribution. It will also pass judgment on basic policy questions which if unresolved might hinder investment.

6. That there will be no tie-in between credit and distribution. That is, farmers will be given credit regardless of where they buy their fertilizer.

7.

7. That the Government of India will not require government participation in the ownership of fertilizer plants in the private sector.

It was agreed that the current system of credit cooperatives was not adequate and that the following actions would be taken to remedy this:

1. A cabinet level committee on agricultural credit chaired by the Food and Agriculture Minister would explore alternative avenues of supplying credit to farmers.

2. The government will systematically review and test alternative credit possibilities. The following will be tested on a pilot basis.

A. The food corporation will supply credit to farmers against advances on their crops.

B. Current private credit institutions will be urged to extend credit availabilities and the possible need for credit subsidies will be evaluated.

3. The possibility of an all-India agricultural credit organization to supplement the credit supply of the cooperative sector will be actively explored.

It was agreed that new instrumentalities such as the agricultural production board, a committee of cabinet members and other key officials chaired by the Food and Agriculture Minister and vested with the authority to make binding decisions on matters of agricultural production, will be used to achieve the necessary allocation of resources to Indian agriculture.

It was agreed that:

1. 32 million acres of the most productive land farmed by the more efficient farmers will be designated for a crash production program with a target of 25 million tons of additional food grains by 1970 on this selected acreage.

2. The resources and inputs necessary will have the number one priority to wit:

A. The new fertilizer responsive varieties of food grains will be planted on well irrigated land, applying from 100 to 150 pounds of fertilizer per acre as compared with a national average of 3 to 5 pounds per acre. These new varieties, planted on the best irrigated land, would get the necessary fertilizer even though this might require a cutback on some other land if fertilizer were in short supply.

B. If the seed multiplication program for the new imported varieties (wheat from Mexico and rice from the International Rice Research Institute in the Philippines) falls behind schedule, foreign exchange will be made available for the import of additional supplies of suitable seed.

C. New irrigation techniques, going from the traditional flow method to controlled maximum irrigation, will be selectively applied. For this purpose resources will be made available wherever it is demonstrated practicable. In addition, adequate resources will be made available to develop minor irrigation sources to attain a water balance for multiple cropping. With this new intensive irrigation more and more land will be multiple cropped.

It was agreed that price policies will be reviewed periodically to ensure a continuing favorable relationship between the price of food grains and the price of purchased inputs such as fertilizer.

It was concluded that the new legislation establishing the food corporation and the recent amendments to the Defense of India rules along with the basic constitutional provisions did give the center government adequate authority to control the movement and distribution of grain between the states. The Minister made it clear that the central government now had the authority to develop and implement a rational food policy.

It was agreed that efforts to dramatize and mobilize public sentiment to demonstrate the urgency of action in agriculture would be made. Such actions as public statements by the President, Prime Minister and other leading public officials will be used even more in the future.

It was agreed that:

1. Highest priority will be given to agricultural development and allied programs in the fourth Five Year Plan. This priority will also apply to the allocation of foreign exchange to agriculture. It is noted that the agricultural program detailed above would require foreign exchange of the order of 2 billion dollars for the fourth Five Year Plan.

2. To meet food production targets the import of 500,000 tons of nitrogen fertilizer (in terms GF N) for the 1966–67 crop is essential. Out of this total quantity needed, arrangements will be made to import 100,000 tons from available resources. Every effort will be made to find the balance of the resources required to reach the target. Minister Subramaniam emphasized the critical importance of reaching this target, stating that in view of the severe limits on the availability of foreign exchange that immediate United States aid is imperative.

It was agreed that the Government of India will make the following food aid phase-out schedule an integral part of its fourth Five Year Plan for agriculture.

Year	Cereals Surplus (plus) or Deficit (minus)	Import Requirements for Buffer Stocks (in million tons)	Total Import Requirements
1966–67	(minus) 6.2	0.8	7.0
1967–68	(minus) 3.8	1.7	5.5
1968–69	(minus) 2.0	2.0	4.0
1969–70	(minus) 0.2	2.3	2.5
1970–71	(minus) 0.9	Nil	nil

Signed Orville L. Freeman, Secretary of Agriculture, United States of America; C. Subramaniam, Minister of Food and Agriculture, India. Date November 25, 1965. End text.³

Reinhardt

1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, AID (US) 15–8 INDIA. Confidential; Priority. No time of transmission is on the telegram. Received at 2:24 p.m. and passed to the White House at 4:24 p.m.
2. Not found.
3. This agreement, subsequently referred to as the “Treaty of Rome,” was hailed by John P. Lewis, Minister of Embassy in New Delhi and Director of the AID program in India, in a December 28 memorandum to Komer as more solid in content and promise “than any comparable program since Independence.” Lewis’ assessment was that the United States “has helped engineer what could be a breakthrough for Indian agricultural expansion.” Lewis saw that expansion as an important part of an effort to speed up Indian economic growth, an effort being described by AID and the World Bank as “the Big Push.” Lewis noted that the success of “the Big Push” would also depend on a revamped assistance program for India. (Johnson Library, National Security File, NSC History, Indian Famine, August 66–February 67, Vol. II)