Modi Government Caught Up in a Serious Protest, Again

20 January 2021 Deepak Saini, FDI Associate

After India’s Parliament passed three agriculture-related Acts in September that farmers want repealed, the Supreme Court temporarily suspended them and asked the government and the farmers to jointly resolve the matter. The question is, will the government give in to one of the largest protests seen in India or withstand it?

Background

Since Prime Minister Modi re-took office in 2019, the Indian Government has been embroiled time and again in serious national and international issues. This time, farmers, mainly from the northern states of Punjab and Haryana, protested against the newly-enacted farm laws, which they believe are anti-farmer and detrimental to their livelihoods, in massive numbers. The government has defended its decision, saying that the reforms have been designed to uplift the struggling conventional agricultural industry and are necessary to free small farmers from the predations of middlemen. Despite the criticism of abrupt and unconstitutional laws that it has encountered, the government believes that the changes will empower repressed small farmers.

Comment

Until now, farmers could only sell their produce at government-controlled markets through commission agents, also called the Agricultural Produce Marketing Committee (APMCs), or “Mandis”, which are controlled by state committees that assure a Minimum Support Price (MSP) to farmers on 23 crops, including cereals like wheat and rice, pulses, oil seeds and certain commercial crops. In the early 1960s, when India was at risk of a famine, lacked modern farming techniques and struggled to grow enough food to feed the nation, the concept of MSP was introduced to build farmers’ confidence and to encourage organised large-scale farming using advanced agricultural technologies. MSP is the minimum price given to the farmers for their produce, an instrument that is recommended by a non-statutory commission at the start of every sowing season. This government initiative, first tested in the Punjab due to that state’s ample water resources and long farming history, led to a green revolution by the 1980s that resulted in astounding rice and wheat production. The state-run Food Corporation of India (FCI) procured the crops of wheat and rice at MSP, which not only made the big landholders wealthy, but also provided a safety net for smaller farmers. The FCI then distributed the procured grain and other produce at subsidised rates among the poor. That practice, however, has been so marred by corruption as to often overwhelm small farmers, leading many to commit suicide.

On 20 September, the upper house of the Indian Parliament passed three Acts: the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, and the Essential Commodities (Amendment) Act. The ruling BJP government maintains that the Acts will encourage private investment in farm infrastructure, supply chains, new technology and will allow small farmers to negotiate their crop prices on a national platform while escaping the states’ commissions- and fees-ridden system. These reforms intend to present more trading areas to the farmers, small or large, and allow them to engage in contract-farming like many other industries.

Prime Minister Modi said that the reforms would ‘liberate’ the farmers and emphasised that it was completely justified to give small farmers their due rights. The opposition political parties, however, accused the government of breaking the rules to rush the contentious legislation through the parliament using a voice vote and called it a “murder of democracy”. Congress Party leader Gaurav Gogoi expressed his dissent, accusing the government of favouring big corporations, which he called the ‘government’s capitalist friends’. That, however, sounded more like an allegation than a fact.

Predominantly, the farmers from Punjab and Haryana, who have been at the frontline of the protests fear that entry of private players will disturb the existing arrangement in which nearly 99.5 per cent of wheat from Punjab, 99 per cent from Haryana and 95 per cent from Madhya Pradesh was bought by FCI at MSP last year.  The farming community demands that the MSP for all crops be added to the new legislation but the government argues that legalising MSP will add a burden of nearly US$231.4 billion ($300 billion) annually to the Treasury and has maintained that MSP was never a law and had always been only a recommendation. An industry expert denounced these calculations saying that the exorbitant figure is based on a total of 23 crops and, apart from wheat and paddy, most is bought by private players in the existing system while insisting that MSP was crucial. He explained that the government’s presence in the market stabilises prices and empowers farmers to negotiate confidently with private purchasers. For instance, last year the state government of Karnataka only had to buy 15 per cent of the total production of a crop (pigeon pea) and the rest of the stock was picked up by the private businesses at the set price.

A state’s robust storage infrastructure plays a crucial role in the success of Mandis but, despite that, the FCI has buying limitations. It would be impractical for the whole farming community to grow wheat and expect the FCI to buy everything at MSP as it would violate the basic rule of demand and supply thus impeding the economy. As a matter of fact, there is a large variation in numbers of farmers, across the nation, who actually benefit from the current system. For instance, last year, approximately 95 per cent of paddy and wheat growers in Punjab benefited from the MSP whereas only 3.6% of farmers did in the state of Uttar Pradesh. A study confirmed that, in 2018-19, the farmers in Punjab’s regulated markets received 30 per cent more money for their crops than did their Bihari counterparts and there is no evidence of private companies contributing towards agricultural infrastructure. As a case in point, in the eastern state of Bihar, where the APMC Act was repealed in 2006, the FCI’s procurement rate has remained at 2 per cent of the state’s total production, which often led farmers to sell their produce at 25-35 per cent below the MSP. To counter the problem and to provide the whole sector with equal opportunity, the government wants competition-driven boundary-free trade, which only seems possible by opening the industry to the private sector. The APMCs formed to protect the farmer from the exploitation of the creditor worked well until the 1990s, but with the growing economy and more opportunities entering the market, it is argued that the farmer should not be restricted by the defined trade areas of the APMCs. In the long-term, too much reliance on government without modernising the sector to global farming standards is unsustainable.

Despite reassurances from the government that the MSP will remain, farmers fear that few influential intermediaries will control the market, which will eventually nullify the MSPs. Indian agriculture expert, Mr Sharma, condemned the move, saying that India was on the same path as the US when then-President Nixon forced the “get big or get out” idea on America’s agrarian industry, which currently faces overall bankruptcy of US$425 billion ($551 billion).

The Modi Government has made it clear that it will not repeal the Acts, but is open to negotiations. The Supreme Court of India expressed its displeasure at the government over its handling of the issue and noted that, ‘People are committing suicide. People are calling names. People are suffering in the cold and the pandemic … we don’t see why there should be an insistence that the laws must be implemented at any cost.’ The court stayed the laws and formed a committee to manage further discussions on the matter. The farmers however believe that the committee members are pro-government and do not wish to negotiate with it. The farmer unions have planned a peaceful tractor rally alongside the Republic Day celebrations in New Delhi on 26 January. There are fears that some anti-social elements could see this as an opportunity to embarrass the government by instigating violence during the march.

It is somewhat difficult to predict the extent to which the reforms will benefit farmers, but it is hard to comprehend the urgency behind the move when the whole nation needs a post-COVID economic recovery. Rather than acting in haste, maintaining the status quo in sensitive areas and approaching them with caution may help India move towards much-needed economic and social stability. That would, in turn, eventually attract foreign direct investment and project India as a credible global business partner.

About the Author

Deepak Saini is currently undertaking a Master’s degree in International Relations and National Security at Curtin University.
Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of Future Directions International.

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