Prime Minister Narendra Modi is no stranger to provoking public ire with his determination to push through reforms, but this may be his biggest showdown yet. Farmers are demanding that he repeal laws passed in September that they say will ruin their livelihoods. The government insists that the new policy will benefit producers and refuses to withdraw the legislation. After months of protests, more than 10 rounds of talks, and a Supreme Court order to temporarily suspend the laws, the government says it would consider some amendments and could delay implementation by up to 18 months. But the agitators are in no mood for concessions.
“We are not going anywhere. We are ready to sit here for years if need be. The government has to listen, ”said Balwinder Singh, 50, who normally grows rice and wheat on 3 acres of land in Punjab. He has been protesting since November 26 at the Singhu border, the epicenter of the demonstrations outside of Delhi. “We can survive the coronavirus, but not these laws.”
Behind the protesters’ fears and government rhetoric is a reality that the country somehow needs to reshape its agricultural system or face the environmental consequences of overproduction and a fiscal calamity from huge farm subsidies. If the reform is carried out correctly, it could lift millions of families dependent on agriculture out of poverty and propel India to the forefront of world food exports. Get it wrong, and you could drive tens of millions of people off their land and degrade up to 90% of the country’s water supply.
It’s such a titanic problem that back-to-back governments have avoided making significant changes. No Modi. Emboldened by seemingly unsinkable popular support, even during a devastating pandemic, his administration has intervened. It’s a classic playbook for the prime minister, whose six years in power have been marked by political reforms that often sparked national protests and occasionally threw the country into trouble, such as canceling 86% of the currency in circulation and introducing a citizenship law based on religion. But the government’s willingness to engage in agriculture shows that this is potentially an even more delicate path, one that runs the risk of alienating more than half of the country’s 1.3 billion people, who depend on agriculture for their livelihood. life.
The two sides are poles apart. The government says the laws will overhaul the way agricultural products are produced and sold in the country, opening up a decades-old system of state wholesale markets to more private purchases and helping producers earn more. Farmers fear that the laws will give companies and large wholesalers the power to impose prices on small landowners, who make up the majority of producers.
“It’s about unlocking productivity in areas like growing cereals by applying high-quality agricultural inputs like seeds and using less water to grow the same amount of grain,” said Rahul Bajoria, chief economist for India at Barclays Plc in Mumbai. “The best way for the agricultural sector to grow is to focus more on exports, for which the country needs to improve productivity and quality control.”
But the nation’s millions of small farmers live a precarious existence and have come to rely on a government support system that allows them to survive year after year with enough to get to the next harvest.
“Private companies don’t pay us on time,” said Singh, the protester. “If we are not paid on time, how will we prepare for our next harvest? We will starve. ”
The root of the conflict lies in a system that evolved for more than half a century after the Green Revolution of the 1960s slowly transformed the nation from a land of frequent famine to an agricultural powerhouse. India is now the world’s largest exporter of rice and the second largest producer of wheat and sugar. At the same time, a complex and inefficient system of state support, controlled markets, and public welfare emerged that Modi is trying to eliminate.
Under the current system, the government sets minimum prices for about two dozen crops and purchases large volumes of rice and wheat for its welfare programs. While traders are not legally required to pay government-set fees, the large volume of state purchases creates de facto support for key grain prices from small farmers, who sell their products through licensed traders in designated markets. These markets were established to open up industry and prevent exploitation by small farmers, but over time many became effective monopolies, and merchants banded together to stifle competition. As a result, the prices of rice and wheat have been stable for years, while other crops such as soybeans, corn and rapeseed have experienced strong price swings.
Farmers like the arrangement because the government provides them with a guaranteed buyer, allowing them to easily obtain short-term informal loans to buy agricultural inputs such as seeds in a country where rural banking services are often inadequate.
The new rules are intended to liberalize trade by allowing farmers to sell crops outside of designated markets. The Modi administration has promised that the welfare support mechanism will be maintained, but protesters are unconvinced.
Many believe the reforms are ultimately designed to lower the government’s food subsidy bill, which is expected to be $ 33.4 billion in 2021-22, by allowing market forces to drive down prices. Current support rates reflect the cost of production plus a 50% profit, which, along with assured purchases, has encouraged farmers to overproduce some crops. With India growing more wheat, rice, sugar cane and cotton than it needs, a pitched battle could cause prices to fall.
Worse still, 86% of farmers in India cultivate plots of about 2 hectares (5 acres) or less, while the other 14% own more than half of the cultivated land. In an unfettered market, large homeowners with lower costs per acre and better access to funds could end up dominating markets, forcing smallholders to sell their land. That’s a change that took decades in many developed nations when rural residents migrated to cities to work in factories. But an accelerated transition to the scale of the Indian population runs the risk of a major humanitarian crisis.
Migrant farmers
Jokhu Ray, who grows corn and rice in the eastern state of Bihar, has learned what a free market could mean. Bihar abolished its government-run market in 2006 and Ray says the result was disastrous for him. In crop year 2019-20, he was only able to get 10 rupees (14 cents) a kilogram for his corn, less than the support price of 17.6 rupees or the 15 rupees he got the previous year. Like many others, Ray left his village to look for work elsewhere and now works at a construction site in Rajasthan.
Stories like Ray’s have fueled farmers’ fears. Protesters across the country held 3-hour “chakka jams” over the weekend, stopping traffic. The government blocked the internet at major protest sites and deployed some 50,000 police and paramilitaries, along with riot control vehicles in and around Delhi, according to local media. After violence broke out at a Republic Day rally in the capital in January, the United Nations urged farmers to keep the protests peaceful.
“The government has shut down the Internet here out of fear,” Singh said by phone. “We are not afraid. We are informing people through phone calls. ”
“We urge those involved in the agitation to put an end to the protests,” Modi told lawmakers in parliament on February 8. “We should give these agricultural reforms a chance.”
Instead, farmers are demanding new legislation that prohibits paying less than the minimum support rate, a policy that analysts say would distort the market even more. Private buyers could freak out, forcing the government to step in and buy even more. That would exacerbate a fiscal deficit that is already expected to widen to 9.5% of GDP due to the coronavirus.
The state-owned Food Corp. of India, the country’s largest food grain buyer, has already stretched after buying 39 million tons of wheat and 52 million tons of rice from last year’s crop of approximately 108 million tons and 118 million tons respectively. Recent bumper harvests have filled many state barns to bursting.
Increasing minimum prices each year could also affect exports, said BV Krishna Rao, president of the nation’s Association of Rice Exporters. “The moment we make minimum prices a legal obligation, we are destined to lose our share of the global market.” He suggested that support prices should be set close to world levels and that farmers should compensate for losses if necessary.
And there are other long-term consequences, even more serious, if India does not find an equitable way to reform its agriculture, especially in states like Punjab and Haryana, where the protests began.
Green revolution
India’s Green Revolution in the 1960s brought an increase in grain production in Punjab thanks to high-yielding seeds, mechanization, and increased application of pesticides and fertilizers. Known as India’s granary, the state supplied about a third of the 62 million tonnes of water-intensive rice the government bought from monsoon-seeded crops so far this year, according to the Ministry of Feeding.
“States like Punjab grow more rice than they consume despite unfavorable terrain, which has resulted in a drastic depletion of their water tables,” said Rini Sen, an economist at ANZ Banking Group, in a report.
India has only about 4% of the world’s fresh water and farmers draw almost 90% of the available groundwater. Growers say they can’t afford to switch from water-intensive crops like rice and sugar cane unless the government ensures the same kind of price support for more sustainable crops like soybeans, mustard or the gandul (used to make dal).
Finding a compromise that reassures farmers that they can still earn a decent living while an archaic and inefficient farmers market is dismantled may be Modi’s most difficult task to date. But as the two sides enter what could be a long and bitter confrontation, India must resolve it.
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