Use an iron fist on a velvet glove

The restless farmers of Punjab can be painted as saints or sinners. On the one hand, they spearheaded the Green Revolution in the 1960s when India was starving, helping India to become not only self-sufficient, but also a grain exporter. That is why they were rightly called heroes.

But by growing water-intensive crops like rice in a low-rainfall state, Punjab farmers dramatically lowered the water table. First, all the drinking water wells dried up. Then the shallow wells of the smaller farmers dried up. The wealthiest farmers with the deepest wells benefited while harming others and destroying aquifers. In addition, they now burn stubble from their crops in October-November for the early sowing of wheat, injuring and killing thousands in Delhi and the surrounding areas with smoke contamination. For a few more rupees, farmers feel justified by deliberate contamination that is morally criminal.

Punjab farmers have enormous political influence and get massive subsidies invisible to the public. Economist Ashok Gulati reveals that Punjab farmers get annual energy subsidies of Rs 8,275 crore and fertilizer subsidies of Rs 5,000 crore, averaging Rs 1.22 lakh per farm household. Plus, they get subsidized credit and grants from PM Kisan. Their high farm income translates into high land prices of Rs 50-100 lakh / acre. Industries do not invest in Punjab because land is exorbitantly expensive.

The average farm in India is only one hectare, so prosperity requires farmers to move from agriculture to industry and services. But in Punjab one hectare is worth 1.25-2.5 million rupees! They may not look like it, but the agitators surrounding Delhi are lakhpatis on annual allowances and crorepatis on assets.

Autocracies like China would crush such upheavals. But democracies don’t fire on troublemakers. If the agitators are numerous and influential in the elections, the state will come to terms with them. That’s why farmers get huge subsidies in Europe, the United States, Japan, and Korea. India is not alone.

Punjab agitators want Prime Minister Narendra Modi to repeal all three of his land reform laws. But these laws are very sensible. One allows farmers to sell their produce anywhere in India, not just in government mandis, where they pay taxes and fees. The second establishes a framework for contract farming, which is voluntary and mutually beneficial. The third amendment is the Essential Commodities Act which has historically been used to prevent products from moving between states and to impose stock limits on merchants. The latter has made it impossible for merchants to build global-size department stores – any stock limit announced by a state government will turn store owners into instant criminals. The freedom to sell anywhere in India should be seen as a fundamental agricultural right, and stock limits should be seen as socialist dinosaurs frustrating a modern storage system. Modi must abide by all three laws.

Farmers in Punjab have benefited from government procurement of wheat and rice at a minimum price support, something that has not been done with other crops. Only 6% of Indian farmers benefit from MSPs, but they are concentrated in Punjab and have great influence. Modi has guaranteed that the MSPs will continue regardless of the new reforms, but farmers are concerned that the reforms are the first steps to ending the MSPs, so they want the laws repealed. Government stocks of rice and wheat are already three times what is needed for buffer stocks. The heroic farmers who once fed the Indians now feed the rats in government calamities. Surprisingly, physical audits have consistently shown millions of tons disappeared in government drops due to theft or rodents.

As long as MSPs are below the world price, surpluses can be exported. But when politics forces the MSPs above the world price, the grain goes dormant and feeds neither the Indians nor the world. It’s crazy to subsidize farmers to produce what the Indians and the world don’t want. Keep MSPs by all means, but link them to world prices. All experts agree that farmers must abandon agriculture en masse in order to increase farm size and income. Second, Punjab farmers should be encouraged to diversify into high-value fruits, vegetables and dairy products that will require much less water than rice and wheat rotation, and also reduce stubble burning.

But these are long-term goals. At this point, Modi should wait for the agitators. He should smile warmly at them, swear his heart goes out to them, guarantee the MSPs, and insist that they have been misled by opposition politicians. In fact, it should announce a big bonus for buying wheat in the coming rabi season. It should be brimming with sweet words and incentives, but stick with its eminently sensible reforms.

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