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SINGAPORE: India is in a bind over three controversial agricultural laws, prompting a major political backlash involving farmers.
Rebellious scenes and disorder have prevailed, particularly in the northern states of Punjab and Haryana, as major agricultural bills: the Trade in Agricultural Products and Trade (Promotion and Facilitation) bill, the Farmers Agreement (Empowerment and Protection) on Price Guarantee and Agricultural Services Law. and the Essential Products (Amendment) Bill: After being passed by Parliament, it obtained Presidential consent to become law on September 27.
The government and Indian companies have announced the new laws.
Indian Prime Minister Narendra Modi described the reforms as a “watershed moment” in Indian agriculture, while industry leaders such as S Sivakumar, head of agribusiness and IT at ITC and Kapil Mehan, strategy advisor to some Agribusiness companies and the first managing director of the fertilizer company Coromandel International – describes the changes as “transformative.”
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Despite the anticipated benefits, the new laws, however, have generated considerable political unrest, as commission agents, various farmers and opposition groups are angry that the reforms undermine state control over agricultural marketing, disrupting the economy and politics. that thrive around such control for decades.
The Congress Party, currently in government in the state of Punjab, seeks to capitalize on the discontent against the Modi government into a political opportunity by mobilizing disgruntled farmers across India.
Angry farmers took to the streets across India on Friday, escalating protests over a new farm bill they say will benefit only large corporations AFP / NOAH SEELAM
On Tuesday, Congressional Leader Rahul Gandhi criticized the government for the new legislation, writing on Twitter: “The farmers gave the country food security and the Modi government only betrayed them.”
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Rahul has made recent visits to Punjab and Haryana, where he held tractor demonstrations and public meetings against the new laws.
WHAT IS THE BONE OF CONTAINMENT?
Indian farmers have been selling their produce for several years in markets regulated by the Agricultural Products and Marketing Committee (APMC) laws of various states. The product is sold to commission agents designated by state governments under these laws.
The APMC laws have been the instrument of control exercised by state governments to monopolize the purchase and sale of agricultural products. Farmers have operated within this restrictive prism for decades without the opportunity to sell elsewhere.
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The Draft Law on Trade and Trade in Agricultural Products (Promotion and Facilitation) allows farmers to sell outside of APMC markets.
The bill removes restrictions on intrastate and interstate trade in agricultural products, allowing farmers in states governed by APMC laws to go beyond these markets and earn higher profits by selling elsewhere.
This should allow a greater flow of agricultural products from surpluses to the deficient states, promoting a national agricultural market.
Once these APMC markets are no longer the only option for farmers, states suffer economically and politically. Economically, they lose taxes, collected from vendors forced by the APMC to buy from farmers. These are substantial for a state like Punjab, which is leading the protests against the reforms.
Indian Farmers Pile Harvested Potatoes – The economy appears to have taken a turn with rapid growth in the third quarter. (Photo: AFP / Sam Panthaky)
Politically, over the years, the APMC laws have enabled and maintained a culture of patronage that is self-reinforcing. Formal intermediaries between governments and farmers have flourished, acting as interface agents between political parties and farmers.
The structure can change significantly if more and more farmers renounce CMPA.
DEEPER CORPORATE CONTROL
The political turmoil has also been fueled by the business interests of large corporations that dominate agricultural trade, which have been hampered as a result of policy changes.
The Farmers Agreement (Empowerment and Protection) on Price Guarantee and Agricultural Services Law encourages contract farming. It allows farmers to link directly with companies, exporters and retailers to supply products at predetermined prices.
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Apart from the assured prices, the changes allow the transfer of risks from the farmer to the buyer, safeguarding the former against unforeseen setbacks in production and allowing access to quality inputs.
Contract farming opportunities may encourage more inclined farmers to move away from APMC markets to engage with businesses, precipitating economic and political setbacks for state governments.
However, farmers are also concerned that this development could be a double-edged sword for them, as they fear being eventually pushed out of the agricultural market by corporate players.
Indian tea growers, many of them women, make a living, says Oxfam AFP / STR
The concern has been compounded by recent investments by foreign technology and retail companies, such as Amazon, Walmart and Facebook, in Indian telecoms and retailers such as Reliance Jio and Flipkart, fueling distrust of the corporate sector.
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Shiromoni Akali Dal (SAD) leader Harsimrat Kaur Badal, who resigned from Modi’s cabinet in September in solidarity with farmers, alluded to the example of Reliance Jio in a recent interview, in which he first cut prices for telecommunications and It increased them later, after acquiring a significant number of customers.
Harsimrat cited farmers who feel the same could be repeated in agriculture at their own risk.
MINIMUM SUPPORT PRICE
There is growing concern among farmer groups about the changes that are precursors to the discontinuation of the minimum support price (MSP) scheme for the purchase of food grains and agricultural products by the central government.
If farmers get better prices by interacting with businesses and if food supplies across the country stabilize from the free movement of products allowed by the Essential Products Act amendment of 1955, then the economic justification for the MSP, in terms of providing prices for their products, are greatly reduced.
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The central government could, over time, be tempted to discontinue the MSPs, given the high subsidies they imply for the treasury, in addition to the rising costs of grain storage.
Such an outcome will be significant for states like Punjab and Haryana, where large farmers have benefited for decades by downloading their products at predetermined MSPs.
The Modi government has assured the states the retention of the APMC and MSP.
An Indian farmer carries rice seedlings in a paddy field in the village of Rani, outside Guwahati, the capital of the northeastern Indian state of Assam, on August 4, 2017 (File Photo: AFP) .
However, the reforms clearly limit state government monopolies on agricultural marketing for decades.
They also disrupt the rent seeking incentive structure that has been consolidated over the years in rural India around markets for agricultural products. With the laws bringing large-scale disruption to the agricultural ecosystem, it is no wonder it has caused political ripples in India.
Whether the changes will significantly improve farmers’ prospects or not will depend on how they respond to the reforms and the benefits they realize over time. But for now the country should unite in what appears to be progressive liberalization for a millennial sector.
Dr Amitendu Palit is Principal Investigator and Director of Research (Trade and Economic Policy) at the Institute for South Asian Studies (ISAS), an autonomous research institute of the National University of Singapore (NUS). He can be contacted at [email protected].
