Farmers in the Indian capital New Delhi are protesting against new agricultural reforms of Modi led Indian government rejecting four main initial proposals were ending the provision of free electricity to farmers, prevention of farm stable burning which is causing hazards to the environment, ending the monopoly of state-led Agricultural Produce Marketing Committees (APMC) in the procurement of agricultural products enlisted as essential commodities and removal of several food crops from essential commodities list.
In retaliation farmers’ unions led a massive protest for months in New Delhi. Modi government finally agreed to repel the first two proposals but refused to repel the last two. So the protests continued and resulted in the hoisting of Sikh religious flag in Red Fort on the Republic Day. A Sikh religious symbol is also part of Khalistan separatism and thus many experts are saying Khalistan movement is making a huge back riding on farmers’ protests. So Modi government is going for agricultural reforms at the cost of internal stability.
Agricultural Produce Marketing Committees (APMC) and Minimum Support Price (MSP)
Indian government procures essential commodities from farmers at a fixed price also called Minimum Support Price (MSP) so that farmers can cover their cost of production and crop traders cannot control the market and cannot force farmers to distress sell. This procurement is done at local Agricultural Produce Marketing Committees (APMC). The government uses this procured crops to supply to poor people for free or at a low price and maintain food security of the country. Farmers fear that allowing private traders to procure agro products and removal of many food crops from essential commodities list means the government will gradually reduce APMC activities and only private payers will be left. Thus procurement at MSP will gradually end overtime.
The difference in Procurement Rate among States
An important point is that MSP procurement varies widely among different states. For example in paddy, states like Punjab, Haryana, Chattisgarh and Telangana procurement is close to 90%. While for Bengal, Assam, Gujarat procurement is at most 10%. For UP and Bihar, it is 20% to 25%. For wheat too Punjab, Haryana and MP get above 60% procurement at MSP while for UP and Rajasthan it is 10% to 20%. Naturally, farmers from Punjab and Haryana are mostly involved in protests while farmers from other states are only partially vocal if not silent against new farm laws.
Why high MSP procurement offered in few states only
It is often said by Indian experts that successful MSP procurement depends on the provincial government’s drive. Paddy farmers throughout India can cover their cost despite facing a market price lower than MSP. While wheat farmers face on average a market price close to MSP. MSP is only incentivizing farmers to grow more than what is demanded in the market. So in reality MSP procurement has become a political issue. Rural families of Punjab and Haryana supply a huge number of soldiers in the Indian Army. Moreover, Punjab is a Sikh dominated province which had seen separatist Khalistan movement in the past. So MSP procurement of 90% of crops can be seen as a way to keep them happy and lure them away from any rebellious movement. Notably, Telengana, Chattisgarh and Andhra Pradesh which are known for Naxal (armed communist) movements also see high procurement at MSP by the Indian government. So it can be anticipated that sizing down of MSP procurement will help Khalistan and Naxal movements a lot.
Government Arguments in favour of Reforms
Since early 2010s economists like Ashok Gulati and K.N. Nagraj argued with data that a number of poor people have fallen in the last 40 years and so the government does not need to procure essential crops as much as before. If the government continues to procure like past it has to endure the high cost of storing these crops and there is no market to sell them. Moreover, unlike in the past, India is now a food surplus country and has no need to store such a huge quantity of crops unnecessarily. If procurement under MSP is reduced then paddy and wheat farmers will have to find a market for their products. This will lead farmers to grow high-value crops like high fibre oats, fruits, vegetables, etc. which have a huge demand in Indian cities. India has a growing middle class due to high economic growth for three decades and they prefer high-value crops which till now has to be imported. Thus reduction of MSP procurement will help India to substitute high-value agricultural product imports which will save precious foreign exchange.
Fears of Farmers
Farmers know changing from paddy or wheat to high-value crops will not be easy. High-value crops have to be marketed through corporate agricultural whole-sellers who will gradually dominate the agricultural market and farmers will be at their mercy. Already big Indian corporates have begun to make infrastructures for trading in agricultural products. Farmers know they cannot fight the might of big capital. Moreover, many farmers will be forced to incur losses and sell farmlands. From independent farmers, they will turn into wage-labourers of industries. History teaches us the eviction of farmers from farms to cities in the most effective way of getting cheap productive labour for industrialization. So farmers are afraid this historical process will start happening in a big way due to the new farm laws.
Why is Modi government taking the Risk?
Modi government knows it is risking internal stability by going for new agricultural reforms. Not only Modi government has to face the wrath of farmers in elections but the Indian state may end up facing a massive rise in separatist movements. Still, Modi is ready to take the risks because he knows India is falling further behind China every passing day. China has completed land reforms in the 1950s and invested heavily in health, education and physical infrastructure by 1970s. By 1980s China had disciplined productive and cheap labour force. Using this China won the global market by 2000s and is now on the way of becoming the number one superpower surpassing the USA in 2020s.
India in 70 years failed to initiate land reforms properly and failed to invest in basic education, health and infrastructures. So India is failing to compete in the global market. Its consumption-led growth is too much dependent on cheap imports of goods and capital. This kind of growth is failing to provide India with a manufacturing base. Without a strong manufacturing base, India is failing to provide its army with latest arms, ammunitions and technologies. Recent Ladakh episode clearly depicted how vulnerable India is before the military might of China. China is also providing Pakistan with the latest military equipment which is adding more pressure on India.
The Indian government had also watched the fate of the Armenian army at the hands of drone led Azerbaijan army. It is said Armenia used many India made weapons and its army is equipped with technologies still being used by India. News of high tech warfare of China in the land, water, air, cyber, space and electromagnetic fields is spreading too. India is clearly losing its South Asian backyards to China. So modernization of Indian army is the topmost priority and for that India needs a globally competitive manufacturing base which in turn needs agrarian reforms.
Can India Make it?
Agrarian reforms are a most hazardous and lengthy process for any country with strong agrarian tradition. India being multi-linguistic, multi-religious and multi-ethnic has to face much more hurdles than primarily mono linguistic West, China, Japan, Korea. So bribing some of the groups having strong bargaining chips is part of survival strategy for the Indian state. This bribing procedure is slowing down modernization of Indian economy and society. But slow modernization is making India vulnerable to the might of geopolitical rivals especially China. So India is feeling tremendous pressure to speed up the modernization process. History teaches us multi-religious, multi-linguistic, multi-ethnic empires like Ottoman, Austro-Hungarian and Czar has shown this tendency. They had to bribe many groups which slowed down their modernization which in turn made them vulnerable to external pressures. External pressure again forced them to speed up modernization. In the end, these empires got dissolved into many republics with fewer diversities and got modernized after that. Only time will tell if India is going to face the same fate.
India is politically dominated by internal Hindi speakers with 46% population share and 41% Parliament seats. Indian business is also highly dominated by Gujaratis. Haryanvis and Rajasthanis (Marwaris). Other groups with substantial population and ideal geographical location are voiceless politically and penniless commercially. Attacking their last resort i.e. farmland can be last straw on camel’s back. Indian state in its last 70 years mainly under Congress knew this hard reality and thus refrained from such actions. External pressure due to the rise of China is forcing the Modi government to take the dangerous path of agricultural reforms.
Recently the richest Indian province Maharastra’s ruling party Shiv Sena in its mouthpiece Saamna said that growing centre and province divide can ultimately balkanize India. West Bengal Chief Minister Mamata Banerjee also hinted the same by proposing shifting capital from New Delhi to different cities of India in different years. By 2026, Delimitation of Parliament seats will come when Hindi provinces will get a greater share of Parliament seats (according to their population share) and non-Hindi provinces will have even fewer seats in the centre. So we have to wait five more years to see if India can remain internally stable while trying to modernize its economy. History says no empires have succeeded yet.
DISCLAIMER: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy and position of Regional Rapport.