Modi Should Hold Firm against Farmers

For over four months, agitating farmers have surrounded India’s capital, New Delhi, often blocking major roads and railway lines. They stormed Delhi’s fabled Red Fort on India’s Republic Day, January 26. The protesting farmers want the repeal of three farm reform laws enacted in September 2020, and all attempts at compromise have failed. The Supreme Court suggested resolution by a committee of experts but the farmers rejected the committee. The spectacle of thousands of farmers camping in tractors in the winter cold around Delhi for so long has drawn admiration and sympathy from many in India and abroad. Yet the farm reforms are actually overdue changes that will benefit Indian agriculture in the long run. The agitators represent the richest, most subsidized farmers rather than impoverished victims. Farmers in all democracies form powerful voting blocs that extract concessions from governments. India’s farmers are no exception.

Many countries have price supports for farmers. India instituted Minimum Support Prices (MSPs) in the 1960s to persuade farmers to switch to the high‐​yielding varieties introduced by the Green Revolution. Absent MSPs, local gluts would have arisen, prices would have crashed, and farmers would have abandoned the new varieties. The Green Revolution started with wheat in the states of Punjab and Haryana, near Delhi, which have always boasted the highest yields. Their farmers were long hailed as heroes for transforming India from a starvation in the 1960s to self‐​sufficiency in the 1990s and later a net exporter.

But this came at a cost. Using their voting clout, they created competition between political parties to provide ever cheaper inputs. They now get electricity and canal water free, and fertilizer and bank credit at highly subsidized rates. This has been environmentally disastrous. Free electricity ended incentives for energy‐​efficient pumps or controlled irrigation. For the summer crop, Punjab farmers switched from traditional maize to rice, a water‐​guzzling crop made very profitable by free water and electricity. Over‐​pumping has destroyed aquifers and lowered the water table dramatically. First, drinking water wells ran dry. Then the shallow borewells of smaller farmers ran dry. The richest farmers with the deepest borewells benefited most.

Punjab and Haryana farmers harvest their rice crop in October to November and then burn the stubble to enable quick sowing of winter wheat. The resultant air pollution kills and maims thousands in Delhi and neighboring areas. Laws enacted to stop stubble burning are ignored with impunity.

Economist Ashok Gulati reveals that Punjab farmers get annual power subsidies of $1.1 billion and fertilizer subsidies of $665 million, averaging $1,626 per family. This is close to India’s per capita income. In addition, farmers get subsidized credit, periodic loan waivers, and cash grants that vary from state to state. High real farm income in Punjab translates into high land prices of around $100,000 per acre, so even small farmers with five acres are among India’s wealthy.

Of the three proposed reforms, one abolished compulsory sale by farmers in government‐​regulated markets within each state, freeing farmers to sell anywhere in India and avoid market taxes. The second amended old legislation that empowered state governments to block inter‐​state movement and place stock limits on what traders could hold. This latter clause made it impossible for modern private sector warehouses to come up. The new law will facilitate modern private sector warehouses. A third law created a legal basis for contract farming. All three measures have been recommended by agricultural experts for years.

But Punjab farmers have interpreted the reforms—correctly—as the start of a process to end ever‐​rising government subsidies and support prices and move towards a more market‐​oriented system. They prefer the status quo, where they can use voter strength to extract ever more rents from the government. They will not be able to do the same in a free market system.

Only 6% of Indian farmers benefit from government procurement of wheat and rice, but these are concentrated in Punjab and Haryana. Two major farmer associations in the states of Maharashtra and Andhra Pradesh have welcomed the reforms, but the Punjab farmers are close to Delhi, have surrounded the capital, and claim to speak for all farmers.

To end the agitation the Modi government has already promised too much—assured continuation of free electricity and procurement at minimum support prices. Yet the farmers will not budge an inch on demanding repeal of the three reforms.

An authoritarian government like China’s would have quashed the agitation by force. That is not possible in democracies, where the farm lobby can use its voting clout to extract concessions unavailable to other forms of livelihood. This is a sort of blackmail. The government should hold firm against it. The storming of the Red Fort, and raising by some farmers of the blue flag associated with the Sikh secession movement in Punjab, have already cost the agitators some public support.

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