Why Did Modi Lose His Nerve On Farm Laws?

Modi had clearly not come to terms with the limits to a prime minister's powers, any prime minister's powers however strong numbers he may have in Parliament, observes Virendra Kapoor.

The pendulum seems to have swung fully to the other side.

For over a year the government determinedly stonewalled the demand for the repeal of the three farm laws, arguing these can be somewhat tweaked to allay the concerns of the protesting farmers but a repeal was completely ruled out.

However, in the last few days it has virtually yielded every demand, including the outright repeal of the farm reforms.

And withdrawn criminal cases against even those who had defiled the sanctity of the national flag at the Red Fort.

Further, it has agreed to consider the extraordinary demand of offering legal guarantees for the mandatory procurement at Minimum Support Price not only of wheat and paddy but 21 other crops.

Such abject surrender is puzzling, particularly for a government which had all most assiduously created an image of strength and firmness.

So, what happened?

What explains this transformation from a strong to a weak government which lost its nerve and yielded on all fours to a relatively minuscule group of prosperous farmers from Punjab, Haryana and western UP?

The proximity to the next round of assembly polls, including in the crucial state of UP, alone cannot be a sufficient ground for such surrender.

Could it be that Modi has persuaded himself to abandon the thankless task of reforms, especially if the targeted beneficiaries mulishly refuse to appreciate the potential gain they stand to reap by abandoning their old wasteful ways?

After all, you can take the horse to water, but you cannot make it drink, can you?

For any politician to keep one eye on the popular mood while pushing forward the reform agenda was always a tricky balancing act.

But Modi's problem was that he seemed to be in a hurry, to make up for the time lost when previous regimes had virtually taken the eye off from the farm sector reforms.

Indian agriculture in general had not seen any meaningful reform since the Green Revolution of the late 1960s and early 1970s, subsisting on all manner of subsidies.

Modi, who had earlier shown similar impatience with the stultifying land acquisition law bequeathed by the UPA, and two years later, in enforcing shotgun demonetisation, had clearly not come to terms with the limits to a prime minister's powers, any prime minister's powers however strong numbers he may have in Parliament.

In a democracy, 'demos' (people) cannot be taken for granted.

Hopefully, his retreat on the farm sector reforms would make him take the stakeholders along while initiating such a transformative exercise.

In this case, had he persuaded the states, particularly the BJP-controlled states, to implement the same reforms -- particularly when agriculture is a State subject -- the outcome would have been less embarrassing for the government.

Now, governments would fear undertaking reforms lest the entrenched vested interests ganged up against them.

The rollback of what was by all accounts a welcome attempt to free the farm sector from the stultifying stranglehold of big landlords and arthiyas was now sought to be further bolstered by the unreasonable insistence on a legal guarantee for the minimum support price regime for all 23 crops.

This way the growers not only would continue to be entitled to free power and water and highly subsidised fertilizers and seeds, but would also be guaranteed the purchase of the entire produce at cost-plus prices by the government.

A surer way to push the clock back on Indian agriculture and bankrupt State coffers was yet to be devised.

For the truth is, even without legal guarantees the current levels of procurement are unviable, exacting a huge burden on the exchequer.

The FCI can barely cope with the current levels of procurement with a sizeable portion of food grains rotting in godowns.

Already trillions of rupees on procurement essentially of wheat and paddy, while the procurement of other 21 crops is negligible, are earmarked annually, with the FCI procuring far above the mandated food security buffer.

Were the government to be forced to buy the entire production of wheat and rice alone the annual procurement budget would balloon over four times.

The current procurement though far in excess of the requirement is barely over twenty percent of the total production of wheat and rice.

Were the farmers to have their way, instead of industrialisation, building warehouses would become the most lucrative business with every nook and cranny in town and city, village and small kasba boasting of warehouses to store the procured grains.

As it is, the FCI outgo on renting warehouses is quite substantial; it would now multiply several times.

Assured of procurement at profitable prices, there will be competition to grow wheat and rice rather than non-MSP crops such as fruits and vegetables.

Even poultry farmers would switch to traditional crops given the assured returns.

While open market prices of procured grains will fall far below the MSP levels, there would be scarcity of non-MSP crops in the market.

Moreover, even the farmers who traditionally keep a part of the produce for their own consumption would sell the entire crop to State agencies while buying the food grains from the open market at rates far below the MSP.

Truly, they will rake in with both hands, the taxpayer emerging the sole sucker.

The lop-sidedness of the current farm sector policies will only get further aggravated by boosting the compulsory procurement of food grains.

The government has barely succeeded in resisting pressure from the World Trade Organisation against various subsidies offered to the farmers.

Should it extend these under pressure from the farmers, to all other crops and procure the entire production, member-countries are bound to demand punitive action against India.

It will be foolish to jeopardise the interests of crores of ordinary Indians for the sake of the belligerence of a small number of pampered big landlords of Punjab?

For no other sector of the economy exacts such a huge price on the national purse than the farm sector.

It may be that jobs in the non-farm sector are scarce but perpetuating the current practices of cultivation on the 90 percent of the handkerchief-sized landholdings will be counter-productive for the larger economy.

The salutary objective of moving people away from farms, and boosting productivity, cannot be achieved by further widening the MSP net.

Instead, the goal should be to ultimately do away with the need of MSP procurement altogether and allow market forces to level the playing field for all farmers, and not just for the fat-cat zamindars of Punjab, Haryana and western UP who move around in airconditioned limos while migrant labour tills the fields.

For a sense of sanity to prevail in the farm sector it is important that politicians of all hues reach consensus on farm sector reforms.

Feature Presentation: Aslam Hunani/Rediff.com