For democracy’s sake, Modi government must now stand firm on new agricultural laws

Those who unleashed violence on India’s Republic Day have lost moral authority to speak on behalf of the country’s farmers. The world watched in bewilderment at the premediated attempt to hijack India’s celebration of democracy and quest for much needed reform of its economy. The Modi government must now for the sake of democracy stand firm, writes India Inc. Founder and CEO Manoj Ladwa.

It was shameful. It was unedifying. It was violent. The so-called “peaceful” tractor rally on January 26, India’s Republic Day, by some farmer unions protesting against three new farm laws passed by the Indian Parliament turned out be the exact antithesis of what a Gandhian satyagraha (a policy of passive and peaceful political resistance as advocated by Mahatma Gandhi against British rule in India) should be.

India shamed by mob violence

Using tractors as battering rams, protestors broke down police barricades, destroyed public property, deviated from agreed upon routes and ran amok in India’s capital, injuring nearly 400 policemen, who showed commendable restraint in the face of grave provocation. One protestor also tragically died when his tractor overturned after hitting a security barricade.

Since most of the protestors happened to be from Punjab (and some from Haryana and Uttar Pradesh), many of them sported turbans, giving the protests an unfortunately misleading religio-ethnic identity that couldn’t have been further from the truth.

The laws they were ostensibly protesting against – the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 and Essential Commodities (Amendment) Act 2020 – were conveniently forgotten in the mayhem. Perhaps what the instigators of the violence exactly wanted.

The main objective: Embarrass Modi

The main objective seemed to be to embarrass the Modi government in the eyes of the world on the 72nd anniversary of India’s constitution and the sacred pillar of democracy on which it rests.

IMF says new laws will benefit farmers

In my view, and in the opinion of several neutral experts around the world, including IMF Chief Economist Gita Gopinath, the new farm laws are a much-needed palliative for the ailing Indian agriculture sector and have great potential to raise farm incomes. Gopinath said so in Washington just three days ago.

“Reform is always a difficult process… these laws will help widen the market for farmers and allow them to sell to multiple outlets without having to pay tax. And this, in our view, has the potential to raise farmers’ incomes,” she said.

The historical background

Then why are farmers protesting? Since the Green Revolution of the 1960s, farmers in Punjab and Haryana have benefited from subsidised inputs, cheap or free electricity and water and guaranteed offtake of wheat or rice at remunerative prices.

This has created a vicious cycle and de-incentivised investments in services and industry related to agriculture. It has also created an ecological and economic crisis in these two states.

There’s a historical reason for the incentives that have been provided. These were meant to be temporary measures to navigate India out of the food crisis it was facing in the early decades after Independence as the fertile lands of West Punjab went to Pakistan and in the 1960s, Burma, which was the rice bowl of Asia, shut itself to the world.

Lukewarm response from farmers outside Punjab, Haryana

Incidentally, farmers in other parts of India, who didn’t benefit from the same incentives as those in Punjab and Haryana, have been conspicuous by their absence from the two-month-old protests on Delhi’s borders.

Cost arbitrage

If Indian agriculture has to become part of the global supply chain – if it is to benefit from the cost arbitrage as Indian IT did in the 1990s and continues to do – the farm sector in India has to get into a partnership with Indian and global industry.

That’s what the three new farm laws facilitate. And that is what the vested (and largely corrupt) interests who benefit from the current system want to prevent.

Himachal farmers steal a march over others

Let me give you the example of Himachal Pradesh, which was part of the undivided Punjab province; it was carved out as a separate entity after Independence and became a full-fledged state only in 1971. It is among the more prosperous Indian states and its economy depends mainly on horticulture, fruit and vegetable farming and its linkages with the food processing industry. None of these farming activities are supported by government-mandated price guarantees like the Minimum Support Price (MSP).

So, it is a fallacy to state that farmers will be denied remunerative prices if MSP is not written into the law. And here, I must add that contrary to the falsehoods being peddled by some farm leaders and Opposition parties, the three new laws do not mention MSP even once; so, there is no question of these laws revoking this price guarantee.

Contract farming benefits both MacDonald’s, farmers

Let me take another example. When MacDonald’s entered India in the 1990s, it needed a particular variety of potato to make fries. That variety wasn’t grown in India.

It sought support from the Canadian company McCain, which tied up long-term contracts with farmers in Gujarat for cultivating that particular potato variety under contract. This has proven to be mutually beneficial to both the farmers as well as the McCain-MacDonald combine.

Now, not only does McCain supply potatoes to MacDonald’s, but it also makes a number of ready to fry potato products not only for the Indian market but also exports these to South East Asia, China and elsewhere, thereby, establishing India as a part of the global supply chain in the food processing industry.

So, it is a complete lie to say the new contract farming law will hold farmers hostage to corporate interests and is a backdoor ploy to snatch lands from them and hand them over to large companies allegedly aligned to the ruling party. In fact, there are express provisions within the proposed laws the protect the rights of farmers against corporate dominance.

New system to give farmers more choice

Meanwhile, the existing system under which farmers sell their produce to government-approved agents in officially sponsored trading zones, is not being done away with. The new laws give farmers the choice of either continuing with the extant system if they are happy with it or moving to the new system if they find it more remunerative.

I have spoken to several independent experts. The consensus among people who should know is that they will help raise farm incomes and increase the Indian farming sector’s linkages with the global supply chain. Modi is no fool to initiate reforms that will do anything other than benefit his biggest voting constituency. And if he has, he will pay the price at the next election. Simple, sensible democracy.

Fear of the unknown

But the fear of the unknown is being exaggerated by the well-entrenched vested interests who will stand to lose heavily if the farmers are empowered by the reforms being ushered in by the Modi government.

The government has indicated that it is willing to amend specific clauses if the protestors can make out a case that these will help farmers. But the protestors have repeatedly spurned the government’s offer for a clause-by-clause discussion on the three new laws, as their arguments are stacked up on emotion and fail on logic.

Government should stand its ground

The Modi government should stand its ground on the farm laws and not give in to the pressure tactics of vested interests who want to hold back India’s progress for their own benefit. The rest of India and the world need India to reform, to open up, and be that great engine of global growth that is so much now needed.

Manoj Ladwa is the Founder and Chairman of India Inc. Group

(Source: India Global Business)

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