Genuine farm reforms would have helped a lot
Given that the caste arithmetic was stacked against him once Nitish Kumar and Lalu Prasad decided to tie up in Bihar, prime minister Narendra Modi needed a strong counter-narrative of the mandal-vs-kamandal that revived the BJP’s fortunes after LK Advani’s rath yatra, or the development-vs-UPA-corruption that swept Modi to power. That counter-narrative, especially in a state like Bihar that has such a high proportion of agriculture-dependent households, could have been farm reforms, but sadly the prime minister completely missed this. Initially, when Modi came to power, and appointed the Shanta Kumar committee on reforming Food Corporation of India (FCI), it did appear the government was going to unleash farm reforms, but that seems more hope than anything else today. Indeed, with agriculture growing by just 1.5% per year in the first four years of the current Plan period, farmers are likely to be more anti-BJP than in, say, the UPA years when, thanks to a variety of reasons, farm wages were galloping.
The arguments, espoused most vociferously by FE columnist Ashok Gulati, are fairly simple and, apart from benefitting farmers, will also help fixing the environmental degradation India is faced with. A NITI Aayog panel has also suggested some agriculture reforms—introducing a system of deficiency payments to farmers to compensate them if the price falls below the minimum support price (MSP)—but these are interventionist, a much better way is to allow farmers to respond to market initiatives. Today, as is well known, farmers really benefit from high MSPs in wheat and rice primarily, but these are largely restricted to 3-4 states. Add the fertiliser, power and water subsidies, Gulati points out, and it turns out India spends around Rs 200,000 crore a year on this—divide this by the net sown area of 140 million hectares, and the Centre and states can give farmers Rs 14,000 per hectare in cash instead of the subsidies that are captured by just a small minority of farmers. Add in the amount wasted in the FCI system, and the cash payment can be raised dramatically. Imagine what this would do to farmers incomes—and their voting patterns—in states other than the handful in which FCI operates; also with government subsidies no longer restricted to cultivating wheat and rice, farmers will be free to grow whatever crop they wanted in response to market prices. The FCI system encourages farmers to grow rice in Punjab where 5,389 litres of water are used for every kg of the crop—transferring this to West Bengal would save Punjab’s soil from further degradation while saving water since high humidity there means the crop needs just 2,713 litres. Similarly, with money saved from the FCI-system, and perhaps a tax on exports of water-intensive crops like rice, the Centre could pay 70-80% of the R20,000 crore or so it would cost to insure the bulk of cropped area each year—in which case, even in a drought, farm incomes would be protected.
Developing national farm markets, as the NITI Aayog panel has suggested, would also go a long way in getting farmers on Modi’s side since they could move their produce to the best markets. This, however, requires removing restrictive mandi laws like the APMC (Maharashtra has made no move on this), scrapping huge mandi taxes like the 14.5% in Punjab and Haryana (both BJP-ruled), allowing inter-state movement of commodities, and scrapping of commodity stocking limits—getting all states on board will take forever, but even the BJP-ruled states haven’t made a start. It’s too late for Bihar, but not for the other states going to the polls over the next two years like Uttar Pradesh and West Bengal.