NEW DELHI -- India's latest agriculture reforms, which Prime Minister Narendra Modi says will help double farmers' income, have sparked a massive uproar, with opposition parties and growers calling them "anti-peasant."
Amid protests by farmers, mainly in the northern states of Punjab and Haryana, Parliament this week cleared three bills aimed at liberalizing the agriculture sector. The government expects the legislation to bring transparency and accelerate growth in the agriculture sector, to attract private investment in supply chains and farm infrastructure, and to create new employment opportunities in rural areas.
About half of India's workforce is employed in agriculture, a sector that contributes 15% of the country's gross domestic product. Farmers rely on fickle monsoon rains, keeping productivity and profits low. Many end up deep in debt and resort to suicide.
As part of the new reforms, farmers will be allowed to directly enter into selling agreements with food processing industries and agencies, wholesale and retail traders as well as exporters. They will be able to sell their products at competitive rates to private players anywhere in the country, instead of just at government-regulated wholesale markets, or mandis as they are commonly called, where they receive a minimum support price. The MSP is a government-fixed benchmark designed to protect farmers from sharp price falls in times of bumper harvests.
Farmers fear the reforms will lead to the dismantling of mandis and the MSP, leaving them at the mercy of private players who may go below a price floor despite government assurances that the traditional markets and MSP will continue, and that growers will be free to choose mandis or other buyers. Farmer groups across the country have called for mass protests on Friday.
Dharmendra Malik, a spokesperson for the Bharatiya Kisan Union, a major farmer's body, said over 100 agriculture unions are joining the demonstrations on Friday, demanding that the MSP be made their "legal right" regardless of who they sell to, and that the government guarantee it will continue to procure food grains and other products at least at MSP rates.
"There will be 3,000 to 4,000 protest spots across the country, including in states such as Haryana, Punjab, Madhya Pradesh, Rajasthan, Karnataka and Tamil Nadu, with every protest expected to gather about 1,000 participants," he told the Nikkei Asian Review, giving a rough estimate.
"The current bills that also allow contract farming and permits [traders and retailers] stockholding [of commodities] are aimed at benefiting corporate houses only," he added. "Now, these houses do not need any license to make purchases from farmers and would not be regulated by mandis anymore."
The reforms are being ushered in as the country battles a surge in COVID-19 cases. India has reported more than 5.5 million infections and 90,000 deaths so far. The reforms also come as India tries to revive an economy that took a 23.9% year-on-year fall in April-June, the country's worst quarter on record.
Calling the bills' passage "a watershed moment" in the history of Indian agriculture, Prime Minister Modi said, "For decades, the Indian farmer was bound by various constraints and bullied by middlemen. The bills passed by Parliament liberate the farmers from such adversities."
He added that the reforms "will add impetus to the efforts to double income of farmers and ensure greater prosperity for them."
The main opposition Indian National Congress has slammed the move as a "black law" -- a law that goes against the interest of the people. "Democracy has been shamed by the manner in which the government issued a death warrant against farmers [by passing the bills in the Parliament]," party leader Rahul Gandhi said.
A ruling alliance partner whose voter base is in Punjab also protested the bills, with Harsimrat Kaur Badal, the food processing industries minister, resigning from her post last week.
"We must also try to understand that [middlemen or commission agents] are also [involved in] actually making the markets," said Sunil Kumar Sinha, principal economist at Fitch Group's local arm India Ratings and Research. But the bills are designed on a perception that "the role of the middlemen is bad because they ... appropriate most of the profit."
"Just imagine, if a stock market didn't have brokers, [could people on their] own be able to trade and then survive?" Sinha said. "So, bringing certain regulation and streamlining -- that could have been one option."
There currently are no rules applicable to these market makers.
Sinha continued, "So, there is a tremendous amount of hand-holding, which is required if you really want to transition from the current system to an alternative system ... but there is no talk about that."
The India Ratings economist drew a parallel to India's goods and services tax, or GST, whose chaotic implementation in 2017 disrupted business activity.
Sandip Das, a New Delhi-based agriculture expert, said the apprehensions that government-regulated mandis will disappear are unfounded. Das pointed out that the previous INC-led government delisted fruits and vegetables from the mandi system, yet these commodities are still sold at these markets as well as outside. "The bill that allows all farm commodities to be sold directly anywhere in the country is just an extension of what the [previous government] did with fruits and vegetables," he said.
As to why the farmers in Punjab and Haryana have been among the most vocal in protesting the reforms, Das said middlemen have a strong influence over farmers in the states and do not want the ongoing system to suffer in any manner.
"These middlemen charge 2.5% commissions [on what is sold in the mandis at the MSP], which is a very huge amount of money," he said. "There is also a 2% to 2.5% mandi fee [in the two states] as compared to just 1% in other states."