How Prime Minister Modi Walked The Talk On Agriculture Reforms

If there is one politician who has been sticking his neck out and issuing a “guidance for the next few years and on concrete outcome basis” it is Prime Minister Narendra Modi. Symbolism is an important aspect of political communication (right from gareebi hatao of Indira Gandhi to achche din aane wale hai of 2014 campaign).

However, Prime Minister Modi has not only mastered the art of symbolic communication but has gone beyond that by promising to the stakeholders (country at large) the outcomes in concrete terms in a time-bound manner.

Some of the illustrative initiatives that were publicly announced and adhered to by his government:

In the backdrop of this illustrative list, one thing should be very clear to the country and opposition leaders in particular. That Modi means it when he makes a promise to the nation.

Even qualitative promises (ghar mein ghus ke maarenge, for instance) have been pursued with all seriousness at the earliest possible time. Even in some cases where the achievement was way off the mark (skill development for instance), no one can accuse the Prime Minister and his team of not pursuing all the required actions diligently.

In the current context, the Prime Minister has publicly stated that his objective is to double the farmers’ income by 2022 and make our economy a $5 trillion economy by 2025.

All measures soft and hard have been used by him in the past to ensure achievement. For instance, his call to the nation to give up subsidy on cooking gas cylinders was met with a huge success (Give it up campaign) with the use of soft power.

Also, tough measures like a massive cap on stent price leading to drop of around 85 per cent in price of stents from Rs 1.5 lakh to about Rs 30,000 were also taken with absolute ruthlessness in the larger interests of our society.

So, when the Prime Minister repeatedly has been stating that he will go all out to ensure

1. Farmers’ income will double by 2022
2. Implementation of farmer friendly support system in a comprehensive way – to use his words — “beej se bazaar tak”

There is absolutely no reason to believe that the Prime Minister’s words were for public consumption and not implementation.

Some of the initiatives undertaken by Modi government earlier in this agriculture sector are:

1. 100 per cent neem coating of urea
2. Kisan credit cards
3. Fertiliser availability via massive investment of about 48,000 crore in six plants (by 2021, India can be self-sufficient as well as capable of exports)
4. Soil health cards
5. PM Fasal Bima Yojana
6. More crop per drop — water availability
7. Testing labs for soil/fertility
8. Annual transfer of Rs 6,000 per farmer in tranches

However, all these steps fall within the value chain way upto but short of the “bazaar” — which lies only on the production side. The missing piece was the “marketing of the agricultural produce”.

To put things in simple terms: Price*quantity=revenue (P*Q = R)

Doubling of the agricultural revenue is the stated aim.

Initial six years were spent on improving quantity by removing constraints on the supply side.Quantity increased from about 250 million tonnes of foodgrains in 2014 to about 291 million tonnes in 2020. It can be expected that by 2022 about 25 per cent increase may have happened from 2014 base line.

Assuming the price to be almost constant, the best that the Prime Minister could have achieved would be around 30 per cent increase in revenue (thanks to increase in quantity alone).

So, it is very common sensical to expect that the Prime Minister would have to address the issue of price realisation for the farmer to ensure that revenue doubles by 2022. In other words, break the monopsony of the Agricultural Produce Market Committee (APMC).

Market Structure — The Bottleneck

Prime Minister Modi realised this crucial aspect and worked on a softer version of this tough measure by e-NAM to connect all the mandis across the country through an electronic platform.

However, technology once again is a tool in the hands of the market structure and final outcome is largely an outcome of the structure. This exploitative structure didn’t allow the farmers to get a good price across country.

To explain — the structure of APMC can be called what is technically known as being closer to “monopsony” (where there is only one set of buyer and large number of sellers. This is a mirror image of a monopoly with one seller and large number of buyers).

APMC, which was intended to help the farmers realise good price, actually exploited them by forming a cartel of merchants, who would depress price of the perishable goods and therefore make humungous margins when they sell at a higher price to the end consumers.

There was no option other than to overhaul this market structure — from its current monopsonist mode to a more competitive mode — so that the huge margin appropriated by the middlemen is drastically reduced and farmers get a fairer price.

And this increase in price realisation for the farmer with an incremental increase in the quantity should more than double income for farmers as the simple equation P*Q=R shows. Indeed, the Prime Minister has walked the talk. And he is being highly predictable, given his public promise of ensuring this outcome.

The surprising part is that the opposition leaders “pretend to be surprised”.

1. Modi has been making the “beej se bajaar tak” reforms talk for years.
2. Agricultural standing committee 2018-19 has looked into these issues in agriculture sector in greater detail.
3. A high-powered committee of seven chief ministers was formed in July 2019 to recommend measures to address these issues.
4. Ordinances were promulgated on 5 June 2020 to bring in these reforms (due to the Covid-19 pandemic monsoon session was expected to get delayed)
5. In mid-September 2020, Parliament brought in bills to replace the ordinances.

And still, the opposition creates a ruckus and chaos — as if this was unknown and happened overnight.

It is time for the opposition to buck up and also compete with Modi and Bharatiya Janata Party on the politics of development and not still hold on to the old school politics of patronage, pilferage and promise only in the air. Someone should remind the opposition, that their manifesto contained the same promise, election after election. Just that Prime Minister Modi walked the talk!

Dr Samir Kagalkar is state convener of BJP Economic Cell, Karnataka. He holds a doctorate in strategy and policy from IIMB, and MA in Economics from GIPE, Pune.