October 21, 2000

Perils of political protectionism
The Jai Kisan trap

The state underwrote all your inefficiencies. If farming is to continue to be managed on these principles, how is it different from the PSUs?

Rajiv Gandhi may or may not have been lying when he claimed that neither he nor any member of his family had benefitted from the Bofors gun deal. But he certainly told a stupendous lie when, while addressing the joint session of the US Senate and Congress on his visit to Washington in June 13, 1985, he claimed that the bulk of India’s economy was agricultural and all of it was privately owned, with no state controls. It was a lie then and now, 15 years later, it still remains a lie.

Otherwise, why did the Centre buy Rs 350 crore worth of diseased paddy from Punjab’s farmers?

Agriculture, or more precisely the kisan, is the most formidable holy cow of the socialist era. You can question waste in the government, curse bureaucratic obstructionism, condemn public sector undertakings for their loss making. But you cannot question the farmer for low productivity or bad quality. How can you go against the spirit of jai jawan, jai kisan? All political parties tell the farmer, through actions like buying diseased paddy, that he need not bother about efficiencies or quality. The state—and the taxpayer—are there to bail him out. With such security why should he bother to improve farm practices or bring in any degree of creativity or enterprise into his business? Is it any surprise then that our most fertile farming regions are trapped in the paddy-wheat cycles with no incentive for anybody to do anything imaginative?

How is this protectionism and state interventionism any different from the way we ran the public sector? You could produce whatever quality you wished and at any cost. The state underwrote all your inefficiencies and waste. If farming is to continue to be managed on the same principles, how is it different from the public sector? Except that the State doesn’t directly pay your salaries and that you end up doing a lot more hard work unlike PSU employees of yore.

The latest bailout is no exception. In October 1998, almost to the date, Punjab Chief Minister Parkash Singh Badal had come to Delhi with the same request. Because of unseasonal rains, he said, the paddy had been damaged. So the Centre increased the acceptable amount of broken rice from 22 to 30 per cent and discoloration from 3 to 13 per cent. Subsequently his own party’s agriculture minister (in the Union cabinet), Surjit Singh Barnala tried to force this rice down the throats of the states. Nobody bought it and it all became a clean giveaway.

No matter how noble the farmer’s profession, no matter how much he sacrifices for our food security, any system that perpetuates a freebie mindset militates against the very idea of the free market which is what our farmer needs most of all. It is precisely because we remain frozen in the hungry sixties that we haven’t broken out of the jai kisan trap. This deification of the kisan, and his linkage with food security, has imprisoned us completely in the foodgrain trap. We therefore continue to be food surplus, which may be an interesting thing to say in the government’s anniversary celebration advertisements, but our farmer and the farm sector by and large continue to become poorer. So does the taxpayer.

This is how this particularly vicious cycle works. Because the state-owned procurement machinery is so foodgrain-centric, farmers — even in the green revolution zones — do not want to risk switching to cash crops. Punjab, Haryana and western Uttar Pradesh, for example, cannot think beyond paddy, wheat and sugarcane any more. All three bring poor margins, so the farmers’ incomes remain stagnant. But they provide security because of the support price-procurement syndrome. This goes on in spite of the fact that meanwhile grain production has improved a great deal in other parts of the country. We continue to produce much more grain than we can consume. But we continue to import huge amounts of pulses, edible oils and cotton that we could have produced.

Last year, for example, while the recommended level of buffer stocks was 24 million tonnes, the government stored 35 million, simply because there were no buyers in the market for that surplus. This year this will go up to 43 million tonnes. If stocks remain like this around the year, which they probably will, this will entail an additional cost of nearly Rs 4,000 crore per year (at nearly Rs 1,900 tonne per year carrying cost). This is nearly half as much as the food subsidy budgeted for this entire year and it is all being buried under mounds of rotting grain because no one has the courage to question the old jai kisan paradigm.

In the age of free markets, globalisation and economic reforms it is scandalous to perpetuate a system that so completely kills enterprise and innovation in the most crucial sector of our economy. What the grain surpluses tell us is that the entire agriculture sector is run with not a thought for the principles of the free market. If the market can consume only this much foodgrain and if it is not remunerative to export it, why produce so much? Why not encourage the farmer to switch to cash crops? Cotton and pulses for example. In Punjab and Haryana, soil and irrigation are eminently suited for these crops that consume much less water and energy but produce much higher returns. This will bring the farmer more cash surpluses, enable the government to keep its grain stocks within manageable limits and, meanwhile, non-traditional regions like eastern Uttar Pradesh and parts of Bihar can take over the job of producing grain surpluses. Already yields are up in those areas, partly because of the new skills and enterprise the migratory labour, which for years had been going to work in the fields of Punjab and Haryana, has brought back with it.

If that happens, everyone will be a gainer. The post-green revolution farmer in the north will make more money and break out of the current stagnation. The completely wasteful procurement subsidy will be saved and India will cut down substantially its imports of good quality cotton and pulses. Pulse imports, in 1997-98, for example, had touched Rs 1,200 crore, and with growing prosperity and improved nutritional standards, the demand for pulses is only going to increase. Even a few tens of thousands of hectares in the north shifted from paddy to pulses will make a big difference, besides conserving energy, water and fertilisers. In addition, the pulse crops, being leguminous, will put nitrogen back in to the soil.

This will happen only if the Badals of our world, instead of indulging in blackmail, were to go back to governance, communicate with farmers, clean up agricultural research and give people the confidence and the entrepreneurial dignity to go out and be a part of the new, free market. But why should they want to do this when all agricultural economics in India is such a successful political racket to buy the farmers’ votes with taxpayers’ money? You first pauperise the farmer and then give him tiny handouts. In return he sells his dignity and vote. This is why farming continues to be the most state-controlled sector of our economy, even a decade after we began dismantling the licence-quota raj.

 

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