Big Basket

Farmers’ stir: Analysing the situation from two sides of the barricades; Who’s wrong?

(This is a reprint from NewsBred).

Farmers on foot, tractors, trucks have marched from Punjab towards Haryana and Delhi. Along the way, they have faced barricades, police resistance which morphed into tear gas, water canons and arguably some baton wielding. It’s not a pretty picture and the typical hubris of Modi government is painted in our newspapers. The stand off has refused to die down two months after the three Farmers’ Acts were passed by the Parliament in September.

Emotions are running high. So I would cut out the flourish and engage the readers in the simplest of language possible.

So, let’s first work out what the farmers want and what the Centre is loathe to give it to them. The essence of these Farm Acts is that (a) it’s now One Nation, One Agriculture market; (b) that farmers could engage with private players; and (c) No need to hoard the grains.

ONE NATION ONE AGRICULTRE MARKET: It implies that a farmer could sell his produce anywhere in the country. So, if I am a Punjab farmer, and couldn’t look beyond the mandis of the state (read Agriculture Produce Market Committee—APMC) thus far, I could now scan the neighbouring states of Himachal, Haryana or Uttar Pradesh and get the best price on my produce;

FARMERS COULD ENGAGE WITH PRIVATE PLAYERS: Farmers in Punjab are hampered on water and technological issues. The water tables of the state are so depleted that there are “Cancer Villages in Punjab” due to all the chemicals and pesticides. The simplest example on technological issue is the stubble-burning which makes Delhi a gas chamber and which the farmers’ can’t attend to because of the cost involved. Now farmers could engage private players for redemption on these fronts, including seeds.

NO STOCKPILING: The Centre says we have enough food. Farmers’ don’t need to stockpile but for exceptional circumstances. The State government wants to have it say. It’s not a major point in the present confrontation.

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Once these three Farm bills were moved, Shiromani Akali Dal walked out of the alliance with the BJP. The Punjab state government of Congress, led by Captain Amarinder Singh, moved a resolution which was passed by the state assembly to override these Farm Acts of the Centre. Yet, the agitation has refused to die down because the President of India hasn’t given his assent to the state assembly’s resolution.

The arguments from the other side, backed by the Punjab state government and passed by the assembly, are these:

(a)    The State government could notify the fee on any private or electronic transaction. So if you go to Punjab, as a private, player, the state government could actually levy tax on you (So whither Ease of Doing Business?)

(b)    Instead of a few hundred mandis, the whole Punjab state would thus become a mandi over which the writ of the state government would run large;

(c)     The Punjab state government says that the procurement of wheat and paddy should happen only on the Minimum Support Price (MSP). If it is bought for less, the state would have the right to punish the private player. The State say we are doing so to protect the future of farmers: What happens if the Centre changes its mind and does away the MSP for wheat and paddy?

It’s the MSP which is the stickiest of all points. The contention that private players in future could hold the farmers at their mercy is unfounded. As of last year, the total procurement by private players in the State was a mere 0.58 per cent. Further, under the Pradhan Mantri Garib Kalyan Yojana, some 80 crores of the 150-crore population are being given free foodgrains. The Centre would always need to procure foodgrains. The incitement to farmers that their future would be held to ransom is fallacious.

Sure, the MSP is not just important for the farmers. It’s also important for the Punjab state government. It taxes farmers to the tune of 8.5 per cent. Last year, the Punjab state government made 3600 crore revenue out of this exercise. This money, they claim, they spend on the welfare of farmers which includes free electricity and free water.

Naturally, MSP suits both farmers and the Punjab state government. Farmers get free subsidies. The State government affords it through taxation, most of which comes from the revenue that the Centre gives by procuring the foodgrains.

The Centre is loathe to guarantee MSP. One, there is little logic as outlined since the government would always need foodgrains. Two, as said, private players are miniscule in this game. Besides, wheat and paddy are not the only produce from Punjab. There is a flourishing dairy industry too. All could benefit if the market is allowed to take its own course.

Arguing in favour of farmers for “free” subsidies is the same if I go to my bank tomorrow and say I can’t pay my loan back because it pinches my pocket. That’s no argument. You can’t run a nation on this premise. Further private players, as said, could provide solution to a lot of lingering farm issues in this country. If the threat of a punitive State action is around, nobody would come forward. The farm situation would only worsen. E-commerce players like Grofers and Big Basket, a win-win for all, would suffer.

Now look at it from another perspective. This issue seems only to concern Punjab. The farmers in the rest of the country have no issue with these three Farm Acts. Wheat and Paddy and that too of Punjab farmers isn’t the entire India and its produce. Could a state hold to ransom which is good for farmers and sectors all across?

Now let’s delve on the political aspect of it. Captain Amarinder Singh and Congress know that the election is only a year and a half away in 2022. This is the right time to make a capital investment. Shrimoni Akali Dal too want to recover its lost ground. It’s BJP, who would fight all 117 seats alone. Who stands to lose the most? One should give BJP credit for persisting in face of such adverse poll logic.

There is also this question of middlemen. It’s not an inconsiderable number in Punjab: At the last count it was 36,000. The Food Corporation of India (FCI) gave them Rs 1,600 crores at 2.5 percent commission last year. They stand to lose the most if the monopoly of mandis (APMC) is done with. They also flourish under the political patronage. Both won’t like the new measures to kick in.

 

Modi puts his foot on the tail of the Dragon; and hopes the nation is with him

(This is a reprint from NewsBred).

India is decoupling itself from China, and not just from Line of Actual Control (LAC) in Ladakh.

India has banned 59 Chinese Apps used by tens of millions of its citizens and I would be surprised if the Prime Minister Narendra Modi doesn’t warn us of its fallout in his afternoon broadcast to the nation on Tuesday.

China would retaliate by pulling out its investments and factories and looking to cripple our telecom and pharmaceutical industry due to our over-reliance on its equipment and ingredients. Their smartphones have 72% of our market. Half of our electronic imports and two-thirds of our drugs depend on China. Why, even our bulletproof vests are made with material from China.

The investment and jobs we were looking in infrastructure (Tsingshan, steel) and automobiles (SAIC), not to speak of the names which are household such as Big Basket, Byju’s, Flipkart, MakeMyTrip, PayTm, Swiggy, Zomato etc could all take a massive hit. It could grow into a trade war and we the citizens of this country would have rising costs, lost jobs and hardships coming our way.

How do you think our cash-strapped telecom companies could cope? Or how diminishing incomes would react to rising costs? And not just demand, would the supply side be able to stay on its feet if walls go up?

Yet India must decouple itself from China. A nation which depends on enemy for its food, goods and materials don’t last.  Germany lost to Britain because of the latter’s blockade in World War I. Ancient Athens fell to Sparta who won’t allow supply of grains through the Black Sea. Why, Australia today is tabulating the cost of a diplomatic spat with China on its crop exports.

The free-trade advocates might whisper into your ears that its’ protectionism, that we are going to pre-liberalization era of 1991 but don’t pay heed. Instead ask: What kind of open trade China is if its subsidizing land, material and tax-cuts for its manufacturers, brutalizing its labour, just to make sure your manufacturing remains buried forever? It’s nothing but a return to colonial era when we exported raw material and imported finished products.

Time is ripe for India to actively intervene in markets. Put spine in India’s manufacturers. Write-off investments in machinery if required. Revamp land, labour and tax structures. Incentivize them to the extent they reinvest profits in men and material. We could then hope for our future generations to look after their parents. Our disabled soldiers to return to the care of their able sons and daughters

If nothing, listen to what Chinese said a few years ago in their economic White Paper of the 21st century:

“Manufacturing is the main pillar…the foundation of the country. Since the beginning of industrial civilization in the middle of the 18th century, it has been proven repeatedly by the rise and fall of world powers that without strong manufacturing, there is no national prosperity.”

India already has the assurance of US State Department which announced last year that Australia, New Zealand, Japan, South Korea and of course India would take care of its supply chains in a rewired world. The critical industries outlined are pharmaceuticals, medical equipment, semi-conductors, automotive, aerospace, textile and chemicals among others.

Many countries are already opting for China Plus One manufacturing strategy. Taiwan is now actively promoting “non-Red supply chain”; Japan has put $220 billion on the line for its companies to shift production back home from China. South Korea is doing likewise with easy regulations, financial aid and tax incentives to those who could “return” home. Italy has announced an emergency decree which empowers it to veto foreign investment in electricity, water, health, media, aerospace, banks, insurance, robotics etc.

Prime Minister Modi seems to have opted for the brave course of short-time pain to long-term suicide. He has put his political career on line. He had no business to walk down this road which could put India in some serious woes.  It might make us a little poorer, our goods more expensive but it would secure our borders, our future.  China’s cheap exports are a gift which we would pay with ocean of tears in future. Let’s do our bit for our motherland.