Quiet reforms by Narendra Modi- Double edged sword

Prime minister Narendra Modi's steps to tame food inflation may have given smiles to consumers, but brought tears to farmers, and evoked criticism by the opposition parties.

Concerned at ever-increasing food prices that hit the common man directly, Modi quietly ordered a series of measures by agriculture and food ministries that included reduced procurement of paddy, wheat and cotton and discouragement to populist incentives to farmers by the state governments.

Plight of the paddy and cotton farmers from a dip in the government's procurement brought all opposition parties together in the Rajya Sabha on Monday to warn the government of possible suicides by farmers and wonder what happened to all lofty promises the BJP made to farmers in the run-up to elections.

After his return from the US, the prime minister had asked the ministries concerned to buy only 25 per cent of the rice needed for supplies through the public distribution system or ration shops. The earlier practice was to procure between 35 and 70 per cent of the requirement. Reduced procurement of paddy and cotton and refusal to reimburse any incentive given by the states have brought farmers to situation where they cannot even recover their basic cost of production.

The quietly-initiated reforms in food procurement were designed to reduce waste and increase market supplies, thereby lowering consumer prices. The government has restricted the MSP increases for wheat and paddy to an economically bearable Rs 50/qtl, which is a third lower than the UPA's 10-year average of Rs 75/qtl. Prime minister has also restricted the powers of state governments to announce bonuses for MSP, a step which has affected BJP-ruled states as well. Chhattisgarh had added Rs 300/qtl for paddy. Other states like Kerala, Rajasthan and Madhya Pradesh added Rs 150/qtl as bonus for wheat, all during the 2013-14 season. These were populist measures to appease farmers as there was no need for these states to go for excess procurement. Officials here told dna that it was only reducing availability in the open market, even though buffer grain stocks were already raised to 49 million tonnes in 2014-15, or 133% higher than the required stock of 21 million tonnes.

Officials boast that in order to contain food inflation, the Prime Ministers' Office (PMO) had categorically asked food and agriculture ministries to ignore pressure from powerful agriculture mafias comprising commodity speculators By limiting the levy ratio on rice mills to 25%, the government also ensured more grain for the market. "These steps have damaged the ability of hoarders and speculators to boost prices, and have led to a cooling off of rice and wheat prices in the market," said officials.

Oppn up in arms
The opposition parties and farmer lobbies have strongly reacted to these steps. Opposition parties led by Congress forced two adjournments in Rajya Sabha on Monday. Congress leader Ahmed Patel said cotton prices have fallen from Rs 7,000 per quintal last year to Rs 3,000 per quintal, driving farmers to commit suicide. When UPA was in power, he said, the Cotton Corporation of India (CCI) was instructed to purchase cotton from farmers at right price but this year no such instruction has been given. Former agriculture minister Sharad Pawar (NCP) said the textile minister, in response to his letter on the issue, has said that the minimum support price this year is Rs 3,750 to Rs 4,050 per quintal depending on cotton varieties. This compares to MSP of up to Rs 5,900 per quintal last year, he said. According to an estimate, the net saving of subsidy on account of the government directive will be over Rs 5,000 crore, a little less than five per cent of the total annual food subsidy bill of Rs 1,15,000 crore.