Farmers' protests in India show no sign of abating after nationwide road blockade

Protests by farmers in India, now in the their third month, are showing no sign of abating after demonstrators on Saturday staged a nationwide road blockade.

The demonstrators joined tens of thousands of farmers who have been protesting on the outskirts of the capital New Delhi since November.

The farmers want three new agriculture laws to be scrapped.

They argue the reforms will benefit corporates and spell the end of the government-backed agricultural model on which they depend. However, the government refuses to repeal the laws, insisting they will bring in much needed investment and help to modernise the sector.

Analysts and industry insiders agree that reforms are required as India's agriculture industry is deeply rooted in a decades-old system and has failed to keep up with the pace of development. The farm laws have the potential to improve efficiency and profitability, they say.

But some experts argue that is critical for the government to support the farm sector to establish a level playing field as it continues to liberalise agricultural markets.

“The farmer and big business are part of the same value chain and their interests need not be at loggerheads,” says Om Routray, vice president of marketing at SourceTrace, a company that provides digital services to agriculture businesses.

“For the laws to benefit all farmers, the government needs to remain invested in the sector – but the nature of that support needs to evolve.”

At stake is an industry that supports the livelihoods of about half the population. The protests are seen as the biggest challenge Prime Minister Narendra Modi has faced since he first came to power in 2014 and won re-election in 2019, helped by farmers' votes as he pledged to double their incomes.

Although agriculture is the country's biggest generator of jobs, its contribution to GDP has declined to about 15 per cent compared with more than 40 per cent in 1960, according to World Bank data. The rise of the non-farm economy and declining profitability in the sector have caused the drop, experts say.

This is linked to structural issues that have been plaguing the sector for years. At the core is the fact that the majority of the country's farmers have tiny, uneconomic land holdings following land reforms that took place decades ago, V Padmanand, a partner at Grant Thornton Bharat, says.

“The land distribution policy allocated land to tenant farmers, which got further fragmented and subdivided as the population increased,” Mr Padmanand says. “This further fragmentation led to a size where investment in farm level mechanisation and inputs became not very [economically] feasible or affordable.”

India's most recent agriculture census, published in 2018, reveals that 86.2 per cent of the country's farmers are small and marginal growers who own less than one hectare of land.

These "economically weak" small farmers have little capacity to invest, leaving them at the mercy of middlemen both for sourcing farming products and selling their produce, Mr Padmanand says. This eats into their profits, while wastage is rife because of inefficiencies.

At the same time, given the importance of agriculture in the country to feed the nation and the fact that it is a risk-prone industry – subject to unpredictable factors such as rain, drought and pests – it is dependent on some protectionist measures.

“India has a large population and a significant portion of them are below the poverty line who need to be provided basic food as per the Indian laws,” says Amit Sinha, co-founder of Unnati Agritech, an Indian platform that offers technology services to farmers. “This means that food grains have to be produced at certain volumes.”

Globally, agriculture is a sector that often relies on government support and India's subsidies are, in fact, lower than many other countries, experts say.

The liberalisation of the farm industry would boost private sector investment and help farmers get access to technology and better agricultural practices, which would create a more efficient supply chain and lift farmers' profitability, experts say.

“With the smallholder farming, the ecosystem is important to support them in evolving their farming activities and managing the risks,” Mr Sinha says. “With the evolution of technology and the wider adoption, the various interventions are becoming more targeted to the exact needs of the farmer.

“Traditionally, scientific farming was lacking in India” and the country needs to encourage farmers to adopt technology and proper use of fertilisers to improve cost management and output, he adds.

However, farmers are concerned the reforms will lead to a phasing out of state-run wholesale markets where they sell their produce and where certain crops are guaranteed with a minimum support price.

The reforms permit private trade outside of government-controlled markets. However, by opening up the sector to more buyers, corporates will pressure farmers to bring down their rates, opponents to the new laws say.

Most of the protesting farmers are from the northern states of Punjab and Haryana, which are major growers of staples including wheat and rice, and they rely on the state-backed system.

But the majority of the country's growers are not part of the minimum support price system. Many small farmers have ended up heavily in debt as they struggle to secure good prices for their produce, often because of inefficiencies in the supply chain or because of crop failure.

Many borrow money to invest in seeds, fertilisers and pesticides, and these economic challenges have resulted in a high rate of farmer suicides in India.

“The key aspect of the new farm laws is to provide options to the farmers for where he wants to sell the produce,” Mr Sinha says. “This would only help improve the avenues of earning. The farm laws would definitely benefit the sector. It will help bring farming in India more in synch with the market realities.”

Trilochan Sastry, a professor at IIM Bangalore and the founder of Farmveda and the Centre for Collective Development, says “in India, the situation is unique compared to the rest of the free market economies”, given that hundreds of millions of citizens depend on agriculture for their incomes.

Regardless of the debate about the pros and cons of the farm laws, Mr Sastry says “we need to find solutions for the never ending farm crises”.

Farmers with small holdings of land also need to set up large scale businesses such as cooperatives, known as farmer producer organisations, Mr Sastry says.

However, the new policies already have a dedicated scheme for the formation and promotion of farmer producer organisations and address key problems by encouraging aggregation and consolidation of farm activity, Mr Padmanand says.

“Today, the concern is not of shortage of agri produce as the Green Revolution [of the 1960s] had successfully converted India into a agriculture surplus economy,” he says.

“The concern and challenge is of management of surpluses. The agri ecosystem needs more efficient management in terms of planned production, as well as well marketed produce, so that farmers economically gain from the same and don't resort to distress sales nor perforce dump their produce.”

But as the farmers' protests continue, the demonstrations are a hindrance to addressing the critical challenges that would be tackled by the farm laws and are vital to the sector's future, experts say.