It was the quickest retreat that any government has made in recent times. It took just a day’s protest outside Parliament before the United Progressive Alliance (UPA) government decided to withdraw the controversial provisions of a notification it had issued last month on the payment of fair and remunerative prices to sugarcane farmers.
You may describe it as an instance of a responsive government. After all, in a democracy, a government must listen to the legitimate demands of its people. Indeed, the opposition political parties hailed it as a victory of India’s democracy. Within the government, there was even an attempt at justifying this policy retreat as a sign of alert ministers who did not allow the farmers’ protest to escalate into a political crisis.
How hollow these claims and statements are should become evident once we place in the right context the details of the order, its background and the manner in which the government rescinded its controversial provisions. Several points need to be clarified here.
One, the controversial order of the Union government had sought recourse to the Essential Commodities Act and mandated that a state government, keen on paying its farmers a sugarcane price higher than the fair and remunerative price fixed by the Centre, can do so from its own kitty. In other words, if the state government decides to pay a higher price to please its sugarcane farmers, it should not expect either the Centre or the sugar mills to carry the burden.
So, why should the farmers worry over this order? In an ideal world, sugarcane farmers should have knocked at the doors of the state government if they thought they deserved a higher price. Using the same yardstick of a responsive government in a democracy, the chief minister concerned should have taken a call on whether the farmers in the state should get something over and above what the Centre has mandated under its fair and remunerative price regime.
That is not what really happened. Sugarcane farmers, largely hailing from western Uttar Pradesh and many of them owing allegiance to a man called Mulayam Singh Yadav (who lost the battle for power at Lucknow to Bahujan Samaj Party’s Mayawati), decided to knock at the doors of the central government instead. It is strange but true. Mulayam Singh Yadav too played this game. Instead of putting pressure on Mayawati to give his farmers a higher price, by dipping into the state coffers, he blamed the Centre for having hatched a conspiracy to deprive the farmers of their dues. It is possible to argue that Yadav chose the Centre as his target of attack because that would have given him greater political mileage in the current political scenario. But that does not fully justify his move against the UPA government.
To be sure, the Centre’s order had two key provisions. The first provision was not against farmers. All it stated was that the additional burden arising out of a higher price determined by the state government should be borne not by the sugar mills but by the state exchequer. That argument was not illogical. But politics has strange ways of playing itself out. All political parties decided that the burden should be borne by the industry or the Centre and under no circumstances by the state government. Worse, even the Union government succumbed to that pressure politics.
Yes, the second provision in the Centre’s order went against sugarcane farmers. It had eliminated the system of sugar mills sharing their windfall profits with farmers in the form of higher prices for sugarcane. That brings us to the larger issue of the advance planning the Union government may or may not have done before ushering in the new fair and remunerative price regime for sugarcane farmers.
Last month’s sugarcane price order sought to bring about two important changes: Transfer the burden of higher sugarcane prices announced by the states from the industry to the state exchequer and freeing the industry from the burden of sharing its windfall profits with farmers. The first move had undermined the state’s freedom to dole out financial concessions to farmers at industry’s cost. The second move dealt a direct blow to farmers.
The UPA government should have anticipated the kind of reaction its order elicited and how both the state governments and the farmers were up in arms against the two key provisions of the new fair and remunerative price regime for sugarcane. Congress member of Parliament Rahul Gandhi is now being projected as the man who met Prime Minister Manmohan Singh and put an end to the crisis. But the UPA government and the Ministry of Consumer Affairs, Food and Public Distribution, in particular, should pause and wonder if they faltered in the way they tried to change the sugarcane pricing regime and subjected the ruling party to avoidable political embarrassment.
Whether it is the sugar industry or the fertiliser industry, there is a complex web of regulations that keep market forces largely out of the equation.
In 1991, Dr. Manmohan Singh, with his Prime Minister's support, dismantled decades of licencing and regulation in about four working days. This transformed the Indian economy and paved the way for the FM to become PM.
The government should now attempt similar wide-ranging reforms to take India to the next level. The sugar industry is as good a place to start as any other.
For the past six years since 2003 SMP was fixed around Rs 80 per quintal, way below sugarcane cost of production. Cost of labour has doubled thanks to NREGS and input costs increased by over 50% during the period and the SMP fixed was very unfair and un- remunerative. Hence farmers switched over to cultivating other crops as sugarcane farming proved to be a losing proposition and sugarcane acreage and supply declined. Therefore sugar production declined as a consequence. States fixed higher SAP for sugarcane. Naturally sugar prices doubled in the process, all because of un-remunerative SMP fixed by government for the past several years.
Government is floundering on the crystals of sugar again and again.
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