Indian farmers march on the capital Delhi to oppose new laws changing to the way crops are marketed, but the landmark legislation could benefit free-trading nations like Australia.
While farmers in India fight three controversial free-market agriculture laws, some experts say Australia could benefit from the landmark legislation to reform India’s massive farm sector.
Key points:
- Farmers have marched on Delhi to demand laws reducing state support be rescinded
- An Australia-based academic says the laws are well overdue and will benefit farmers
- India’s sugar export subsidies have already been reduced, and could be cut further
The laws could break up state control over the marketing of food and fibres, allowing farmers to sell directly to corporations, grow crops under private contract, and use e-commerce platforms.
Many staple foods have been removed from a list of essential commodities regulated by the state.
But despite an Indian Supreme Court ruling on Tuesday delaying the laws’ effect, Milind Sathye, a professor of banking and finance at the University of Canberra, said he expected implementation to begin soon.
“The protesters are not ready to talk, clause by clause, they just give one demand: repeal the laws,” he said.
Dr Sathye said the laws had become a political football for parties and regions opposing Prime Minister Narendra Modi, whose BJP party won a landslide re-election in 2019.
“Farmers in states with governments that oppose the BJP government, including Punjab and West Bengal, have been strongest in opposition,” he said.
“When the laws were passed it was the same unions now opposing it — opposition parties who were also saying they will bring reforms, in their election manifesto, are now opposing it and supporting the farmers.”
Critics have slammed the Indian Government over the timing of the laws during the pandemic, but Dr Sathye said 20 years of consultation was enough notice for the changes to be passed.
A committee of experts will meet with farmers’ groups for negotiations following the Supreme Court ruling.
Australian trade grows
While Australia and India have sought to develop a free trade agreement for nine years, high tariffs and difficulty making headway on key commodities like farm produce have stalled progress.
Despite this, two-way trade more than tripled between 2007 and 2018 to $30.4 billion, with many industries pinning hopes on India partially replacing the damaged relationship with China.
Dr Sathye said the agricultural element of the trade could be boosted by the new environment created by the laws.
“The new laws will enable exporters to access countries like Australia, where the price will come down for domestic consumers.
“There are a lot of advantages already; potato farmers in India have benefited significantly from the new laws.”
Sugar under pressure
Sugar market analyst Tom McNeill said the Indian Government’s system of price controls resulted in little benefit to the nation’s millions of small farmers, while causing headaches for industry and policymakers.
“Their income is only minimally impacted by slight rises, but what it continues to do is see overproduction, domestic prices fall, and government needs to step in and keep regulating,” he said.
Mr O’Neill said the constraints impacting the Indian budgets made the decision a timely one, with potential benefits for free-trading nations like Australia.
Surplus stockpiles in India totalling 6 million tonnes have been reported, with some blaming guaranteed sugarcane prices for farmers, leading the government to scramble to provide export subsidies and divert more to ethanol production.
Sugar mills, under pressure to turn a profit on the devalued product have, in some cases, delayed payments to farmers as a result of the tight margins.
Factories in the major production state of Uttar Pradesh alone could owe as much as 80 billion rupees ($1.4 billion) in payment arrears to farmers ahead of the 2020–21 harvest.
With storage facilities at capacity, an export subsidy of 5,833 rupees per tonne was offered by the Government in December, nearly half the previous year’s offer of 10,448 rupees and below expectations of 8,000 rupees.
Mr O’Neill said the announcement had led to a brief spike in the price, but reducing subsidies was a slow-moving fix to the low global sugar price.
WTO action impacts
Action to strike down India’s subsidies was launched in 2019 by the Australian Government, joined by several other major exporters of sugar.
The impact of the WTO dispute, in concert with a mounting tax revenue shortfall, could spell the end of generous subsidies, Mr McNeill said.
“In my view, that’s already beginning to shape that to some degree,” he said.
Dr Sathye said the action lodged against India could fail on a technicality, as it used the Indian rupee, rather than the US dollar to compare the subsidy rate.
“How is the subsidy calculated by the WTO? That mechanism itself is subject to dispute, that’s the point where the dispute really lies,” he said.
“There are other technical arguments too — that is something for the WTO to decide.”
A decision is due to be handed down in the second quarter of 2021.
