The Political Economy of Agricultural Policy Reform in India

52 CHAPTER 5

after the budget was called “anti-farmer,” it was able to increase the price in 1999 by announcing the price hike almost a month before the budget was presented.

Until the 2004 elections, economic reforms did not play a major role in national electoral politics. In general, public awareness about economic reforms was very low, particularly among the poorer population, including but not limited to agricultural laborers and people belonging to lower castes (Kumar 2004). Economic policies, including those affecting agriculture and allied sec- tors, were major issues in the 1998 and 1999 elections, both of which were won by BJP-led coalitions. However, those who disapproved of economic reforms tended to vote for the BJP in these elections, while those who approved tended to vote for the Congress Party. This trend occurred despite the fact that the BJP had committed itself to economic reforms in its mani- festo for the 1999 elections (albeit with nationalist overtones). The manifesto made no specific commitments on farm subsidies besides promising to con- tinue them and to “maximize benefits to all sections of agricultural popu- lation” (National Democratic Alliance 1999). Moreover, when the BJP was returned to power in the 1999 elections, the government made “second- generation reforms” the centerpiece of the administration. It announced its intention to decontrol and deregulate the fertilizer industry in a phased manner. The BJP national executive, the group of leaders who set national policy for the party, favored paying the fertilizer subsidy directly to the farmers. As an alternative, it suggested that the subsidy be abolished and the minimum support price increased in proportion to the increased cost of fertilizers (Bharatiya Janata Party 2001; Business Line 2002). The government was willing to consider complete decontrol of the fertilizer sector. Although the eventual policy proposals did not recommended complete decontrol, the ensuing discussions led to at least a partial reform of the policy framework governing the production and supply of urea.

In part, the willingness to review the subsidy issue can be attributed to the leaders of the MoCF: by all accounts, the minister, Suresh Prabhu, and the secretary, A. V. Gokak, were both committed to reform and decontrol. Partly as a result of his technocratic style and partly in response to impending removal of quantitative restrictions in conformity with a World Trade Organi- zation (WTO) mandate, Prabhu pushed the idea of decontrol of the fertilizer industry. Speaking at a meeting of the Fertiliser Association of India (FAI) in August 2000, he said that although the government was willing to help estab- lished fertilizer units to modernize or relocate to the coast in order to switch to natural gas, it could not, as the industry demanded, make special provisions for the problems “of all castes and sub-castes in the industry.” He was refer- ring to the industry’s demands for differentiated support to “pre-1990 and

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