Awake, governments, or your fall is near!

A poll by Times of India suggests that people are getting fed up with governments, both at the central and in states.  ‘Inflation is beginning to hurt seriously, corruption is at an all-time high and the government is not doing enough to tackle either problem,’ is how Times of India sums it up.

The 8-city survey, though urban-centric, reveals people’s digust with government only doing lip service when it comes to prices of items of daily use.  Similarly, it displays the ‘enogh is enough’ mood of the people regarding scams tumbling out of government stallion.

Not only have people shown displeasure at constantly high inflation, they have said, they have indeed reduced consumption of some items, put off purchases or reduced savings. Six out of seven have blamed either the central or the state governments or both for this. Nearly two-thirds say, government has not done all it could.

On corruption, 83% say, it is at an all-time high. Three-fifths of respondents blame politicians for wide-spread corruption and over one-third believe that the government is not serious about the problem.  Almost everybody maintains that corruption scandals have tarnished the government's image.

• 97% say price rise has impacted family budget
• 86% blame Centre and state governments for inflation
• 62% say government hasn't done all it can to curb prices
• 83% say corruption at all-time high
• 60% feel politicians main culprits
• 64% say government not serious about tackling graft
• 96% say central government's image damaged by spate of scams

courtesy: Times of India

onion price hike: what's so great about it?

Onion prices have zoomed to Rs 80 a kilo in many retail markets in some cities. So what? Milk prices have again been raised, the second time within a year. Sugar and dal prices have come down from their peaks but the prices raised by halwais, tea-stalls, restaurants etc have not been reduced. India consumes  120 million tonnes of milk, 30 million tonnes of sugar and jaggery, and 15 million tonnes of pulses a year but only 10 million tonne onions.

So, why does the onion price rise make such big news?

You will say, "Onion price hikes in the past have led to government falls." Forget that, no government is going to fall due to this onion price hike. It won't impact even the coming state polls.

"OK," you might say, "Onion is put in all Indian vegetables and curries. It is a must in most non-veg preparations..." I beg to differ here too. That is not the reason onion is big news.

In my humble opinion, the answer lies with TV channels. Onion is bought whenever people go to the market to buy veggies and it alarms them if they find prices suddenly up. In the eyes of TV channels, this makes superb news-material. A channel last evening paraded a housewife who dutifully said, she won't be able to fire her heath. Another channel predicted that onion would rise to Rs 150 a kilo in a couple of days. In yet another channel, an illiterate anchor joined a similarly qualified reporter standing in a veg market to show with authority how the government failed to guess and then take corrective actions.

A colleague of mine in the electronic media was candid in admitting that onion was a big issue because there was not much juice left in Radia-Raja-Tata affairs to sustain viewer interest. "Think," he said, "if there were a bomb blast somewhere or a major air accident today, would we be chasing onions?" I got my answer.

PS
On a more serious note, the government failed miserably [like almost always] in taking timely action. Farmers' associations of Maharashtra and trade circles have been predicting this type of situation [though perhaps nobody knew that would be so sudden] for three weeks now. On top of it, where was the need for Pawar to make a statement yesterday that prices would come down, if they really do so, not before three weeks or so?

raising support prices of crops

For those who don’t know what food procurement and support prices mean in Indian context, this is a small primer.

India grows about 225 million tonnes of food grains and government agencies procure about 50 million tonnes of it from farmers in the harvesting season. Most of the grain so procured [mostly wheat and rice] is channelized into the state-run Public Distribution System or the rationing network.

Every year, the Union Government announces ‘support prices’ for main crops for the next season. Support price is the price at which the government commits to buy that commodity from the farmer if the market price goes below that, so that the farmer is assured of a minimum return. So, for the coming season [November-March], wheat, mustard, safflower, lentil and gram support prices have been announced. In practice, the support price does not remain a price to be paid during distress, as the procurement agencies are asked to proactively garner as much grain as they can.

Food Corporation of India is the coordinating agency for food grain procurement, storage, movement and disposal of stored grain. FCI, procurement agencies of different states and some cooperative giants carry out the actual procurement at major food grain markets and by putting up procurement centres in important production centres.

Over the years, the support prices of all crops have been raised substantially. A Commission on Agricultural Costs and Prices [CACP] comes out with the support prices based on a complex calculation to account for the cost of cultivation, profit margin, inflation etc, and the government tops it with some more for political reasons.

Government uses the support price also for giving cropping guidance – this year, the support price of wheat has been raised modestly from Rs. 1100 per quintal to Rs. 1120, while that for gram has been raised from Rs. 1760/q to Rs. 2100/q and that for mustard from Rs. 1830/q to Rs. 1850/q. Since India imports large quantities of gram and other pulses [and these are very important for nutrition security as India is predominantly a vegetarian nation], the government’s encouragement to farmers to grow pulses is understandable.

On the other hand, constantly raising food grain support prices leads to rise in food grain prices for bulk consumers such as mills and retail consumers. India’s food inflation presently stands at over 15.5% per year, and it is at least partly due to rise in support prices.

Economists, agriculturists and consumer groups, all criticise the system of support prices on one count or the other – mostly counter to each other’s points of view. But the system continues. It breeds lots of corruption, wastage and inefficiency in food trade. It also does not allow fair price discovery for farmers. The country ends up paying huge subsidies for procurement and storage. The country also loses a good deal of foreign exchange as it cannot sell surplus food grain when the global prices are high, due to political sentiment attached with food security.

In fact, India’s procurement will rise further if the government comes out with the Food Security Act [guaranteeing food grains to all, as a matter of right] – this is the promise the Congress made during the last general elections.

hiding behind growth figures to explain inflation, mr. finance minister?

Finance Minister of India, Mr. Pranab Mukherjee, yesterday said in parliament: "There is no question that the strong recovery, desirable as it is, has contributed to an acceleration of prices.” He explained it and it was convincing.

But Mr. Mukherjee, what you said is part of the story and it is so when we are talking about inflation as it is measured by statisticians and analysed by economists. Price rise is something that affects humans who use money to buy things. You and your colleagues and your spin masters have been blaming the present price rise on last year’s poor monsoon rains, rising consumption, international commodity prices and so on.

What you need to do [not explain], Mr. Minister, is to bring down the prices in the retail markets, especially of essential commodities. Check the price rise in wheat, rice, pulses and edible oils that are staple food for Indians. You can do so if you really try hard because you have huge huge stocks of food grains and a nearly unlimited purchasing power. Check rise in prices of milk and milk products. These are the best nutrition supplements for the common man, especially children. You need not artificially control the prices of petroleum fuels, but you can surely check corruption and inefficiency in petrol and diesel, kerosene and cooking gas management by public sector companies.

To say that Public Distribution System [PDS] is operated by the States is to shirk your responsibility of suitably incentivising, guiding and advising the States. If you can ensure an efficient and leak proof PDS in the country, the impact of ‘inflation due to rising growth’ will not hurt people too much.

Similarly, blaming the States for huge margins being charged by retailers and middlemen does not wash, dear Minister. In Delhi, you get vegetables and fruits in residential colonies at rates that are up to five times of the prices prevailing in the city’s wholesale markets.

So, dear Minister, be committed towards people’s welfare like Gandhi ji was. Don’t hide behind economic explanations for people’s misery.