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Food Price: On the Edge of a Precipice

Nilotpal Basu



Soaring', `sky-rocketing', `going through the window' - are all words and phrases which is associated in describing the phenomena of price rise. But alas! All these are found to be clichéd and wholly inadequate to describe the situation that has become unbearable for the majority of the Indian people. Equally - `callous', `inept', `insensitive' - are expressions, which attempt to define the response of the Government to this grave situation that the citizenry is faced with. Again, there is a complete disconnect. A disconnect between the degree of hardship for the people and the need for commensurate sense of urgency which was needed to be displayed by any standard of accountability which is the watchword for a parliamentary system of Governance. But we are really witnessed to a grave tragedy on this account.

Why has the situation become so bad? The most common refrain of Governments in the past and the present has been to attribute the incidence of extremely steep price situation - particularly of those commodities, which are regarded `essential' to the global pattern. The foremost among them is, of course, food, because it is the primary requirement for human survival. However, even a cursory look at the global food price situation would reveal that India compares very adversely as compared to most of the countries of the world. The primary reason being that the world today is in the grip of a much deeper recession than it is here in this country.

The Government also has tried to gloss over the reality and tried to argue a demand supply mismatch to trivialize the magnitude of the problem. Of course, they have also tried another round of similar assurance that by the year-end, the prices would come under control. The repeated nature of such unfounded promises is, in fact, adding up to the common man's sense of irritation and disgust. The Finance Minister has actually laid the blame on the festival season spurt in the demand to explain the shooting up. However, the trend of prices has been going up and up, regardless of whether there is any festival or not.

More importantly, this supply demand mismatch further falsifies the ground reality. Unfortunately, the reality in the countryside does not get adequately reflected in the mainstream media. Our farmers are expressing themselves with a great anguish over the crashing prices that their produce is fetching in the mandis. We have instances where standing, as well as, harvested crops are being set on fire. There are claims by the farmers in different parts of the country that they will not sow the kharif crop. And, one cannot blame them for these expressions of despair. Their crop is not reaching prices, which would actually cover their costs. With the sharp rise of the fertilizer prices, not to speak of their availability along with all other inputs, the costs have gone up so much and it is actually rendering losses with the kind of prices they are commanding in the market. Therefore, far from what the Government is claiming, the primary producers are not being able to sell their produce is the reality. So if there is a glut in supply - it is not because of a glut in production but because of the want of an appropriate mechanism, which can fetch a fair price for the farmers. And, also, at the same time, increase the flow of supply. But the absence of such a mechanism is actually leading to a situation where the current level of unavailability of petty agricultural production - particularly food production may led to a major reduction in the farming activity in the coming kharif season. Far from translation of the Finance Minister's assurance, the situation is actually moving towards a horrific consequence.

The absence of the appropriate mechanism is actually not a chance incidence. The withdrawal of appropriate public agency intervention in procurement and credit delivery is leading to the inroads of private lenders and big time players in the agricultural commodity market. The reduction of public stocks and the stocks coming increasingly under big private players' control is increasing that much of speculative activity. The Government's refusal to disallow forward and future trading in the agricultural commodity market is amplifying the impact of speculation in the rising food prices. This is at the cost of both the primary producers and the urban consumers.

However, two other principal factors, which are adversely affecting the food price situation, go to show that the Government is directly responsible for the present state of affairs. The Government's refusal to not only revamp the public distribution system but going virtually in the reverse direction to completely dismantle that is leading to an unprecedented level of exclusion of poor people from accessing food at affordable prices. This is done by trying to artificially manipulate the number of poor and continue with the targeted system, which is absolutely falsifying the prevailing reality. The absurdity of this was graphically exposed with the contention of the Planning Commission affidavit in the Supreme Court. On the other hand, allowing the free play of big private players in the countryside also allows only the relatively bigger players to hold on their produce and not indulge in the distress sale. Obviously, this is pushing the smaller and marginal peasantry into a state of complete helplessness apart from excluding a large section of poor from affordable food.

The other question, which has come to gain the maximum significance, is, of course, the impact of the increase in fuel price. In the last twelve months, there have been eleven occasions where one or the other fuel prices like petrol, diesel, cooking gas or kerosene have been increased. Initially, the Government tried to explain these rises as a consequence of increase in international crude oil prices. That this is a sham is now becoming increasingly clear because the latest round of increases do not pertain to the international prices. In fact, the international prices are actually little less than what used to be sometime earlier. A major component of the increased price is being actually collected by the Government as taxes. At a point in time when taxes on the corporates are waived and direct taxes are reduced, why should the Government increase indirect taxes including those on petro products to raise its revenue? The Government claims that public sector oil marketing companies are losing. But any cursory look at balance sheet of all public sector oil companies will be reveal that year after year, they are making huge profit and passing on in the form of tax and dividends to the Government. On the other hand, any RTI query by a common citizen will reveal that even the subsidy that the Government is claiming to provide to the oil marketing companies which dispense kerosene and cooking gas is actually far less than the overall revenue that it collects on account of tax and dividends from the sector as a whole and the oil companies as well.

Together with the fuel prices, the abnormal rise in fertilizer prices are also linked to the benchmarking of this important input to the international crude oil prices. Therefore, it is abundantly clear that the horrific price situation is a direct outcome of the pricing and the taxation policy of the Government in the hydrocarbon sector.

Therefore, neither lack of supply nor empowerment of the people enhancing demand can explain the present reality. The high prices are benefiting the Government to mop up increased tax revenue, the big private players in the petroleum sector and agricultural commodity sector and the entire burden is brought upon the majority of the people most of whom are poor. The poor whose expenditure basket is disproportionately burdened because of food being the most major item, they are at a point of explosion.

Since these hapless people do not have a voice and the mainstream media does not find their woes as sufficiently interesting material of a `breaking news' type or deserving to be carried in the front page - the powers that we may find themselves in a state of content and inertia. Therefore, if the present apathy continues, one may wake up to the reality of an Indian version of the `occupied Wall Street'.

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