August 26, 2006

Gyan Pathak

With the spiraling prices of essential commodities and rising discontent among the public, the UPA government is resorting to expediency to mollify the people's resentment. The Union government even euphemistically tried to play it down through its Secretary of Consumer Affairs ministry Mr L Mansingh, who brazenly claimed that the prices of essential commodities had stabiliezed. He even contradicted the view expressed by the media people in his press conference that there was a “disconnect” between what he was claiming and the ground reality. On top of it, he refuted the charges that hoarding or futures trading were the causes of steep hike in the prices. According to his statement the major reason for the spiraling prices was the gap between the demand and the supply. However, government has been often reiterating its statement that it is sensitive to the price situation and is committed to contain it. It's simply a dichotomy, especially in absence of any follow up action after the statements are made.

The real intentions of the government are now clearer than ever before. It only wants a “reform-oriented” regime, more properly a market economy for this country. The political economy that India had been pursuing in the past several decades in now a forgone conclusion in which governments used to interfere with the price control to protect the common man. Now it does not want to. It is precisely the reason that formulation of the approach paper of the Eleventh Five Year Plan does not sufficiently address the problem of food security at the household level.

The latest example of the government's real intention was reflected in the decision of the Ministry of Food and Civil Supplies, Consumer Affairs and Public Distribution to restore the power of state governments for undertaking de-hoarding operations under the Essential Commodities Act 1955, in respect of wheat and pulses. The decision followed the scuttling of the Essential Commodities (Amendment) Bill 2005 by non other than the Union Minister of Agriculture Mr Sharad Pawar, who informed the Lok Sabha that the bill passed by the Rajya Sabha earlier this week could not be taken up in the house because he wanted some amendments in the passed amendment bill to strengthen the legislation against hoarding.

It is clear that the decision is without spine. There is no law to support it, because government has rescinded all control orders by 2004. It was despite the recommendations of the department related Parliamentary Standing Committee to fine-tune the Essential Commodities Act to protect the common man given about two years back from the orders of 2004. The present UPA government followed the NDA government's policies comfortably until voices of discontent among people were come to the fore in the fag end of 2005, when government tried to hoodwink people by coming with the aforesaid amendment act recommended by the Parliamentary standing committee four years ago.

The amendment bill has been systematically scuttled on one or the other pretext while the Ministry came forward with a decision that they are going to empower the states to handle the stock situation for the purpose of de-hoarding and price control. We have no option left but to laugh at the contradictory statements of the government who now says after a week that hoarding or futures trading did not impact the price rise.

Let it be, but it is the fact the decision of empowering the state governments will have no impact on the prices due to the simple reason that states has no power because of lack of any control order whatsoever. On top of it, the proposed empowerment covers only wheat and pulses and for only six months. It is the time for procurement and purchase of Kharif crops, especially paddy for which there would be no restrictions. By the time Rabi crops, especially wheat, would come in the market six months deadline will be over and then private traders and multinationals would be free to purchase any quantity of the crop. There is also a loophole purposely left for the benefit of the traders. The Union government has not proposed any restrictions on movement of the stocks in other states or areas. It means a state cannot effectively implement the proposed empowerment without any all India control.

It is worth mentioning here that the Union government had given free hand to private traders and multinational companies after introduction of the Essential Commodities (Amendment) Act Bill 2005 in the Parliament in December last, which is kept pending even after the passage of the Bill in the recently concluded session of the Rajya Sabha.

It is also worth recalling that in the first quarter of this year farmers were being given Minimum Support Price of Rs 650 per quintal for wheat. The private players, such as Reliance, ITC, Cargill, Adani group, Australian Wheat Board etc jumped into market to purchase wheat at slightly higher prices. The government purchase for the Central pool was plummeted to a new low and by the time the Centre realized this, it was too late. The private traders and multinational companies had already purchased 60 lakh tonne of wheat. The Union government announced an addition bonus of Rs 50 per quintal. Despite that government agencies could purchase only 92 lakh tonnes which was 40 per cent lower than the need of handling even the Public Distribution System. At present wheat is selling at Rs 950 to Rs 1500 (common variety) in the various parts of the country, that the government claims, has now been stabilized.
One wonders if it is not an intellectual dishonesty towards people. The market forces and our ruling class has formed a vicious circle that needs to be broken.#