Economic Highlights
New Delhi, 20 June
2014
To Check
Prices & Monoplies
SLEDGE
HAMMER NEED OF HOUR
By Shivaji
Sarkar
The economy
is in shambles. Undeniably, Prime Minister Narendra Modi is right in echoing his
views of being tough to tackle it. A severe malaise needs strong dozes of
medicines. But a patient lying on the bed for years has to be tackled carefully
as too strong medicines might prove fatal. Consequently, his antidotes even
though right have led to a jittery response from the sick. Indeed, the doctor
is in a dilemma.
Notably, he
has asked his Ministers to change tack wherein rising prices has be given top priority.
Towards that end, Modi’s Government is sending signals that it is acting on food
inflation through a slew of measures. The Railway Minister Sadanand Gowda has postponed
a hike in rail fares, a move that the outgoing UPA Government had initiated on 16
May, the day poll results were announced. Pertinently, a crude piece of
politicking to create a “moral” dilemma for a new Government.
Indeed
increasing prices are a challenge which requires a politico-economic solution. Specially
against the backdrop that during the past few years a kind of mafiosi developed
to convolute the market that was supposed to be the epitome of solutions. This has
gotten into every aspect of business to stoke prices and rake up profits. Thus,
mere announcements of releasing food grain might not achieve results unless it
is backed by strong action as well, under the Essential Commodities Act and
other laws.
Importantly,
it is no more small businesses or hoarders that determine prices. Large
corporates, either through direct operations or functioning through funding
“adhatiyas” (traditional wholesalers) control the market whereby, onion, potato
and tomato prices are being manipulated through this mechanism.
It also
needs to be probed how proliferation of large Indian retailers is jacking up
prices through cartelisation. While FDI in retail remains controversial, it
apparently has benefited the indigenous not so honest big businesses. Mere
economic measures might not be enough to contain them.
Clearly, Modi
has to act with a sledge hammer. The motto of business cannot be fleecing and
high profits. It has to serve the people and growth. If that is not being achieved
such businesses should be told either to behave or fold up. The Government also
needs to find out why the Competition Commission has failed to act in these
cases.
Further, it
also needs to have a relook at reviving the MRTPC. The US and most
western countries have strong anti-trust (monopoly) laws to keep a check on the
market despite shrill cries of the multi-nationals for having “corporate
sovereignty”. In a nation, only the people are sovereign. There cannot be dual
sovereignty. The Government’s tough action on erring businesses would have
strong popular support.
The Government
has also to look into the aspects of proliferation of some large corporate into
direct or disguised farming and selling of packed rice, wheat flour and other
agro products. Their profits even in the most difficult economy have soared to
around 40 per cent. Some of these consumer farms, with large foreign holdings,
through forced mergers and acquisitions, have become largest monopolies. They
prevent any semblance of competition through strong-arm tactics. The high
profits are used for lobbying and interference in governance through the
bureaucracy and continue with their stranglehold.
There is no
gainsaying that tough steps are needed to make them fall in line and understand
that people have the powers to strike back. The argument of it shaking
“business confidence” is false. Such steps would increase actual competition
and bring down prices on a permanent basis. It would also benefit
entrepreneurship. Measures for creating a string of small businesses to break
the monopolies are an immediate and long-term need.
None of
these require amending laws. Existing laws are enough to act.
Additionally,
petroleum prices ought to cause worries in the wake of developments in Iraq and a possible
flare up in the region. The Government’s petroleum companies have failed to
take advantage of oil imports from Nigeria, where crude prices are
less than the international market. A private company is raking up huge profits
as it has replaced even US in it imports from Nigeria. It calls for a probe why
oil marketing companies ignored this to keep their import bill low.
The pricing of indigenously produced
crude for domestic consumption also needs to be reviewed. Production cost in India is far
less than international prices. Almost 30 per cent of needs are met through
spudding oil onshore and offshore. Through a mix of imported and indigenous
average oil prices this can be achieved to keep the fuel price at affordable
limits. This would have a sanguine effect on the cost to the people. The prices
for domestic consumption could be kept at lower rates.
Another
strong signal could be given through the rejection in a hike in the KG Basin
gas price given that a strong economy requires cheaper fuel. The KG Basin
produces cheap (at less than $ 2) but intends to sell at high price (Rs 8). A
reversal would lubricate the economy.
In addition
keeping transportation and energy cost low have to be the priorities. These
prices have cascading effect. Wages are determined by these factors. If prices
could be checked, wages also would remain under check. This could generate more
jobs. High wages have led to slump in jobs. Higher wages mean steep business
costs and again higher prices. This has to change.
The Government
has also to take a call on whether it would like to have impetus – subsidies to
big business, or real relief to the farmers, who remain the pivot of Indian
economy, though western trained planners and economists ignore this. Howsoever
any dispensation might wish it has to live with subsidies be it in name of
MNREGA or food security.
Reorienting
subsidy to the farms would benefit the country not only for now but for a
secure future. Food prices have to be kept low not by depriving the farmer but by
integrating him and 70 crore others who work with him. The farm sector must not
be corporatized. It would throw crores of people without sustenance. Food
security law is like putting the cart before the horse. It has to be reversed so
that the farm sector becomes the backbone of the economy.
There is
scope of being tough without affecting the common man. One hopes such decisions
would check the prices, boost confidence and spur the economy. -----INFA
(Copyright,
India News and Feature Alliance)
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