People's Voice - September 1-15, 2009

Unaffordable food prices were a major issue during the campaign for the Lok Sabha elections in May. It is now close to 100 days since the second Manmohan Singh government was formed, but there is no respite from the skyrocketing prices of basic food items consumed by the toiling masses. Who or what is to blame for this situation?

Prices of pulses make it unaffordable for the masses

• Tur dal prices jumped from Rs.44/kg to over Rs.90/kg between August 2008 and August 2009. Tur prices had already risen by over 40 percent between 2005 and 2007. So, in the last four years tur dal price has risen more than three times. Price of other pulses have also risen considerably.

• Pulses are the main source of protein for vast masses of people. Tur dal is one of the main pulses consumed by people in many parts of our country. However, tur dal as well as pulses as a whole have become increasingly unaffordable. This is reflected in the fact that per capita consumption of pulses has fallen by 50% over the past 5 decades.

• The government has never ensured support price for pulses. Farmers producing pulses are at the mercy of the market forces. Government has never carried out a systematic procurement campaign for pulses.

• The annual production of pulses has stagnated at around 150 lakh tonnes for the last ten years. The increasing demand has been met through imports, which have risen from 4.6 lakh tonnes in 1998-99 to over 20 lakh tonnes in 2008-09. Despite the shortfall in domestic production, pulses were allowed to be exported till 2005-06, when a ban was imposed on their export.

• The government’s connivance with the trading companies in creating shortage is evident from the fact that 1.74 lakh tonnes of pulses imported by PSUs like STC, MMTC, NAFED, etc., meant for distribution through PDS are currently lying at major ports and rotting. In April 2007 the government decided to import 15 lakh tonnes of pulses and asked PSUs to arrange imports. The state governments never lifted the stocks as the imported price was much higher than the local markets.

• The same story is expected to repeat now. An order for supply of tur dal in Sep-Oct 2009 has been placed on Myanmar at $1250 per tonne, which would mean Rs.63/kg at Mumbai port. It would mean nearly Rs.100/kg in retail shops.

The central government says it has taken various measures to control inflation. It now claims that it is up to the state governments to control hoarding and speculation. This is one of the ways in which the central government is trying to shift the blame and fool the people.

Till two decades ago, the problem used to be created by wholesale merchants and retail shopkeepers hoarding physical stocks of rice, wheat, dals, cooking oil and other relatively durable commodities. They then indulged in what is known as “black marketeering”, that is under the table sale of such commodities at exorbitant prices. In the course of liberalisation and privatisation during the past two decades, this hoarding and “black marketeering” has now acquired respectability, as a legitimate business. Large corporates, engaged in retail trade, like Reliance retail routinely buy up and stock physical stocks of such commodities and jack up the prices in the market. This is one cause for the rise in prices.

Liberalisation in trade of agro commodities, particularly food consumption items, has also been a major contributory factor to this. Multinational corporations engaged in international trade of such commodities are making huge profits out of such trade.

Today, the problem is created not only by physical hoarding of commodities, and the international trade in agro commodities, but also by speculation through trade in stocks that are yet to come to the market. This is the result of opening up all commodities to what is called futures trading. In futures trading, there are not only actual buyers and sellers, of what is yet to be produced, there is an ever increasing proportion of speculators who have no intention of actually buying or selling. In the case of futures trading, the main aim is profit maximisation through speculation on the future rise in price of the commodities, and a majority of the contracts to buy and sell do not get actualised.

Futures trading has existed in India for specific agro commodities since 1875. After independence the Forward Markets Commission was set up in 1953. From that time, till the 1980’s, futures trading was generally at a very low key, until the Khusro Committee (1980) recommended reintroduction of futures trade in previously traded commodities and introduction of many fresh commodities like potato. In 1993, the Government of India made all agro commodities free for futures trading. Presently about 90 agro commodities or their variants are traded in the futures market in India.

No sugar this festive season

• Sugar prices in August 2009 are Rs.33/kg an increase of 50% in one year.

• The country produced 286 lakh tonnes of sugar in 2007-08 whereas the consumption was only 243 lakh tonnes in 2008. There was a fall in price of sugar due to overproduction. Sugar mills refused to pay to farmers for sugarcane supplied, pleading that they did not have money. As farmers did not get paid for the crop of the previous year, they planted less sugarcan e in 2008-09. Sugar production fell by 44 percent to 160 lakh tonnes in 2008-09, leading to a big shortage.

• To meet the current shortfall, the government has allowed sugar mills to freely import raw sugar for further processing by the mills. About 30 lakh tonnes sugar has been imported so far by sugar mills, which is less than what is required. Sugar mills, controlled by a few large companies and a number of political leaders are ensuring that the shortage prevails so that they can make windfall profits.

• The Indian Sugar Millowners’ Association, the lobbying organization of capitalists owning sugar mills, is opposing any duty-free import of refined sugar. They are also demanding that levy quota of 10 percent sugar production, taken by the government at controlled price for supply through PDS, be abolished so that capitalists can sell even this quantity at market price.

• Knowing the shortage of sugar in India and plans for imports, international sugar traders have jacked up sugar prices by 50% to 0.5 USD per kilo in just four months. So, even imported sugar will not help to bring down sugar price for next one year. International traders are aware that the sugar stock in the country is just 45 lakh tonnes before the onset of peak sugar consumption festival months. By the government’s own admission, wholesalers and larg e consumers like soft drink and biscuit producers have resorted to extensive hoarding.

• The pattern of over-production in one year leading to crash in sugar-cane price followed by under-production in the following years accompanied by soaring prices has repeated so many times that we have to conclude that it is deliberate, planned and carried out to help sugar capitalists and trading companies to benefit out of soaring and crashing prices. Sugar production was as low as 98 lakh tones in 1993-94 but jumped to 165 lakh tones in 1995-96. It fell to 129 lakh tones in 1996-97 but jumped to 182 lakh tonnes in 1999-2000. Wild swings in sugarcane production due to wild swings in prices create havoc for farmers.

According to the Forwards Market Commission, between April 1 2008 and November 30th 2008, the total value of futures trade in agro commodities stood at Rs 4.03 lakh crores in the futures market in India. The aim is to enlarge the scope of this market to international levels. According to the Chicago Board of Trade, which is the world's largest commodity exchange, average daily trading in future claims and obligations in commodities was around US$ 2.8 billion (Rs. 12500 crore) for wheat and US$ 11.2 billion (Rs. 55000 crore) for soya bean. The total trade in commodity markets globally is US$ 513 trillion, or 10 times the size of global GDP and 5 times the trade in stock markets. Gambling in food, extending beyond presently available stocks, in future arrivals on the market, has become a global big business.

The Union Minister for Agriculture says that rising food prices are inevitable as long as annual demand outstrips annual supply. He does not explain why there has been no concerted policy effort on the part of his government to enhance the annual supply. He leaves in the shade the fact that his government's policy has been to leave investment decisions more and more to private profiteers. The policy over the past 20 years has been to open up food trading to the biggest private profiteers and speculators in the country and the world.

Capitalist development, and its further acceleration through so-called free market reforms in recent decades, has had a destructive effect on the food economy of the country. It has subordinated and squeezed small peasant economy on one side, while expanding commercial and capitalist farming, on the other. With maximisation of private profits becoming the overriding factor driving investment decisions, production of pulses, millets and other important sources of nutrition for the Indian population has suffered from neglect. Producing for foreign markets has grown at the expense of producing for domestic consumption. Even the staple food items for which the central government claims to be organising public procurement and distribution through ration shops, are in short supply. An increasing share of food grain trade has passed into the hands of private profiteers headed by big corporations, and it is they who control more stocks than the Food Corporation of India. The PDS supply has been deliberately reduced in the name of targeting it to those "below poverty line".

Workers, peasants and all the toiling people must together fight for both immediate and strategic measures to make food affordable and available to all, without exception. The government was forced to introduce a ban on futures trading in certain varieties of rice and wheat last year following public uproar. However, this does not hold true for other agro commodities, including other varieties of rice and wheat, potatoes, etc. A permanent ban on futures trading in all agricultural commodities is an essential and immediate demand. We must fight for elimination of private firms from the sphere of export, import and domestic wholesale trade in agricultural commodities. It is a necessary step to enable the creation and development of a modern universal public distribution system, covering all essential items of consumption and accessible to everyone.