Make Success Campaign Against Price Rise

The Left parties in their meeting on July 4, 2006 had decided to conduct a week-long campaign against price rise from July 13 to 19, 2006. However, in the wake of Mumbai blasts, the campaign will now be held from July 17 to 19, 2006. The focus of the campaign would be on the following demands:

•     The central government must with immediate effect end forward trading in foodgrains, pulses and other essential food items.

•     Both the central and state governments should take urgent measures to strengthen and expand the public distribution system.

•     Firm measures should be taken to check hoarding and profiteering in foodgrains and other essential commodities.

The following material would be useful in conducting the campaign –– Editor

GALLOPING PRICES UNDER THE UPA REGIME

Life of the common people is becoming increasingly difficult due to the all round price rise across the country, eroding real incomes of the working people. Essential commodities are getting out of the reach of the poor. The inflationary situation has been aggravated by the successive rounds of price hikes of petroleum products, which has had a cascading impact on the prices of several commodities. Failure of the UPA government to check the rising trend of prices would amount to a betrayal of the interests of the people.

Commodity Prices

Data from the Price Monitoring Cell of the Department Of Consumer Affairs of the union government, which collects data on 15 essential commodities from 18 centres across the country, show that prices of most of the essential commodities monitored by the Cell have experienced significant rises ever since the UPA has come to power at the centre. The comparison between the prices of some essential commodities prevailing in Delhi in June 2006 and June 2004 is given below:

It is well known that prices in the open market for all the commodities are much more than what is shown in government’s data.  Even the government’s Wholesale Price Index for the current year shows that prices of all commodities have risen over the past six months with the prices of vegetables, pulses and milk experiencing steep climbs.

Wholesale Price Index for 2006

Far from any intervention to check price rise, the government has been claiming that inflation is under control. Complacency of the government on the price front is squarely responsible for the current situation. However, it is surprising that the BJP, which headed the erstwhile NDA government at the centre, is shedding crocodile tears on price rise. The NDA government had taken a series of steps, which has undermined the capacity of the central government to check price rise. The CPI(M) demands that the UPA government adopt firm measures to check price rise and reverse the decisions taken by the NDA government which has led to this situation.

REVERSE NDA GOVT’S DECISIONS BENEFITING

HOARDERS & BLACKMARKETEERS

The Essential Commodities Act, 1955 which enabled the central government to monitor and control the prices of essential commodities has been progressively diluted by successive pro-liberalisation governments at the centre. The number of commodities designated as essential commodities, which stood at 70 in the year 1989 was brought down to 15 during the NDA regime, in the name of facilitating “free trade and commerce”. This move, which was strongly opposed by the CPI(M), jeopardised the capacity of the central government to check reckless profiteering in the trade of essential commodities.

The NDA government had also issued a Government Order in 2002 removing the licensing requirements, stock limits and movement restrictions on specified food items under the Essential Commodities Act, thus allowing dealers to freely buy, stock, sell, transport, distribute or dispose any quantity in respect of wheat, coarse grains, sugar, edible oilseeds and edible oils without requiring any license or permit. Similar restrictions in respect of more items of foodstuffs like pulses, gur, maida, atta and vanaspati were removed in 2003. Such dilutions of the Essential Commodities Act, which have allowed free movement of essential commodities across the country, are also responsible for the inability of the central government to control the prices of essential commodities.

The CPI (M) demands that all such measures taken by the NDA government, which have allowed the hoarders and blackmarketeers to play havoc with the supplies and prices of essential commodities be reversed by the UPA government. Moreover, the Prevention of Blackmarketeering and Maintenance of Supplies of Essential Commodities Act, 1980, which empowers the central government or state governments to detain persons whose activities are found to be prejudicial to the maintenance of supplies of essential commodities, have to be implemented strictly against the hoarders and blackmarketeers.

PROHIBIT FORWARD AND FUTURES TRADING

IN ESSENTIAL COMMODITIES

The NDA government had also permitted speculative futures trading in all commodities, including essential commodities, through a government notification in April 2003. Futures contracts are a form of forward contracts, which are traded in regulated exchanges. A forward contract is a supply contract between a buyer and seller, whereby the buyer is obligated to take delivery and the seller is obligated to provide delivery of a fixed amount of a commodity at a pre-determined price on a specified future date. Forward and futures trading is used by those who hold large stocks of a commodity for commercial reasons.

Futures contracts are also used to purposefully accumulate stocks in order to make speculative profits from future increase in the price of that commodity. Since speculative activities dominate the forward and futures trading and it instils greater volatility in commodity prices, such trade was prohibited for essential commodities under the Forward Contracts (Regulation) Act, 1952. The NDA government had lifted the prohibition following which futures trading in essential commodities have started in commodity exchanges.

The volume of trade in commodity futures has grown sharply over the past two years and prices of commodities have increased simultaneously. The farmers and small traders, however, who do not have access to the commodity exchanges, have not gained anything from such price increases. Only the big players who have the capacity to hold large stocks and the resources to participate in futures trade have benefited from huge speculative gains. In spite of this, the UPA government has not only continued with the policy of allowing big financial players to play speculative games in the commodity futures markets but is also planning to allow FIIs and Mutual Funds to enter these markets. The CPI(M) demands that futures trading in essential commodities be prohibited on an immediate basis. Commodity prices cannot be controlled without strong and effective regulation of the forward and futures markets.

STRENGTHEN THE PDS

The NCMP of the UPA government is committed to the strengthening of the PDS and restoring the universal PDS. The targeted public distribution system has utterly failed as large sections of the poor have been excluded from the system. The most recent evaluation of the Planning Commission points out that as many as 57 per cent of those who should be identified as BPL have been excluded. The fault however lies not only with the process of identification of the poor but with the very system of targeting in a poor country like India. However, the UPA government far from taking steps to strengthen the PDS has been more eager to cut down food subsidy. The government is currently considering a proposal for hiking prices of foodgrains for BPL and APL categories, cutting allocations to both these sections and cutting down the foodgrain component in all employment generation schemes. The UPA government should not go ahead with such retrograde steps and instead expand the scope of the PDS by allowing the state governments to issue BPL cards to all those who are identified as poor. The CPI(M) also demands that more essential commodities, like pulses, sugar and edible oils should be brought under the purview of the PDS.

REVIVE AGRICULTURAL PRODUCTION

Stagnation in agricultural production is a major reason why shortages have arisen in many commodities. Moreover, the wrong policy of handing over procurement to private traders, which is being continued by the UPA government, is also responsible for the price rise. The government has allowed big companies, including MNCs, to corner stocks of wheat by paying only slightly higher prices to the farmers than the government’s procurement price while the private traders have created artificial shortages by hoarding stocks thus ensuring that the market prices of wheat have increased significantly. With the buffer stock declining sharply the government ended up importing wheat in February this year, paying the foreign trader almost one hundred rupees more than the Indian farmer. Recently the government has allowed duty free import of wheat by private players too and has also decided to import pulses and sugar in order to meet the shortages in the domestic economy.

The import of wheat along with sugar and pulses by the UPA government is a matter of serious concern and points towards its total mismanagement of the food economy. This has serious implications for India’s food self-sufficiency and economic sovereignty. The CPI(M) demands that the UPA government should take steps to increase production of foodgrains and other essential commodities and to ensure procurement at fair prices to farmers for foodgrain requirements of the PDS and other government programmes.

REVERSE UNJUST HIKE IN PETRO PRICES

The UPA government brought about a fresh round of hike in the prices of petrol and diesel in the month of June, the seventh time since the UPA came into power. The government has justified the steep hike citing the increase in the international oil prices. However, the government has stubbornly refused to review the structure of taxation on petroleum products as suggested by the CPI(M) and the Left parties, which would have made it possible to avoid the petro price hike.

The taxes levied by the central government on petroleum products are ad valorem taxes. Along with the increase in international crude oil prices, the central government’s tax revenues have also risen in the same proportion. For instance, when the international price of oil is Rs 100 per barrel, a 10 per cent tax fetches the government Rs 10. If the international price doubles to Rs 200, then the same 10 per cent tax fetches the government Rs 20. A reduction of the tax rate from 10 per cent to 5 per cent following the increase in oil prices would enable the government to collect the same amount of revenue, i.e. Rs 10. The Left parties had demanded that the government should reduce its ad valorem rate of customs and excise duties in a similar manner. If this were done, then the need to increase prices to meet the increase in the international prices would not have arisen. 

The central government has earned a windfall bonanza of extra revenues, because of the rise of international price of crude oil, which it does not want to part with. Instead, it has imposed burdens on the people. Moreover, while the central government has refused to part with its bonus revenues, it is pressurising the state governments to reduce their state sales tax. In the year 2005-06, provisional figures suggest that the total tax revenue from the oil sector is a whopping Rs 1,26,600 crore. Of this, the central government received Rs 77,800 crores. All the states and union territories put together received Rs 48,800 crore.

The CPI(M) demands that the central government, which enjoys a major share of revenues from the oil sector, should take the initiative in cutting its customs and excise duties. The BJP has protested against the petro price hike. But the people cannot forget that it was the NDA government, which had dismantled the Administered Price Mechanism (APM) for petroleum products and had hiked petro prices 33 times in six years.