People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 31

August 02, 200



Targeted Price Rise


A most cruel attack is being mounted on the livelihood of millions of aam aadmi through the continuing relentless rise in the prices of all essential commodities.  This is happening at a time when the Wholesale Price Index (WPI) is in the negative  and Consumer Price Index (CPI) is growing at  a rate of over 10 per cent.  This mismatch, in itself, has serious implications and reflects a deep structural defect in our economy. 


Clearly, therefore, this is a `targeted' price rise, ruining the life of the aam aadmi, due to the  faulty policies of the government which seeks to further compound the miseries of the people by `targeting' (read: denying) both the public distribution system and other subsidies.  On the other hand, consumers of non-essential commodities, i.e., mainly producers, benefit from a negative WPI.  This mismatch is also because of a deliberate bias in the weightage given to the commodities that are considered in the calculation of the WPI.  Food and other articles of essential consumption have a weightage of only around 20 per cent in the WPI.  The reality, of course, is the exact opposite.  The 77 per cent of Indian people who survive on less than Rs. 20 a day spent most of their meagre earnings on food.  It is this section that is being targetted for  such a cruel assault on their livelihood. 


There has been a massive jump in the prices  of all essential  commodities including cereals, pulses and vegetables by nearly 50 per cent between June 2008 and 2009.  In the month of July, this trend has considerably accelerated.  This is particularly true with arhar dal which shot up  from Rs 68 per kg on July 4 at Kendriya Bhandar to Rs 76 on July 10.    As we go to press, the price is  close to Rs 100 a kg in the open retail market.  Similar is the fate of all other dals.  In a country where `dal roti' is the staple subsistence diet, such price levels are pushing millions into levels of absolute poverty. 


The prices of vegetables show no different trend.  The vagaries of the monsoon and the fears of a fall in the production of foodgrains and cereals is compounding  the situation.   So far, the delayed monsoon has led to a reduction in paddy transplantation in 13.66 lakh hectares. This is a shortfall of nearly 25 per cent. But the problem is not because of delayed rainfall alone. In states like Punjab and Haryana, which have, virtually, assured irrigation, the shortfall will be to the tune of 8.17 lakh hectares in paddy transplantation. As far as the cereals are concerned, there is, nearly, a 53 per cent reduction in production considering a shortfall in terms of planting. In case of bajra, the sowing has taken place only in 6.56 lakh hectares, which is not even eight per cent of the 2008 figures. Similar things happened with jawar, with maize. 


Unless there is a very firm intervention by the government, the aam aadmi cannot be protected from a further erosion of livelihood conditions.  The UPA-2 government, unfortunately, has not, so far, taken any decisive action on this front.  What is required immediately is to universalise the public distribution system and distribute all essential commodities through this network.  The current thinking of the government, as reflected in the budget, however appears to be to the contrary. In the name of `targeting', the definition of the BPL is being so manipulated that crores of people will be left out from receiving  foodgrains and other essential commodities at affordable prices.  As we noted in these columns earlier, the Food Security Act proposed to be  legislated, in fact, deprives the poor of even the existing benefits that they are receiving under the Antodaya scheme. 


There has been a feeble tendency in sections of the government to explain this mismatch between the WPI and the CPI and the abnormal hike in the prices of essential commodities due to hoarding.  It is the government's responsibility to regulate the market and keep a vigil  on hoarding.  The central government  tries to pass the buck on to the state governments  saying that the latter are primarily responsible for this.  The fact of the matter is  that it is the central government that  will have to take the responsibility in ensuring  that such manipulation of prices through hoarding is not permitted.  The reality is that such a price rise  is occurring universally in all the states all across India. 


This unprecedented price rise is primarily due to the fact that large-scale encouragement is being provided to speculative trading  in the commodity exchanges through future trading in essential commodities.  The Forwards Market Commission of India,  in its fortnightly reports,  informs that the total value of trading  at the commodity exchanges between June 1 and June 30 this year was Rs. 15,64,114.96 crores.  The corresponding figure for 2007 was Rs. 2,21,888.06 crores.  In other words, within these two years, the total value of trading  in the forward markets jumped by over seven times.  This is a gigantic volume of speculative trading.  Clearly, such trading  is far outstripping the stock of the commodities or the capacity of production  in the country.  Therefore, the only way profits can be made from such  huge value of trading  is to ensure that the prices of these commodities relentlessly rise, mercilessly burdening the people. 


In this year's budget, the UPA government far from tackling this phenomenon of speculative trading has done the exact opposite of encouraging it further by abolishing  the commodities transaction tax.  If the trend of relentless price rise in essential commodities is to be contained and the livelihood of aam aadmi  protected, then the UPA government  must ban all futures and speculative trading in essential commodities. 


The protests organised by the Left parties inside the Parliament and outside through popular struggles must be intensified in the days to come to at least ensure that the status of the aam aadmi is not further assaulted by such a cruel rise in prices of essential commodities.