People's Democracy

Editorial

Serving the Rich

In the Name of Aam Aadmi

WE wish our readers a very happy festive season.  We, however, wish them with a heavy heart fully sympathising with and sharing their agonies due to the relentless rise in the prices of all essential commodities that is heavily dampening the festive spirit. 

This UPA government has completely failed in controlling this price rise.  Through these columns, we had suggested many measures which, if implemented, would have brought some relief to the people by controlling the prices.   That, however, would have meant that the government must act against the interests of those sections who are hugely benefiting from this price rise.  Thus, the inability of the UPA government to control prices stems from its class bias that favours super profits for the rich at the expense of the aam aadmi. 

One of the reasons of this galloping price rise has been the sharp rise in the volumes of trading in the speculative commodity markets in the country.  The Forward Markets Commission of India reports that the total value of forward trading between April 1 and June 30, 2008 was Rs 11,15,326.99 crores.  This jumped to Rs 15,64,114.96 for the same period in 2009.  This sharp rise can only happen when handsome profits are available  in such trading.  By definition, profits are generated in forward trading when the price of a commodity that is sold on a particular date in the future is higher than what it is being traded for today.  Thus, the profits of such speculative traders can come only when the situation is so manipulated that the prices must necessarily rise.  All means will be resorted to, to ensure this, including black marketeering and hoarding. 

This is not merely an Indian phenomenon. The recently released World Investment Report  of the UN Conference on Trade and Development (UNCTAD) has categorically said that speculation is driving up the prices of food articles globally.  This is not because of a demand supply mismatch but due to activities of financial speculators and transnational corporations (TNCs).  While discussing the experiences of TNCs participation in agriculture in the developing countries, it says that this �can have negative impacts�. It can lead to restrictive business practices, increased dependence of the farmers to buy  seeds and other inputs  from the TNCs, changing cropping patterns thereby creating shortages of staple food etc.  We have had our own experience with the plight of our farmers raising cash crops like Bt cotton and other seedless genetically mutilated crops.  Further, by enticing farmers to shift to producing cash crops away from producing staple food crops, the TNCs  may end up in a lower production of foodgrains negatively impacting food security  and directly contributing to rise in prices due to shortfalls in production.  All these have been happening in India.

Returning to speculative trading in India, after a thorough discussion in the parliament and a public outcry, the government in January 2007 had  announced a ban on forward trading in few commodities like rice, wheat, urad and tur dals.  This led to a 20 per cent fall in the prices of these two dals clearly establishing link between speculative trading and rise in prices. 

Earlier this month, the Indian Jute Mills Association, the apex body of the jute industry in the country, had demanded of the government that a ban to be imposed on forward and futures trading in jute.  The association had appointed a management consulting firm to study the impact of futures trading on prices.  According to this report, futures trading has abnormally hiked the prices of raw jute.  Most of the gains went to the middlemen and the traders with no benefit accruing to the farmer cultivator.  In 2008-09, farmers got an average price of Rs 14,780 a tonne, while it sold in the market at Rs 20,350, i.e., a trading margin of Rs 5,570 a tonne.  Speculative trading is, thus, a double whammy on the people. On the one hand, the farmer gets a raw deal and, on the other, everybody including the farmer has to bear the brunt of the higher prices. 

Following the outcry against sugar exports at a time when production was below average which resulted  in sugar prices  rising steeply, the government banned exports as well as suspended futures trading in sugar from May 26 till December this year.  Unlike in the case of urad and tur, this however, did not lead to a fall in market prices.  This is not because speculative trading has no impact on sugar prices.  This is because of an ongoing case over a financial scandal involving sugar exports.  In a case that involves the Indian Sugar Exim Corporation (ISEC), the largest foreign bank in India, Standard Chartered, and four big mutual funds  over financial derivative deals  which led to a Rs 50 crore loss to the ISEC.  While the case will be decided by the courts as to who is responsible for this loss, the prices of sugar cannot be allowed to fall in order to cut further losses for the powerful sugar cartel.   What is worse for the people is that this is happening at a time when as against an average consumption of around 23 million tonnes annually the size of the crop this year is expected to be a little below 15 million tonnes.  The net result is that already the retail prices are above Rs 30 a kilo, a 50 per cent increase from the same period last year. 

Under these circumstances, it is imperative that the UPA government immediately ban futures trading in all essential commodities. In addition, the public distribution system must be strengthened and all essential commodities must be distributed through a strengthened network not being limited to rice, wheat and kerosene only, as is being done today. 

Needless to add, post this festive season, popular struggles must be intensified to mount the pressure on this UPA-2 government to implement these measures.

(September 23, 2009)