People's Democracy

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


No. 07

February 14, 2010



How LDF Govt Has Protected Kerala Consumers, Prevented Farmer Suicides


Below we publish a slightly edited version of the speech V S Achuthanandan, chief minister of the Left and Democratic Front government of Kerala, recently made at the chief ministers conference organised on the question of how to hold the price line in the country.

HONOURABLE prime minister, union ministers, chief ministers of various states and senior officials of the central and state governments, first of all I thank the honourable prime minister for calling a meeting on such a nationally important issue of price rise in this present age of global recession, climate change and food crisis.

Only an effective PDS can ensure food security. As part of liberalisation and opening up of the Indian markets to retail giants, the government of India is out to permit FDI in the retail trade sector and the APL quota of food grains to the states has been drastically cut. The government of India has cut down the APL allocation of food grains to Kerala by 85 per cent, from 1,13,420 metric tonnes in 2006 to 17,056 metric tonnes per month in April 2008. The Kerala government has been requesting the government of India to restore the APL quota of food grains to 1,13,420 metric tonnes which was there in 2006. But this request has fallen on deaf ears. Similarly, the APL wheat quota was cut down by 68 per cent and BPL wheat quota by 21per cent. Hence if the government of India is seriously thinking about price control and food security in the country, first of all the original PDS allocations should be restored to the states, including Kerala. As for Kerala, it is a consumer state that has gone for diversification of agricultural crops as advocated by the central government and is contributing substantially to the country's foreign exchange by way of export of tea, coffee, rubber, spices etc.

The government of Kerala has been actively intervening in the open market through the supply of essential commodities like pulses and spices at 30 to 70 per cent less than the open market price. Further, the state government is supplying rice at Rs 13 per kilogram through the Civil Supplies Corporationís outlets. The state government is giving rice at Rs 2 to 26 lakh families belonging to the BPL category and to the APL families of the SC/ST and fishermen communities. In order to control the price of meals in the hotels, the state government has started Maveli hotels supplying meals at Rs 10 to 15 across the state. We spend roughly around Rs 400 crore every year by way of the above initiatives. The state government has been requesting the government of India to bring in a mechanism for meeting at least 50 per cent of these funds required for market intervention, as most of the states will not be able to bear the costs of market intervention. Due to these effective interventions by the government of Kerala, we could control the prices in the open market and the consumer price index for agricultural and rural labourers indicates that Kerala is in the 16th position with regard to price hike.

The state government has also been requesting the government of India to include coconut oil in the list of edible oils and subsidise its sale. Coconut oil being the main edible oil produced and consumed in Kerala, subsidising it will help the farmers and the consumers alike. Though the import of edible oils will increase their supply in the country, the actual benefit would go to the farmers and traders in foreign countries. Hence this genuine request of the government of Kerala may be looked into urgently. 

The state government is procuring paddy from the farmers at Rs 200 per quintal above the MSP declared by the government of India. The food credit facility given by RBI for this purpose is at a rate of 10.5 per cent, which is higher than what is being offered even by private banks. Hence an interest rate subsidy to the tune of two to four per cent may be given by the RBI. The release of funds from the FCI for the paddy procured is badly delayed. Since payments have to be made to the farmers in time, any delay in the release of funds will only lead to an increase in the miseries of farmers in the country. In Kerala, only the timely intervention of the state government through interest free loans, waiver of debts by the Agriculture Debt Relief Commission, and increased MSP for paddy, has prevented suicides among farmers. 

The state government has also been requesting the government of India to permit the sale of fortified atta through the Civil Supplies Corporationís outlets which is the second line of PDS to control the atta prices as well as to prevent the diversion of wheat. These may be sanctioned at the earliest by the government of India.

The state government has not imposed any VAT on imported sugar. The Kerala Civil Supplies Corporation has requested the designated government of India agencies for supply of imported sugar for sale through its outlets. But a favourable response has not been received to date.  Though levy sugar has been restricted to only BPL families by the government of India, even that allotment is not being given to the states by the millers. The state of Kerala has to get 7,600 metric tonnes of levy sugar from the millers. Though allotment orders have been issued by the government of India, the millers are not supplying the sugar. The matter was taken up with the central government but no action has been taken in this regard. This will only help traders to hike price of sugar in the open market. 

Last but not the least, the report submitted by Shri Kirit Parekh to the petroleum ministry has recommended decontrol of the pricing mechanism for petroleum and its products. The effect of such a move will only be large-scale inflation all around. The costs of transportation will go up, imposing a crippling burden on the consumer states like Kerala. The budgets of every household will be strained by the increase in kerosene and LPG prices. I would most emphatically state that these recommendations of Shri Parekh should not be accepted, as they would form the last straw which would break the consumer's back.      

In conclusion, if the government of India is seriously thinking of controlling the prices of essential commodities and strengthening the PDS for ensuring food security in the country, the APL quota of food grains as well as sugar should be restored to the 2006 levels and supplied in time besides the other measures I have suggested.