People's Democracy

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


No. 32

August 08, 2010



'Change Economic Trajectory

Otherwise Democracy in Peril'


Below we give extracts from the speech delivered by the CPI(M) Polit Bureau member and leader in Rajya Sabha, Sitaram Yechury,  during the discussion on price rise held on August 4, 2010.


IN almost every session in this House we have been having a discussion on inflation and price rise. This time we had insisted that such a discussion should take place under a rule which entails voting with the express purpose of using that vote as a pressure on the government to take effective steps. On the need for taking effective steps, I need not reiterate, but when this UPA-II government had assumed office, the president of India in her joint address to both the Houses had outlined what the government would do in the first 100 days. The President had said, and I quote, "My government is firmly committed to maintaining high growth with low inflation, particularly in relation to prices of essential agricultural and industrial commodities".


Subsequently, in the budget session, as is the normal practice, when the President addresses both the Houses, she said in para 7, "There has been an unhappy pressure on the prices of foodgrains and food products. Higher prices were inevitable given the shortfall in domestic production and prevailing high prices of rice, cereals, edible oils globally." Further, she says in para 8, "My government continues to accord the highest importance to ensuring relief to the aam aadmi on food prices." Then, she goes on to say, "A core group consisting of senior ministers of the union government and some chief ministers has been constituted to examine a wide range of related policy measures."


After these two references by the President of India telling the country and the parliament, what does her government intend to do as far as this higher prices and inflation is concerned? The very fact that we are today discussing this under a special provision of a unanimous resolution that we have all agreed together is itself a reprimand on this government that it has not been able to contain this price rise. The very fact that this discussion is going on is something that has established it. We urge upon the government to take effective measures, which I think, need to be taken to contain price rise; but, that the government must recognise the fact that it has failed in containing the price rise, and now effective measures need to be taken – this necessity has been established when this debate has started.





We have heard this earlier that there is a global phenomenon of price rise, there is a mismatch between demand and supply; yes, there is a mismatch between supply and demand. What has been the production of our foodgrains and pulses during the last year? I will give you the figures which the minister has given in reply to a question in the other House where it says that in 2006-07, we had produced 9.3 crore tonnes of foodgrains and pulses; in 2007-08, it was 9.6 crore tonnes – so, it had grown. In 2008-09, it further went up to 9.9 crore tonnes. In 2009-10, this has fallen drastically to 8.7 crore tonnes. Now, this drastic fall in the production of foodgrains and pulses, we can attribute, like the Congress spokesperson and my colleague who initiated this discussion from the ruling benches had, to a deficit in the monsoons. But, are we going to depend only on the monsoons even 60 years after Independence? What has the government done in order to invest in agriculture? In the last ten years, the average rate of investment in agriculture is less than 2 per cent of our GDP. If this is the rate of investment in agriculture, how are you actually going to increase your supply?


I am talking of a supply-demand mismatch and the problem does not get solved unless you are able to tackle how you are going to improve on the supply side. That has been woefully inadequate. And, that is a point that we need to understand. That is why we hear about the extension of the green revolution to the rest of the country. We hear about high-yielding varieties but many of the issues that had been raised by the Swaminathan Commission are still not being implemented and I will come to some of the points subsequently.


But, in this background, the government must immediately assure this House and the country that in the coming days and in the subsequent budgets, it would properly earmark public investment in agriculture, particularly in expanding irrigation, so that we are not dependent upon monsoons. Otherwise it will be a perennial problem that we cannot resolve.





Secondly, we have heard discussions on the quantum of foodgrains that are lying with the government. The Economic Survey presented this year before the budget informs the country that as against the statutory norm of 200 lakh tonnes of rice and wheat, the government had in its godowns nearly 475 lakh tonnes of rice and wheat. After that, we have heard the reports which were discussed this morning, of at least 3 million tonnes of wheat rotting because there is no space in the central godowns. We have seen photographs and visuals shown on TV channels on how this wheat is rotting. We have heard the Supreme Court chiding the government saying that if you cannot store your grains properly, why do not you give it to the hungry?


In that situation, why is this foodgrain not being distributed? We heard our colleague from the ruling benches saying that the states are not taking the foodgrains. Why are the states not taking the foodgrains? Let us take an example of Kerala. They were given foodgrains earlier. It has been cut by about 90 per cent of the grains that were supplied to the state of Kerala at APL rates. When you cut nearly 90,000 tonnes of the rice given at the rate of the BPL prices, and say, “Now you take them at the market price, which works out at Rs.17”. Which state is going to take from the centre at the market price of Rs.17, and distribute it through the Public Distribution System? You are making a mockery of this entire situation. If you have to control prices, there is no other way than universalising the PDS, and distributing all essential commodities through the PDS. That is the only way in which you can provide relief to the people.





Another factor that has been contributing to this price-rise has been speculation in the trading of essential commodities. A point we have all along been making, but which has been contested by the government. And, this morning, we heard the ruling benches, the colleague who spoke saying that there has been a ban on futures trading on essential commodities. That was not correct. After we contested, she said, ‘some of the items’. But, I just want to give a startling figure before this House. Between April 1 and June 30, 2009, the total value traded in the commodity exchange in these three months was Rs 15,64,114.96 crore. In this year, for the same three months, April 1st to June 30th, the total value traded shot up to Rs 24,55,987.26 crore. Now, why is this leap? Everybody knows that in futures trading and forward trading, profits can only be made when the prices rise. If I trade, let us say for the next January 30th, so and so item at so and so price, if the price on that day in the market is higher than that, only then I make a profit. If the values have increased so much, it is obvious because profits are there, and the profits are there because you have this rise in prices. And, as far as some items that have been banned are concerned, I have before me what the Commodity Exchange has released about trading permission granted for commodities during 2010. And what are these? “Fibres, spices, edible oils and oil, pulses” – I am not reading other things, I am reading the essential commodities – “vegetables, raw jute, cardamom, coriander, dhania, turmeric, pepper, red chilly, crude palm oil, palmolien, rape and mustard seed oil, soyabean, coconut oil.” All these things which are needed as essential commodities have been granted permission for your forward trading in the speculative market. And, unless this is banned, and completely banned, you cannot really control these prices. Why is the government so reluctant to take this step? Is it because statistics show that this is impacting on prices. Internationally, UN agencies have said that when globally oil and the food prices were rising, that nearly 70 per cent of that rise was due to speculation in commodity exchanges.





Now, when all this is happening, why don’t you, at least, for some time, at least, suspend it, and give relief to the people, and then from your own experience take the decision whether to continue it or not. But, that does not happen, and there is a reason for that. The reason for that is this. This is connected, therefore, with the larger economic trajectory that this government is pursuing, which is not confined only to price rise and inflation.


The larger economic trajectory that it is pursuing, in the entire manner in which it is seeking to emerge from this global economic crisis and to take India into a higher growth path, is through actually giving stimulus to those who have already enough resources at their command. This is also reflected in what the finance minister presented in his budget documents, a very interesting new booklet which is called Tax Forgone. If you look at those figures of Tax Forgone, it will tell you how much of money that could legally have been collected by the government, but that has not been collected. As a result of this, the rich are getting richer and the poor getting poorer in our country. You have the phenomenon where the number of billionaires in our country doubled from 26 to 52. In India we have the habit of counting billionaires not in rupees; we count them in US dollars. But the combined assets of these 52 individuals today is equal to 25 per cent of our GDP. 25 per cent of our GDP! We have a colleague, who headed the committee, which the prime minister appointed, Arjun Sengupta, who tells you 77 per cent of Indians live on less than 20 rupees a day. You have an IPL India and you have a BPL India. These are the two India’s in the making. I am not making any reference to your cricket chairmanship, Pawar Sahab, do not misunderstand. But you have an IPL India and BPL India. If this is the thing that is happening, if money is going to those who already have money, what will they do with it? If they invest in production, you have to have people who have money to buy what they produce. But the bulk of your people do not having purchasing power in their hands. If 77 per cent people are living on less than Rs 20 a day, what can they buy? My esteemed colleague from the BSP has now pointed out and told you all the figures of all the essential commodities and their prices. So, if they cannot buy, then what will those who have the money do? They will only speculate. It is this economic trajectory that is leading to speculation and that is why the reluctance of the government – they do not want to ban this speculation. But unless you ban the speculative trading in essential commodities, you cannot control the prices.





The third point which concretely the government must do is to immediately reverse or rollback the hike in the petrol products announced in the budget. We have gone through this discussion earlier. At that time the petroleum prices were not deregulated. Now that they are deregulated, why continue this hike in the petroleum products that was announced in the budget? At the same time of increase in prices, we are also being given figures of how much the government is collecting through revenue on the taxes on petroleum products. Here, I want to raise an important point for the government to consider. We import crude oil because that is the lifeline of our economy. Crude oil and petroleum imports in our country are like importing foodgrains when there is a famine. When people are dying of hunger, you import food in order to make them live. Do you impose taxes on those imports of foodgrains? Crude oil is like that for our economy. It is essential for our economy to run. Do you impose taxes on something which is essential without which your economy cannot run? This is something which the government will have to seriously ponder that these sort of taxes that are imposed upon the imports of petroleum products is something that should be reconsidered. The government now says, 'if I do not impose these taxes, where do I get the revenue from? Where do I get revenue from for my Bharat Nirman programmes?' That is where I go back to the Tax Forgone statistics that were provided by the finance minister where it has shown that 5,18,000 crores of rupees tax has been forgone in the last fiscal year. Okay, even if the excise and other duties, if I remove that, even if I grant that they were used for economic stimulus, the direct tax concessions that were given amount to nearly Rs 80,000 crore to the corporate sector and Rs 40,000 crore to the high end income tax sector. That is a total of Rs 1,20,000 crore of tax is forgone through tax concessions. If you had not given those concessions, what is your earning from the petroleum sector – Rs 1,20,000 crore, that Rs 1,20,000 crore was totally unnecessary to tax this sector.


So, there are alternatives and that is where the government has to choose. The alternatives are not to burden the people through taxes on petroleum products or not to give concessions to the rich and remove this tax foregone and collect your legitimate taxes from them and give relief to the poor. This is the class orientation, which we must clearly understand. You have on the one hand concessions of such nature given to the rich and this is something that cannot be acceptable, and this has to be reversed if you want to contain these prices.






We have heard a lot of discussion and some members from the ruling benches had raised the question of the under-recoveries or the losses of the oil companies. The minister for petroleum is here and I think, he was saved yesterday because his question did not get answered but I have the printed copy of what he supplied us as the answer. In that printed copy, he tells you that the per barrel cost of production of crude oil produced by ONGC during the last five years is given below and for the last year it is 35.94 US dollars per barrel. ONGC sells this to your oil marketing companies for 55.94 dollars. It is making 20 dollars per barrel. After producing, it is selling to your own oil companies. In his own statement this is said. This is yesterday’s answer and ONGC sells for 55.94 dollars. Twenty dollars already hiked up and then, after that – I am not coming to the profits yet –  even if you say that the production cost is 36 dollars, even if you take one dollar as Rs 50 which is not so –  it may be 46 or 47 -- but even if you take Rs. 50 it is Rs 1800. Now, after all the discounting you are selling at 56 dollars i.e. a cost of Rs 2800 per barrel. A barrel normally has about 160 litres. So, per litre how much does it work out? It works out to Rs 17.50 per litre. This is what ONGC produces and then, if you add Re1 for your refining cost, it is Rs 18.50. What are you selling it at Delhi? You are selling it at Rs 53. This is the cost of production according to the minister’s own statistics. That it is not going to cost more than Rs 18.50 but your sale price is Rs 53. Okay, you can blame the finance ministry and you take out the taxes that the finance ministry has put which is 50 per cent of this. Even then you are selling it at Rs. 26 or Rs. 27 or Rs 28 when the production cost is only Rs 18. Whom are we fooling? This is the reality. Whom are we fooling? Now, coming to this import parity price, if my cost of production is much less than the international cost of production, why should my consumer pay the international price of that product? We have given you an example. Italian shoes are very famous all over the world. I am not wearing one and I don’t know how many of our colleagues here are, but, Italian shoes are very famous. Suppose, I import Italian leather and make the shoe in India, making that shoe in India, using that leather will cost me say, Rs 100. In Italy it may cost you Rs 1000 and the brand market may be another Rs 10,000. They may be selling that shoe for Rs 12,000. Why should I sell it for Rs 12000 here to my customer? That difference is what is called under-recovery. That is under-recovery. There are no losses. There are absolutely no losses that are there and in spite of so called losses what is the profit that ONGC made last year? The minister’s reply is: ‘The profit that they had made last year in crores is Rs 16,768 net profit after tax.’ So, what is this under-recovery? Why are we fooling ourselves? Why are we going by the international prices? It is costing you so much, so you collect that much from the people.


Yes, put up a profit margin as well but don’t go by this penchant for counting everything in US dollars. Let it not reach to such an extent that you are actually pricing your product not on the basis of cost of production in India, but on the cost of production abroad and then you say you are making losses. As per the audited financial results for the year ending 31 March 2010, Indian Oil Corporation’s net profit has been shown as Rs 10,998 crore, with cash surplus and reserves of Rs 49,472 crore. These are the audited accounts and you are saying that they are making losses! What are we doing? And, what is profit that the HPCL and the BPCL earned? HPCL earned a profit of Rs 544 crore in 2009 and the BPCL Rs 834 crores. Whom are we fooling? This is what on which I need a reply from  the government as to why are we fooling ourselves? This is something that we have to tell our country very clearly to stop this fixation with international price. That was the fixation before Indira Gandhi nationalised the oil sector. That was when you had ESSO, CALTEX and all that in India when we were growing up as children. They were international companies and MNCs. So, they were pricing it according to the international price. But, after you nationalised everything, you have Indian companies. So, why are we going by international pricing? Unless you change this attitude, you cannot stop fleecing the people in the name of import parity pricing and this has to be completely reversed. If this is not done, no relief to the people can be provided.





Then comes the question of what the finance minister has stated earlier and what has been stated now that taxation is the common burden between the centre and the states. Now, there is a very interesting sleight of hand in this. The finance minister's calculation says that Rs 1,08,000 crore is what is going to be collected from petroleum sector this year. My calculation shows, it should be anywhere beyond Rs 1,20,000 crore. Of course, that will become clear after the Revised Estimates. Out of Rs 1,08,000 crore, the finance minister says, Rs 24,000 crore will be transferred to all the states put together. That leaves Rs 84,000 crore with the centre. Then, he claims that all states together – collectively – have state-level taxes which stand at Rs 72,000 crore. So, Rs 72,000 crore + Rs 24,000 crore which are transferred from the centre will make the states get altogether Rs 96,000 crore, while the centre gets Rs 84,000 crores.


Now, the point is, since the states get Rs 96,000 crore, the country is being told, that the major burden of the price rise is because of the taxation of the states. But, this Rs 84,000 crore of the centre directly goes into the price that goes up. Rs 96,000 crore is collected by the 28 states. If you take it state-wise, on an average, each state is collecting less than Rs 3,500 crore. So, the burden on the people because of taxes leading to higher price is Rs 84,000 crores at the centre plus Rs 3,428.57 crore at the states. That is the point. So, one state is getting only Rs 3,428.57 crore. So, don't blame the states. Different states have different sales tax. So, Rs 84,000 is a burden because of the central taxes and Rs 3,400 is a burden because of the state taxes, on an average. There are some states, where it is more, and some states have less. Therefore, the states are not doing this. It is not correct to say that bulk of it is happening because of the states. Bulk of it is happening because of the centre.


Therefore, I want this government to seriously consider and let us know, let the House know, let the people know, let the country know that there are other avenues for raising revenues. One is, don't give these tax concessions and tax foregone, which last year was Rs 4.10 lakh crore. In this budget, it is Rs 5.18 lakh crore. Instead of giving these sorts of tax concessions, collect the tax and spend it on the people; that is when the aam aadmi will get some relief. Secondly, if one is able to spend more than a crore of rupees to buy a luxury car that runs on diesel, should he be given subsidised diesel for them? Okay, I know, dual pricing is a problem. Administering dual prices is a problem. But you can have a one-time cess on these luxury diesel cars. Somebody who is paying Rs 1 crore for a Mercedes Benz which runs on diesel can easily pay Rs 10 lakh as a one-time charge on buying that car. You are now saying that something like 1,50,000 luxury cars are being bought or sold in our country every year. If Rs 10 lakh as a one-time charge is put on those 1,50,000 luxury cars, what is the revenue that the government will earn? Why don't you consider this? Then, you have private generators that run on diesel. Why should the subsidy on diesel meant for the Indian farmers go to these sections? Think of something else from where you can, actually, tax those who can afford rather than raising prices in this manner, which is causing immense harm to the livelihood of our people.




Therefore, it is perfectly and completely possible to arrest this price rise. What is required is: (1) immediately roll back your budgetary hikes. (2) immediately universalise the PDS system and release your extra food stocks and distribute to the people. (3) Ban Futures Trading and speculative trading on all essential commodities. (4) stop giving these concessions to the rich. Instead, collect that money, increase  public investment, give jobs to the people, so that the salaries they earn will increase domestic demand in our economy and that will spur the growth.

All this is perfectly possible. But if you do not do this, let me warn you, if you do not do this, then other things will happen because those who have money are getting more money and what will they do with it? It will only be the growth of crony capitalism. You have an IPL and BPL India, that I spoke of earlier. Now, we heard about the Commonwealth Games scam that is happening. Then, you have illegal mining that is going on. You will have growth of this sort of activities which will further impose burdens on the common man and increase and fatten the profits of the rich. That is why, this process of crony capitalism is also distorting our democratic process. It is distorting our democratic process. Putting a ceiling by Election Commission for election expenses is a mockery of what amount is being spent. As a result of crony capitalism in elections, democracy itself is being destroyed. Forget socialism, democracy itself is being distorted under this process. Therefore, finally, I am saying, the entire question of controlling price rise is not a technical question of containing inflation. You have to seriously rethink the economic trajectory that we are pursuing. Otherwise, crony capitalism will affect our democracy. What we pride ourselves as the biggest achievement in the process of decolonisation anywhere in the world is granting of adult suffrage in India through our Constitution. In that entire process and that experiment of this idea of India, that in itself will come under great threat. Therefore, I would only like to end by the warning that Babasaheb Ambedkar gave when he presented the present draft of the Constitution to the Constituent Assembly on 25th November, 1949: "On the 26th of January, 1950, we are going to enter into a life of contradictions. In politics, we will have equality and in social and economic life, we will have inequality. In politics, we will be recognising the principle of one man, one vote and one vote, one value. In our social and economic life, we shall by reason of our social and economic structure continue to deny the principle of one man, one value. How  long shall we continue to live this life of contradictions? How long shall we continue to deny equality in our social and economic life? If we continue to deny it for long, we will do so only by putting our political democracy in peril. We must remove this contradiction at the earliest possible moment or else those who suffer from inequality will blow up the structure of political democracy which this Assembly has so laboriously built up."


So, please understand what you are dealing with. It is not merely a technical question of reducing price by a certain quantity or a certain percentage. You are dealing with a warning that Babasaheb gave more than 60 years ago. Now, in the name of aam aadmi, please do not inflict all these burdens on aam aadmi. Otherwise, there will be rebels, there will be agitations, there will be struggles but to gain the respect that we want to build for India as a modern independent India, reverse these policies and accept these concrete suggestions