People's Democracy

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


No. 02

January 09, 2011




On the UPA Government’s Price Policies


THE tenure of the UPA II government since it came into being in May 2009 has been marked by relentless pursuit of neo-liberal policies that have served to deepen the economic crisis in general and the crisis of the rural and agrarian economy in particular. This government has decontrolled pricing of petrol, diesel and other petro products; it has allowed futures trading in essential commodities; it has entered into dubious free trade agreements harmful to the peasantry and other toiling masses; it has allowed free play for the agribusiness MNCs and domestic big capital in the seed and fertiliser industries; it is subverting even the limited advance to self reliance made in Indian agriculture in the pre-liberalisation period.


The price policies of the government relating to inputs for agriculture are devastating in their impact. Petrol and diesel prices have been repeatedly raised in recent months. Power tariffs are much higher than they were earlier. Fertiliser prices have risen sharply. The introduction of the so-called nutrient based subsidy system for fertilisers based on the claim that it would lead to balanced use of fertilisers is in reality a device to increase prices of all types of fertilisers. The persistent refusal to enhance public sector production capacity in fertilisers and the closing down of many plants has left us at the mercy of the international fertiliser oligopolies. This has exposed us to sharply rising prices of imported fertilisers, which now account for a much larger share of domestic consumption than before.


While all input costs in agriculture have thus been rising relentlessly thanks to UPA-II policies, the government refuses to raise procurement prices so as to reflect the increased costs of production. Field studies have brought out the fact that the estimates of cost of production for paddy by the Commission on Agricultural Costs and Prices (CACP) are way below the actual costs. The same is the story for most crops. Not only is there no reasonable minimum support price for most crops, even for the ones for which minimum support prices (MSP) is announced, there is no peasant-friendly procurement system in place.


The peasantry are not only suffering from the worsening terms of trade arising from the rise in input prices and the declines/fluctuations in output prices caused by the liberalised foreign trade policies. The cost of living has gone up massively in recent months. The food inflation rate is more than 12 per cent, even though the peasantry gets no benefit from the increased consumer prices for vegetables, pulses, edible oils, sugar and so on. The government policies have allowed unbridled speculation in essential commodities through deregulation and allowing futures trading, resulting in sky-high prices for essentials but no benefit for the peasantry. While rice sells at 40 rupees or more per kilo, the farmer gets hardly 10 rupees a kilo for paddy. While sugar sells at more than 40 rupees a kilo, the procurement price for sugarcane does not even cross 2000 rupees per tonne (2 rupees a kilo). The UPA government protects and promotes the interests of monopolist traders and speculators, domestic and foreign, who drive up prices, but provides no relief to the peasantry and other toiling masses. It heaps more and more burdens on them by reducing subsidies and privatising and deregulating all economic activity.


Privatisation of education and health has meant high costs of education and health care for the peasantry and all sections of the rural and urban poor. The systematic destruction of the public distribution system (PDS) by the UPA-II has worsened matters further.


The Kolkata meeting of the AIKC, held from December 28 to 30, 2010, strongly condemns the neo-liberal price policies of the UPA government and demands that they be reversed. It demands that:


1) The government ensure that subsidies to farm inputs be restored with no reduction in real terms.

2) Recent increases in petrol and diesel prices be rescinded and the dismantlement of the administered price mechanism be reversed.

3) Procurement prices be revised upwards to reflect actual costs of production on the ground and ensure a reasonable remuneration for the peasant producers.

4) The PDS be strengthened, targeting abandoned and all essential commodities made available at reasonable prices.

5) Speculative activities in essential commodities be banned, as also indiscriminate exports.