People's Democracy

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


No. 51

December 18, 2011




Prices Controllable If Govt Takes Three Steps: Yechury


Here we reproduce a slightly edited version of the intervention made by Sitaram Yechury, leader of the CPI(M) group in Rajya Sabha, on December 7, 2011, during a discussion in the house on the issue of price rise. Subheadings have been added.


HERE I would like to point out that this is the third time that there is a discussion on price rise, i.e. in the third session in a row. There was a discussion first when the honourable chairman moved a resolution --- and we all supported that resolution --- where it was said in the last sentence that the government would take some steps to protect the people from inflation. Thus the people were supposed to be given some respite from inflation, but they didn’t get any. There was again a discussion in the next session when the opposition moved a resolution, and we wanted some amendments to it. There too it was said that the government would take all possible steps to curb inflation, but none were taken. This time we wanted a discussion under Rule 168, so that there is a voting on it, and thus there is some pressure upon the government. But the sad thing is that there is no such pressure today. However, I think that the government must take some steps on moral grounds, because of the commitments it has made to the people.




In this regard, I may suggest three solid steps which the government may take, but before it some discussion on the existing reality is needed. The food inflation crossed 20 per cent mark during the last two years; even today it is above the 12 per cent mark. Vegetables are costlier by 26 per cent today, pulses by 14 per cent, fruits by 12 per cent, eggs, fish and meat by 13 per cent and milk by 12 per cent. But when comes the question of why it is happening at all, we are told that the income of the people has gone up. The finance minister said so; the prime minister too said so when he was returning after taking part in the G-20 meeting. I quote what he had said, “If the economy is growing at 8 per cent and the population at 1.6 per cent, the per capita income must be growing at 6.5 to 6.7 per cent.” And what did the finance minister say when he made an 11-page statement at the beginning of that session? He said, “The steady rise in the incomes of our people is creating an excessive demand and that is the reason for this price rise. There is a mismatch between supply and demand.”


Now, what is the reality? The Economic Survey informs us. I quote, “The growth of private final consumption expenditure fell from 8.6 per cent in 2005-06 to 7.3 per cent in 2010-11.” And what is the other reality before us? You say that the actual incomes have grown. But what does today’s Times of India say? It tells something on the basis of the Organisation of Economic Cooperation and Development (OECD)? This OECD is a holy cow for globalisation and a mantra for all the PPPs. Its report about India has been published today, and I quote, “The top 10 per cent wage earners now make 12 times more than the bottom 10 per cent, up from a ratio of 6 in the 1960s.” It further says, “The top 10 per cent earners make 5 times more than the median 10 per cent but this median 10 per cent makes just 0.4 times more than the bottom 10 per cent.”


What is happening? If the income has increased, it is going to a few hands and thus “two Indias” are being created. We have said here many times that there is one shining India and there is another suffering India. The suffering India is growing in number and the more its suffers, the more the other India shines. Our Rajiv Shukla is not here, otherwise I would have said to his liking --- he is a great avid cricket fan --- that there is an IPL India and the BPL India. These are the two Indias that have been created.


Therefore the question is: If the incomes are growing, whose incomes are growing and by what methods? We need to note that the common people’s income is not growing, but yet they are suffering because of the rising prices. What needs to be done for them? I hope the finance minister, having been associated with the finance ministry for a long time, will understand that inflation is a classic mechanism of income redistribution, as any economist would tell you. It is income redistribution from the wage earners to profit earners. That is what exactly is happening in our country today. You are creating a chasm between “two Indias” and on top of it there is this price rise of the dimension that I was telling you. That is creating agony for the aam aadmi today.


So what the common man wants is relief. We need not make the shining India more shining. Rather, India cannot shine until the common man begins to shine. Otherwise, India would shine but not the Bharat.




So, what are the three steps needed? First, we think it is speculative trade which is worsening the situation of inflation. And let me add that today it is only rice and urad in which forward trading is prohibited. What do the latest data from the Commodities Exchange, from the Forwards Markets Commission headquartered at Mumbai are telling? That in the period from April 1 to October 31, 2011, the cumulative value of trade has gone up by Rs 1,06,36,960.76 crore. That means it has grown by 72.63 per cent in a few months. But if you take the agricultural commodities as a whole, the trade has grown to more than Rs 10,83,000 crore; in percentage terms, forward trading in agricultural commodities was nearly 54 per cent during this period. If there is so much of growth in the value of forward trading, what does it mean? Nobody will invest in forward trading unless there is profit. But if the prices do not rise, those who speculate in forward trading do not make any profit. So the pressure for prices to rise is automatically there when you have this sort of a cumulative value in this forward or speculative trading.


Thus the first needed step is that you ban all forward trading, all speculative trading in agricultural commodities, and ban it for every single commodity. There will be some problem, as foreign finance capital will start shouting as to what you are doing. But this would be in the common man’s interest. The government can check the efficacy of this step by suspending the forward trading for six months. If the prices don’t come down, we are prepared to accept your word.    


Corruption has a link with forward trading. Where all this money comes from? Where is it going? How much black money is being generated? All this is related to speculation.




Secondly, you say that the rice of petrol has been reduced by 2 rupees while the crude price has gone up by 3 dollars a barrel. The logic up to now was that petro-product prices were going up because the crude prices were going up. Now you have reduced it while the crude prices abroad are going up. Yet you are not prepared to accept that the two sets of prices are unrelated. You say that oil companies are suffering from under-invoicing of Rs 1.32 lakh crore. But you don’t decide the prices on the basis of the production cost; in fact you show under-invoicing by linking the petro-product prices to international crude prices. On the basis of this supposed under-invoicing, you say that oil companies are facing losses. But, according to the audited accounts till March 31, 2010, the net profit of the Indian Oil Corporation was Rs 10,998 crore. It is the net profit after paying taxes. The reserved revenue surplus of the India Oil Corporation was Rs 49,472 crore. During April to December 2010, two other major oil companies, the Hindustan Petroleum and the Bharat Petroleum, earned profits of Rs 544 crore and Rs 834 crore respectively.


But if these companies are earning profits, the people must get some relief, or not? Nobody understands why you are raising the prices of petro-products. On the other hand, you say you are giving a subsidy of Rs 40,000 crore on petro-products.


What is the amount of money earned by the government of India in 2010-11? The reply given by the finance minister to a question in parliament on November 22 was that in 2010-11, the total amount, through indirect taxes collected and realised, was to the tune of Rs 1.02,827.77 crore. In addition, they got a dividend and royalties from oil companies to the tune of Rs 22,240.47 crore. As the finance minister says, sector-wise data of direct taxes, personal tax and corporate tax, are not maintained centrally. But if you add that too, the revenue would go up to more than Rs 1,30,000 crore. The subsidy you are giving to the people, you say, is Rs 40,000 crore. But in fact the people are subsidising the government. You are making a profit of Rs 90,000 crore from the petroleum sector, and still you claim that raising the prices is necessary. Is it justified? We say: the simple solution is that you roll back the prices.


It is good that the government has retraced its step on the retail trade issue, otherwise this winter session would have gone waste, just as the last year’s winter session went waste.




The third step needed is related to foodgrains. Today, our central godowns have a stock of more than 600 lakh tonnes. This is more than two and a half times of the stock needed according to the buffer norms. Why? For the mice? I ask: why don’t you give these grains to states at BPL prices? In that case, they would be distributed through the public distribution system, which would have some impact on the price situation.    


These are the three steps needed. First, impose a total ban on speculative trading. Second, roll back the petro-product prices. Third, release the excess foodgrains for distribution through the public distribution system. We think there would be some control on escalating prices if the government takes these three steps.


Right now, there is no pressure upon the government as the discussion would be without any voting. But we want that the common man must exercise pressure upon the government.


In the end, I would only say that the tax concessions given to the rich in the last budget were 5.12 lakh crore. But if only that were not given, there would have been no fiscal deficit in the country. However, amusingly, the concessions to the rich are called incentives and those to the poor are called subsidies! And they say that subsidies are bad for the economy while incentives are good!! Is it a government of the aam aadmi or of the khaas aadmi? We say: give concessions to the people rather than to the rich. I only urge the government to seriously consider these three measures, even if there is no voting today, and start implementing them in the interest of the people of this country.