(Weekly Organ of the Communist Party of India (Marxist)
March 03, 2013
Issues on Price Rise
ONE of the
important issues being
raised in the Sangharsh Sandesh Jatha is that of the
relentless price rise of
essential commodities, particularly of food items. The UPA
intensifying the very policies, which cause price rise.
are warning of high prices of food on a global scale in 2013
measures are not taken. In
Even the World Bank, which has been responsible for the imposition of the neo-liberal policy framework across the world in its recent report has warned that “high and volatile food prices are becoming the new normal..” It points out that while on a global level food prices declined in the latter half of 2012, they still remained high.” The FAO in a similar warning states “despite decline in international food prices, they remain close to all time highs. Stocks of key cereals have tightened.” The warning is timely as with the decline in global prices in the last quarter of 2012, already the assurances given by developed countries for reforming the systems which had caused the food crisis in 2008 which led to severe shortages and skyrocketing prices in many developing countries, are now being put on the backburner. The reasons which push up global prices include financial and commodity speculation, diversion of agricultural land from food to biofuels, rising fuel prices which increase transportation costs; low levels of public food reserves, low and declining public investment in agriculture and changing climate conditions.
While the drought
in the United
States, Russia, Ukraine and other countries is cited as one
of the reasons for
apprehensions of a drop in the production of wheat, the FAO
has warned that the
continuing diversion of land to produce crops for the
biofuel industry in the
US, Europe and the growing trend of companies to buy land in
countries like Africa for growing such crops at the cost of
food grain, will
lead to “increasing hunger worldwide.” By subsidising corn
To give a few
concrete examples of
how the imperialist-corporate driven policies effect world
prices, it is
estimated that the use of around 30 per cent of total corn
production for the
bio-fuel industry in the
The other critical
aspect is the huge
increase in speculative capital and in the role of financial
these markets. Speculative investment is estimated to be 20
times more than all
the agricultural aid by all countries combined. The recent
linking speculative capital with price rise in food stated
that “over 400
billion dollars is traded in food commodities, that is 20-30
times the physical
production of the actual commodity.” This speculation for
profit which has no
connection with the real world of production, has an impact
on pushing up spot
prices. The profit greed of corporates and the financial
sector mafia was symbolised
by the statement of Chris Mahoney, the head of the food
trading division of
Glencore, the world’s biggest commodity trader when he said
In response to
against speculation in food prices in 2008 and following the
crisis caused by the neo-liberal policies of the imperialist
In the EU, the regulatory regime promised was to come into place by the end of 2012. However it has once again been postponed. Analysts of these regulations have pointed out that it is full of loopholes, and gives exemptions to benefit the big traders.
Thus, the warnings of the UNCTAD, FAO and even the World Bank of higher global food prices in the coming days should be taken seriously.
uses high global
prices as an excuse and a cover to conceal its own policies
responsible for high food inflation in
On February 14,
the ministry of
commerce and industry released data on wholesale prices as
reflected in the
wholesale price index between
and January 2012-2013. The figures confirm what every
working household across
Food articles rose by 11.88 per cent.
Cereals 18.09 per cent Vegetables 28. 45 per cent
Rice 17.31 per cent Potatos 79.07 per cent
Wheat 21.39 per cent. Onions 111.32
Pulses 16. 89 per cent Sugar 12.95 per cent
These are the wholesale prices. The increase in retail prices would be even higher. The decontrol of sugar is imminent which means there will be another round of higher prices of sugar. The elimination of all regulatory mechanisms to control the prices of petroleum products and cutting down subsidies has a cascading impact leading to further price hikes. Since the UPA took office the price of petrol has been raised 19 times raising the price of one litre of petrol by 126 per cent and that of diesel by 67 per cent.
In spite of a cross party consensus reflected in the recommendations of the Standing Committee report to ban future trade in agricultural commodities, particularly food items, the government has permitted and indeed encouraged speculation in futures trade by not taxing such transactions. Even as small and marginal farmers who make up over 70 per cent of the farming community are being forced to make distress sales of their produce, big profits are being made in trade of agricultural commodities in the commodities exchanges. This is reflected in the increase in the cumulative value of trade in agricultural commodities by over ten per cent over the last year even while the cumulative value of trade in all commodities decreased by five per cent.
In the light of the warnings of global food shortages, it is essential for the government to de-list food items from futures trade and also to resist the growing pressure to lift the current ban on rice futures. It should learn from the most recent and scandalous example of the highly speculative trade in Guar (the gum of which is used as a thickening agent in some foods and also as a sealant for shale gas). In the year ending October 2012, the price had shot up 1000 times yielding profits worth 1290 crores rupees to identified companies indulging in speculation. But producers of guar, mainly farmers from Rajasthan received no benefits as they had already sold their crop. Although the trade has since been suspended, prices are still volatile. Such blatant manipulation of the market invites no punishment in liberalised India.
India has sufficient stocks, over 6.62 crore tonnes of foodgrains as on February 1, 2013 which is three times the norm set for this quarter which is 2 crore tonnes. Given the anticipated shortage in world markets, big companies, foreign and domestic, have started putting pressure on the government to “liquidate” the stocks by allowing liberal exports. The global price for a quintal of wheat was much higher than that paid to an Indian farmer. Whereas the MSP for a quintal of wheat was 1285 rupees, the export price was between 1800 to 2000 rupees. The export of rice also was at much higher prices than the MSP. The minister for food has put the value of exports in 2012 as 20 billion dollars or over 1.8 lakh crore rupees. Thus the government helped traders and exporters make big profits while farmers were denied a better price.
The liquidation of stocks for exports which help traders not farmers is taking place at a time when India has a quarter of all malnourished people in the world. The stocks should and must be used to ensure a minimum amount of foodgrains at subsidised rates through a universal public distribution system
It is equally necessary in view of the anticipated global shortage of foodgrains to use the stocks judiciously as a buffer against hoarding and blackmarketing. Reckless exports are not in India’s interests.
· Control Price Rise
· Stop Future Trade in Agricultural Commodities
· Reverse deregulation of Diesel and petrol and bring back the administered price mechanism
· Do not export food stocks
· Distribute Food Stocks with at least 35 kgs of foodgrains at maximum price of two rupees a kg to each family through an expanded universal PDS