Rising Prices: Food and Vegetables Beyond Aam Admi Reach

The initial euphoria generated by the new Reserve Bank of India Governor Raghuram Rajan has evaporated in less than a month. Though falling rupee has been checked and there has been appreciation of Indian rupee against the US dollar from Rs. 68 to Rs. 62 a dollar, the common man has no respite from the spiraling prices of essential commodities particularly food items, vegetables and fruits. The WPI (Wholesale Price Index) is at 6.10 % where as vegetable prices are up by 78% and onion is selling at Rs.70-80 a kilogram. The monetary policy remains choppy and Raghuram’s task ahead is to ensure stability in exchange rate and contain inflation.

Lucky are those who manage two square meals a day for the prices have hit the roof. For majority of people with small income, surviving is a challenge. The UPA Government and the Congress Party still swears that it has  done and is doing a lot for the ‘aam admi’. From the ground reports it appears that the government policies are directed to benefit only a handful of corporate and business houses who are in the good books of the ruling clique.

The immediate reason of rising prices of food articles, vegetables and fruits are attributed to increase in transportation cost. The diesel prices have increased and there is growing demand to further effect a hike of Rs. 10/- a litre for diesel to bring down the losses of public sector oil companies along with giving opportunity to private players in the oil sector to make more money.

In India, more than 70 % of goods transportation is carried by road. Perishable commodities like fruits and vegetables are transported by trucks. Due to poor maintenance of the highways more fuel is burnt than required. Besides, the truck drivers have to pay fixed amount to multiple inter-state check posts and to the police before they reach destination to deliver the consignment. The transport companies charge this bribe money from the customers.

The Dedicated Freight Corridors of the Indian Railways that was first announced some twenty years ago is yet to take off. There have been few earth works on the tracks that would run across the country from East to North and from North to West. The budget estimate has increased in thousands of crores of rupees and the government has no enough funds to speed up the project that might save some fuel and bring down the transportation costs of not only food and vegetables but also of raw materials for the industry.

After Golden Quadrilateral Project launched by Atal Behari Vajpayee Government, the UPA rulers have not been able to speed up and complete the unfinished works of the project since 2004 let alone add any significant length of National Highways. The Delhi-Jaipur Road is still incomplete and there have been protests over toll charges since the stretch is still under construction.

 As I have already pointed it out in my earlier comments on the government fiscal policy, it goes without saying that the economic situation is likely to worsen in the coming days. The government is totally directionless. It is drifting in the sea of confusion like a ship without radar.

~R. K. Sinha

  

Economic Crisis Looms Large: Petrol Rationing on Cards

With economic crisis looming large on the Indian horizon, the UPA Government has set alarm bells. Rationing of petrol and diesel appears to be first step to reduce the rising import bills. The Petroleum Minister Veerappa Moily has sounded the alarm by telling that petrol pumps should operate only for 12 hours in a day- from 8 a.m. to 8 p.m.

Any move to ration petrol would send wrong signals to the industry which has already gone into negative zone in terms of growth during the first quarter – April to June of the current financial year. It will further discourage investments. Not only that it will send negative vibes to the global players who have already withdrawn their hands from investing in India.

The government attempt to ration petrol directly contradicts Prime Minister Mamohan Singh and his Finance Minister P Chidambaram who have expressed confidence in the Indian economy by declaring that it will improve soon and the declining trend would be reversed. The statements were made on the floor of Parliament last week.

If the government is so confident of reversing the trend then why Prime Minister Manmohan Singh asked the Petroleum Minister to take steps to reduce the oil import bills by 25 billion US $. Moily is desperate to deliver results on the dictated line of Prime Minister. Just by reducing the hours of availability of petrol and diesel at the retail outlets would not necessarily reduce consumption of the product. It will, on the contrary, lead to hoarding and black marketing of petrol and diesel. Car owners who normally buy say 10-20 liters in a day would tend to get their fuel tank full and maintain the meter constantly at half the capacity of the tank.

If the government is sincere and serious about the crisis then, Prime Minister should come once again to Parliament which still is in session for another couple of days and tell the nation that the country is in financial crisis. The government should appeal to the people to minimize consumption of not only petrol and diesel but also restrict consumption and use of imported goods.

I recall the appeal of the then Prime Minister Lal Bahadur Shastri who had asked us to skip one meal in a week. People responded enthusiastically and overwhelmingly to Shastriji’s appeal and saved food grains in million of tones. Alas, Manmohan Singh is not Lal Bahadur Shatri. Still, he as the Prime Minister of India and can admit before the nation and appeal to the people to make small sacrifice to arrest the falling rupee and rising Current Accounts Deficit. Our import bill on imports of crude oil alone is more than Rs. 8,500 crores a year.

Moil has also suggested that India should increase the import of crude oil from Iran substantially and save 57,000 crores of rupees since Iran oil is cheap and payment is made in Indian currency; not in US dollars. But the catch is the UN sanction on Iran. Can the present government afford to antognise Washington by defying the UN sanctions against Iran and go for large scale import of crude oil to reduce the current accounts deficit which stands at staggering 80 billion US dollars? It is unlikely.

~R. K. SINHA