jiggo Posted May 10, 2013 Posted May 10, 2013 How UPA will destroy the food market and feed the rich http://www.firstpost.com/economy/how-upa-will-destroy-the-food-market-and-feed-the-rich-770025.html In its anxiety to win the next elections, or at least not lose it, the Congress is well on its way to destroying the country’s agricultural markets. Between them, the Food Security Bill and concurrent moves to raise minimum support prices (MSPs) ahead of the next elections, meant to help feed the poor and benefit farmers, will have the opposite effect: feeding the rich, both in India and abroad, by imposing inflation on India’s poor and fomenting further corruption to benefit the crooked rich. The damage to be caused by the Food Security Bill, which seeks to cover 65 percent of the population with super-subsidised grain, is already well understood by all except for the political bosses of the Congress-led UPA. As Firstpost wrote yesterday, the procurement needs of rice, wheat and coarse grain will destroy the agricultural markets because the government will simultaneously become both a monopoly seller and monopolist buyer in grain in the country. The Food Security Bill is a covert way to nationalise the buying and selling of key cereals, which can only lead to higher prices and more corruption. When the government is the only major buyer or seller of foodgrain, you will The Food Security Bill is a covert way to nationalise the buying and selling of key cereals, which can only lead to higher prices and more corruption. Reuters The Food Security Bill is a covert way to nationalise the buying and selling of key cereals, which can only lead to higher prices and more corruption. Reuters essentially create two markets – one legitimate and another illegitimate. The legal one will be run by the government and its procurement agencies, while the illegal one will deal in grain siphoned off from the public distribution system and sold in the open market. Put another way, there will be an official market for grain – where prices will bear no relation to the real cost of producing food – and there will be a “black market†– which will be the real market for grain. In this scenario, it does not take more than the IQ of a backward rabbit to realise that the UPA is programming for more corruption rather than less. The lessons of 2G, CWG, Coalgate and the MNREGA scams have simply been wasted on the UPA. Worse, there is now evidence that the UPA – or rather the Congress – is going to compound the follies of the Food Security Bill. A report in Business Standard today says that the government has set up a new panel headed by Ramesh Chand, Director of the National Centre for Agricultural Economics and Policy Research, to check if the Commission on Agricultural Costs and Prices (CACP) is using the right methodology to set minimum support prices (MSPs) for grain. This is disingenuous – and the UPA’s action seems suspect. It is probably trying to shoot the messenger, which is bringing it bad news on the Food Security Bill and MSPs. The combo of Food Security and the proposed new method of calculating MSPs will be a grain market killer. The CACP, headed by respected economist Ashok Gulati, has been at the forefront of debunking the cost calculations of the Food Security Bill by surfacing its hidden costs. It has also warned that the actual Bill will be at least Rs 6,00,000 crore over three years, making the fiscal situation worse. The CACP has also been warning against mindless increases in procurement prices without reference to real demand and supply. This will needlessly push up the subsidy bill. Last December, the Union Cabinet specifically overruled the CACP’s decision to keep wheat procurement prices unchanged since the godowns were overflowing. It raised prices by 5 percent, adding to the grain mountain and subsidy bill.:hatsoff: Quite clearly, the UPA sees the pragmatic CACP as an impediment to its political calculations, which call for more dramatic increases in MSPs in the run-up to the next general elections. In 2008, the UPA not only announced farm loan waivers but also spectacular increases in MSPs. An analysis of the causes of subsequent inflation by V Kumaraswamy in Business Standard in 2011 had this to conclude: “In just one year – 2008-09 – MSPs of most foodgrains have been increased by 30 percent to 75 percent. The steep increase in 2008-09 could only be the result of political arithmetic with ensuing elections. This genie is not the handiwork of market forces where either demand grows faster, leading to supply shortfalls, or cost inflation in key inputs (which) create price spirals: it is solely the by-product of administrative action.†In short, inflation was largely the result of administratively decided MSPs. Now cut to the Ramesh Chand committee, which has been set up to overturn the CACP’s more moderate approach to MSPs. Today’s Business Standard says that the committee will help figure out whether farm costs are understated because of inappropriate calculation of the “value of family labour, the rental value of land, the interest on capital, the depreciation of fixed assets – factors vital to calculating MSPs…â€. It may be true that some costs are understated in the MSPs, but many costs also overstated. But even this is beside the point: it is not the job of the government to price grain at a cost that is unrelated to demand. If the demand for wheat is X, and the cost of producing it determined to be X-Plus according to the new calculation, farmers should be exiting wheat production not encouraged to grow more of it. Farmers would benefit from growing more profitable crops that the market is demanding rather than wheat whose prices are the result of the government’s electoral benevolence. According to a Reuters report, the wheat harvest this year is higher than expected, and thus India’s export price (fixed by the government) is now 10 percent higher than global market prices. “India is currently holding to a floor price of $300 per tonne for wheat exports, making its offer of the grain unattractive compared with global prices of $270-280 per tonne.†Calls for cutting the minimum export prices are growing. Failing that, the wheat export plan of 5 million tonnes by June 2013 will flop. Exports are vital to clear some godown space for fresh arrivals at the mandis. If India cuts export prices, it means we will not only be subsidising our own people, but the world markets as well. A poor country will be subsidising the rich. The move to legislate the Food Security Bill and the proposed changes in the method of calculating food MSPs, which can only mean upward revisions, will possibly ruin what’s left of the agricultural markets in India. At one stroke, India will be legislating higher food inflation, higher subsidies, and an end to reform in the agricultural sector since all prices will now be government-inflluenced. So much for UPA-nomics. It’s about winning elections, not feeding the poor. It’s about poor economics and more corruption.
CSK Fan Posted May 11, 2013 Posted May 11, 2013 Coming up next, how UPA is the second coming of Satan and will destroy all creation
Clarke Posted May 11, 2013 Posted May 11, 2013 Coming up next' date=' how UPA is the second coming of Satan and will destroy all creation[/quote'] One minor query: who's paying the bill for this free meal ? Last I heard, the govt was under massive pressure to reign in the fiscal deficit. Where's the $$$ to cover basically free food for two-thirds of our population every year after reducing govt spending ? BTW is this bill part of the democratic freedom you were mentioning in the population thread ? I thought the idea was if you multiply like rats, you suffer the consequences as part of the freedom the country offers ? Did that suddenly change to the govt basically doling out free food to 800 million people, because the UPA defines what constitutes freedom ?
Clarke Posted May 11, 2013 Posted May 11, 2013 The logical (and disastrous) consequence of this bill is another white elephant that cannot be touched for many generations, just like reservations. It was bad enough to destroy meritocracy in govt institutions by encouraging incompetence for the sake of vote banks, now we shall encourage hundreds of millions to carry on the multiple fission since the govt is there to provide for them. Jai Ho!
FischerTal Posted May 11, 2013 Posted May 11, 2013 Coming up next' date=' how UPA is the second coming of Satan and will destroy all creation[/quote'] with rahul gandhi at the helm, it is possible.
Mariyam Posted May 12, 2013 Posted May 12, 2013 The logical (and disastrous) consequence of this bill is another white elephant that cannot be touched for many generations' date=' just like reservations. It was bad enough to destroy meritocracy in govt institutions by encouraging incompetence for the sake of vote banks, now we shall encourage hundreds of millions to carry on the multiple fission since the govt is there to provide for them. Jai Ho![/quote'] People multiply because a government provides for them? For many years, in spite of a debilitating civil wars and numerous conflicts,the countries in the horn of Africa- Ethiopia, Eritrea and Somalia had the highest growth rate (population) in the world. And they surely don't have any food program. They might have not even had any semblance of a government.
Mariyam Posted May 12, 2013 Posted May 12, 2013 How UPA will destroy the food market and feed the rich http://www.firstpost.com/economy/how-upa-will-destroy-the-food-market-and-feed-the-rich-770025.html I've read the article, and I haven't understood large parts of it. Isn't the government already a major buyer? IIRC, FCI buys 15-20% of India's wheat production every year. Its the single largest buying bloc. If the government becomes the monopoly buyer and it is going to raise the minimum support price? Why would they do that? Why is minimum support price even relevant in case of a single major buyer? Isn't there already a black market for food grains. May not be rampant, but its still exists. If the government does create a massive black market as the article claims, it will affect them negatively. Why would the lot of middle/lower middle class families who can afford food at market rates now be content? They would be forced to buy from the black market or claim to be BPL and get rationed food under the proposed bill. The Minimum support price, I thought, is an agricultural ( farmer) protectionist tool. This article should have been better written/explained. This is bit was lol-worthy In this scenario, it does not take more than the IQ of a backward rabbit to realise that the UPA is programming for more corruption rather than less. I like this strategy. Make some random claims, and punctuate it with a ' it doesn't take more than the IQ of a backward rabbit ( are there any forward rabbits too?) to understand why blah blah blah.....' , putting the onus on the reader.
Clarke Posted May 12, 2013 Posted May 12, 2013 People multiply because a government provides for them? For many years, in spite of a debilitating civil wars and numerous conflicts,the countries in the horn of Africa- Ethiopia, Eritrea and Somalia had the highest growth rate (population) in the world. And they surely don't have any food program. They might have not even had any semblance of a government. The effect of reduction in mortality rate will obviously be an increase in population growth. Besides that, an absence of overall education, HDI & productivity growth will add to the numbers as well when the dole system kicks in. Its a proven fact in the United States when comparing fertility rate of welfare mothers vs non-welfare mothers, the former has a fertility rate thrice that of the latter http://usgovinfo.about.com/b/2008/08/25/welfare-continues-to-drive-new-births.htm What do you think would happen to Somalia's population if a constant supply of food was provided to Somalia's citizens/residents without any other change ?
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