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Drought of Justice, Flood of Funds

Mumbai
Sure, August is proving an unusual month. But what an extraordinary one July was. We celebrated the delivery of the cheapest car in the world and the costliest tur dal (pigeon pea) in our history within the same 31 days. And it took some work to get there. The price of tur dal was around Rs.34 a kilogram just after the 2004 elections, Rs. 54 before the 2009 polls, Rs. 62 just after and now, at over Rs. 90,  bids for three-figure status. (49 rupees = $1.)

The euphoria of July also saw Dr. Montek Singh Ahluwalia of the Planning Commission declare that the “worst is behind us.” (Though it must be conceded he had said that even in June and possibly earlier).  That’s good. I only wish they’d told us when the worst was upon us. It would have been nice to know. Otherwise, it gets hard to appreciate improvement.

As a matter of fact, the Prime Minister and Agriculture Minister suggest the worst could be ahead of us. And they don’t mean the swine flu. Both appear to have written off much of the kharif  (summer or monsoon) crop.  They advise us to buckle up for a further rise in food prices due to the drought they now say affects 177 districts.  That they’ve thrown in the towel on the kharif crop is evident in their calling for more efficient planning of the rabi (winter crop). Yet, the government had two months during which it could have opted for compensatory production of foodgrain in regions getting relatively better rainfall. But there was no effort at monsoon management.

Even today there are very useful things that could be done to counter the worst ahead. A positive step taken by the Rural Development Ministry now allows small but vital assets like farm ponds to be created on the lands of farmers through the National Rural Employment Guarantee scheme NREGS . A pond on every farm should be the objective of every government. (Incidentally, this would help hugely with the rabi season. It would also ease the hostility of quite a few farmers towards the NREGS.) A massive expansion of the NREGS will also help cushion the hundreds of thousands  of laborers  struggling to find work and devastated by rising food costs. But it would call for throwing out the entirely destructive 100-days-per-household limit on work under the scheme. With the Prime Minister calling for anti-drought measures on “a war footing,” this should be the time to do it.

The price-rise-due-to-drought warning is a fraud. Of course, a drought and major crop failure will push up prices further. But prices were steadily rising for five years since the 2004 elections, long before a drought. Take the years between 2004 and 2008 when you had some good monsoons. And more than one year in which we claimed “record production” of foodgrain. The price of rice went up 46 per cent, that of wheat by over 62 per cent, atta (whole wheat flour) 55 per cent, salt 42 per cent and more. By March 2008, the average increase in price of such items was already well over 40 per cent. Then these rose again till a little before the 2009 polls and have risen dramatically in the past three months.

The agriculture minister appears to have figured out that the stunning rise in the price of pulses may have little to do with drought.  “There is no reason,” he finds, “for prices to rise in this fashion merely on a supply-demand gap.” He then went on to find a valid reason: “blackmarketing or hoarding.” But he stayed silent on forward trading in agricultural commodities. Many senior ministers have long maintained that “there is no evidence” that speculation related to forward trading has had any impact on food prices. (The ban on trading in wheat futures was lifted even before the results of the 2009 polls were announced in May. And existing bans on other items have been challenged in interpretation.)

The price rise since 2004 could be the highest for any period in the country barring perhaps the pre-emergency period. For the media, of course, July was far more interesting for the political price in Parliament over the Gas war between the Ambani brothers. When these two barons brawl, governments can fall. Also, how could atta be more interesting than airline tickets (the prices of which fell dramatically over several years). Food prices may have gone up but airline travel costs went down and those are the prices that mattered.

So the price of aviation turbine fuel became a far more to-be-covered thing as private airlines threatened a strike demanding public money bailouts. At the time of writing, it appears the government will try and make things cheaper for them. These airline owners include some associated with the Indian Premier League cricket enterprise, which got crores of rupees worth of tax write-offs last year. Maharashtra waived entertainment tax on the IPL. And with so many games held in Mumbai that proved a bonanza for the barons paid for by the public.

There’s always money for the Big Guys. Take a look at the budget and the “Revenues foregone under the central tax system.” The estimate of revenues foregone from corporate revenues in 2008-09 $ 14.3 billion. By contrast, the NREGs covering tens of  millions of impoverished human beings gets $ 8.1 billion in the 2009-10 budget.

Remember the great loan waiver of 2008, that historic write-off  of the loans of indebted farmers?  Recall the editorials whining about ‘fiscal imprudence?’ That was a one-time, one-off  waiver covering countless millions of farmers and was claimed to touch $14.5 billion. But over $ 27 billion (in direct taxes) have been doled out in concessions in just two budgets  to a tiny gaggle of merchants hogging at the public trough, without a whimper of protest in the media. Imagine what budget giveaways to corporates since 1991 would total. We’d be talking many trillions of rupees.

Imagine if we were able to calculate what the corporate mob has gained in terms of revenue foregone in indirect taxes. Those  would be much higher and would mostly swell the corporate kitty for the simple reason that producers rarely pass on these gains to consumers. Let’s take only what the budget tells us (Annexure 12, Table 12, p.58). Income foregone in 2007-08 due to direct tax concessions was $ 12.9 billion. That foregone on excise duty was $ 18.20 billion. And on customs duty $ 31.9 billion. That adds up to $ 63.1 billion. Even if we drop export credit from this, it comes to well over $ 41.6 billion. For 2008-09, that figure would be over $ 62.4 billion.  That’s a very conservative estimate. This is just from the union budget. It does not include all manner of subsidies and rate cuts and other freebies to the corporate sector. But it’s big enough.

Simply put, the corporate world has grabbed concessions of over $104 billion in just two years that total more than seven times the ‘fiscally imprudent’ farm loan waiver. In fact, it means that on average we’ve been feeding the corporate world close to $ 145 million a day every day in those two years.  Imagine calculating what this figure would be, in total rupees, since 1991. Ask for an expansion of the NREGS, seek universal access to the PDS, plead for more spending on public health and education  –  and there’s no money. Yet there’s enough to give away over $ 6 million an hour to the corporate world in concessions.

If Indian corporations saw their net profits rise in April-June this year, despite gloom and doom around them, there’s a reason. All that feeding frenzy at the public trough. The same quarter saw 170,000 organized sector jobs lost in the very modest estimate of the Labour Ministry. That’s not counting the 1.5 million said to have been lost in just the export sector between September and April by the then Commerce Secretary.

And now comes the drought. A convenient villain to hang all our man-made distress on  —  and sure to oblige by adding greatly to that distress. A huge fall in farm incomes is in the offing. If the government wants to act on a war footing, it could start with a serious expansion of the NREGS (about the only lifejacket people in districts like Anantapur in Andhra Pradesh have at this point, for instance). It could launch, among many other things, the pond-in-every-farm program. It could restructure farm loan schedules. It could start getting the idea of monsoon management into its thinking. It could curb forward trading-linked speculation that was driving one of our worst price rises in history long before the drought was on the horizon. And it could declare universal access to the Public Distribution System. That cost could probably be easily covered by say, cancelling  the dessert from the menu of the unending corporate free lunch in this country.

P. SAINATH is the rural affairs editor of The Hindu, where this piece appears, and is the author of Everybody Loves a Good Drought. He can be reached at: psainath@vsnl.com.

 

 

 

 

 

 

 

 

 

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P Sainath is the founder and editor of the People’s Archive of Rural India. He has been a rural reporter for decades and is the author of ‘Everybody Loves a Good Drought.’ You can contact the author here: @PSainath_org

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