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Updated: February 19, 2013 11:54 IST

Helpless consumers, hapless government

V. Sridhar
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The nexus between wholesalers, retailers and other middlemen and their ability to manipulate the release of supplies is what is responsible for the sharp rise in prices, says an expert. File photo: Nagara Gopal
The nexus between wholesalers, retailers and other middlemen and their ability to manipulate the release of supplies is what is responsible for the sharp rise in prices, says an expert. File photo: Nagara Gopal

The fatalistic notion that prices are moved by the hand of God is what allows governments to escape any responsibility for controlling them. Although it became evident by the middle of the last year that the severe drought in the State would result in spiralling prices of foodgrains, it was not utilised as a means of reining in prices, says R.S. Deshpande, director, Institute for Social and Economic Change (ISEC).

Pointing to the fact that commercial, rather than foodgrains crops, were more badly affected by the drought, Dr. Deshpande says this reflects the clout wielded by the traders. “The nexus between wholesalers, retailers and other middlemen and their ability to manipulate the release of supplies is what is responsible for the sharp rise in prices,” he says. Traders hoard stocks and then release them slowly so that they maximise their profits, he says.

Onion layers

Incidentally, Dr. Deshpande, who is familiar with the working of the onion market at Yeswanthpur, which has witnessed wild fluctuations in prices in recent weeks, has a word of advice to anyone who wishes to observe the happenings at the onion mandi.

“If you keep your ears closed but eyes wide open, you will see how the traders exchange (hand) signals to fix prices,” he says. A handful of traders control the onion business, he notes, while observing that the government has done precious little to leash them.

Dr. Deshpande recalls a time in Bangalore, about a decade ago, when the HOPCOMS network worked effectively, serving the interests of both farmers and consumers. “When I came to Bangalore in 1998, I found it provided good quality fruits, vegetables and a few other essentials at a very reasonable price,” he says. However, he observes that the cooperative system degenerated, mainly because of “nepotism and corruption”.

Why PDS

An effective public distribution system — emphasising effective — is absolutely essential for two sets of reasons, says Dr. Deshpande. A universal PDS that functions effectively will ensure supplies reach the poor. But just as important is the indirect impact by “dampening” the general price level, he notes. The large-scale diversion of stocks to hotels and maida and rava millers and the processing industry has gone hand in hand with the exclusion of large sections of the poor from the reach of the PDS.

The success of an effective PDS hinges on it being a decentralised system, which would also result in it being more transparent and accountable to the people it serves, according to Dr. Deshpande.

Referring to the recent announcement in the State Budget that the government is committed to providing rice at Rs. 2 a kg, he says: “It does not matter whether it is Rs. 2 or Rs. 5 a kg, as long it reaches the people it is meant to.”

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