Ask for expansion of the NREGS, universal access to the PDS, more spending on health and education — and there’s no money. But there’s enough to give away to the corporate world in concessions.
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 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.
The euphoria of July also saw Montek Singh Ahluwalia declare that the “worst is behind us.” (Though it must be conceded that he said that even in June and, possibly, earlier.) That’s good. I only wish he had 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, Prime Minister Manmohan Singh and Agriculture Minister Sharad Pawar suggest that 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 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 a more efficient planning of the rabi. 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 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 lakhs of labourers 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, of wheat by over 62 per cent, atta 55 per cent, salt 42 per cent and more. By March 2008, the average increase in the prices of such items was already well over 40 per cent. Then, they 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 goes on to find a valid reason: “blackmarketing or hoarding.” But remains 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 might 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 IPL, 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 is Rs. 68,914 crore. (http://indiabudget.nic.in/ub2009-10/statrevfor/annex12.pdf) By contrast, the NREGS covering tens of millions of impoverished human beings gets Rs. 39,100 crore 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 Rs. 70,000 crore. But over Rs. 130,000 crore (in direct taxes) has 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 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 Rs. 62,199 crore. That foregone on excise duty was Rs. 87,468 crore. And on customs duty Rs. 1,53,593 crore. That adds up to Rs. 3,03,260 crore. Even if we drop export credit from this, it comes to well over Rs. 200,000 crore. For 2008-09, that figure would be over Rs. 300,000 crore. That is a very conservative estimate. 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 in just two years that total more than seven times the ‘fiscally imprudent’ farm loan waiver. In fact, it means that on average we have been feeding the corporate world close to Rs. 700 crore every day in those two years. Imagine calculating what this figure would be, in total, since 1991. (Er.., what’s the word for the bracket above ‘trillion?’) 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 nearly Rs. 30 crore an hour to the corporate world in concessions.
If Indian corporates 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 1.7 lakh organised sector jobs lost in the very modest estimate of the Labour Ministry. That’s not counting the 15 lakh jobs 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 programme. 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 PDS. That cost could probably be easily covered by, say, cancelling the dessert from the menu of the unending corporate free lunch in this country.