Opinion Making it cheap
A Central regulator for agri-prices might be a good idea
On agricultural prices,instead of running around like monkeys with our heads cut off,and letting the 30-second sound bites set the agenda,we need cool thinking.
First accept,though,that we are in a bit of a jam. With per capita income growing at 7 per cent,agricultural output growing at best at around three-and-a-half per cent,and apart from sugar most commodities not having grown at all in the last three years,only the foolhardy will trust the quick fix. Yes,this year,according to the governments first advance estimates,output has risen,but these estimates always get revised downwards.
The second,equally important,point is: dont take seriously statements that police raids will solve the problem. Every time I went to Delhi to work,if prices rose,action against hoarders was the clarion call. It happened in 1974,1983 and so on. It is a hangover of World War II. Some of the countrys most thoughtful policemen are my friends; and,like me,they know that no policeman ever delivered any onions to any housewife including their own at cheaper prices.
Does that mean we cant do anything? Of course not.
Action in the long term should not be postponed,even if it takes time. Investment in markets,communication,commodity exchanges,first-stage processing,particularly bringing in the network,larger villages and smaller towns is terribly important. This is not just a question of lets get in foreign retail,thank you. Investment in value chains,including as part of a policy plan,domestic and global retail channels is needed; but,in the short run,that will probably raise prices. That is after all what they are supposed to do,to ensure supplies. But the long run is not all far off.
We ask NAFED and so on to intervene. Now NAFED hasnt exactly been a star performer in the PSU world. In fact,at one stage,it had lost a lot of its working capital,and I hope somebody has looked at all that. From all accounts,its a much worse performer than the FCI,which is by no means an angel.
Does this mean nothing can be done to stabilise prices? While prices cannot go down to the level at which urban consumers will be happy,a lot can be done to discourage destabilising speculation and wild movements. We must mandate an agency to do this. It must be professional,managerially competent,at least as much as the existing traders and distribution channel operators,work autonomously to fulfil its mandate,and have sufficient clout to ride roughshod over the silos in which government operates it.
Take the clout first. If such an agency is set up,it must be in the Cabinet Secretariat,for otherwise it will never be able to coordinate across commerce,finance and the RBI,not to mention agriculture and consumer affairs.
This new regulator should have the responsibility of stabilising the prices of a limited set of food commodities. It should have an idea of expected demands,at least as much as any business has when it makes money from trade. Meanwhile,the link between trade policy and domestic agricultural policy needs work. We have been using tariff changes as supply management tools,and do it ham-handedly,as their use is not policy- but pressure-induced. The regulator should largely work through futures,both at home and abroad with very limited physical interventions in the market itself,and only when absolutely necessary.
Were the regulator to put its larger estimates of expected movements in the public domain,that would itself act as a stabilising force. It should also publish inter-centre price differences,so trade can even them out. For its physical interventions,it could use the trade distribution channels as its commission agents,just as the FCI uses arhtias to procure grains.
Perhaps it is prudent for me to stop here. There is,perhaps,a limit to how hard you can push governments to do the right thing.
The writer,a former Union minister,is chairman,Institute of Rural Management,Anand
express@expressindia.com
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