Wednesday, March 25, 2009


Every one is supposed to go ga ga after hearing the the news that the inflation last week continued to slide down to the lowest figure since a long time. The Official figure of 0.44% inflation based on WPI (wholesale price index) changes reflects a trend that indicates relatively slower rise in wholesale prices as compared to that existed an year ago. It is difficult for a common man to understand the relevance of whole sale prices that prevail in the market as these have no resemblance to the prices that rule the retail market. Of course GOI also brings out Consumer Price Index in three different categories for agricultural labor, urban workers and non-industry workers but as these figures are much higher than WPI they are not widely disseminated. There is widespread apprehension that the country may even get into a deflation mode or negative inflation regime soon, the major reason being declining demand in the country for many products due to recession like situation. Some economists interpret the rapidly declining inflation as a sign of plummeting demand for many things by consumers, left with less and less disposable income.

The 'feel good' factor disappears the moment one looks at the price front, especially for some of the basic food materials in the retail market. The basic staples rice in the South and Atta in the North have registered price increases in the range of 30% to 50% during the last one year for no rhyme or reason. Though GOI claims that this price increase is due to higher support prices offered to the farmers, this is hard to accept because no farmer gets this type of hike in prices for his crops in a single year. Same trend is evident with other essential commodities also except in the case of edible oils, price of which is influenced by the import duty on palm oil and soybean oil. Present zero duty import regime for the above oils, compared to more than 60%-85% earlier, has succeeded in bringing down the prices very significantly, at least for these two items. Whether it is sugar, salt, dal or dairy products, the upward trend in consumer prices is causing misery all around with low income groups cutting down on foods due to economic compulsions, affecting their health adversely. In the case of fruits and vegetables the situation is some what different. The cheapest fruit in the market is Papaya with a ruling price of Rs 10-12 per kg while others cost upwards of Rs 25/kg. Wide fluctuations in prices of vegetables, experienced by the consumer defy any explanation and how meager the farmer gets out of the price paid by the consumer, is a matter that must affect the conscience of this nation.

The PDS which the country put in place under the socialistic pattern of government in sixties does provide some solace to the consumer but the widespread corruption that characterizes the distribution system denies the benefits to a substantial segment of the deserving population. After the economic liberalization reforms in the beginning of the last decade, PDS has become dysfunctional in many states causing further misery to economically weaker sections of the society. It is high time that PDS is reorganized and modernized to serve the purpose of social equity and guaranteed food to meet the minimum nutritional need of the low income population which cannot afford to face the galloping price escalation in the open retail market. Using ration cards as an identity document must be stopped and only those opting for regular purchase of commodities from the PDS, because of economic reasons, should be provided with such cards.

What country needs is a re-look at its food retailing system, giving prime importance to growers' cooperative organizations for marketing the produce from their members directly to the consumers. Amul is a classical model of a cooperative venture that changed the face of dairy industry from one of perpetual shortages into a situation of plenty in less than 4 decades. Why we are not able to clone this model in other areas like edible oil or horticultural crops or food grains is not well understood. NDDB, in 1983-84 made an attempt under Dr V Kurien, to organize production, processing and marketing of fruits and vegetables with a pilot scheme in new Delhi. Though the project gained considerable experience, it could not be implemented across the country like the dairy ventures. Whether it is due to GOI apathy or the strong lobbying by vested interests, people of this country are the real losers in the bargain. If GOI and State administrations provide weighted policy and fiscal incentives to the cooperatives to face the challenges from investment-rich private players, there is no reason why the former cannot succeed in keeping the consumer prices under control. Probably one of the pre-requisites for success is empowering the cooperative producing and marketing organizations, owned and operated by the growers, with the required financial muscle in meeting the credit needs of the agricultural sector. This could be done with a fraction of the massive one time "write off" program under the last year's budget estimated at Rs 60000 crores!

The successful e-choupal model promoted by ITC, a major player in wheat processing industry, can be easily emulated by the cooperatives, the only difference being the direct ownership of the organization when it is in the cooperative sector. Maize cooperatives working in southern Karnataka, are a living example of a successful growers' organization with enormous market clout in fetching maximum returns to their members. Such successes need to be multiplied manifold in all areas of agriculture, horticulture, livestock rearing and captive fisheries if the industrious farmers and the vulnerable consumers in India are to be liberated from the 'middle man' syndrome that is prevalent to day, largely responsible for the consumer misery.


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