Bijaynomics's Blog

Interview with Minister of Agriculture Dr KV Thomas

Interview with minister of State for agriculture Dr KV Thomas

Rs 58,000 crore worth food grain is lost. Who is responsible?

This figure is highly exaggerated. I do not agree with this one. According agriculture ministry’s study, only 0.004% of stored food grains have rotten. There were 11,708 tonnes of damaged /non-issuable foodgrains in FCI depots. However, I would like to clarify that not everything in the 11,708 tonnes of damaged food grains have got spoiled. This quantity has become non-issuable to benficiaries of the public distribution system, because of different reasons and all of it can not be termed as rotten. Some amount of foodgrains gets damaged during transportation as well. I would say this is a small number. At the same time, I must confess that we should not tolerate wastage of even small proportions. Both FCI and the state governments are responsible for the lost foodgrain.

Was any action taken by your ministry? Did you personally react to the crisis?

We did. We sent senior officers from the ministry to take stock of the situation. We have taken stringent action against errring officials of the FCI. The state government will have to take action as well. I have myself visited many states. We are formulating a mechanism of looking into the quality of food grains that are still in the open and seeing what can be salved. The ministry is studying the recommendations of Dr MS Swaminathan of building a network of ultra modern storages across the country.

But still there is an impression that the government did not react on time, and that it did not care. After all, images of food grains rotting in the open and rats in the FCI godowns are generation old, right?

Ans: It is wrong to say that the government has not reacted and it does not care. The empowered group of ministers (EGoM) headed by finance minister Pranab Mukherjee and Sharad Pawar as a member ascertained the status of stocks in FCI godowns. In 2005-06, there was shortage of food grains. Many godowns were vacant. We were asked why godowns are vacant and the ministry was severely criticised. The FCI, eventually, had to shut down some of its storage facilities after 2006-7. Now we have a situation of surplus and this mess has happened.

Who eventually will store the food grain, the farmer, the middle man or the government (in this case the Food Corporation of India)?

The FCI, it is the government agency that stores the foodgrain.

But kindly explain this disconnect. One half starves in India, the other half wastes food grains?

The FCI has dual responsibility. The corporation’s first responsibility is to provide minimum support price to farmers. It has been doing that very well. It’s second responsibility is procurement of food grain and storing it. The FCI has had decent success in providing fair price to farmers and stabilising market from volatility in food grain prices and even procuring the same. Storage, I agree, is an issue with the FCI. But the distribution of food grain is state government’s responsibility. Even, states like Kerala has not offloaded food grain of its assigned quota. At the same time, Punjab and Haryana are fighting for increasing their quota.

The plan for decentralized storage facility is 40 years old. It is still hanging fire? Which is the best way to solve the crisis, obviously now you cannot build warehouse overnight?

We are improving our storage mechanism. We want more space. We have leased godowns from private players. And the price involved is huge, running into crores of rupees. Earlier, we had signed a 7 year lease with private players which has now been extended to 10 years. We are doing financial assessment of building new warehouses across the state. I agree we cannot build warehouse overnight. Being a government company, the FCI follows certain labour laws and the corporation’s workforce is active only during the procurement season. I agree they need to be active throughout the year.

Does the FCI has enough space to store foodgrains across India?

We need to improve the corporation’s storage mechanism. There needs to be better co-ordination between FCI and the state governments to avoid mess like this one.

Finance Minister

Can FM Realise His Double-Digit Dream?

The reaction of economists and politicians varies from outright scepticism to cautious optimism, says Bijay Kumar Singh.

New Delhi

Finance Minister Pranab Mukherjee has set an ambitious target: of achieving double-digit growth in 2012, even as he grapples with the twin problems of a mounting fiscal deficit and escalating inflation.

The Indian economy has weathered the recessionary storm well and Indian policymakers are once again talking of 10 per cent growth to anybody who cares to listen.

“India was expected to register a growth of 9 per cent in 2011-12. My target is making it a year of double-digit growth,” Mukherjee said in a presentation last week to the International Institute of Finance in Washington, DC.

Noting that India had not remained unaffected by the global financial crisis, Mukherjee said that after four consecutive years of 9 per cent growth in India, it slowed to 6.7 per cent in 2008-09. The rate improved to 7.4 per cent in 2009-10 and is expected to touch 8.5 per cent in the current fiscal.

But the finance minister’s optimism does not wash with his political opponents. Yashwant Sinha, who handled the same portfolio when the National Democratic Alliance was in power, is sceptical. “The UPA 1 (the first term of the United Progressive Alliance) had also set for itself a double-digit target that they could not achieve, despite very feasible domestic and global environment,” he said, adding that with the Indian economy in the grip of an unstable fiscal deficit and a rising rate of inflation, the target was even more unlikely to be reached. “Further growth will only add to inflationary pressure which can destabilise the economy,” he said.

Unlike Sinha, some academics and economists are cautiously optimistic. As Abhijit Sen, a member of the Planning Commission and professor of economics at Jawaharlal Nehru University, put it, “It could be achieved, it is not impossible.” He said the target for the first year of the 11th Plan was 9 to 10 per cent, and India was growing better than others. But, he cautions, for double-digit growth, the savings-to-investment ratio must move up to 40 per cent against the current 34 per cent. “Moreover, agriculture must grow at 4 per cent, which we have not yet attained,” he said.

Others point out that India’s growth story cannot be delinked from what happens in the West. “We can aim for a 10 per cent target, but sustaining it would be difficult unless the global economy does well,” said DK Joshi, principal economist with CRISIL Ltd, a unit of international rating agency Standard & Poor’s. His contention is that without a robust recovery in North America, Europe and Japan — which together buy two-thirds of India’s exports — it would be impossible to get the required push.

For Brinda Karat, politburo member of the Communist Party of India (Marxist), growth was not the question. “Double-digit growth is possible, but growth for whom, who is going to be get the benefit?” she asked. For her, a double-digit growth is nothing but a number, it does not represent development. “The issue is whether the pattern of growth is inclusive so that a dent is made on poverty, unemployment and inequality,” she said.

In this context, she said the recent decision by the government to partially decontrol fuel prices is nothing but a move aimed at squeezing the consumer. “This government is taking money from the pockets of the aam admi (common man),” she said.

Second to none

Second To None

India’s huge used-car market is speeding ahead, reports BIJAY KUMAR SINGH

One man’s trash, they say, can be another man’s treasure. This is certainly true of the used-car market, which has set exciting new milestones in the past decade. “The secondhand automobile market is growing at the rate of 20-25 per cent annually,” says Pravin Narang, spokesperson for Mumbai-based used-car seller Mahindra First Choice Wheels — a pre-owned car company floated by automaker Mahindra and Mahindra Ltd.

Sensing the huge market — pegged at about 1.9 million units a year — most automobile manufacturers have set up ventures to tap this sector. Thus, Maruti Suzuki Ltd, India’s largest passenger car manufacturer, has Maruti True Value, Hyundai Motor India Ltd has Hyundai Advantage, and Ford India has Ford Assured.

Figures from the National Council of Applied Economic Research (NCAER), a Delhi-based think tank, underline the potential. According to these, secondhand cars accounted for about one in seven of all cars sold in 2001-02. Today, says Maruti Suzuki Ltd, that figure is about one in five.

This is particularly remarkable given that new-car production has also seen sharp growth. According to data provided by industry body Society of Indian Automobile Manufacturers, total production grew by over 135 percent: from 989,560 units in 2003-04 to 2,351,240 in 2009-10.

One significant reason for the growth in second-hand car sales is that over the years the price of used cars has remained more or less stable, whereas that of new vehicles has risen. Says Rajesh Shukla, senior fellow at NCAER: “While the average price of a new car was Rs 2.15 lakh in 2003-04, that of second-hand cars was Rs 1.06 lakh. In 2009-10, new cars cost approximately Rs 3.75 lakh, while the average price of second-hand cars was Rs 1.10 lakh.”

What has also boosted the sector, says Shukla, is the increasing disposable income in the hands of the middle class. “The country’s per capita income has risen rapidly. The middle class has grown at the rate of 12.2 percent a year from 2001-02 to 2005-06. This is pushing the second-hand goods market,” says Shukla.

Agrees Koteshwar Prasad Dobhal, spokesperson for industry lobby Associated Chambers of Commerce and Industry: “Competitive prices, wage hikes and rise in agricultural income are together driving the second-hand goods market in India.” All three are major factors in the growing consumerist culture. According to a study by global consultancy McKinsey & Company, India will become the world’s fifth largest consumer economy by 2025. And fueled by this increasing appetite for both the new — and the old that looks like new — the second hand car can be expected to deliver extra good mileage.

GUY SORMAN

The Indian model is more sustainable than China’s’

In his new book Economics Does Not Lie, French economist Guy Sorman calls the India story a ‘market revolution’. Excerpts from an interview with BIJAY KUMAR SINGH

Finance Minister Pranab Mukherjee has set a target for achieving double-digit growth by 2012. Is this possible?
Double-digit growth can be reached not by a minister but by the entrepreneurs, and through hard work of the Indian people. The government can be helpful by liberating entrepreneurship, removing red tape, increasing competition and putting in place a stable monetary and fiscal policy by lowering interest rates. High growth would be the outcome of a stronger free-market oriented policy.

What are India’s growth prospects?
India’s development has just started. Agriculture will make huge productivity gains through improved techniques — like improved seeds, better use of pesticides and GMOs (genetically modified organisms). Auto manufacturing, especially of small cars, will become a major industry for Indians, inside and abroad.

But there’s a big movement against GMOs in India. Even the Ministry of Environment and Forests wants introduction of GM foods postponed.
GMOs work. The fight against GMOs is usually ideological, anti-big business. Is it better to use a lot of pesticides or GMOs?

India is currently faced with high food price inflation. How should this be tackled?
Inflation in India, like everywhere, is first a monetary phenomenon. Price increase usually translates into bad monetary policy: money printing and excess of public debt. As for food prices, the lack of transparency and poor transportation infrastructure can generate speculation.

You have said that India is no longer doomed to remain poor. But according to the Arjun Sengupta report of 2007, over 836 million people in India are spending less than Rs 20 a day.
The report does not explain why the nearly 200 millionstrong middle class, which did not exist 20 years ago, suddenly appeared. Where did they come from? Clearly, there is not only an Englishspeaking upper class. In order to really evaluate the impact of liberalisation, it is essential to keep the same criteria from one year to the next. If you change those, like Sengupta does, you can demonstrate what you like. And we all know that the report is an ideological operation — to justify more welfare programmes and rebuild bureaucratic influence.

What’s your take on China-India comparisons?
China’s growth is exportbased, and thus dependent on the global market. This makes China’s growth unpredictable and fragile. Moreover, the edge China has is largely due to its low wages, imposed by the Communist Party. Recent strikes in China’s factories, however, show that this workers’ exploitation may not go on for ever.

Being a democracy, India is more focussed on the domestic market, more based on small businesses and innovation. In the long run, the Indian model is more sustainable than China’s.

PHOTO: AFP

MS SWAMINATHAN

with Bijay Kumar Singh

Many neo-liberal economists suggest that food security is outdated concept in today’s market based globalised world. They believe that we should focus on products where we have competitive advantage instead of wasting our scarce resources on providing food security to every citizen. How would you respond to them?

Food is the first among the needs of human being. We all know that India is the home to largest number of malnourished children, women and men in the world. Therefore, providing food security to every citizen should be fundamental responsibility of government. It will be criminal act to neglect food security and we will be sacrificing national sovereignty, if we neglect food security. Today we have a great opportunity to provide food security to our people.

Foodgrains are rotting across the state. Is this crisis of food production or crisis of food storage? Why this disconnect in India?

We have not attended to problem of distribution. Agriculture is backbone of livelihood security and it involves Production, Procurement, Preservation and Distribution. We have urbanised politicians and bureaucrats who don’t understand suffering of common people.

The country should get its priorities right. It is shame if it can not save its foodgrains for the needy, the state should not be talking about food security law. Food security should be priority. Instead, the government has chosen to focus on airports and Commonwealth Games.

In 1966, when Shree Morarjee Desai was minister then he gave importance to storage aspect. In 1979, to prevent negation of hugely successful Green Revolution through improper storage of grains, the save Grain Campaign was proposed. It envisaged 50 ultra modern grain storage structure across the country., each with capacity of 1 million tonnes. The idea was to decentralize storage, eventually creating units right down to the block level of the district. Has it been done in place , this year’s colossal wastage of grain may not have happened.

In Globalised world, subsidy is a bad word. Even Prime Minister wants to reduce subsidy. Don’t you think agriculture subsides distorts the cropping pattern and lead to regional disparity in development?

Trade now is free but not fair. The developed countries that are opposing subsidies provide the largest amount of subsidy to farm sector in the name of conservation without attracting theories of World Trade Organisation. India now offers subsidy much below WTO limits. USA is providing Green Box subsidies to its farmers. Their conservative farming is not competitive farming. It distorts trade. Our negotiator are not able to negotiate our farmers concern properly in international forum like WTO.

Recently journalist P Sainath said that the empowered group of ministers want the definition of food security limited to specific issue of foodgrains(wheat and rice) and should be delinked from larger issue of nutrition security. Would you support this move of EGoM?

The National Advisory Council is working on it. The EGoM have written to us, but we did not accept. To best of my knowledge, EGoM have not taken any final decision.

Finance Miniter Pranab Mukherjee has set target of achieving double digit growth by 2012. Is this possible when agriculture is growing below 4%?

It is possible to achieve double digit growth if Information Technology Sector, Manufacturing Sector and Retail sector does well. But for growth to be inclusive, agriculture must grow at rate of 4%.. And if we want to achieve 4% growth rate in agriculture, we should have 8% growth in animal husbandry and fisheries, and 8% in horticulture. There has been stagnation in wheat and rice production because the strategy recommended in 10th plan has not been followed.

I would like to quote JRD Tata,” I don’t want India to be a superpower, I want India to be a happy country”.

India is currently faced with high food inflation. How should this be tackled?

It is a matter of great concern for when we see that food prices are so high, although farmers are not getting remunerative prices.

Last week prices of Pulses and vegetables have come down. 85% rise in price of milk price is due to rise in cost of fodder. We should stop exporting wheat for making cake. We need nutrition policy both for animals and men.

I suggested Pranab Mukherjee before budget session that during 2010-11, 60,000 pulses and oilseed villages may be organized in rain fed areas. Producing food in adequate quantities and making them available at affordable prices will be greatest challenge during the coming years. I was ready to help the government, but I did not get any response from government.

Is India ready for Genetically Modified Food?

I don’t think India is ready for Genetically Modified Food.

Do you support Genetically Modified Brinjal?

There is need for more tests. Tests have largely been done by the company. There have been no independent verification. When it comes to food crops then risks have to be considered. Even Jairam Ramesh quoted me.

What is status of Genetically Modified Rice experimented in your institute M S Swaminathan Research Foundation?

Genetically modified rice doing well. We are cultivating Genetically Modified Rice in coastal areas in Kalpakkam in limited scale. This is original seed and original work. It will give boost to coastal farming.