Polls, Pulses and Plans of Modi Government

Polls, Pulses and Food Security Plans of Modi Government

Indian Governments' recent actions may discourage Investors' and Traders'

Bihar elections have exposed the policy flaw of Modi Government towards food security. Lack of focus on food security and food inflation will cost political goodwill of this government. Only 0.3 percent of India, i.e. 3.7 million people, with income more than USD 100,000 may have priority for bullet train and smart cities but rest of India i.e. 1270 million people still look for food security and affordable food supplies, education and health services as priority.

Land and productivity is stagnant, but population is and income is growing. This will lead to massive food inflation in coming days.

Where are these plans?

Recovery of 83,000 tons of pulse after 8500 raids is a joke in trading history of India. Any trader or dealer orders minimum one truck load of material. Seized material clearly indicates, the average is less than minimum order quantity i.e. one truck load. Government must not react in panic, this exposes weakness of the political and administrative system and its managers.

Pulses imports are usually undertaken in bulk vessels carrying over 50,000 tonnes, whereas stock limits of 300-350 tonnes per importer is what many states have fixed. Will any importer contract fresh consignments with such restrictions, which would require the pulses to be sold the moment they are discharged from vessels — a practical impossibility?

Similarly, a dal mill processes anywhere from 10 to 100 tonnes of raw pulses daily. For smooth running, it needs to maintain at least seven to 10 days of stocks. But suddenly, we are seeing raids and stocks being seized, when these may have even been pledged with banks for securing working capital.

Should consumers, millers and traders' go to court for justice?

What this indicates?

If less than minimum order quantity is considered as hoarding by authorities, it will collapse the trade and distribution and warehousing infrastructure in India. Today, it is for pulses, tomorrow it will be for edible oils, onion, pulse, spices, etc.

This will not reduce prices in retail market. In fact it will increase prices because retailers may use excuse of no supplies.

As a consumer, I am worried about government action on trade and non-action on food security plans. I am sure soon government will realize its mistake and change the limit quantity.

On one side Pulses are crossing 200 per kg, on the other hand, basmati is selling at par with non-basmati paddy i.e. less than Rs 20 per kg in Punjab mandies, why no action is taken by government to revive the prices of farmers in mandies. Who is making money in basmati trade?

Why Imported pulses are targeted?

Illogical Government action on imported pulses consignments is unfortunate. Importers are not buying pulses from domestic market. They have not used government subsidized inputs and government support for their consignments’. They are buying pulses from international market after meeting all legal formalities under Indian laws. Why government of India is seizing their consignments. If Government of India failed to upgrade pulse production, why importers have to pay the price for government inefficiency?

Why government wants to seize the private property i.e. imported pulses, which is purchased for trading purpose from outside India as per India laws.

In principle, Government of India should ensure supplies of the pulses from its domestic production as reasonable prices. If they want to control the prices, government should create buffer stocks and ensure timely supplies to markets to control the prices. In globalized world, seizing private property and assets for political agenda due to failed policies is dictatorial mindset.

Government must understand that demand and supply is the only parameter in market to determine the price. Trader work on laid out legal framework and terms and conditions in market place. They do their homework and plan their trade, invest money, take risk and take the benefit of demand and supply imbalance. Why government failed in doing its homework? If they failed in their governance, why traders should be asked to pay the price for governance failure?

This raises a fundamental issue; can imported assets from personal fund on personal risk and liability be seized by the authority because of their own failure to improve production? This is against the international trading arrangement. No rules can be changes midway which can disturb international trade. Time must be given to the traders to meet the proposed guidelines.

Government immature action will increase political risk:
Overnight change of law, without stakeholders’ consultation, and raids is not only unethical but against the concept of fair trade regime. This also raises the capability of government to forecast the supply demand situation and also raises the doubts about government intention and increases political risk for investors and traders around the world. This is very unfortunate.

International community will be happy to follow all the laws provided they are framed as per international norms and with transparency. If government is not willing to follow the global norms, they should also announce that this government cannot plan in advance and resort to uncertain policy environment. This should be made clear in advance, let international investors’ and traders decide, whether they want to operate in India or not?

This action will discourage foreign investors’ to invest in India, international trade to and from India will suffer and overall credibility of government will take.

Government must follow established norms and code of consult for international trade to inspire trust and confidence in trading community.

What is the way forward?

International traders’, investors’ community and author  urges Prime Minister of India to ensure food security policy and plans for food security of 127+ crores population and second spell out your approach and policies towards investors and traders in case of failure of governance in controlling prices of essential commodities in India.

Transparency and predictable policy environment is the only assurance for improved domestic and foreign investment in India.

I hope government will soon learn to plan for Food Security and execute it efficiently in place of making announcement without any implementation plan with a timeline.

India needs 10 million tons pulses every year.  I request government to focus on how to improve pulses supplies from domestic production otherwise India will invest more than USD 10 billion on import of pulses every year. This will derail whole development agenda of Modi government by 2019 elections. Opposition will use pulses price hike as political agenda.

Bullet trains and Smart Cities for 3.7 million can wait but not the basic food security for 1270+ million people.

In my view, Lack of attention towards food inflation affecting common man specially ladies voters and working class will impact the outcome of Bihar elections.

This will be wake-up call for Modi government. Modi Government must not ignore 'basics for masses' while talking of new ideas, like bullet trains and smart cities,  for well to do citizens.