Rice Supply Situation

Rice is a staple food of half of the world’s population. As we produce close to 163 mt(Million Tonnes) of rice per year, we play a vital role in the international rice market . Hence any happenings in the Indian agricultural sector will have an impact on the global market.

On the backdrop of poor monsoon across india and the recent flood in the southern india will surely have a cut on the khariff production figures. After a record of 99mt output in last years khariff, we are now estimating to produce 81mt this year. At the moment shortfall of substantial 18mt is a cause of concern. We might face a worst rice supply situation in the days to come

What government will do:

• Regulate the rice market: Controlling inventory build up under ESMA will ease out supply for some time, but it is going to kill traders & millers in the market.
• Import of rice: As of now India has not participated actively in international market to procure rice. A sudden move by FCI will shore up rice prices globally as the volumes will increase rapidly.

What government should do:

• Rice @ Rs.2/kg: Rice sold at a substantial subsidised price will have lesser utility and the wastage is more. Centre should request state government to abolish such schemes for the time being.
• Substitute food: Think over promoting substitute food products like wheat, maize or other pulses.
• Increase domestic supply: improve the water availability conditions on ground to cultivate rice so that Rabi will have higher output units.
• Crop Insurance: Promote farmers to cultivate for Rabi season by assuring them with crop insurance. As most of them feel that, there will be scarcity of water in the summer season. Hence most of them have not even started seedling plots for nursery.

Every time a crisis occurs, we can not always look back to our age old strategy of regulating the traders & millers inventory in the market. We have to shift to a level, where we can address the base of the problem.

Rabi season is nearing, but water availability during this term is difficult to predict as the season gets over in summer. Hence government should design a strategy which will improve transplantion of paddy.

SAY NO TO SUBSIDY

I think word “subsidy” is always associated with problems rather than solutions. Intent of the government to relieve common man is misused in many ways. Centre spends enormous amount of resources and energy in controlling misuse, but the question is whether govt is successful enough in regularising its policies???

Export of Pottash

International market price of potash is nearly $640 per tonne (nearly Rs.31000) and the subsidised potash sold at Rs.4455 per tonne in Indian market. The differential between these two prices will invite smugglers to exploit the margin of profit.

These days,I had been meeting many guys, who would want to purchase potash upto Rs.9000- 10000 per tonne when the MRP is fixed at Rs.4455 per tonne. And retailers in smaller places will not think for a single minute before selling their goods, they say, by selling it to farmers I hardly get Rs.300 per tonne if some one wants to give me extra 4000- 5000 bucks why not sell it to him?

Initially I did not have an idea, what they would be doing with such an expensive purchase of fertiliser. After a small effort i came to know that, these middlemen sell this fertilizer to smugglers and the same will be exported to nearby countries such as Malaysia and Vietnam. In the later stage same exported fertiliser will be imported back to india at the prevailing international market prices.

The whole consignment will be shipped out by declaring falsely the goods as industrial salt. In a later stage same material will be imported back as Muriate Of Potash popularly known as MOP.

We have many rules & regulations, but none of the rules help us in protecting tax payer’s money. In this globalised world market should rule the market and not the government.

SAY NO TO SUBSIDY...

Sugar Cane: Short Term is OK But What About Long term?

As the sugar production dropped from 250 MT to 150 MT, we are able to witness a sharp rise in the sugar price. Data says at present we are not running out sugar inventory, but there will be a case where demand surpasses supply in the months to come. Due to heavy storing and speculation, price of sugar is sky rocketing.

To control the price, centre has come up with a stock limitation notification. According to this notification any individual or company using sugar as a raw material more than 10 quintals or 1000 kg has to provide CA certificate for their usage pattern. This notification will cover small entities like mithai shops, bakeries and restaurants along with companies like Britannia industries, Parle and Haldiram’s.

This eventually leads large industry to shell out their extra inventory to the open market and there by have a control on the rising price of sugar.

We are happy that centre has come up with a quick remedy to the rising problem of sugar. But, policy maker should realise stock limitation notification is a solution to the current short term problem and still the long term problem of sugar is not yet resolved.

As we all are aware that sugar cane is not just a raw material to produce sugar but also to produce ethanol, bio fuel and thermal power. Molasses contributes major revenue for the state’s excise exchequer and also used in blending petrol to make it greener so that it emits less green house gas. At present we are using 5% ethanol blended petrol across the country and the target is to increase the blend to 10 percent.

Keeping all these points we can not directly look out for a window to import sugar. We have to improve our production figures at ground level. Govt should adopt a policy where they can encourage farmers to grow more sugar cane.

Nutrient Based Fertiliser subsidy Scheme: How efficient it would be?

One of the important features of the Budget presented by Mr.Pranab Mukherjee is to move towards a nutrient based fertiliser subsidy regime. In regard to this scheme, govt has approached leading bankers to extend their support to efficiently delivering subsidy amount to the end farmer. As such working out an efficient & transparent system is not a simple task.

Idea of delivering subsidy directly to the farmer is good. But, will this reduce the subsidy burden on the central government?

Let me try to analyse the situation when the scheme is in force;

• Norms would be designed in such a way that there will be an upper cap to use fertiliser. For eg, 3 Quintal of Urea/acre for Paddy in an irrigated area.
• In reality farmers use it more than what is recommended which is a routine now and changing the consumption habits will hamper the yield.
• If the yields are low, farmers will be in trouble and the net share to the GDP will come down drastically.
• To handle this problem, farmer will start declaring higher amount of land in cultivation so that he gets a better quantity of fertiliser.
• Corruption will increase in the system to get a better allocation share; there is a chance of grey market.

I don’t see a small benefit out of this scheme. Government should reconsider the plan.

Base of the problem: In the last financial year, to woo the farmers, govt has reduced the MRP of all complex fertilisers by almost Rs60/- to Rs110/- to different categories of complex fertiliser. A significant reduction in the MRP has started affecting planned budget allocation for fertiliser subsidy. Central govt did not have funds to pay the subsidy bill raised by manufacturers of fertiliser, so they started issuing bonds to fertiliser manufacturers ( Duringthe last year monsoon all commodity prices reached the sky), leaving fertiliser manufacturers with no working capital to continue their operations. Finally, a shortage for fertiliser in the market.

My advice to the government;

• Stop wasting time on designing a system for nutrient based fertiliser subsidy scheme.
• Increase the MRP of all fertiliser, there by reduce the subsidy burden on central govt. (Reduction in the MRP has not reached end user, in fact it has created a black market. Because there was an acute shortage for fertiliser after the reduction in the MRP. Today fertiliser is sold above the last years price)
• Since a decade there is no revival of fertiliser prices, there needs to be regular changes in the MRP to acclimatise the respective situation in the market.
• Liberalise fertilise manufacturing policy.
• Invite private investments in this segment in an aggressive way.
• Devise a scheme where you can reduce the manufacturing prices.
• Do not alter the existing system of delivering subsidy.

There is a need for nation wide discussion on the new subsidy scheme. The way we fought for the gay marriage rights, we should also fight for the upliftment of the agri sector.

Caste, Religion & Dynasty

Elections are over and UPA has got public mandate to form the government. Most of the candidates who has won this election is because of caste, religion or the family name. Ours is a polity dominated by top down hierarchy and there is no value for a person who believes in the concepts of governance & accountability.

The recent fight between Congress -DMK on the issue of allocation of ministerial berths to the family members of the Karunanidhi is a best lesson for all of us. 

It was a common feel among observers in Delhi on the past performance of TR Balu & A Raja was a completely negative. Balu has misutilised his powers to help his son in the business and he failed totally in governance & accountability. It was a sensible decision by Mr.Singh to keep them out of the new government and also, he never wanted Azhagiri to take up any position in the new govt as he has won the MP seat for the first time and he is less experienced. At the end, Karunanidhi emerged as a winner by getting executive positions for his family members and two of his top acolytes.

Such political drama has become normal in politics, it is you and me to think and do something about it, otherwise the creator has to take new avatar to set it off.

Be Careful !!!

Friends... Time to be catious & careful, during the IPL 2 season. As their might be a problem with security in those 14 locations where IPL matches are clashing with general election schedule. It is better for us to be cautious and take care of our own security rather than depending on some one else to do the job. And don't beleive completely in the words of Home Minister, as he is habituted in giving overconfident statements like, "cricket in india is always safe and there needs to be some adjustment in the schedule of the game".

In the past, we have seen him giving such overconfident statements on indian economy. But, in reality he did nothing. He is the main reason for huge fiscal deficit, jobloss, low demand and poor indian economy.

So, don't go with his word and take care of your own security.

A Real Pain: Third Stimulus Package

A week ago, the acting finance minister Mr.Pranab Mukherjee said it is not necessary to announce any fiscal measures in the budget as the government is going to face general election in few months. But, within seven days he realised that, country needs a third stimulus package amounting to Rs.30000 crores.

Govt reduced excise duty by 2pc, a cut in service tax, cut in excise duty on bulk cement and many more such sops are added in the recent package. All these measures will cost exchequer Rs.30000 crores. But, in reality, will these measures put an impact on the consumption and demand pull???

Answer is BIG NO... Because these measures are insignificant. A 2 pc reduction in the excise duty will reduce the price of TV worth Rs.15000 by Rs.300/-, an air conditioner was costing Rs.25000/- will be cheaper by Rs.500/- and a flat costing Rs.24 lakh will be cheaper by Rs.12000/-, if at all the manufacturer pass on these benefits to the end consumer.

When the fiscal deficit is expected to be around 12% of the GDP. Do we really need a third stimulus package???

Eye Candy

Nah... I am not writing any page 3 article here. This one is all about flashy red buses(VOLVO) which roam around in the city of Bangalore.

During my recent trip, I got an opportunity to talk to one of the conductor of VOLVO city bus. My conversation started with asking about daily collections and break even of operating VOLVO bus in the city.

For my surprise he has given me the facts as mentioned below;

• Mileage per Litre of Diesel: 1.65 Km
• Cost of Operation per Shift: Rs.5200/-
• Revenue per shift: Rs.3500/- to Rs 4000/- (these days)
• Each bus will operate in two shifts per day and the loss amount will be: Rs. 1200/- * 2 shifts = Rs. 2400/- (on a lower side)
• There are 350 VOLVO buses run in Bangalore city as of now, generating a loss of Rs.840000/- per day.

This not an end of the story, during the period of Ex CM Mr.S M Krishna. He has ordered 1500 buses for BMTC alone as a part of the scheme “Bangalorenna Singaporagisona”. Still 1150 buses yet to come on the road, just imagine what will be the financial situation of BMTC. What a visionary Mr.Krishna is, without developing basic infrastructure he has ordered 1500 VOLVO buses.

VOLVO buses: literally an eye candy.

Who should be blamed?

It was a quite slow day in the morning, i was checking sales records and inventory position in the system, suddenly few people gathered on the road which is just opposite to my store and there was a completely packed jeep which came to a still. Mob started attacking the driver of the jeep and in few minutes he managed to escaped from the scene, for a while it was difficult to understand what was happening over there?

It took few minutes for me to figure out that it was an accident of a three year old child, who had suffered major head injury. Kid is from a nearby village called "edelli", she had accompanied her mother who is currently hospitalised in the govt hospital at Hunasagi. She came out of the hospital running to join her grandfather who was going to get medicine from the nearby medical store. Within few minutes anyone can stop her, she had become a victim of our careless society.

Completely Packed Jeep

To mention it was neither a drunk and drive case nor rash driving case. Jeep was quite slow, but driver could not see the running girl on his left side of the road, as the bonnet was completely occupied by passengers. I mean" passengers were sitting on the bonnet" and driver was given a small window to look at the road and drive safely.

Since his vision is limited only to the right side, he could not notice a running child on his left side of the vehicle. Left wheel came on the shoulder and created a major injuries on the head, child died on the spot.

Who should be blamed?

• Careless passengers who travel in a completely packed vehicle
• Driver of the vehicle
• Police, as it is their duty to ensure smooth flow of the vehicle, loaded with correct capacity
• KSRTC department which is not providing enough buses to travel

By the end of the day people had forgotten the incident and already started travelling in a fully packed vehicle again to reach their villages. Who has to be held responsible for such careless behaviour on road?

This needs a collective work to create an awareness about safety to the society, but our national media is busy in mangalore pub case and as usual govt officials are incapable of handling such issues. God knows where we will head in the near future?

LuckByChance: Finance Ministry Relieved

A sigh of relief for finance ministry as the phosphoric acid suppliers cartel broke off today in the international market. Keeping the prevailing market prices of Phosphoric acid & Ammonium sulphate, Govt Of India is planning to control the fertiliser subsidy bill within Rs.50,000 crores for the financial year 2009-2010.

We all should thank god, somehow prices of fertiliser raw material crashed to lowest level since July’08. Otherwise our beloved Finance Minister would have spent additional 150% other than the planned expenses for the fertiliser subsidy bill.

Oops! Now he is not a FM, he is a Home Minister. Don’t Know who will be responsible for the mess created by him in the finance ministry;

* Planned expenses for the fertiliser subsidy bill stands at Rs.45,000 crores for FY 08-09.
* Unplanned expenses for the subsidy bill Rs.87,000 crores(This represent extra what we spent on fertiliser subsidy).

This is just one example of mismanagement of taxpayer’s money. We will see such many more examples, when finance ministry announces Union Budget Implementation Report in the last week of February’09.

We should not come to a conclusion of deciding a good finance minister, by just looking at the strategies on paper. One should understand implementation abilities of Finanance Minister. I am waiting for the day when we can have a productive discussion on the performance of finance minister as an individual.

Where is the relation?

It was a time when inflation was hovering around 13% and govt of india took a decision to ban export of rice and all essential commodity to control the rising inflation rate.

India being a second largest producer of rice in the world, started storing its rice produce for future use. China also decided to ban export of rice at the same point of time to control the inflation number.

As the decisions of these two countries have started affecting the equilibrium of demand and supply in the international market, and which resulted in a hike of around 60% to 70% in the price of rice.

Along with the international market we started feeling the heat of soaring price of rice in India. In the beginning, Govt Of India has taken a measure of banning export of rice to curb the inflation, but today rice price has gone up by almost 60% in Indian market. And inflation figure is hovering around 5.5%, which is termed to be under control and not to worry about the inflation.

How these strategies are made? And where is the relation between rice & inflation? If at all the weight given to rice in the inflation basket is less then why such a big measure has been made to ban export of rice?