We should not overlook the area which will offer to the (poor!!) cash–rich FIIs ample scope for maximum exploitation and (unending) stream of rich returns. A. Rangarajan, in his article entitled “Food Roulette” takes us through the maze of “Commodities Futures Trading”. Commodities futures trading, he points out is just gambling aimed at booking profits between sell and buy orders, and has little to do with the commodities supposed to have been bought and sold. Complete multi–commodity indices were created, and even institutional investors like pension funds and banks started investing in these commodity index funds. The speculative investment had devastating effects. At least 20 countries around the world, including Haiti saw food riots, caused by the operation of these commodities markets.
Historically, future price agreements involved millers or traders or food processors and farmers; those agreements were confined to actors from the food sector and resulted in some stability of prices. But, in the year 1999, following aggressive lobbying by investment bankers, serious deregulation took place in the U.S. commodities Futures and Trading Commission, which opened the flood gates of speculative investments involving food and agricultural products. After the burst of the dot–com market in the year 2000 and the burst of the home loans market bubble, the greedy hedge fund managers and Wall Street analysts turned to food and commodities; no longer satisfied with reasonable returns, their game was now to chase windfalls. Studies showed that, in the case of transactions which involved food/agricultural derivatives, only 2% pertained to actual delivery while the rest were speculative. Food prices soared. An UNCTAD study points out that between 2005 and 2008, world maize prices tripled, wheat prices went up by 127% and rice prices by 170%. In our ‘globalised’ and ‘liberalised’ world, everybody got caught in this — including people in the poorer parts of the world who spend from 50% to 75% of their income on food. Some have argued, as ‘our’ government does periodically, that food prices have gone up on account of other factors, such as global warming, drought, diversion of land to bio–fuel, increased consumption in populous countries where income levels have been rising, and soon. Frederick Kaufman pointed out that the price of red spring wheat which had been stable for a hundred years in America, trading between $3 and $6 per 60 pound bushel, suddenly started to rise. On February 25, 2008, it rose to a ridiculous high of $25 a bushel. This is ironic, since the year 2008 saw a record wheat harvest. Obviously, speculation was playing havoc here. Bio fuels currently account for only 6% of the grain production.
Coming to the story (touted by ‘our’ government also) that prices could be going up because of the growing middle class among Indians and Chinese eating more, a July 2011 report of the F.A.O. sets the record straight. Olivies de Schutter cites F.A.O. data and points to the fact that India and China are seeing falling per capita food grain consumption. So our government should stop fooling the public with some imaginary reasons.
Speculation in food and rising food prices are the last thing India should have to contend with, given the ground realities and inequalities (aggravated by the government’s “policies”.)
It is clear that the high prices of food and other essential articles are due to the government allowing the commodity exchanges to function unfettered; that the government knows fully well what is going on — and, in fact, is hand in glove with the FII’s cum speculators. It is a pity that the country, as a while, does not seem to care about the real causes of the high prices and high inflation, or does not seem to know what is going on. Instead of taking honest steps to curb speculation and bring down prices, the government has the mendacity to permit the foreign institutional investors (F.I.I.) to “invest” upto 23% in commodity exchanges. Such investment by FIIs in commodity exchanges will no longer require government approval. What a triumph for the FIIs! This change “aligns” the policy for investment in commodity exchanges with that of other “infrastructure” companies in the securities markets such as stock exchanges, depositories, etc. — all calculated to fleece the country to the maximum extent.
Perhaps realising that the charade cannot go on too long before being detected, the government has at last decided that it has to make some noises to show its ‘concern’. So, it has said that to curb “excessive speculation” — which means that speculation according to the government is not against the people per se, but ‘excessive speculation’ is — though it is not clear how one measures this. The Centre “may consider” a ban on certain commodities from futures trading. “The futures market is not to be used for hoarding. “Illegal management” of finance should not be there (though it is not clear what is meant by this). Certain quantities of a commodity were exported. “Whether that much had been produced or not is to be verified”, said the Minister of State for Consumer Affairs piously. How well–informed the government is on such vital matters!
Between January and March, 2012, mustard seed prices rose by 101%, chana by 108%, potato by 170%, mentha oil by 172%, soya bean by 118%, etc. on the exchanges. These are important contribution to the monthly food inflation index. The ever helpful government is trying to ascertain whether there had been any ‘attempts’ to hoard commodities to influence the futures markets and, if so, how this activity was being financed. We cannot have a more vigilant government than this to look after the poor aam admi! The Minister told the journalists that he had received ‘several’ complaints about excessive speculation and fluctuations in futures trading in farm commodities, leading to escalation in prices, and that the Forward Markets Commission (FMC) had been asked to “ascertain” whether there had been any “attempts” to hoard commodities to influence the futures markets and, if so, how this activity was being financed. The government is more interested in the “hedgers” benefiting from futures trading, and the consumer is apparently nowhere in the picture.
There is another sector which offers the “Foreign Investors” vast and excellent opportunities for exploitation and for pocketing huge profits. The government has – naturally – to allow them a level playing field. That sector is the pharmaceutical sector. Our imported government has allowed them 100% – the government has to put this “limit”, because they could not put a higher ceiling! – FDI in this sector. The government is like a babe in the woods: it could not envisage the possibility of “brown–field” investments, whereby foreign companies merely take over an already existing Indian company. The policy is being reviewed in the wake of fears over the impact of this in the future of the Indian drug industry.
Between 2006 and 2010, six major Indian companies have been taken over by MNCs including Dabur Pharma, Ranbaxy, Shanta Biotech. Since 2001, when 100% FDI was allowed in the sector, only 10% of foreign investment has gone to ‘green field ventures’. Indian companies which have been merged or taken over, are unlikely to produce low–cost generic drugs as they will compete with their parent companies’ patented or brand–name medicines.
Except for hypocritical rhetoric, and constituting a hundred and one committees, the (imported) government, that is ours, is not likely to do anything which will impact on the profitability of these FDIs. Unless there is an Anna–type of (massive) movement, the accessibility of the vast majority of our people to modern medicines and medical treatments will recede further and further.
It is time to end this unconscionably long “article”. So, a few words about nuclear power should suffice. Writing under the caption, “Callous Pursuit of Power”, Jawed Naqvi writing for the Dawn of Karachi asks: Does politics drive electrical power or is it the other way around? “Give me blood, and I will give you freedom”, said Subash Chandra Bose. The Indian Prime Minister seems to have spun his own mantra:
”Give me energy, preferably nuclear energy, and I will continue
to claim unbridled political power.”
Naqvi refers to the thousands of protestors and villagers living around the Russian built Koodankulam Nuclear Power Plant in Tamil Nadu, who were blocking highways until the State government began a violent crackdown after supporting them initially. The Prime Minister had accused the protestors of being foreign agents. Says, Naqvi: “What is shocking in this standoff is that a Russian report has questioned the safety of nuclear plants, even as the Indian government led by the Prime Minister, swears by them.” The Russian report, stunning in its candour, prepared for President Dimitry Medvedev, by the State agencies concerned in the safety of the country’s nuclear power reactors in the wake of Japan’s Fukushima disaster, reveals that Russia’s atomic reactors are grievously under–prepared for both natural and man–made disasters ranging from floods to fires to earthquakes or plain negligent. The report comes as several countries have given up on hopes of a nuclear future. Germany had voted to phase out its last nuclear plan by 2002, and Switzerland plans to follow suit by 2035.
Recently, Italy sent a strong message in a referendum when 95% of Italian voters turned down the opportunity to have a future lighted by nuclear power. Russians have expressed in polls that they would like to see Russia pursue a different energy strategy.
The Russian report referred to above lists 31 serious flaws which make Russia’s nuclear industry extremely vulnerable to natural disasters. The report is one of the few documents to surface in recent history, which strongly contradicts Russia’s own glowing assessment that its reactors are safe.
If the fatal Chernobyl unit was made by Russia, the Japanese reactors that inflicted a nightmare on the unsuspecting people had a different genealogy, says Naqvi: “Indian (and Pakistani) governments have not much to choose from. Their people do.” So, the question is “should not the Indian people have an opportunity to indicate their choice on the question of nuclear energy?” The government should disclose to the public full information on the following aspects, among other things:
(1) How many reactors, of the capacity and design of the two nuclear reactors which are being installed at Koodankulam, have already been constructed, and when and where were installed?
(2) If nuclear reactors of these designs and capacity are working already, what has been their safety record? Were any operational and other problems of a serious nature (like radioactive leak, etc.) experienced? How long did it take to attend to those problems?
(3) Has a detailed cost benefit analysis been done? Have all the cost elements, including settlement packages for persons displaced from the site, storage of spent fuel, the cost of transporting the nuclear waste to the site where it is to be interred and the cost of interment, etc., been factored in?
(4) What will be the cost of power to the ultimate consumer?
Now for the conclusion.
Ranga Gopalaswami, writing under the head, “Is our government doing its duty?” says, among other things, that the government has been seeking to handover nuclear power generation to the foreign companies, on terms and conditions favourable to them; surreptitious clauses, absolving them of responsibilities, are being added under the nose of an embattled and unvigilant Parliament. He refers to the pontification made by one of our food ministers: “We can always import foodgrains, we must grow cash crops for export.” Ranga asks: “Is our nation safe in the hands of people with such a ‘vision’ – of hypothecating our food supply and our very future to external powers”? The answer is obvious: “We can expect nothing else from a callous Government, which our Government is”.
I hope I shall not be accused of being facetious if I say that the people of India should ask of the government:
Why this kola veri di?
Why this corruption very di?
And why this FDI very di?”
By C A Balasubramanian
Additional Controller of Accounts (Retd.), Government of India