Moneylife Life Public Interest Is FDI in retail Indias most pressing issue today?

Raise Your Voice -Part 3

Is FDI in retail Indias most pressing issue today? Raise Your Voice -Part 3
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EAS SARMA | 28/09/2012 03:48 PM |

Governments contention that FDI in Retail Trade is the most pressing reform needed by the country is a laughable proposition. It shows how the political executive is far removed from the ground reality of the country While the coalition dharma forced the United Progressive Alliance (UPA) government to go along with the perpetuators of 2G spectrum scam, the same coalition dharma was found to be far too much of a hurdle in the way of UPA rushing into opening the flood gates to foreigners to enter retail trade in the country. Such is the distortion of the priorities set by a

government which seemed to be in total disconnect with the ground realities of the country. Could not UPA think of any other reform that has more far reaching implications for the majority of the people? To tell the country that foreign direct investment (FDI) in retail trade alone is going to improve the lot of the farmers is patently laughable, in the absence of any attempt on the part of the government to understand the agrarian situation in the country and address the basic problems that constrain any fundamental change for the better in the lives of the farmers and a quantum jump in agricultural production. This is explained below. According to the Census of 2011, 69% of Indias population lives in rural areas. Their main occupation is agriculture. Around 347 million acres of land is under agriculture. Anyone with a genuine sense of concern for Indias economic development should focus attention on the security of ownership of the farmers, the choices available to them to develop their own capabilities and involving them centrally in the decision making processes of the government. The land records systems in the states are in a virtual mess. As a result, the small landholders and the tenants are often bypassed when the government ostensibly compensated the displaced farmers in forcible land acquisition. It is the absentee landlords or fraudsters who received the payments.

Ironically, this is the sector that continues to get battered with every reform initiative of the government. Since Independence, as a result of development, more than 65 million people have been displaced from the rural areas and deprived of their agriculture-based occupations. Unfortunately, the rate of displacement has been on the increase. Out of the 157 million acres of government land (including the ceiling surplus land taken over), only 20 million acres alone have been assigned to the landless farmers, often those already in occupation, and many more millions of such landless families, though they are cultivators of the government lands, have no secure ownership rights. Many land assignees have already lost their lands to the richer, more influential absentee landlords, despite the stringent deterrent laws in existence. In one state, a chief minister himself was found to be in illegal occupation of hundreds of acres of land given earlier to the poor! Millions of acres of Bhoodan lands meant to be given to the landless are in the hands of the rich and mighty. There are 12.4 million tenants without firm ownership rights, cultivating 15.6 million acres of land. The successive governments who are in the stranglehold of absentee landlords of an anachronistic feudal agrarian system have no time or inclination to address reforms

needed in this vital sector that touches the majority of the country's population. To think that a foreign multi-national company (MNC) will come with a magic wand to correct the situation betrays the ignorance of the leaders we have and the disconnect they enjoy with the masses. In an electoral system that is driven by money, muscle power and mafias, they are confident that they can come back to power anytime! On the tribal front, despite the constitutional safeguards in force, millions of tribals have lost their lands to non-tribals and companies trying to illegally plunder the countrys limited but precious mineral resources. The mineral scams that have surfaced of late are enough evidence of this. Should not the government first consider a comprehensive land reform programme that revamps and digitises the land records on a war footing, confers ownership rights on the tenants and the landless cultivators and enables them to come on the mainstream of the credit giving agencies? Even the newly introduced law on land acquisition and rehabilitation, thoroughly diluted by the vested interests, will prove counter-productive if these reforms are not grounded well before it is enacted.

 Should not the government have announced a scheme to restore the lands to the tribals so that they may regain their confidence in the law of the land? Instead of foisting industrial corridors that displace people and make no sense in the rural areas, should not the government consider more benign schemes that facilitate the setting up of ventures in which the farmers, the fisherfolk, the milk producers and others become partners in setting up modern agroprocessing activity and air-conditioned retail outlets to sell their perishable ware in a way that enhances their dignity and self respect? They do not need Walmarts and Carrefours which benefit the politicians and the civil servants more than the common people.

Taxes are root cause for under-recovery of oil companies: Raise Your Voice -Part 1
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EAS SARMA | 24/09/2012 12:44 PM |

EAS Sarma, former secretary to the Government of India shares findings of the National Institute of Public Finance on how diesel prices are loaded! He also exposes how core sectors such as agriculture, transport, power and industry will bear the brunt of the rise. Now is the time to raise your voice Prime minister Dr Manmohan Singh had made it look as though the hike in the price of diesel was the most urgent act of reform on the part of his government. Let us consider it in the overall perspective of the oil economy of our country. While using his money-does-not-grow-on-trees argument, the PM had informed the nation how the public exchequer could no longer bear the burden of the so-called subsidies on diesel and cooking gas. He conveniently failed to inform the nation that his government had granted generous tax exemptions to the corporate world and these were estimated at Rs3.92 lakh crore during 2011-12 as evident from Annexure 15 of the Receipts Budget presented by his finance minister to the Parliament this year.

The new finance minister has already started talking about scaling down fertiliser subsidy for agriculture. The Delhi electricity consumers are facing a tariff hike in the name ofreform, though the same government opposed competitive bidding in captive coal block allocation in the guise of insulating the downstream electricity consumers from undue tariff escalation! The economic logic of the rulers is strange; it is one logic for the corporate world and another for the rest of India! There is one logic to support corruption and another to deprive the masses of their legitimate entitlements. There is one coalition dharma for 2G spectrum and another for dropping a coalition partner articulating the genuine feelings on behalf of the people in her constituency. Money can grow for privatising profits from coal and spectrum but not for providing relief to the poor. In the vocabulary of our leaders, anything given to the poor are bad subsidies to be discouraged. The largesse given to the corporates is an essential set of incentives aimed at enhancing investor confidence. No wonder that the PMs speech evoked all-round ovation from the corporate honchos of Mumbai and other places and a corresponding endorsement from the stock markets. Looking at the disturbing trends in the world oil market and our own increasing dependence on oil imports, it is necessary for any responsible

government to evolve policies that shift the economy away from oil. During the last eight years of its tenure, the United Progressive Alliance (UPA) government had ample time to initiate several measures to reduce imports through oil conservation and substitution. Some of these, which no coalition partner would have opposed, are listed below. 1. In terms of oil consumption per tonne-km, freight transport by road consumes seven times the oil consumed by rail. Shifting freight transport from road to rail could have saved that much of diesel. No plans have been initiated in this direction. 2. In terms of oil consumption per passenger-km, passenger transport by cars and two-wheelers consumes twice the oil consumed by public transportation by buses. Shifting passenger traffic from road to public buses could have reduced oil consumption to that extent. UPA government could have given incentives to states to move in this direction. No such scheme is available. 3. The leaders who talk of reform are those who unequivocally encourage oil-guzzling luxury car manufacturing facilities in preference to the manufacture of cycles and buses needed by the majority of the Indians, which incidentally will save oil consumption.

4. As a result of the intermittent electricity supply to the rural areas, farmers are forced to depend on diesel-operated pump sets for irrigation. The government, through Rural Electricity Corporation (REC), could have taken up a large scale programme to encourage agriculture to shift in favour of electricity-operated pump sets, more particularly, solar energy driven pump sets. Instead of concentrating on rural electrification as per its original charter, REC, during the last few years, has shifted its focus in favour of funding dubious private power generation projects. The government has done precious little to contain this trend and launch schemes aimed at providing the farmers alternate forms of energy. 5. Petroleum Conservation Research Association (PCRA) has been in existence for decades to encourage oil conservation and substitution technologies in agriculture, transport, industry and so on. By providing greater budgetary support to PCRA, the government could have moved faster in the direction of enhancing oil use efficiency in the economy. 6. On its own part, the prime minister and his colleagues could have signalled the whole country on the need to save oil by consciously moving away from conspicuous consumption of oil in VIP motorcades and so on. It is now in public knowledge how these very same leaders have placed orders for several VVIP

Westland helicopters that alerted the Italian anticorruption authorities and initiate a probe against possible bribe-giving in India! Despite the world oil prices shooting up, our leaders seem to think that they are oil sheikhs of the Middle East in terms of the large oil-guzzling cars they and their accompanying followers use in large numbers, day in and day out. All discerning citizens of this country should raise these basic questions to make our leaders accountable to the public. Should a hike in oil prices and introduction of FDI in retail top the agenda of reform in India? Are our leaders familiar with the problems that the majority of the Indians face in their day-to-day lives, which merit greater attention and urgency? I hope that more and more voices will join this campaign in favour of making these reformist leaders accountable to the public. They may fool some people for some time but they should not be allowed to fool the nation as a whole.

Governments are fleecing oil companies

and consumers: Raise Your Voice-Part 2

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EAS SARMA | 25/09/2012 11:56 AM |

It is evident that if at all the oil companies are incurring notional losses vis-a-vis the trade parity price they would have got; it is largely a result of the heavy taxes levied more or less equally by the Centre and the states on diesel. In other words, both the Centre and the states are actually fleecing oil companies and therefore consumers In the first part of the "Raise Your Voice" series (Taxes are root cause for under-recovery of oil companies: Raise Your Voice -Part 1), we saw how taxes are the root cause of under-recovery for oil companies in India. While prime minister Dr Manmohan Singh, in his televised address tried to convince for increasing diesel prices, he failed to take the people into confidence on the circumstances that caused losses to the oil companies. For the benefit of the people, I have enclosed below a copy of a highly educative report that the National

Institute of Public Finance and Policy (NIPFP) recently prepared on the structure of diesel pricing. In particular, I invite your attention to Table 5 at pages 23-24 of the report which provides at a glance the retail price of diesel in Delhi and the way it is built up from the ex-refinery price. I have summarised the essential price elements below in a tabular form for easy reference.

It is evident that, if at all the oil companies are incurring notional losses vis-a-vis the trade parity price they would have got; it is largely as a result of the heavy taxes levied more or less equally by the Centre and the states on Diesel. In other words, both the Centre and the states are actually fleecing the oil companies and, therefore, fleecing the consumers by as much as Rs7.57 per litre. Now, they have increased the price further by Rs5 per litre, thereby allowing the oil companies to offset their notional losses to that extent, but not giving up the Centre's own tax share in the price build up. Since taxes are levied ad valorem, the tax element of Rs7.57 per litre will marginally go up, placing more public money in the hands of the

Centre and the states at the cost of the consumer. Instead of passing on this latest burden, the Centre could have been more generous by giving up its own tax revenue from diesel and saving the citizen of this undue burden. No such generosity is visible. I may also place before the people the following break up of diesel use in the country.

In other words, the use of diesel is in essential sectors of the economy. A diesel price hike will therefore not only burden citizens but also trigger inflationary trends. Any responsible government ought to have placed these facts in the public domain before abruptly announcing the price hike. Apparently, public accountability is the last thing on its agenda. 1. Could the oil companies have improved their internal efficiencies and offset the burden?
2.

Could the government have cut down its unproductive expenditure and generated enough

savings to be able to reduce the diesel tax burden on the citizen? These are the questions that we should all raise in one voice. I hope this article will generate a public debate on this issue.
Why FDI in retail is bad for India ?
digg The last few days have seen big debate around the issue of retail foreign direct investment (FDI). It has split politics as well as business into two opposing camps. 51% for FDI is a huge amount, one that could change the retail landscape in India, perhaps forever. One of the conditions for this proposal is that multibrand companies should source at least 60% of their farm produce from small farmers. The justification is that this will give a boost to small farmers but there is an inherent flaw in the argument. Since the 1970s, farmers in the US actually make less because they supply to big stores and the same thing could likely happen in India.

The second argument is that this FDI will create jobs. However, nobody is talking about the kind of jobs it will create and the kind of jobs that it will threaten, namely the small grocer and kirana shops that is the hallmark of any Indian

neighborhood. Finally and most worrisome of all, nobody is addressing the kind of down-the-line problems FDI will create. The model of multi-brand supermarkets is hardly working nor is it sustainable. It involves massive supply chains ranging from remote corners of the globe, encourages consumerism, cheap produce and planned obsolescence. It creates more waste and more pollution. India already struggles with massive infrastructural problems with waste management what is the proposal to deal with the excessive amounts of waste created by the FDI investment? What about actually making space for building the Walmarts, Tescos, Carrefours that propose to come in? What is going to happen to home-grown super-market chains? Are Indian cities going to look like soul-less American ones with no character and only neon signs and parking lots for decor? The multi-brand supermarket is a failed business model even in those countries that pioneered them, notably the United States. The more enlightened shun these business establishments and are moving towards encouraging local produce. If the Indian government is really serious about encouraging small farmers, then they will be rejecting GMO and making sure locally produced organic food is more widely available. If the government is serious about creating jobs then they should be focusing on improving sectors within the country namely waste management, agriculture and infrastructure development. The great experiment of consumerism in the United States that started off in the 1950s is moving into India in leaps and bounds with advent of malls, multiplexes and now multi-brand supermarkets. However, now this model of consumerism is showing serious cracks instead of using resources to come up with something that works, something that is progressive and fits in with the Indian ethos, why do we insist on blindly following something that does not work?

The way I see it, the retail sector in the country does not need a new business model. India as a country needs a new business model that embraces the principles of long-term sustainability and eschews the policy of short-term financial gain. Let the supermarkets go create jobs, encourage farmers and flood shelves with cheap Chinese products in their own countries. India need not follow suit, indeed India should not follow suit. This country needs to be developed from ground-up in a holistic manner. All we are currently doing by encouraging foreign investment that does not fit in with systematic growth is focusing on the embellishments whilst the foundations lay crumbling.
Nimtauri (WB): Taking her battle against FDI in multi-brand retail to rural Bengal, Chief Minister Mamata Banerjee on Tuesday told farmers and small traders that allowing foreign retail companies in the state would rob them of their land and businesses. Asking them to resist entry of foreign retailers, she said, "FDI in retail would bring disaster to farmers and small traders who would stand to lose their land in the long run as well as their businesses and livelihood". "Loot chalche loot, jhoot chalche jhoot" (In the name of reforms, loot is going on and falsehood is being spread), she said adding all should unite to safeguard the interests of poor farmers and retailers. She wondered whether reforms meant pointing guns at farmers and that there would be no shopkeepers in the localities. "They (Centre) have no ability to give employment to the people, but are trying to rob them of their livelihood." Pointing at the villagers assembled here in East Midnapore district, she said, "Do you know what the FDI in retail means? How the small traders and the farmers would survive if their work go? Farmers plough the fields and sell their produce at the markets. Now they are saying that these would be given to Walmart. I have got nothing personal against Walmart. But in America Walmart has been told that if it has to do business in America, it will have to buy sixty per cent of American goods," she said.