Thursday, September 27, 2012

Watching the fools’ theatre on TV

Admittedly I am no economist. Neither am I one of that super articulate all knowing intelligentsia that is so visibly everywhere these days. But I do have half a brain, and yes, I have a load of opinions too. And I really don’t see what the hoopla is about certain economic reforms that the so-far-completely-useless government of ours is finally introducing.

Fine, I understand that raising the prices of fuel oil is a problem. I personally have been dealing with steeply rising prices of petrol over the last few years which has basically thrown the domestic budget for a major curve, and managed to put a damper on even our obsessive road trips. But, there’s a problem here. Apparently, this price rise is because of the heavy losses being suffered by the oil companies in importing the oil, because of the international prices, and so on. Makes me wonder then, why it is that I have to pay almost Rs 75 here, for a measly liter of petrol, when the same thing costs 3 dollars, or Rs 150, for FIVE liters in the US! Why am I paying more than more than double the price?

Doesn't sound like a problem caused by international market to me. When you look a little deeper, it’s the taxes. So, instead of raising the price, maybe one can take a new look at all these weird taxes, octroi, surcharge and whatnots? And are the Indian petrochem companies really suffering such huge losses? If that were the case, how are they declaring hundreds of millions of rupees of profits every year? How are their CEOs paying themselves millions of rupees in salaries? So that’s definitely something that needs to be looked at, reconsidered. Yet, subsidies are not the answer, they are never the answer. So maybe that’s something the economists should think about?

As for the corresponding increase in the more heavily subsidized diesel prices, that’s a whole different kettle of fish. Yes, diesel is the lifeblood of our entire goods and freight transport system, and any rise in prices has a ripple effect on prices of everything, essential commodities to luxurious fripperies alike. However, there is another angle to this. Diesel is also what the most expensive, luxurious, status-symbol, cars – like a whole range of SUVs, run on. So, while on the one hand subsidizing diesel prices is essential to keep an overall check on inflation, especially of essential goods, what it also means is that the richest people in the land get to drive around in their cars at less than half the cost of my driving in mine – which is utterly ridiculous.

When someone can afford to spend a minimum of 10 lacs for a car, versus my little garib-rath costing 2 lacs, what kind of sense does it make that I have to pay 75 rupees when they buy fuel at 32? So what’s the solution? If you raise the prices, as was recently done, it affects mass transit facilities, and freight. Keep it low, and it not only puts a huge strain on the budget and the exchequer, it is hugely unfair to people who earn less, but have to pay much more to travel in their vehicles, while the wealthy get away with paying peanuts. One solution could be to have differential pricing for the fuel…. When a truck or tanker or bus rolls in, sell the fuel for 32, and then, when a rich man’s SUV rolls in, charge them 70.

Anyone can see that THAT’s not going to work. Even apart from all the cries of partiality, unfairness, etc, … how are you going to implement it? How can you make sure that the rich get billed higher? Not likely, not feasible, not possible to implement or oversee. So what then? The other suggestion offered, and it’s the only one with any chance of working is to increase the taxes, surcharges, etc on the SUVs substantially. This way, the rich man does end up paying a large amount extra while buying the car, which he can presumably well afford, which then gets forwarded to the government as taxes. Not an ideal solution, given that I will end up spending much more over the years of using my car, but slightly more equitable than the system in place now.

As for cooking gas, or LPG, I completely support, agree with, and applaud the recent move to de-subsidize anything above six cylinders per family per year. This is perfect. So far in India ALL domestic LPG has been heavily subsidized. Where the market price is around 750 rupees, the consumer has been getting the cylinders, endless numbers of them, for 400 each. That’s untold billions going straight down the drain. And all it does is encourage wasteful cooking practices. 99% of Indian families I know don’t use pressure cookers for their kitchen activities, most of them don’t make any effort to conserve gas, leaving the gas on while they chop veggies or clean rice etc. at this rate, most families I know get through a cylinder in just 15 to 20 days. And so, they are all having heart attacks at the thought of having to pay double the price for any cylinder they buy from the 7th cylinder onward.

My family unit uses 4 to 6 cylinders a year. If a gas refill finishes in 2 months, I sit and wonder why. Average is about 2 months and 20 days. And why? Do we starve? According to the chief minister of Bengal, one of the most vocal protesters to this move, even if u just have tea or coffee, you need 24 cylinders a year!!!! TWENTY FOUR?!!! What are you doing? Leaving the gas on all night? We have 3 meals a day, more cups of tea and coffee than the average Indian home, and in winters, and pretty much all through the year, we heat bathwater for the baby. And we still don’t need more than 6 cylinders a year! Do I know magic? No…. I own and consistently use four pressure cookers for anything from rice and dal to maccher jhol and chicken/mutton. In fact, I feel handicapped without a pressure cooker, and make practically everything in them. Also, I make sure that everything is ready before I light up the gas. Veggies are chopped and washed, masalas are ready, utensils within arms' reach. Not a single second of gas time is wasted.

Years of messages on television and radio and on billboards have not managed to inculcate these habits in most Indians. People have gone blue in the face trying to explain to them that fossil fuels are a limited resource, or that subsidies cost the government (and me as the taxpayer), billions every year, and it has made zero impact. They have just continued cooking their mutton in a kadhai (that’s TWO hours instead of 20 mins!!!), boiling their rice and dal in hanndis (20 to 30 mins instead of 10 mins), and even boiling green bananas for their koftas in a pan (30 to 40 mins instead of 10 mins). They continue to let the gas burn away as they wash utensils, chop vegetables, wash vegetables, grind masalas, and take care of a thousand cooking chores that they should have finished BEFORE lighting up. These are the people who ONLY understand the language of double prices. If they have to buy every eighth cylinder …and every one after that … at double the price, then, and only then, are they likely to even try to change their habits and to try and make the gas last longer. This is essential not just for the nation and its budget, but for the planet as a whole too.

As for FDI – foreign direct investment – in retail, there’s a whole lot of noise being made by people who don’t seem to have really even thought about it, or understood it. Sure, I am the worst person to talk, being from the urban middle class, and the direct beneficiary of FDI if and when it happens. I will get a wider choice in produce, at better prices, with retailers competing for my custom. In a real retail market, consumer is king, and being the consumer, I would much rather have a huge Wal-Mart to go to than have to deal with the sullen baniya who treats me like shit and sells me 100 gms of stone chips for every Kg of rice I buy. However, BECAUSE I am the urban middle class, no one cares about my opinion. I don’t matter in the grand scheme of things.

I don’t farm, but I do have relatives who do. They are among the most vocal SUPPORTERS of FDI in retail. How come? Aren't these the people that great leaders like Mamata Bannerjee are trying to protect from the rapacious FOREIGN retailer? The farmers tell me simple things. They sell potatoes for 3 rupees a kilo. The middleman who buys it sells at the mandi for 18 rupees a kilo, and it is sold to me for 20 or 22. The farmer is not the one benefiting in this scenario. However, when the big scary pepsico came in, and started buying potatoes from them, they got a much fairer price! If big chain retail stores come in, they will not IMPORT their potatoes, or rice, or dal, they will buy them here, source them directly from the very farmers Ms Bannerjee is so energetically trying to protect. And they will pay much more than the middlemen now pay. The end consumer will also get the produce for much cheaper than the prices we are paying now. So who is really being protected? The farmer? Or the dalal/agent, the middleman who is such a powerful force in Indian politics.

Add to this the sheer numbers of jobs that the huge chains will bring in… from the basic cleaners and janitors all the way up to regional managers, and it boggles the mind. Even back a decade or so, when the domestic retail chains appeared, they changed the face of urban and small town India. A whole new niche was created for not so educated but able to speak a couple of languages well youngsters to find good, paying, respectable work. The entry of foreign retail chains will only hugely expand this opportunity, providing massive employment options to previously unemployable youth. This is much more than all the jobs that our esteemed leaders fear will be lost because of smaller retailers shutting down. In addition, when you think about it, the jobs lost are not just fewer, they are only in front end niches like counter sales. The ones created will be in every possible field from cleaners to counter sales, from truck drivers to inventory keepers, from loaders to managers, and everything in between.

As for the big boogeyman, that all the little mohalla stores and kirana walas will go out of business, we heard this same tune when chains like Spencer’s, Reliance, Pantaloons Big Bazaar, etc were opening up their doors. And did it happen? Nope! After all, I am not likely to run to the Big Bazaar, much further from my house, stand in a long checkout line, and waste a lot of time when I need a quick dozen eggs or a loaf of bread for the morning. Even if I do my major monthly shopping at a megastore, all the daily top-ups, as well as the milk, bread, eggs, type daily needs, are much more likely to be picked up at the neighbourhood store on the way back from work. In addition, I have seen my neighbourhood kirana wala buying his stores regularly from these retail chains! Seems to me like he benefitted too! So who are we trying to protect? Again, it looks like the middle man, who bought cheap from farmers and sold so expensive to the stores, is the main beneficiary of all this protest against retail markets being opened.

Our dear leaders are concerned that “these foreign investors” (spoken in the same tone of voice as “these rotten tomatoes” or “these stinking fish”) will siphon off all the money to their own countries. First of all, why would u allow that to happen? Why would u not put in place regulators, and laws, that make it mandatory for them to reinvest a large part of their profits into the market? We’ve done it successfully with the insurance sector, I am sure we can manage in retail too. Secondly, assuming that they do take their profits away – the hundreds of thousands of employees working in the hundreds of thousands of newly created, better paying jobs, will presumably not be sending all their money abroad? They live here, work here, earn their salaries here, so they will SPEND here, injecting huge amounts of liquid cash into the economy, which it badly needs!

And, instead of looking at all these advantages, or in spite of knowing them very well, our leavers and rulers are playing political games, whipping uninformed, unthinking public into frenzies with the FEAR of the dreaded FOREIGN HAND. Ms Bannerjee goes one step further and actually decides to table a motion to shut down even domestic retail chains, with another stalwart of Bengal politics, Asit Mitra makes a completely stupid statement like “contract farming by pepsico must be oppose, so what if it gets farmers a better price”.


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