Tuesday, April 17, 2012

Monopolistic and unfair trade practices in Tobacco trade

Tobacco is one of the best cash crop in Andhra Pradesh, Karnataka and some parts of Orissa and more than 200,000 registered growers are cultivating tobacco. Why do farmers prefer  tobacco is.. it's a non perishable, yield  & value  is high per acre and easy to market. India is one of the biggest producer of Flue Cured Virginia (FCV) tobacco which is used for cigarettes all over the world. Tobacco board estimated crop size for this year (2011 and 2012) is 264 millions i.e. Andhra Pradesh  at 162.5 million kgs and Karnataka at 101.3 million kgs. Tobacco contributes a significant amount  to the national economy , the government earned central excise revenue of RS 13,500 crore by selling cigarettes and foreign exchange of RS 4,163 crore from exports of tobacco and tobacco products during 2010-11.

Andhra Pradesh is the biggest producer of the FCV  quality tobacco in India. Despite natural disaster "Thane" in this year, the tobacco yields are better  but the threat is with price decline. The tobacco prices were peak in 2008- 2009 i.e. Rs.115/ kg and the price came down to Rs.90/kg in 2010- 2011 and now the average price is lesser than last year price. Farmers are in misery  and inescapable position to sell their crop with lesser price,  their distress is not only with the fallen price but also with increase of associated costs of plantation to packing. The labor wages have gone up for grading & bundling, and the  barn fuel  ( firewood & char coal) cost also increased. Farmers are not getting remunerative price and the net realization is negative by calculating all these expenses, farmers have no choice to switch to other crop since they don't have proper irrigation facilities. 

Tobacco board is the sole regulator of tobacco crop, it has right to fix the crop size every year and it arranges the convention every year with traders and growers to  discuss  various issues on tobacco trade. The tobacco board auction system is excellent and appreciable but the Board is not strong enough to control the traders.  Ironically, Tobacco board enforce their rules and regulations on miserable  farmers by  imposing penalties on excess production and others, but it never tried to get the better price for farmers by negotiating the traders. Board shows over enthusiasm to protect the traders' interest in the name of foreign exchange and excise revenue. Since GOI signed in treaty  with World Health Organization's  Framework Convention of Tobacco Control (FCTC) , the tobacco board act as a nodal agency to reduce the crop size with its registered growers and it can encourage to alternative crops but it should not suppress the farmers' right to get the better price.

A very few companies are operating the tobacco trade, the major players are ITC ( India Tobacco Company) , GPI ( Godfrey Phillips India) and some others. Traders are bidding very lesser quotes by convincing various deceptive reasons  like International market has excess stocks , don't have enough export orders, price cut due to competition international markets, Non tobacco materials in the tobacco bundles and  tobacco is not properly graded by the farmers. Of course, the traders are misguiding the farmers by all these unjustifiable reasons..... though the global market stocks are huge, the demand for India grown tobacco is high since it's the best for filter cigarettes. Some of the traders are making direct  unauthorized purchases from the  farmers  by offering less price, Tobacco board has failed to curb such illegal purchases since it doesn't have proper vigilance on non auction trading.

The tobacco cartel make deals with each other traders and  they fix the market price internally and control the market without offering remunerative price to farmers, especially the trade is under control of two companies i.e. ITC and GPI . ITC is the most powerful conglomerate and market leader in Indian tobacco trading and cigarettes manufacturing,   It has diversified into other industries  such as  hotels, FMCG, Lifestyle stores, paper and commodities to continue  its dominance and market share. Surprisingly, the RTI query has revealed that the government has equity in  tobacco companies, Life Insurance Corporation (LIC) has Rs.3500 crores of investment  in ITC. If the  largest state owned corporation involved in a tobacco company, the company will definitely get the competitive advantage over its competitors and  it receives special treatment for its own initiatives. ITC may influence the government to protect its business interests, it's a complex of involvement.  Tobacco farmers have been protesting  and denouncing the Monopoly Trade Practice of ITC , no action taken by the government so far and moreover the UPA government has banned the FDIs  in tobacco industry  and  this is nothing but protecting the dominance of existing players like ITC, GPI and VST .  Department of industrial policy and promotion (DIPP) has to review the policies once again and they should liberalize the policies to allow FDIs in tobacco industry.

However, The frustrated  farmers have been  demonstrating  their agony and unrest in various forms i.e.  boycotting the auctions and staging the dharnas,  but the traders are not flexible to pay the remunerative price. Government of India and State government need to take necessary steps to help the tobacco farmers in this crisis situation, the required price hike should be  at least 15% over than last year  since the cultivation expenses were gone up  . The Government has to finance the State Trading Corporation of India or any Tobacco growers’ societies to  make purchase the tobacco  with better price and if possible the central government should allot some  bailout fund to the tobacco board which can compensate to the  distressed tobacco growers . I strongly support the FDIs in tobacco trade because the farmers will get fair price among the competition of traders and manufacturers. If the Government doesn’t curb the traders’ deceitful practices, then the tobacco will be UNHOLY crop for farmers.

Monday, April 09, 2012

Connecting the rivers is a great idea

Over 60% of Indian agriculture is dependent on rains which is very complex, risk prone and low productivity. The problems with rain fed farming is multifaceted; difficult to adopt modern technologies, uncertainty in output and low income which affect  to  livelihood of farmers  that leads to rural poverty and suicides. Being an agriculture dominant country India should have proper irrigation systems to distribute and manage the river water and floods. Supreme Court of India has impelled the mega project which will link the major rivers in north and south for optimum utilization of water.  As we know that our Indian farmers have been suffering with crop losses due to droughts and floods and also their villages were destroyed in floods. The Inter- linking of rivers (ILR) project assures to manage the water from surplus to lacking and mitigates the flood havoc.  The project expands the irrigated land that can increase the food production and able to feed 1.20 billion of Indians. The increased irrigation land will help to adopt modern technologies in agriculture for higher yields.

The river linking project involves on Himalayan and peninsular rivers, the design consists of 30 proposed links i.e. 16 in Himalayan component and 14 in peninsular component.  The grand design of ILR project will add 40 million hectares of irrigated land to India, generates the 34000 million kilowatts of electricity and the navigation controls the floods and mitigates the droughts.  Government of India (GOI) has been implementing the traditional methods like small water tanks, ponds, watershed schemes and lift irrigation schemes which are helpful… but very little, so India needs a durable river management system to fulfill water needs. As we know that how the city dwellers of Chennai, Hyderabad and Bangalore are in fresh water stress for their daily needs and at the same time 60% rainwater is going waste in seas. To avoid the wastage and proper management of water can be possible through river and canals channeling only.

There are many positive results with ILR but the other end the project is being criticized on various reasons and making controversial for their vested interests and political prospects. They are arguing on environmental, ecological consequences, international disputes and resettlement & displacement of the project- affected people. We have new Land Acquisition, Rehabilitation and Resettlement Bill to accomplish such issues and India need to learn from our neighboring countries like China, Pakistan and Brazil, how they completed the prestigious dams successfully for their national interest.  Interlinking the rivers is an economic development process; most of the countries are constructing dams and channels for their national benefit and progress and ILR is same kind for our national energy, irrigation and drinking water needs of growing population. Population displacement and resettlement is a tough task, the projects disrupts the lives and lifestyles of the people who live in the affected areas. However, the government authorities must focus on methodologies and processes to involve all stake holders and civil societies to smoothen the process.

The arguments of the organizations who are opposing this project are baseless and vested, all these organizations are urban based, non-farm communities and they can’t understand the farmers’ perils. They live in air conditioned rooms, using magnificent and spectacular words to grab the public attention, they are failed to understand the farmer’s agony on water scarcity (so many farmers committed suicides for their crop failures due to drought & floods and unable to repay loans they had taken to drill bore wells) The can’t understand the perils of rural women who walk miles together to get bucketful of drinking water. Some of the political leaders are confusing and exasperating the people by giving the false interpretation i.e. this project is going to divert their own water to other areas. But all these arguments are unjustifiable and their electoral prospects only, because the ILR is a national project and this is for entire nation’s benefit and progress not for particular state.

In spite of these critiques and arguments, the ILR project is the only option to fulfill the water needs of growing population. India has been experiencing the floods & droughts and the sufferers used to get ex gratia payments from Prime Minister Relief Fund or Chief Minister Relief Fund, etc. from past 60 years. Instead of that if this gigantic project is completed… all disasters can be prevented, but it requires lot of money and time. As per Millennium Development Goals by UNDP, safe drinking water and sanitation is a human right and our central government should not consider the political limitations for water resources. The central government should take the control on inter-state rivers, the project must be included in five years plan as top priority, make involving all stake holders efficiently and this should be completed in a time bound manner.