This year the monsoon left many areas in floods, loss in standing crop, rotting grains and slow movement as a sequel. Nevertheless, will we learn some lessons from this?
Three weeks ago, we had the Ministry of Agriculture projecting the possibility of lower food grains output due to scanty rainfall in some parts of the country. The estimate was 255 million tonnes (mt) of food grains, just four million short from the previous year. Our buffer stocks from last year would cover this, should there be a shortfall.
Fortunately, in the last three weeks, the Southwest monsoon has reversed the situation and the actual rainfall now shows that there is an excess of upto 45% over the last year.
Every year the monsoon has played a very important role in the Indian economy. This year, however, it started with tragic consequences due to devastating flash floods in Uttarakhand, resulting in huge loss of life and damage to property.
This unexpected onslaught from nature could not be even imagined and thousands perished. Even months after this occurrence, as rehabilitation work is going on, hundreds of bodies are still being discovered. It would take several years more before Hardwar and the neighbouring areas can return to normalcy.
There were no drought conditions in the country that have been reported, though in some areas, there was scanty rainfall.
The Central Water Commission has released the statistical data that shows, in fact, the major reservoirs are at 10-year average, thanks to the 45% excess rainfall received. The Indian Meteorological Department (IMD) confirms that, overall India received 593.8mm rainfall against 517.2mm last year. The final farm output is likely to improve on the present estimated of 255mt grains, once full data is computed.
However, in the case of wheat, the output for the current year (2012-13) is estimated at 92.46mt as against 94.88mt in the previous year. During the same period, high-grade Basmati output has been 8 to 9mt, while all others were clubbed together at about 90 to 100 mt. Exports during the year 2013-14 are projected at about 11mt and expected to earn $6 billion.
The Food Corporation of India (FCI) holds substantial quantity of both wheat and rice in its godowns throughout the country. But these are poorly stored under covered and plinth (CAP) areas and in custom built warehouses. Large number of these facilities is subject to natural rot, unhygienic conditions and due to lack of sufficient pest control methods in place, are the feeding grounds for millions of rodents and other pests. On top of these, pilferage is another hazard that FCI has to face in transportation of materials.
It is claimed that a large percentage of grains, stored in such awful conditions is not even fit for human consumption and can be only sold as feed and filler requirements for cattle. The debate on this issue has been going on for decades now, with no end in sight.
The FCI godowns supposedly hold a record 42mt of grains, and the buffer requirement has been estimated at 20mt, thus leaving an excess of 22mt overflowing in these godowns.
Not very long ago, a proposal to distribute the excess food grains to the needy and poor was put up, but despite overwhelming demand and support from the public, nothing happened, and grains continue to rot. New arrivals, as they keep coming in, are simply loaded on the top of the existing lot, causing removal difficulties for despatch and causing further damage at the bottom bags.
Exports by private sector enabled despatch of rice, soybean meal, maize and cotton, but when public sector undertakings (PSU) are involved in export of wheat, the result has been unsatisfactory. As usual, too many rules with too few to take spot decisions and permit export in full realization of what the market traffic can bear has affected our exports. Prices fall and tend to rise as per market situations and one has to bear in mind intense international competition in food grains, like any other product.
Rotting food grains means total loss; in addition, there is loss of interest and damages that an importer can claim if goods are shipped without proper inspection by authorized third parties. These are unlikely to occur if exports are left in the hands of private sector who will take the initiative. Once the farmer realizes that he obtains the minimum support price and guaranteed movement of goods, he will be tempted to take greater care to produce more.
The government must now persuade corporate houses to come forward and build silos, granaries and warehouse facilities in all the areas where production takes place. This should be done in such a manner that we are able to salvage and keep the stocks in good condition, both for domestic supplies and for export. This is an area that needs urgent action on the part of the government.
Rotting of food grains must stop at all costs anywhere in the country and those responsible must be punished.
( AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
Sensex has declined 8% from its high of 23rd July as rupee depreciated fast due to structural problems. BNP Paribas in its India strategy report explains the factors to consider while investing now
After the recent sharp decline in Sensex, investors should look at high quality cyclical stocks and stocks in auto, engineering, non-banking financial corporations (NBFC) and private sector banks, suggests BNP Paribas in its report on where to invest now. Even as capital expenditure recovery seems pushed back, stocks that depend on consumption, could find support mainly in rural areas, thanks to abundant and well-distributed monsoon. It also believes that a few oil & gas and power utilities provide good prospects.
The Sensex has declined 8% from its recent peak on July 23rd. Its recent correction is much sharper than that in the earlier instances and it opens up the possibility of further declines, taking the market below previous support levels. In fact, the Sensex has been relatively protected by the economy-proof large cap stocks in sectors like IT, pharmaceuticals and consumer goods. Several frontline stocks in financials, engineering, metals and other sectors have declined a lot more. While Sensex is still trading around the 10% band that it's been moving in over the past 8 to 10 months, the mid caps and small caps have been badly hit. Some mid cap stocks have declined between 50% and 80% in 2013 till date, as captured in the chart below.
This recent downturn was perhaps overdue, but was triggered by the RBI's liquidity tightening measures to stabilize the Indian rupee. The Indian rupee stabilized only for a couple of days. “But the damage to growth expectations was possibly more permanent” stated the Report by BNP Paribas.
The RBI’s liquidity tightening measures don’t seem to be stabilizing the rupee. Unless structural measures to reduce the trade gap are implemented, BNP Paribas believes the rupee will weaken further. In the near term, it seems the rupee will continue to depreciate unless the government imposes import controls or other quantitative restrictions on imports. After all, the main driver of India’s large trade deficit is the fact that India consumes more and produces less. In fact, as BNP Paribas points out, “gold imports and oil imports are often cited as key reasons for India’s large trade gap even though the authorities have adopted strong measures to curb gold imports. However, growing consumer goods and capital goods imports are other strong drivers of the trade gap and have not been addressed adequately. We do not expect currency stability until there’s a coordinated assault on the structural drivers of trade deficit.”
“The oil stocks could be adversely impacted from Indian rupee depreciation due to under-recovery and subsidy burden. Also, companies with foreign debt exposure like Bharti Airtel, Adani Power and Tata Power, Power Finance Corp and REC lose out. NBFCs could be impacted if RBI continues with tightening liquidity measures,” stated the report. Liquidity tightening could hurt valuations of the banks and engineering companies as well.
In this context, companies with substantial exports, “from sectors like IT and Pharma outperformed significantly and they will continue to outperform in current scenario of depreciated rupee” stated in report. Report also mentioned that auto sectors having earnings in foreign cash flows like Tata Motors and Bajaj Auto may benefit from the weak rupee.
According the HC, the practice of exhibiting photo of a person and shaming him in public for the sin of being not paying back a loan cannot be encouraged in civilised societies
The Kerala High Court on Tuesday held State Bank of India (SBI)'s decision to publish photos of load defaulters in newspapers as 'arbitrary and illegal'. The Court said that the threat held out by banks to publish photos of defaulters in newspapers lacked legislative sanction.
Allowing writ petitions filed by two defaulters against the SBI notice, Justice V Chitambaresh said, “The practice of exhibiting a photograph of a person and shamming him in public for the sin of being in an impecunious condition cannot be encouraged in civilised societies like ours.”
The move was clearly an affront to the right to live with dignity and honour as well as the right to privacy of the loanees and such publication of photographs therefore, violates the rights guaranteed to the loanees under Article 21 of the Constitution of India, the court held.
The judge said that there was nothing immoral in their (loanees) failure to repay the loans owing to a floundering business or other unavoidable reasons.
During the hearing, SBI contended that terms and conditions of the loan agreements allowed them to publish defaulters’ photographs in newspapers. But the HC pointed out that there was no provision in the Security Interest (Enforcement) Rules (SARFAESI) that enables banks to threaten to publish photograph of defaulters.
The HC pointed out that the clause in the agreement at best empowered the bank to reveal only the names of borrowers in the print media or to disclose the information and details relating to the credit facility. "Even if there was such a permissive clause, the loanees would not (be) stopped from challenging the action of a bank on the ground of violation of fundamental rights of loanees,” the court said.
Earlier this week, a division bench of justices CN Ramachandranan Nair and CK Abdul Rehim ruled that loan defaulters should be given freedom to sell mortgaged land themselves at market prices and settle liabilities.
The HC's order was in response to an appeal filed by KC Thampi of Thiruvaniyoor in Ernakulam seeking an order allowing him to settle the liability of around Rs9 lakh to a primary cooperative bank by selling a part of his mortgaged properties consisting of over two acres of land and his house.
The High Court said the power of banks to sell mortgaged land should be used in a discreet, as opposed to destructive, manner. "Bank should try to sell the minimum extent of land of the defaulter, the sale price of which will be sufficient to discharge the debt and allow the defaulter to retain his remaining property," the Court said.
The Bench also made it clear that its order would have the effect of a general direction and it would be applicable to all recovery proceedings initiated by cooperative societies and government institutions falling under Kerala Revenue Recovery Act.
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