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No beating about the bush.
There is an urgent need to encourage corporate bodies to invest in building up the infrastructure facilities for storage and exports of foodgrains
In order to support the Food Security Act, the Ministry of Agriculture has estimated that the essential foodgrains in India, to the extent of 53 million tonnes be maintained as a buffer stock. This is based on the assumption that it is safe to have this divided into three categories. A three month buffer stock, at the rate of 5.1 million tonnes (mt), three months reserve and a strategic reserve of 7.5 mt would be sufficient, as a start, as per Tejinder Singh, a well known foodgrain trade analyst.
Also, we must remember that as fresh supplies are coming in, stored materials are also being despatched continuously for daily consumption. The foodgrains in overflowing godowns are stored, in large quantities, outside under plastic sheets, tarpaulins etc, which are subject to heavy climatic damage, besides being vulnerable to pilferage and act as a regular storehouse for rodents! Any excess inventory of even 13 to 15 mt are estimated to be worth Rs32,500 crore to Rs37,500 crore!
According to information available in the media, as of December 2013, the stock level of foodgrains with the Food Corporation of India (FCI) stood at 45 mt, some 20 million more than required, based on the estimation of 5.1 mt per month. This figure varies from time to time, based on consumption pattern, arrivals and despatches. We must also bear in mind that most state governments have their own food subsidy schemes, and there is no uniformity on a national scale.
Our foodgrains should be sold, on export basis, at the best possible prices in the overseas market, and our own minimum "floor price" rules have no bearing on the purchaser. Fresh supplies to the godown are simply placed on the top of the heap of the lot already in, which causes irreparable damage at the bottom!
Take the question of wheat stocks in the country and the overseas demand pattern, apart from the aggressive activities of our competitors. At this point of time, cold weather conditions in the US, prime and leading grower and exporter, are indicative of shortfall in their supplies.
Indian wheat stocks, as on 1st December, stood at 31 mt, which is the statutory requirement for buffer stock. Agricultural experts estimate a bumper crop this season, amounting to over 95 mt, as wheat acreage in the current rabi season is estimated to be over 302 lakh hectares, thanks to various state schemes in operation. In Madhya Pradesh, the government had announced a bonus of Rs150 per quintal over the minimum support price (MSP) and it appears more farmers increased the wheat acreage! The central government had announced a MSP of Rs1,400 per quintal, an increase of Rs50 over the previous year, to encourage production.
As a sequel to the bulging stocks of wheat, export efforts by government authorities, besides private exporters, are bearing fruit. Fortunately, in line with the international market, the government had to reduce the floor price from $300 per tonne to $260 per tonne to push up exports and to literally get rid of the stocks, and to make way for the new crop to come in. Preferred supplies from Black Sea producers were fetching $305 per tonne, while both US and French supplies were quoted at about $ 300 per tonne. However, with the cold wave, there has been interest in the tenders called for by India, prices above the floor price of $260 per tonne has been obtained, such as $282.62 per tonne from Vitol Group, for shipment from Mundhra port, while Al Ghurair of UAE bid $ 283.60 per tonne for shipment from Chennai. India thus plans to export at least two million tonnes of wheat before the new crop starts arriving in April, with hopes to reach four million this fiscal, as there are several tenders on the anvil.
Other items like corn (maize) have also made headway in exports, with orders booked for 350,000 tonnes at $216 per tonne. Iran has increased its purchase of basmati rice and soya meal with other items like sugar picking up.
Our efforts to push up export of foodgrains is imperative; at the same time, there is an urgent need to encourage corporate bodies to invest in building up the infrastructure facilities for storage, but allocating free land or on long term lease, suitable for this purpose, in every state and more importantly near the ports to facilitate exports. Anything that can be done in these areas to prevent loss of foodgrains due to climatic damage would be most beneficial to the country.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also 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.)
This is the concluding part of a two-part series on the technical and legal issues of virtual currencies, especially Bitcoins. One of the major legal issues in Bitcoin like economy is anyone could be a victim of theft or malpractice and there is no consumer protection available
This part deals with the legal issues around Bitcoins. The principal question that comes to mind is what exactly the definition of Bitcoins in legal science is. While the law in this field is yet to take shape, some of the existing definitions can be explored to see where this fits.
Is it a currency?
The Reserve Bank of India (RBI) Act defines "currency" to include all coins, currency notes, banks notes, postal notes, postal orders, money orders, cheques, drafts, traveller's cheques, letters of credit, bills of exchange and promissory notes. In economics, a currency is a system of money (monetary units) in common use in a nation. Under this definition, Indian Rupee, British pounds, US dollars, Japanese yen and Euros are different types of currencies. Currencies in this definition need not be physical objects, but as stores of value are subject to trading between nations in foreign exchange markets. Currency must not be perishable, should be a medium of exchange, and should have a stable store of value. This is reason why wheat or jute cannot be treated as currency because they do not have stable store of value and are perishable. It is for the same reason that the world moved away from the pre-historic barter system.
Bitcoins are not perishable, they are a medium of exchange (many stores and shops do accept payments in Bitcoins, only a few do). However, they have no stable store of value; no entity or assets back up Bitcoin value. Bitcoin value is entirely virtual—a Bitcoin is only worth what another person thinks it is worth. This is different than currency issued by countries. A country’s currency is backed by that country’s government. This backing can either be by fiat (government regulation or law) or by commodity (such as the gold). Bitcoin value is not based on government regulation or law mandating its use in a country. Similarly, it is not backed by gold.
Is it a security?
"Securities" include—(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate; (ii) Government securities; (iii) rights or interests in securities.
A security is an instrument that is secured against something else. A security represents a rights on something else. For example, the value of a bond, note or a promise to pay depends on the financial condition of the promisor. A share is secured against the equity interests of a company. Therefore by owning a share, the shareholder owns an interest in the company. The market value of a share depends on what the buyer is willing to pay, given the profitability conditions of the underlying assets. In case of bonds or debentures, a security creates an obligation on one party to pay another party.
Now, a bitcoin is not a security because there is nothing underlying in it. It is not creating an interest or right in any asset or anything else for that matter. Nor is it creating an obligation on one party to pay another party.
However, it may be alternatively argued that a bitcoin can be a security, if someone is purchasing bitcoins as a speculative investment and intending to profit off of a future sale of those bitcoins, then that purchase would be an investment of money. Some uses of Bitcoin may not be an investment of money (such as using Bitcoins to purchase a good). However, people are certainly speculating on the price of Bitcoins, as can be seen by the emergence of Bitcoin investment vehicles. Further, the investment rules and requirements of Bitcoin exchanges which are already in existence can classify a Bitcoin as a security and a transaction as a securities transaction, even if Bitcoins are not security in itself.
In US, the Securities Exchange Commission (SEC) has authority to regulate securities, like stocks, in the United States. In SEC vs Trendon Shavers (2013), the United States District Court for the Eastern District of Texas was concerned with the question whether Bitcoin-related investments were “securities” and hence subject to the jurisdiction of the SEC. Trendon Shavers was the founder and operator of Bitcoin Savings and Trust (BTCST) and solicited Bitcoin in principal investments from investors. The investors suffered losses and hence the SEC brought an action against Trendon Shavers and BTCST on the ground that they have made misrepresentations regarding the nature of the investments and had defrauded the investors. Trendon Shavers adopted the argument that SEC had no jurisdiction because the investments were not “securities” because Bitcoin is not money, and is not regulated in the US. He also argued that no money changed hands. The court did not accept Trendon Shavers’ arguments and instead ruled in favour of the SEC.
But so far, the agency has not determined whether Bitcoin itself can be categorized as a security, making it hard for it to crack down on trading fraud.
Is it a ‘good’?
‘Goods’ means every kind of movable property, other than actionable claims and money; and includes stocks and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. Intangible things like trademarks, patents, copyright, goodwill, water, gas, electricity are all goods. Further, the Supreme Court has held in Tata Consultancy Services vs State of Andhra Pradesh (2004) that the test to determine whether a property is ‘good’ is not whether the property is tangible or intangible or incorporeal. The test is whether the concerned item is capable of abstraction, consumption and use and whether it can be transmitted, delivered, stored, possessed etc.
Bitcoins do resemble goods. It is movable, it is not money, it is not an actionable claim because it does not impose a claim on anybody or anything against which an action can be taken, it can be abstracted by a computer program (within a certain limit placed by the algorithm, and hence it is countable and finite), it is being used and consumed by people dealing in Bitcoins, it can be transmitted, delivered over a network, stored in a wallet and in USB drives. Bitcoins are an abstraction, much like a painting or a song, for which any price can be paid. There is no prohibition on much price one can pay for a painting or a song. Person ‘A’ can pay Rs1 crore, whereas Person ‘B’ can pay Rs1 lakh for the same painting. In other words, the value is perception-based at best.
Thus we may say that Bitcoin is an online commodity. What does this mean for the application of laws to Bitcoins? Section 4 of Sale of Goods Act defines a contract of sale as “a contract whereby a seller transfers or agrees to transfer the property in goods to the buyer for a price.” The consideration in a contract of sale has necessarily to be ‘money’. Thus, if Bitcoins are sold for money, then Sale of Goods Act will be applicable. But if Bitcoins are used an exchange medium for goods, then Sale of Goods Act will not apply. The Chinese authorities are also of the same view. They have announced that bitcoin was a “virtual commodity that does not share the same legal status of a currency.” In the United States, such a classification could put bitcoin under the Commodity Futures Trading Commission (CFTC). But CFTC has not assumed responsibility.
If they are considered as goods, there seems to be no reason to consider Bitcoins as illegal. But there are other legal issues to consider. A trader cannot export goods from India and receive payment in Bitcoins. Under Foreign Exchange Management Act (FEMA), such export proceeds must be repatriated to India in terms of foreign exchange through normal banking channels. Similarly importation of Bitcoins would pose legal difficulties, if transactions are not carried out through legitimate banking channels. Further, legal issues involve lack of consumer protection in any sector of the Bitcoin economy. Anyone could be a victim of theft or malpractice. In the immediate future, the most likely source of enforcement in the US may be the Federal Bureau of Investigation (FBI)’s cybersecurity team.
(Shambo Dey, a student of Government Law College, Mumbai, works as a Research Assistant at Vinod Kothari & Company)
The wheat production this year will be an all time high production and will beat all previous records, according to Minister of State for Agriculture and Food Processing Industries, Mr Tariq Anwar at an ASSOCHAM event held in New Delhi
India is likely to achieve record wheat production on back of good monsoon, Minister of State for Agriculture and Food Processing Industries, Mr Tariq Anwar said at an ASSOCHAM event held in New Delhi today.
“We have been receiving encouraging reports as the weather has been very good and the monsoon has supported us and I think this time we would achieve an-all time high production that would beat all previous records,” said Mr Anwar while inaugurating 6th Agri Business Summit: Infrastructure, Value Chain and Partnership' organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
On reports of stem rust in a wheat field in Haryana, the minister informed that government has already warned the farmers and it is taking an initiative in this behalf.
“Gross inefficiencies in the food supply chain had lead to an extraordinary rise in onion prices and there was no issue related to its production which has remained steady at about 17-18 million tonnes,” said a disappointed Mr Anwar.
“There is something seriously wrong in the way the onion market operates as it is due to inefficiencies in procurement and distribution system that such extreme price distortion takes place,” he added. “There are governance issues related to licensing of wholesalers, issues related to holding capacity of farmers, issues related to market price information and a number of such issues related to the whole supply chain which creates this kind of pricing contradiction.”
“There is a need to develop an incentive system to encourage both producers and distributors or sellers to adopt new technology to maximise production as we have not been able to use even the existing technologies available to us,” said Mr Anwar.
The minister also said that presently, farmers are discouraged to produce more as most of the surplus generated from farm produce is cornered by middlemen. He also stressed upon the role of contract farming to increase farm productivity and thereby increase agriculture income in the future.
He also sought serious industry intervention while emphasising on the importance of contract farming. Most states today would not debar any company from procuring directly from the farmers provided certain procedural issues are followed, said Mr Anwar, while conceding that there are certain issues related to Agricultural Produce Market Committee (APMC) Act in various states.
Some Key highlights of the Report that was released in the Summit include:
1. The share of public sector capital formation in agriculture & allied sectors has come down from 25% in 2006- 07 to about 15% in 2011-12 where as that of private sector has gone up from 75% to 85%. Greater public sector investment in agri infrastructure is needed to facilitate further private investment.
2. The level of farm mechanization is high for wheat/rice harvesting at 60-70% and less than 5% for other crops. The level of farm mechanisation for other farming activities like soil work and seed bed preparation, seeding and planting, plant protection and irrigation is still at meagre 30%-40%.
3. The storage shortfall stood at about 330 lakh metric tonnes (MT) in 2011-12, due to record procurements by the government, which has made creation of covered warehouses an urgent necessity.
4. India’s food processing levels are at just 2% of its overall annual production, which is abysmal compared to China (23%), Malaysia (83%) and USA (65%). Hence plenty of scope remains for increasing food processing activities, which in turn adds value to the end product.
5. Viability gap funding (VGF) needs to be encouraged to upgrade agri-marketing infrastructure. This can be coupled with private wholesale markets and terminal market complexes through innovative public-private partnership (PPP) models.