Glut ruins farmers trapped in ‘cobweb phenomenon’
When prices of a commodity increase during a season of scarcity, more of it is cultivated leading to a problem of plenty
•If it is tomatoes in Karnataka, it is red chillies in Andhra Pradesh and Telangana, and tur and grapes in Maharashtra. An abundance of the produce has led to a crash in prices, dashing the hopes of farmers.
•While farmers in Kolar, Karnataka, dumped tomatoes on the road after the prices collapsed to a new low of ₹2 per kg last week from ₹10 to ₹15 a month ago, violent protests broke out in parts of Telangana after a good yield of the commodity in the two Telugu-speaking States brought down the prices from a high of ₹10,000 per quintal last year to a measly ₹2,500 this year.
•In Maharashtra, the demand for tur, which rode a wave of high prices last year, plummeted after its production went up from 4.44 lakh tonnes in 2015-16 to 20.35 lakh tonnes in 2016-17. So was the case of grapes after a crash in their prices plunged the vineyard owners across the State into despair.
•While most farmers complain about the poor remuneration for their produce in comparison to the prices that prevailed in the previous season, agricultural economists have traced the reasons for the glut and the resultant price crash to the “cobweb phenomenon.”
•After the prices of a particular agricultural commodity shoot through the roof during a season of scarcity, farmers resort to boosting the production on the premise of the pre-existing demand and prices, leading to a problem of plenty, reasoned Dr. R.S. Deshpande, former Director of the Institute of Social and Economic Change (ISEC), Bengaluru, explaining the cobweb phenomenon.
•Most of the agricultural products that have now suffered a price crash due to their abundance had yielded a rich dividend in the previous season.
Chilli woes
•A long duration crop, consuming up to eight months for harvesting, red chilli cultivation was expanded in both Telangana and Andhra Pradesh this year after the commodity commanded a good price last year.
•However, in the absence of minimum support price for the crop, categorised as commercial, the market dynamics of demand-supply kept the price low from the beginning of arrivals in the market this season from April first week. “As the top quality red chilli yielded a price of even ₹13,000 per quintal last year, the farming community had hopes of good returns this year too”, a senior Telangana Agriculture Department official told The Hindu. But, it was not to be. The Centre has, however, announced a market intervention plan to procure 33,700 tonnes out of the 7 lakh tonnes produced in Telangana with a support price of ₹5,000 per quintal and assistance of another ₹1,250 per quintal for other expenses.
Few takers for grapes
•The crash in the prices of grapes not only soured the expectations of the vineyard owners in Maharashtra, but also claimed the lives of at least two farmers.
•The suicide of 36-year-old Manik Randive and 25-year-old Chetan Vasal, both from Nashik, has been attributed to the poor price their grapes fetched.
•Despite a robust grape production, there were few takers as the prices had collapsed. According to Shriram Gadhave, president, Vegetable Growers’ Association of India, wine manufacturers are contending their stocks are full. The average input cost per acre of grape was ₹3 lakh. Yet farmers were selling their produce at barely ₹2 lakh, he said.
•According to him, in April last year, more than 95% of the grape harvest was plucked by wholesalers and wine-makers from farmers’ gardens. Farmers even received a decent rate of ₹40-42 per kg. This year, barely 75% of the picking had been completed while the average rate was a paltry ₹8 a kg.
Dent in tur prices
•Tur dal, which hit the headlines last year with its skyrocketing prices, has suffered a dent in its demand this year after large scale production. In Maharashtra, production of tur went up from 4.4 lakh tonnes last year to 20.35 lakh tonnes during 2016-17, bringing down the prices by a huge margin.
•The total purchase by the government through its agencies at a Minimum Support Price (MSP) of ₹5,050 per quintal was only around 4 lakh tonnes while another five lakh tonnes had been sold at rates lesser than the MSP through the Agriculture Produce Market Committees (APMC). Several lakh tonnes remain unsold.
•But, even during the season of scarcity, rarely do farmers benefit. For instance, even though a consumer paid almost ₹220 for a kg of tur dal last year, the farm gate price was just ₹45 to ₹50, said Dr. Deshpande. “Does it take ₹170 to convert whole tur to edible tur dal”, he wondered.
•Echoing Dr. Deshpande’s views on the cobweb phenomenon, Mr. Srinivas, a progressive farmer from T. Narsipura near Mysuru, said he gave up tomato cultivation this year as many farmers began growing the vegetable on a large scale in the region after it realised a good price.
Japan pitches for Chabahar port
Indo-Japan civil nuclear cooperation agreement is still on track: Kenji Hiramatsu
•Japan is keen on collaborating with India on projects in Asia and Africa as a counter to China’s Belt and Road initiative (B&RI), Tokyo’s Ambassador to New Delhi said here, indicating Japan’s nod for Australia’s bid to join a quadrilateral for military exercises with India and the U.S..
•In an exclusive interview to The Hindu , Ambassador Kenji Hiramatsu revealed that the Japanese government was in talks with Tehran and New Delhi for a role in the Chabahar port project along with India.
•“We are interested in connectivity projects and to make sure that this region is free and open and an important port like Chabahar is good for regional connectivity ... I can’t tell when it will materialise, but we have expressed our interest,” Mr. Hiramatsu said. India, Iran and Afghanistan signed a trilateral agreement in May 2016 to build trade and transit routes from the strategically located Iranian port into Afghanistan and Central Asia, a $20-billion investment for India, and will be seen as a rival to the China-Pakistan Economic Corridor’s Gwadar port.
•Aked if Japan’s plans for connectivity in the region were being challenged by China’s 60-nation BRI, the Ambassador contended that Japan and India could offer similar projects to countries here, based on their common “principles.”
Prosperity, stability
•“We are also providing rather generous financing to these countries as well, to enhance prosperity and stability. We hope many of these countries will also choose our projects, some of which we can do in collaboration with India,” he said, adding that Japan shared values of “democracy, freedom of navigation” with India.
•The Ambassador’s statement points to the growing discussions on strategic convergence between India and other “Indo-Pacific” powers for whom China’s recent economic moves like the BRI as well as an aggressive maritime stance in the South China Sea have been a matter of concern.
•Backing Australia’s request to join the trilateral “Malabar” naval exercises between India, Japan and Australia, Ambassador Hiramatsu said,
•“We cherish the cooperation with Australia, and we have just had a Japan-Australia-India strategic dialogue and a political dialogue between these three countries, and we will have to see how it develops.”
•Speaking about other areas of bilateral strategic cooperation, the Japanese Ambassador said the Indo-Japan civil nuclear cooperation agreement is still on track, and has been presented for ratification in the Japanese Parliament .
This time with feeling
The ordinance enabling the RBI to act on bad loans must be accompanied by wider reform
•The Centre has empowered the Reserve Bank of India to get banks to take tougher steps, including insolvency and bankruptcy proceedings against defaulters, to address the growing volume of bad loans on their books. An ordinance to amend the Banking Regulation Act of 1949 has been issued to quell doubts whether the existing provisions allowed the RBI to direct banks to deal with specific stressed assets. The RBI has also been vested with the power to form oversight committees wherever it deems fit. Currently such committees exist only for loans brought into a scheme for sustainable structuring of stressed assets, also known as S4A. Now the RBI can bring in such panels to monitor the alphabet soup of other mechanisms for tackling non-performing assets (NPAs) such as SDR (strategic debt restructuring) through the JLFs, or joint lenders’ forums. The hope is that this will let bankers take decisive calls on loan accounts that have turned bad, as an independent oversight committee’s approval could keep investigative agencies off their backs. Bankers may not always have the sectoral expertise to monetise or leverage assets underlying bad loans in the best possible way. Yet, their paralysis on the NPA front, with its collateral impact being the worst bank credit growth recorded in decades, is driven by the fear that they could get themselves implicated for poor lending and monitoring decisions. The success of this latest salvo against bad loans will depend on the fine print on how the ultimate decision — whether to take a haircut on a loan and restructure it or invoke bankruptcy clauses — is arrived at.
•Perhaps of equal significance is the reshuffle of certain public sector bank officials announced on Friday. This is a clear signal that the NDA government is losing its patience with bankers persisting with a status quoist approach. The ordinance is the latest attempt to resolve the twin balance sheet problem (of indebted borrowers and NPA-burdened lenders) plaguing India’s domestic investment cycle. In 2015, the Prime Minister launched a Gyan Sangam conclave with bankers, and an Indradhanush road map to revitalise public sector banks. Last year, a Banks Board Bureau was set up to recommend the appointment of top bosses at banks and help them develop strategies and plan raising of capital. If the government wants to see a spurt in investment and job-creation, it needs to do more than just pin its hopes on new oversight committees. It must amend the anti-corruption law as has been promised for a while now, and accept the need to fix the policy-level stress affecting sectors such as telecom, power and highways. Above all, the government cannot in the same breath argue that the political cost of reforms is dissipating, but that the ‘re-privatisation’ of banks as mooted by the RBI recently is still a holy cow for the Indian polity.
Space for all
India’s launch of the ‘South Asia satellite’sends a positive signal to the neighbourhood
•By launching the GSAT-9 ‘South Asia satellite’, India has reaffirmed the Indian Space Research Organisation’s scientific prowess, but the messaging is perhaps more geopolitical than geospatial. To begin with, the Centre has kept its promise of considering India’s “neighbourhood first”. Within a month of taking over as Prime Minister in 2014, Narendra Modi went to Sriharikota for the launch of PSLV C-23 and “challenged” ISRO scientists to build this satellite for the South Asian Association for Regional Cooperation. The decision was then announced at the SAARC summit in Kathmandu, and the government has kept its commitment of gifting its neighbours at least one transponder each on the GSAT-9, a project that cost about Rs. 450 crore. India has no doubt gained goodwill across the subcontinent through the gesture, and the moment was neatly captured by the videoconference that followed the launch, showing all SAARC leaders (with the exception of Pakistan’s) together on one screen as they spoke of the benefits they would receive in communication, telemedicine, meteorological forecasting and broadcasting. The message is equally strong to South Asia’s other benefactor, China, at a time when it is preparing to demonstrate its global clout at the Belt and Road Forum on May 14-15. The Belt and Road Initiative is an infrastructure network that every SAARC nation other than India has signed on to. China has pledged billions of dollars in projects to each of the countries in the region; that, India is obviously not in a position to match.
•Where India does excel is in its space programme, as it is the only country in South Asia that has independently launched satellites on indigenously developed launch vehicles. However, in recent years Pakistan and Sri Lanka have launched satellites with assistance from China, while Afghanistan, the Maldives and Nepal are also understood to have discussed satellite projects with China. Bangladesh, which will launch its first satellite Bangabandhu-1 this year, is working with a European agency. With the GSLV launch India is showing that where it is capable its commitment to the development of its neighbours is strong. Finally, by going ahead with the project despite Pakistan’s decision to pull out, the Modi government is signalling that it will continue with its plans for the neighbourhood — ‘SAARC minus one’ — if necessary. This vision was dealt a minor blow recently when Bhutan pulled out of the ‘mini-SAARC’ alternative plan of a motor vehicles agreement for BBIN (Bangladesh, Bhutan, India Nepal), but the government’s persistence indicates it will not be deterred by the obvious domestic constraints of the SAARC grouping. As Afghanistan President Ashraf Ghani, particularly aggrieved by Pakistan’s refusal to grant transit rights for India-Afghanistan trade, said at the launch of the GSLV-F09: “If cooperation through land is not possible, we can be connected through space.”
Decoding the doctrine
More clarity is needed on implementing the Joint Indian Armed Forces Doctrine
•“Surgical strikes”, probably the most abused term of 2016, are now the new norm. The Joint Doctrine of the Indian Armed Forces 2017, released in April, has formally embedded them as a part of sub-conventional operations — meaning that from now on, they are among a range of options at the military’s disposal to respond to terrorist attacks.
•The more interesting aspect in the second such joint doctrine since 2006 is that the scope of “surgical strikes” has been left open. There is no mention of their employment being within the country or beyond its borders — the ambiguity is intended to send a message in the neighbourhood.
Larger message lost
•In this context, it is important to note that the surgical strikes in September 2016 on terror camps along the Line of Control, though much maligned due to political chest-thumping draped in the camouflage of nationalism, did achieve some far-reaching strategic objectives. They were never meant to put an end to terrorism but reversed a discourse which began in 1998 that India was out of conventional options in its quiver in the face of continued cross-border terrorism after the Indian and Pakistani nuclear tests. Unfortunately, this bigger message was lost in the noise.
•Further, while acknowledging that the possibility of a “conventional war under a nuclear over-hang” recedes with attendant “political and international compulsions”, the doctrine notes that training of ‘‘Special Operations Division’’ for execution of precision tasks needs no reiteration. Factoring in the escalation potential of a conflict due to such actions, it states: “The possibility of sub-conventional escalating to a conventional level would be dependent on multiple influences, principally: politically-determined conflict claims; strategic conjuncture; operational circumstance; international pressures and military readiness.”
•The doctrine also reiterates the basic tenets of the Indian nuclear doctrine, no-first use (NFU) and minimum credible deterrence, contrary to recent calls to revise the NFU and speculation in the West that India would resort to a first strike.
•It adds that conflict will be determined or prevented through a process of credible deterrence, coercive diplomacy and conclusively by punitive destruction, disruption and constraint in a nuclear environment across the Spectrum of Conflict.
•Flowing from the broader objective is the statement that Special Forces units will be “tasked to develop area specialisation in their intended operational theatres” to achieve an optimum effect.
•The various objectives open up an entire gamut of capability addition and process optimisation for the Indian military to be able to enforce it. Achieving these broad objectives requires seamless synergy between the three services, a far cry in the present circumstances.
•Interestingly some of the biggest policy decisions have been stuck endlessly — appointment of a Chief of Defence Staff (CDS), formation of cyber, space and Special Forces commands and carving out inter-service theatre commands. After some initial push from the Government, the enthusiasm has gone cold.
•The doctrine also declares: “Undertaking ‘Integrated Theatre Battle’ with an operationally adaptable force, to ensure decisive victory in a network centric environment… in varied geographical domains, will be the guiding philosophy for evolution of force application and war fighting strategies.” In this context, how the doctrine will be put into effect will be worth watching given that the 15 year Long Term Integrated Perspective Plan is nowhere near being achieved by any of the three services.
Indigenisation challenge
•Another important pronouncement under the “National Military Objectives” is: “Enable required degree of self-sufficiency in defence equipment and technology through indigenization to achieve desired degree of technological independence by 2035.”
•This probably presents the biggest challenge of all given the fledgling state of the domestic defence-industrial complex. While a grand pronouncement was made under the “Make in India” initiative, it has essentially remained an exercise in doling out billions of dollars to foreign companies.
•The doctrine is a bold announcement, but without the necessary elements in place, it will remain just another document like the policy formulations enunciated earlier. Or worse, it will be relegated to being another political slogan for popular resonance rather than send out a message of intent beyond Indian borders and shores.
Time for a digital Indian Rupee
Financial inclusion is an attainable goal
•With a vision to place India on the digital India landscape, the country is beginning to understand transformative agenda like demonetisation by the government. Digital transactions have soared with Net banking, credit cards, digital wallets, payment gateways, Aadhaar pay, PPI, UPI, payments bank and BHIM since demonetisation.
•These are radical initiatives that used technology to ensure wider acceptance. But such formats come with their own limitations and security concerns. In India, where more than 95% transactions are cash-driven, the rural and semi-urban populations have not had complete inclusion in this financial methodology. Hence, it is imperative to introduce digital fiat currency as part of the remonetisation of the economy for monetary sovereignty and policy effectiveness.
•The digital fiat currency, which we have proposed to the government, works in the same way as do notes and coins. By virtue of its digital nature, it has the potential to be the most financially inclusive instrument.
•Any person in India can hold it, transfer it and use it to settle debts, be it a farmer living in Gahmar village in U.P. or a salaried individual in Mumbai, with or without a bank account.
Anonymous users
•The validity of paper notes and coins is independent of the holder. The two persons transacting do not need to know each other’s names nor an ID because the trust is built into the payment instrument. The transaction is final as soon as cash changes hands. There is no need for subsequent settlement between banks.
•It is our proposal that the government issue a digital fiat currency, titled digital India Rupee, which would bear the same characteristics as does the cash Rupee. It would be legal tender and accepted throughout India. It would be backed by the Government. The amount of digital India Rupee in circulation would be controlled as are notes and coins today in circulation. It would be used by and exchanged between any digital payment schemes and would have full interoperability. It would have two additional advantages over paper notes and coins. It would transcend time and space, i.e. it could be transacted remotely between two parties. And, it would be counterfeit-proof! First, the advanced technology would prevent any fraud. Also, any counterfeit with a single rupee could be detected immediately without hurting circulation.
•The digital currency would bring more innovation, competition, better consumer protection, more consumer choices, more open access and better regulatory transparency. It would create a ‘firewall’ between banking and digital payment systems, protecting bank accounts and information on digital systems.
•Since digital India Rupee would be a centrally-issued sovereign currency, it would possess immense trust, security and control. It would also bring transparency on black money, tax evasion and other illicit activities under the legal framework. Also, with the negligible logistics costs and benefits of riding on existing infrastructure, the cost of digital India Rupee would be marginal.
•India’s cash-to-GDP ratio is 12.04%. The transition from physical notes and coins to a digital currency could drastically bring this down at par with the rest of the world. Other countries have explored this for their national digital vision. Even Sweden, that sees low cash usage, is debating issuance of a digital currency and is eyeing a decision on its ‘ekrona’ in the next two years.
FATCA: Deadline, procedure and details
•Your bank account and other financial transactions like mutual funds need to be compliant with The Foreign Account Tax Compliance Act (FATCA). Non-compliance would lead to blocking of accounts.
What is FATCA?
•The Foreign Account Tax Compliance Act (FATCA) is a United States federal law that requires United States persons, including U.S. citizens who live outside the United States, to report their financial accounts held outside of the U.S., and requires foreign financial institutions to report to the Internal Revenue Service (IRS) about their U.S. clients.
Why is FATCA compliance necessary in India?
•India had signed an agreement with the U.S. on July 9, 2015 which enables automatic exchange of financial information between India and the U.S. The agreement provides that Indian Financial Institutions will provide the necessary information to the Indian tax authority i.e. Central Board of Direct Taxes (CBDT), which information will then be transmitted to the U.S. automatically in the case of FATCA. The agreement came into effect on August 31, 2015.
Which financial transactions need FATCA compliance?
•The compliance is needed for bank accounts, mutual fund, national pension scheme and other such transactions. The compliance is needed to be done for all individual and entity accounts opened from July 1, 2014 to August 31, 2015.
What do you need to submit to be FATCA compliant and how can it be done?
•Individuals and entities need to provide details of their country of birth, country of citizenship, country of residence for tax purposes, among others, to the respective financial institutions. The self certification can be done online for bank accounts and mutual funds. The Pension Fund Regulatory and Development Authority has said it would come out with revised guidelines on FATCA shortly.
What will happen if I am not FATCA compliant?
•In a press statement issued on April 11, 2017, the Finance Ministry said the process should be completed by April 30, 2017; otherwise the transactions would be blocked in the accounts for the said period. However, experts point out that on ground, the accounts have not been blocked; even if they have been, one can still provide self certification and unblock the accounts.
