SHRI R. SHUNMUGASUNDARAM (CONTD.): But what is required, according to the suggestions of various hon. Members who spoke prior to me, is that the Public Distribution System must be strengthened. And, that is the agenda of the Common Minimum Programme of the UPA Government. The UPA Government has committed in the Common Minimum Programme that it will strengthen the Public Distribution System, particularly in the poorest and the backward block of the country, and would also involve women and cooperatives in its management. Is this Government doing that? That's the question posed by several hon. Members. I would suggest to the Government to take constructive steps in the direction of strengthening the Public Distribution System by consulting the State Governments. It is criticised that the procurement of commodities should not be through private traders. I can give one example here. In Tamil Nadu, there are farmer markets, known as Uzhavar Sandhai, where the agricultural products are brought directly to the market and sold to the public directly. So, common places are earmarked in various towns and villages. Transportation is provided to these farmers to bring their products. Thus, intermediaries are totally eliminated and the farmers sell their products directly to the consumers, that is, public.

Sir, the other criticism made is about the hoarding. Regarding hoarding, I would only say that the Government should revert back to certain provisions of the Essential Commodities Act, which were discontinued about five years back. One particular provision was the constitution of the Special Courts. Now, there are no special courts for the offences pertaining to the Essential Commodities Act. Those Special Courts were presided over by the district-level Judges, and they were dealing with those cases expeditiously. There were quicker processes. Now all such cases go to the regular magistrates and they get stuck up there. There is no effective enforcement of the law against the hoarders. With these few suggestions, Sir, I would like to conclude my speech.


׿š ֵָ (ײָ) : ֳ֯ן , ֕ ߬ ׸ ָ ָָ Ծ־ã ӓֻ֮ , 60 70 ֲ և ֜ , ֮֕ן ֵ, ִ֕־֤ ֮֕ן ֻ, ָ ׾ ֻ ֛ ָ ָ ֟ - " ָָ ֮, ֿ֮, ß ֮" 'ß ֮' ָ ߅ ִֵ ָ ֟ - ֿ֮, ß ֮օ , ִֵ ָ ָ ֟ - "և ָ ֋, ָָ ׮ , ָָ ׮ , ָָ ֤֮ " , ָ ִֵ ָָ ֤ ֵ , ָ ֕ ָָ ֤ ֋߅ ָָ ִֵ ָָ ߅ ָ ֲֻ֟ օ (3 ָ ֿ:)


׿š ֵָ (֟) : ָ ָָ ֮ ֛ ֟ , ָָ ןֵ֟ ָ ִ , ֟ ׸ִ ׮֟ ֕ ָ ׸ãן ֵ , ֕ ߲ ׾֛֮ ֕ -־ã ֮ ֤ ׯ֌ָ ִ֕ ִ֮ ו ֟ ָ ٣ ãן ׾ ר ׻֋ ׾֢ ӡ ׮׿֟ ֬և ֡ , ֕ ߮ ֲ ֲ ו ֓ ִõ - 00 , ָ ױ ֋ ֵ ֋ ָ ֲ ֳ֮ ָ֯ ߮ ֓ և ָ , ֲ Ӿ ָ ֻֿ ֟ כ ֓ ִ֮ ߮ ִõ , ו֮ ִ֮ ӓֻ ִõ , ו֮ ׻֋ և ָ ߬ ֮ ָ ֛ ׻֋ ֛ ִõ ֕ ׻֋ ׾֯ ֓ , ãן ו ֟ ֲ ָ ָָ ן֯ ֮֕ן ֻ , ִִ ™ ָ emphasis ֛ ֳ֯ן , ֟ ן ׾ ׾֢ ӡ -־ã ӲӬ ן ֵ֮ , ן ָ ִ Ӭ֮ ן ? ֳ֯ן , ִ Ӭ֮ ֟ ׻֋ և ֜ , ֕ ֜ և ֤ ֜ ׾־֮ ׻֋ ֯ ߕֻ ֟ ׸, ׾ -־ã ֟ ׸ ӟָ™ߵ ϳ׾֟ ֻ֟ և ֜ ׻֋ ׾µ և ֜, և ֮ ϵ ֮ -־ã ֮ ӓ׻֟ ׾ -־ã և , ָ ã֮ߵ ßָ ָ և ϲӬ֮ ? ׻֋ ֯ ־ã ? և ֕ , ֻ ־ã ָ ֤ ָ ֕ ָ ֟ ָ ֕ ֓ օ ֓ ߕֻ ׾ ָ ָ ֮ ֛, ֮ ׮ֻ֮ ֛օ ׻֋ ִ Ӭ֮ ֟ ׻֋ ָ ןֵ ן ֟׻ ߑ ߵ ߑ ߵ ן ֲֻ֟ ־ָ ֮ ӡֵֻ ֣ -׸ ֵ֮ כ֙ ֣ ֟׻ ן ݻֻև֮ ֤ ֮ ӛָ ־ã ? ׾ָ֟ ־ã ? ִ ָ ׮ֵӡ ־ã ֻ֟ ׿ֿ ? ߑ ߵ ֲֻ֟ ״ ֮ ָ ֻ ֕ ׻֋ ֮ ֛ ֮ ָ ׮ֻ ? (3 /ߋ־ ָ ֿ:)


׿š ֵָ (֟) : ã ֮ ֮ ֤ ֋, ו ߾֮ ־ֿ֋ , -- ֮ , ָָ ϲӬ֮ ׻֋ ֯ ֮ פ ޛָ ׬׬ ֯׸ ָߤ ָ ָ֯ ׻֋ ߴ ׮֬׸ ֋ ׬ ִ֮ ֯ , ֯ ߴ ָָ ִ ׻֋ ו֮֟ ִ֮ ָߤ , ָָ ִ ֮ ִ֮ פ և ֋, ָָ ֻ ִ ֮֟ ֯և , ׻ ֤ ֓֟ , ֯ ִ

כÙ֮ ִֻ ׮ ֵ , օ פ ס־ , ׮ ֵ ־ ָָ ֕ ָָ , ֕ ָָ ו֮ , ׾ִֿ ß ܟֵָ ָ ãן ִ׵ ן ֮և ֋, ו և ֲָָ ׮ֵӡ ֋ ִ Ѭ֮ ׻֋ ָָ ָ , ֳ և և ָ ׮ֵӡ ֮ ֮ ֟ ִ֯ ֮־֤ (ִ֯)

THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM): Mr. Deputy Chairman, Sir, this has been a useful and instructive debate. This is not the first time we are discussing this year price rise. We had a discussion in this House on the 22nd of May and 23rd of May. Much of what I will say now was covered even in that debate. I will try to recall the more important points that I made there and share with the House what our assessment of the situation is, and what steps we are taking in order to maintain price stability. I was surprised when Shri Venkaiah Naidu said that during the NDA Government there was never any discussion on price rise..(Interruptions).. He is still very young but, I think, memory tends to fade rather quickly. In this House price rise was discussed on the 17th of July, 1998, 7th and 8th of December, 1998, and 14th of April, 2000. In the Lok Sabha, there were discussions on 9th of July, 1998, then, on the 3rd and 8th of December, 1998, and on 27th of April, 2000. Price rise is a matter which concerns everyone. I am concerned. But one must understand why prices rise. Some of you were here when Shri Arjun Kumar Sengupta made his very short but very useful intervention. I am not getting into any technical details. I am not a trained economist, but let me tell you why prices rise in a developing country, and, then, I will deal with the current situation. In a developing country, some inflation is unavoidable. Inflation takes place because of a variety of factors, but, broadly, all of them can be clubbed into three factors. One is cost-push inflation. When input cost goes up, prices do rise. Today, Shri Ramachandraiah asked me: apart from crude oil, what has gone up? I said, look at the commodity prices world over, steel has gone up, aluminium has gone up, zinc has gone up, and, virtually, every metal has gone up. (Contd. by 3K/PB)


SHRI P. CHIDAMBARAM (CONTD.): International prices of wheat have hardened. International prices of pulses have hardened because of non-availability. Broadly, not only fuel prices but commodity prices have hardened throughout the world. And, when our economy is more open, it is not possible to insulate commodity prices in India from commodity prices in the rest of the world.

The first reason why prices go up is, rise in cost, which is called cost-push inflation. I think, most people will understand this. Now, what has one to do about fuel prices? In 2003-04, the NDA Government was extraordinarily lucky that crude prices averaged only 28 dollars a barrel. Now, we have been extraordinarily unlucky that in 2004-05, the average crude prices per barrel went up from 28 dollars to 39 dollars. In 2005-06, it went up to 55 dollars, and, in 2006-07, in the first three-and-a-half-months, the average price at which we are buying crude is 67 dollars 88 cents. It is three times the price of a barrel of crude oil that prevailed in the last year of the NDA Government. All I can do is rue our bad luck because this is something on which we have no control at all. We don't fix prices of crude oil. I am giving this as an example of how cost-push inflation has an impact on prices.

The second reason for prices to rise is demand-driven, demand-pull inflation. If the economy grows at about four per cent or so, the output increases by four per cent or so, there is only so much demand in the market. This is the fourth year in which I expect the economy will grow at an average of eight per cent. If you count the last year of the NDA Government as the first year, on the back of very low growth, the GDP recorded an increase of 8.5 per cent in 2003-04. That can be explained partly as a statistical illusion because it is the back of very low growth on the previous year. But upon 8.5 per cent, we had 7.5 per cent in 2004-05, we have 8.4 per cent in 2005-06, and, this year, according to all estimates that are available so far, the economy will grow between 7.5 and 8 per cent. When output is high, when growth is high, the demand is high. So much more is produced. So much more milk, so much more eggs, so much more clothing, so much more agricultural produce, so much more industrial produce is produced, and people are consuming. Now, the question was rightly asked, why are our cement prices high? The cement prices are high because the demand for cement has outpaced the supply of cement; although capacity has been added to the cement industry, the additional capacity has not kept pace with the additional demand. The same thing applies in steel. Why do you think an L.N. Mittal, why do you think a Tata, why do you think a Kumarmangalam Birla, why do you think a Jindal is putting up a million tonne steel plant in India? If there will be no demand for steel, why would he put up a plant? It is because they forecast that demand will rise very sharply, they are willing to come to India to put up a million tonne steel plant; Posco is putting up a twelve million tonne steel plant, a ten million steel plant because, the demand will rise, and when demand rises unless the supply side keeps pace with the demand, unless the capacity is expanded at the same pace as the demand expands, the prices will rise. (Contd. by 3l/SKC)



SHRI P. CHIDAMBARAM (CONTD.): One of the reasons why prices are rising the world over, especially in the commodities market, is the output, the global output. The global output in 2005 was 4.8 per cent, which means, the global GDP is growing at 4.8 per cent. Then, price rise this year is expected to grow by 4.9 per cent, one of the highest growth witnessed in the post-War era. The US is growing at over 4 per cent; Europe is growing; Japan has come out of its sluggishness; China is growing at a scorching pace of 11 per cent and India is growing by 8 per cent. The global demand is high. When global demand is high, global output is high and this capacity catches up to meet with demand, there is price rice, which is one of the reasons why prices are rising world over, the prices of all countries of the world. That is not the point. The point I am trying to make is, growth exacts a price; high growth exacts a price. One of the prices one has to pay for high growth is some inflation.

The third, and the reason which is agitating me and agitating all of you, is what we call, supply shocks, that is, we have not managed the supply-demand as efficiently as we should have. Now, somebody said, onion prices are four rupees at one place and ten rupees in another place. No Finance Minister can deal with that! The point is these are supply constraints. One has to ensure that there are no artificial barriers to the movement of goods from one place to another. And one must be vigilant, the local Government must be vigilant, to see that these supply shocks don't take place. the price of potato varies from place to place; the price of tomato varies from place to place. These are essentially supply shocks. Now, we have had some supply shocks in the last five to six months. That is why the prices of primary articles have risen. Let me no mince words. I admit, there has been price rise and this is largely driven by two sectors; one is the fuel sector and the other is the primary article sector. On fuel, I can say that we have no control. We have not passed on the fuel price. If we had done that, it would have been more inflationary. We have not done that. We have passed through the burden of 10 per cent of the fuel price rise, crude oil price rise; the Government and Oil companies are absorbing the remaining 90 per cent. That is a larger policy question; I am not getting into that now.

The second reason is, primary articles. It is the primary articles, which have caused this price rise and of these, there are three articles which are really responsible -- wheat, sugar and pulses. Let us look at each one of them briefly. Now, production of wheat in 2004-'05 was 68.6 million tonnes. The estimates were scaled down from time to time -- in 2005-'06, the production has been estimated at slightly over 68.6 million tonnes. Arrivals in the market in 2004-'05 was 15.91 million tonnes of which 93 per cent was procured; 14.77 million tonnes were procured. In 2005-'06, the arrivals were marginally lower at 13.64 million tonnes. But only 67 per cent were procured. Procurement is only 9.22 million tonnes. The target for procurement fixed for various States was 162 lakh tonnes, but what was procured was only 92 lakh tonnes. Punjab had a target of 85 lakh tonnes; they procured only 79 lakh tonnes; Haryana needed 42 lakh tonnes; they procured only 22 lakh tonnes; Uttar Pradesh needed 25 lakh tonnes and procured only half a lakh tonne. Madhya Pradesh needed 5 lakh tonnes and procured nothing; Bihar needed two lakh tonnes and procured nothing. Rajasthan... (Contd. by 3m/hk)


SHRI P. CHIDAMBARAM (CONTD.): The reasons we have looked into and we are conscious of that. Last year, the procurement fell far below target. The corrective measures are being put in place to ensure that that is not repeated next year. My view is that while we can quarrel about the correctness or otherwise of the procurement price. The procurement price is fixed based upon the CACP recommendations. My view is that once the procurement price is fixed, the Central Government and the State Governments must work together to achieve the procurement target. There is no place for misplace sympathy in not procuring. One has to procure. If we do not procure, we will face the kind of difficulties that we face this year. This is a lesson that, I believe, we have learnt and I hope that this shortfall in procurement will not happen in the next season. But that does not mean that allocations were reduced. There was a statement that you have reduced the PDS allocations. That is not correct. In 2003-04, rice and wheat together, the allocation was 71.59 million tonnes. In 2004-05, rice and wheat together, the allocation was 72.05 million tonnes and in 2005-06, the allocation was 72 million tonnes. The allocation was not reduced. In fact, in 2003-04 and in 2004-05, the same quantity of rice and the same quantity of wheat were allocated, ----------- take a few thousand tonnes. In 2005-06, because of the situation that we faced, rice allocation was increased by 6 million tonnes and the wheat allocation was reduced by 6 million tonnes. But the total allocation remained the same. Now look at the off-take. The off-take in 2004-05 and the off-take in 2005-06, despite the change in mix was exactly the same, was 41.47 million tonnes and 41.90 million tonnes. My view as to what has happened is, while the allocation remains the same, the PDS machinery at the State level is not using the entire allocation to ensure that it is pushed through the PDS system. In fact, the off-take is about 60 per cent of the allocation. Specially in the April, the off-take was very, very low. Therefore, the States which are responsible for the PDS must make use of the allocation. I entirely agree with Mrs. Karat. The entire allocation must be pushed through the PDS. But they are not pushing through the entire allocation of the PDS. There is a vast gap between allocation and the off-take which is one of the reasons why there is a psychology of scarcity in the market which, of course, traders take advantage of to push up prices in the open market.

Sir, the next point is sugar. Now, what is the position on sugar. In 2002-03, the production was 201.3 lakh tonnes. In 2003-04, it fell to 139 lakh tonnes. In 2004-05, it fell again to 130 lakh tonnes. So, sugar stocks sharply declined which is the reason why sugar prices went up during that period. In 2005-06, the production has been 191 lakh tonnes and the next year __________ is good. We have banned export of sugar and sugar prices are now _________. But for successive years we lost 60 and 70 lakh tonnes of production of sugar. The demand for sugar is 195 lakh tonnes. There is a clear supply-demand mis-match which was exacerbated in 2003-04 and 2004-05 which has been partially made up in 2005-06. But hopefully with the new sugar season beginning from the first October, we will be able to make up in sugar.

Now pulses is a great problem. We are short of pulses.

(Contd. KSK/3n)


SHRI P. CHIDAMBARAM (CONTD): Presently, production of pulses, as also for all major commodities, has stagnated since 1995-96. There has not been any major scientific breakthrough or technological breakthrough in either wheat or paddy or pulses. Now, take pulses. In 2003-04, production was 149 lakh tons; 2004-05 - 131 lakh tons; 2005-06 - 139 lakh tons. We have always been short of pulses. We have always imported pulses. That is why, 'pulses' is an OGL. Now, what has happened this year is that the world production of pulses has also declined. The only country where there are some pulses available for export is Myanmar. And, we have opened it up for OGL. But, if there are no pulses, the kind of pulses that we consume in this country, if our production goes down, and there is not enough surpluses in the rest of the world, especially Myanmar, the prices of pulses are bound to rise, and this is the problem about pulses. Now, let's look at production figures. I think we should look at production figures to see what has happened to the production of foodgrains. This is a larger question. This must be debated thoroughly. Let's take rice. I don't go back very far. Let me go back only to 1993-94. In 1993-94, kharif and rabi - 80 million tons was the total rice production. It remained, more or less, at the same level for about 7 or 8 years. It went up to about 88-89 million tons in 1998-99, and since then, it has remained the same. Take wheat. Since 1998-99, wheat has been at the level of about 70-71 million tons. Take cereals altogether - since 1998-99, it has been at the level of 188-190 million tons. 2002-03 was a bad year when it went down to 163 million tons. I have pointed this out that there has been no major scientific, technological breakthrough. After the first Green Revolution, there has been no major breakthrough in rice or wheat or pulses...(Interruptions). I am talking about research. I am talking about breakthroughs in research and technology. Unless there is a breakthrough in research and technology, unless we are able to improve the productivity, improve the quality of seeds, we will not be able to solve this problem. We are stagnating for the last 12 years. This has nothing to do with this party or that party. I am giving you the facts. The production is virtually stagnating throughout the country despite adding to irrigation, despite good years of rain, despite bad years of rain. And, I have pointed out to the Prime Minister that this is the real problem in this country. Population is rising. Per capita income is rising. People's eating habits are changing. People, who ate coarse grain, are eating rice and wheat today. That is good. If growth is there at about 8 per cent and population rises at about 2.5 per cent, per capita rises at about 5 per cent, people are consuming more and if this is the stagnation level of production of foodgrains, we will run into problems. We will become dependent on import. So, there has to be a breakthrough. Sir, I don't want to get into more figures and facts. The point is that we have had difficult three months largely driven by fuel prices and driven by rise in prices of wheat, sugar and pulses. But, we have taken a number of steps. We have taken a number of steps on the fiscal side. I don't want to give a long list. What is within the power of Ministry of Finance, we have taken steps on the fiscal side. The RBI has taken steps on the monetary side. Even today, the RBI has increased the reverse rapo rate by 25 basis point. It is a monetary tightening because of high demand. Home loans are growing at 44 per cent. I mean, here, we talk about cement prices being high, iron and steel prices being high, brick prices being high, but home loans are growing by 44 per cent...(Interruptions). It is good. But, it will have an impact on steel prices and cement prices. Nobody is saying that it is bad. I am happy people are building homes. I am very happy people are investing. Non-food credit is growing by 32-33 per cent for the third year running. (followed by 3o)


SHRI MOINUL HASSAN: Some people are not getting rice and pulses also. (Interruptions)

SHRI P. CHIDAMBARAM: Getting what?

SHRI MOINUL HASSAN: Some people are not getting rice and pulses. (Interruptions)

SHRI P. CHIDAMBARAM: I am talking about the fact that monetary tightening is taking place. The monetary tightening has to take place because you cannot sustain a 30 per cent non-food credit growth for the third year running. It is simply not possible. It will overheat the economy. In the United States, if GDP grows by over four per cent, they call it 'overheating', and, the Fed Chairman comes down.

We are now at a growth rate of between 7.5 to 8 per cent. So, monetary tightening is taking place. Whatever monetary steps are to be taken, the Reserve Bank is taking. Whatever fiscal steps have to be taken, I have taken fiscal steps and I will take fiscal steps. The most important thing to address now is the supply side. We must address the supply side to ensure that the supply-demand mismatch is reduced to the bare minimum.

And, I entirely agree with Dr. Arjun Sen Gupta. This has nothing to do with neo-liberalism or dirigistic economy. Mrs. Karat sent me a note. I have sent her a note back. She said, Sharad Joshi belongs to your class. He is supporting you. I said, "No, he is not on my side; nor are you on my side." I am the poor Finance Minister who falls between two stools. The point is that we don't believe in either neo-liberalism or a dirigistic economy. What we believe in is a liberal economy based on market principles. (Interruptions) I am not hiding that, Mrs. Karat.

SHRIMATI BRINDA KARAT: Class speaks stronger than political affiliations.

SHRI P. CHIDAMBARAM: We believe in a liberal economy based on market principles where the State will take necessary steps from time to time to ensure that the poor and the disadvantaged are not affected. We are not going back to a dirigistic economy, nor are we embracing what she calls neo-liberalism. There is nobody here who is a neo-liberal. But, at the same time, let me reject the argument that we go back to a dirigistic economy. The path that we have chosen in the last fifteen years has brought us great benefits. It has brought us....(Interruptions).

This is based on ideological divide. I am not hiding it. There is an ideological division between what you say is right and what I say is my view. I am not hiding it. But the point is you must spread your ideology among the people even as we do.

SHRIMATI BRINDA KARAT: But don't spread hunger among the people. (Interruptions)

SHRI P. CHIDAMBARAM: There is no country in the world..(Interruptions)

SHRIMATI BRINDA KARAT: Learn from Tamil Nadu. Learn from Karunanidhi. (Interruptions)

SHRI P. CHIDAMBARAM: There is no country in the world which has gone back to a dirigistic economy. I don't believe that it is in the interest of the country to go back to a dirigistic economy. (Interruptions) SHRIMATI BRINDA KARAT: Please go to your own State and find out.

SHRI P. CHIDAMBARAM: Please, I did not interrupt you, and, I think, you should allow me to complete my statement. No country in the world has gone back to a dirigistic economy and I now would loathe that this country goes back to a dirigistic economy.

Now, Sir, questions have been raised about two issues on which I must share the concerns of the Members. The first is about the Essential Commodities Act. It is true that in February, 2002, the NDA Government repealed all Control Orders but, in fairness, I must say that that very Order allowed the State Government to pass their control orders with the prior permission of the Central Government. We have made it clear to all the Chief Ministers that if they wish to pass Control Orders, to regulate suspected hoarding, price manipulation or black-marketing, the Government of India will give them permission to pass such Control Orders. Now, one can legitimately raise the question as to why should they come to the Government of India for permission. Why don't you just give them the permission?

Now, I have conveyed this point of view to the Minister of Agriculture, Food and Consumer Affairs, under whose Ministry the Essential Commodities Act is administered; I shall convey these views again. But I would use this opportunity to appeal to all Chief Ministers that if any State wishes to pass a Control Order to deal with hoarding, black-marketing or price manipulation, surely, the Government of India will support such a move so that they can invoke the powers under the Essential Commodities Act against anyone who is acting against the interest of the public. (Contd. by SK/3P)


SHRI P. CHIDAMBARAM (CONTD.): Whether that Control Order should be amended to remove the clause about prior permission, I shall certainly convey the sentiments of this House to the Minister of Agriculture, Food and Consumer Affairs. The second thing is about future trading.

SHRI M. VENKAIAH NAIDU: Sir, if you don't mind, why was this truth not told to the Chief Ministers?

SHRI P. CHIDAMBARAM: That is not correct. I told them myself. ...(Interruptions)..

SHRI M. VENKAIAH NAIDU: It is totally unfair and against the policy of the State Government.

SHRI P. CHIDAMBARAM: The fact that the Control Order repealed all Control Orders is true, is equally true that the Repealing Order said, "If you want to pass the Control Order, take our prior permission". So, I have clarified that now. I have clarified it to them also.

So, the second issue is about future trading in commodities. Sir, this is a complex subject. I don't pretend that I am knowledgeable in this area. You heard Dr. Arjun Sengupta who is certainly more knowledgeable than I am. The theoretical justification, and please mark my word, the theoretical justification for future trading in commodities is as follows: (1) It leads to price discovery because of large-scale transactions by buyers and sellers. (2) It provides for risk sharing. (3) It gives appropriate price signals for the producer, the farmer. A regulated future market with limits, on open position, adequate margins and a price-trigger mechanism generally has found to be successful in many countries to curb speculation. Now, frankly, I am not entirely convinced that this theoretical justification is right in India. There is a debate within the Government. We are waiting for the Standing Committee to give its report on the Bill which is pending before Parliament. My friend, Mr. Jairam Ramesh, said he had spoken to the Chairman of the Standing Committee who had promised to send the report to the Parliament, this House or the other House, I believe, in about a weak or so. I would respectfully urge all the political parties, let us pass that Bill in this Session in both the Houses, with or without amendment. As I said, personally speaking, I am not entirely convinced about the theoretical justification. I think, one must take a close look at it. There is an exercise going on in the Government to take a close look at future trading in commodities. But, once the Bill comes, it will empower the regulator to take this action. The regulator today has virtually no power in commodity trade. That is why the Bill is introduced, and I hope that the Standing Committee will report. When that Bill comes, I want this debate to be repeated in a shorter form and the Minister of Agriculture will be present to answer that debate, and hopefully, we can all reach some conclusion on what and how we should have future trading in this country. Should we have future trading in commodities at all? If we should have, under what regulation should we have? Should some commodities be kept up? I have an open mind on the subject, and I would urge all the hon. Members to please participate in that debate. But, I must insist, Sir, as respectfully as I can, that that Bill must be passed in this Session of Parliament by both the Houses so that the regulator has powers even if he wants to take some action.

Sir, there has been a moderation in the wholesale price index now. You can say that the wholesale price index does not reflect the reality of the ground. I agree. That is the WPI. But, to allege that we are manipulating is, I think, very unfair charge. Nobody manipulates these indices. These are prepared by professionals, the same professionals who prepared it five years ago, who prepared it ten years ago, who prepared it when the Telugu Desam was in Government in 1996-98, when the NDA was in the Government. The same professional organisation prepares these indices. I think it is unfair to allege that we are manipulating. I don't think if he meant it. If he meant it for effect that we are manipulating, nobody is manipulating these things. The WPI, and the Governor today has made a statement, and I would appeal to you to read the Governor's statement.

SHRI C. RAMACHANDRAIAH: Nobody has said that it has been manipulated. We said that it is not relevant. ...(Interruptions)..

SHRI P. CHIDAMBARAM: People said that it is manipulated also. Nobody has manipulated. I think Mr. Narayanan was the manipulator when his party was in Government. Nobody manipulates it today.

SHRI M. VENKAIAH NAIDU: There was a reference, Sir. I made a reference to a particular story that has appeared in the Economic Times and the Finance Minister has not contradicted it so far.

(Followed by YSR-3q)


SHRI P. CHIDAMBARAM: If I begin to contradict everything that appears..

SHRI M. VENKAIAH NAIDU: It is very important. It is a very serious matter. You are concentrating on other things that we understand. That is why the situation is like this. The point is that when a serious charge is made, it is the duty of the Government to make it clear.

SHRI P. CHIDAMBARAM: What is the serious charge?

SHRI M. VENKAIAH NAIDU: They said that the WPI was deflating inflation. As per the WPI, the total inflation in foodgrains is only 9.5 per cent, and as per the survey by experts, it is 26.5 per cent. How can there be such variation?

SHRI P. CHIDAMBARAM: I will explain.

SHRI M. VENKAIAH NAIDU: I am not an expert.

SHRI P. CHIDAMBARAM: I know that is why I will explain it to you later. I am glad you said that you were not an expert. So, I will explain it to you later.

We are talking about constructing the WPI index. There is a CPI index. The WPI index takes certain items in its basket. The CPI index takes very different items. For example, food. Food articles in the WPI index have much smaller weight, whereas food articles in the CPI index have much larger weight. Therefore, the WPI index is constructed on a different basket, and the CPI index is constructed on a different basket. There will be a difference between the WPI index and the CPI index. What matters to the common man is the CPI index, and even there, there is a CPI index for industrial workers; there is a CPI index for agricultural labour; and there is a CPI index for urban areas. So, these numbers must be understood for what they are. They are indicators; they are indices. We don't take them as telling you what the price is. As I said, prices can vary from place to place. Take, for example, prices of commodities. The commodity prices vary from place to place. Vegetable prices vary from place to place. If you construct an index for a town, it will be different from the index you construct for Delhi. All I am trying to say is that nobody manipulates this.

SHRI TAPAN KUMAR SEN: Sir, there are complaints..

MR. DEPUTY CHAIRMAN: You can seek clarifications afterwards.

SHRI TAPAN KUMAR SEN: There are complaints from different trade unions that it is not reflecting the right kind of things. Even the collection of prices is not from proper places. All the methodology is in question. A unanimous question was raised across the party..

SHRI P. CHIDAMBARAM: All I am trying to tell you my friend is that the CPI index is based on gathering price data from a certain number of stations, of certain items of consumption, and the index is constructed on that basis. We can argue that the price data are not gathered from enough places. You can argue that the price data are not gathered as efficiently or as accurately as possible. That I can understand. But it is the same method and the same manner in which the price data were gathered five years ago or ten years ago. I am only refuting the charge that we are manipulating any index. We are not manipulating any index. We take the index for what it is.

SHRI TAPAN KUMAR SEN: But there are defects, Sir.

SHRI P. CHIDAMBARAM: Those defects can be corrected. If there are defects, they can be corrected. The WPI index shows and the Governor's statement today says that mid-May onwards, there is a certain amount of stability in prices, which I said in the debate on 22nd and 23rd of May. The steps that we have taken will stabilise the inflation rate, and mid-May onwards, you will find, as far as primary group is concerned, the index is declining; for fuel, power, and light group, the index is more or less stable because crude prices are, in fact, rising; for manufactured products, there is a marginal increase, but it is very, very low.

Now, this can be corrected, as we hope to correct it, when wheat arrives, when the pulses that are on OGL arrives, when the new sugar crop arrives. I am absolutely confident that prices will stabilise further. In the short run, I do not see any rise in prices. I do not see any relentless rise in prices. But we are watching the supply side very carefully. These supply shocks will be addressed together with my colleague, the Minister for Agriculture, Food and Consumer Affairs. I and other Ministers will take steps to ensure that the supply side is addressed until the new stock of sugar arrives beginning October and the new stock of wheat arrives beginning next year.

The answer is, of course, what Mr. Sengupta said, namely, imports. As consumption rises, and there is a supply-demand mismatch, import is the answer. But what amazes me is that even after this, some people say you should not import. Now, if the total availability, forget whether it is in public stock or private stock, for one reason or the other, is less than last year, you cannot increase the total availability except by imports. (Contd. by VKK/3R)


SHRI P. CHIDAMBARAM (CONTD.): The total availability in the country can only be increased by imports or by banning exports. Therefore, I think, the right decision has been taken to import wheat, to import pulses and in future also, if there is a supply-demand mismatch within the country, both public and private stocks taken together, we will take steps to import in order to enhance supplies of essential commodities.

Sir, let me assure hon. Members that we are acutely conscious that we need to maintain price stability. It is wrong to say that prices have risen only recently. Let me just refresh Mr. Venkaiah Naidu's memory. Between December 1998 and July 1999, it was a declining phase in inflation from 7.1 per cent to 2 per cent. But then, between July 1999 to January 2001, inflation rose from 2 per cent to 8.7 per cent. Memories fail.

SHRI M. VENKAIAH NAIDU: I have the Economic Survey with me. (Interruptions) It was presented by you to this very House. At no time, inflation has crossed 7 per cent during NDA's regime and it was 10 per cent during Manmohanji's period.

SHRI P. CHIDAMBARAM: You are absolutely wrong. Please come to my chamber tomorrow and I will tell you month by month.

SHRI M. VENKAIAH NAIDU: Why should I? You have presented the Economic Survey. If you say that the figures given in the Economic Survey are wrong, then, I can't help it.

SHRI P. CHIDAMBARAM: No, the figures given in the Economic Survey are right. If you come to me, I will share with you a cup of coffee and I will take you through it month by month.

SHRI M. VENKAIAH NAIDU: If you want to stabilise the present prices at the present level, that's a different matter.

SHRI P. CHIDAMBARAM: No, no. I am just pointing out to you. From July 1999 to 2001, inflation rose from 2 per cent to 8.7 per cent. From January, 2001 to February 2002, it declined again to 1.4 per cent. From February 2002 to April 2003, it increased from 1.4 per cent to 6.7 per cent and from April 2003 to August 2004, it again increased from 6.7 per cent to 8.5 per cent. Graphs are available; numbers are available; month-wise inflation figures are available; averages are available; average for the month is available. It is troughs and peaks. I will share with you the graph after the end of this debate. At the end of the debate, I will share with you the graphs...(Interruptions)...

SHRI M. VENKAIAH NAIDU: Sir, one need not go into the weeks or months. There is an annual average given by the Economic Survey which is presented to this House by the very Finance Minister. At no place, it has gone...(Interruptions)...

SHRI P. CHIDAMBARAM: Please understand, Mr. Venkaiah Naidu, nobody is disputing it. The Economic Survey is the publication of the Government. Nobody is disputing the correctness of it. But even in surveys and figures, you must know how to read the figures. (Interruptions) I am inviting you to try to help you.

SHRI M. VENKAIAH NAIDU: I have no problem. I will come. I will not take coffee. I don't take coffee. But the only thing is, I will have the copy of your report and will also try to reconcile both.

SHRI P. CHIDAMBARAM: I am very respectfully inviting you... (Interruptions)...

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SHRI P. CHIDAMBARAM: Therefore, it is not correct to say that. Firstly, there have been troughs and peaks. There was a peak as we came into Government. It was a rising inflation from the month of April 2003. There was a rising inflation. When we came to office, it peaked in August 2004, but we brought it down to 3.7 per cent in August 2005. From August 2005 to April 2006, it's being stable at 3.7 to 3.9. Since April 2006, it has risen from 3.9 to 5.1. That's all I am trying to say. What we hope to do is, through fiscal and monetary efforts, we will stabilise the headline inflation. Supply side shocks, we will address it by addressing the question of wheat, sugar and pulses and I can assure the House, Sir, the Government is acutely aware of its responsibility and will discharge its responsibility in order to protect the common people.

Sir, now, I wish to make one last point. This question has been raised. I have read these figures earlier. I have sent it Mr. Sitaram Yechury who asked from me in writing, I have shared it with him. The point is, it is misconception that we have a tax bonanza because of the crude oil price rise. This very document which I have in my hands has been shared with a very senior Member of the CPI (M). I have sent it to him and he has acknowledged receipt of it. (Followed by MKS/3s)


SHRIMATI BRINDA KARAT: Sir, acknowledging receipt does not mean accepting your logic.

SHRI P. CHIDAMBARAM: Well, you have to accept my figures before you accept my logic. You have to accept my figures first. In 2004-05, the total customs and excise revenues from crude oil, petrol and diesel was Rs. 56,358 crores. In 2005-06, we budgeted for, after reducing customs duties and after adjusting excise duties, Rs. 64,738 crores. But, at the end of the year, we actually collected only Rs. 62,874 crores. So, contrary to the popular impression, the increase in crude oil prices did not give a bonanza to the Exchequer. In fact, we fell short of the budgeted figures by Rs. 1,864 crores, and I have got the reasons why we fell short. ...(Interruptions)... I will tell you why we fell short. On the customs side, we collected an additional Rs. 3,986 crores, but on the excise side, there was a shortfall of Rs. 5,850 crores. Therefore, the overall shortfall as against the Budget was Rs. 1,864 crores. So, contrary to the popular impression, with the rise in crude oil prices we got an undeserved or unexpected bonanza to the Exchequer, we did not even meet the Budget target on the petroleum sector's tax revenues. Now, why did the excise fall? Excise fell because import of petroleum products was less and volume growth of diesel was only 1.5 per cent in 2005-06. Therefore, excise revenues actually took a negative and the customs revenues, we got a little more. Overall, we got Rs. 1,864 crores less. So, no bonanza came out of crude oil prices.

As far as the adjustment of prices is concerned,

AN HON. MEMBER: What about the State Governments, Sir?

SHRI P. CHIDAMBARAM: Just a minute. I am not talking about the State Governments; I am talking about the Central Government revenues.

Sir, as far as crude oil is concerned, we have reduced the customs duty on crude oil from 10 per cent to 5 per cent. We have reduced the customs duty on petroleum products from 20 per cent to 10 per cent. On the excise side, we have strictly gone by Dr. Rangarajan Committee Report where we have shifted to the ad valorem duty. If any further fiscal measures have to be taken, I have an open mind; we will look at fiscal measures, but, at the same time, we also have to protect our revenues. The Budget was presented to this House. You passed the Budget. There is a revenue side; there is an expenditure side. The difference is the fiscal deficit. If I have taken the hidden revenues, there are only two other ways. Either I have to increase taxes or I have to cut down expenditures. Now, there are upsides and downsides to both; we can debate that. If you want to discuss the fiscal policy, we can debate that. But to say that we are getting a bonanza from the petroleum sector, I am only trying to correct that impression; we did not get a bonanza last year, and I do not expect to get the bonanza this year also. But whether we get more than we budgeted, I will report it at the end of the year. But, last year, we did not get more than we budgeted. In fact, we got Rs.1,864 crores less than what we had budgeted from the petroleum sector.

To wind up, Sir, let me conclude by saying that the Government is totally aware that it needs to stabilise prices. We are taking fiscal steps, we are taking monetary steps; we will take steps. We will continue to take steps on the supply side. On the regulatory measures, when the Bill comes to the House, I want this House to frankly and freely debate the merits of the Bill so that whatever regulation is to be done on the future trading of the commodities, we will take. I want to appeal to the Chief Ministers, if they wish to pass control orders to deal with hoarding, black-marketing and price manipulation, the Government of India will stand by them fully so that they can take whatever steps are necessary. Thank you, Sir.

SHRIMATI BRINDA KARAT: Sir, there are some clarifications which are required. ...(Interruptions)...

SHRI DINESH TRIVEDI: Sir, on the supply side, ...(Interruptions)...


SHRIMATI BRINDA KARAT: Sir, I want to seek some clarifications. ...(Interruptions)... ...(Interruptions)...


SHRIMATI BRINDA KARAT: Sir, may I seek some clarifications?

MR. DEPUTY CHAIRMAN: I will give you time. Mr. Narayanasamy.

SHRI V. NARAYANASAMY: Thank you, Sir. ...(Interruptions)...

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SHRI V. NARAYANASAMY: I sought his permission first. ...(Interruptions)...

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