Crisis stage-managed

MAKING WAY FOR BIG BOX RETAIL

There is more to onion prices than meets the eye. And it is time to peel the onion, layer by layer.

No sooner did the onion crisis erupt on your small screen last week, following retail prices jumping from Rs 35 per kg to Rs 60-80 a kg, Commerce Minister Anand Sharma was the first to make a statement. Even before Agriculture and Food Minister Sharad Pawar opened his mouth, Sharma had told the nation that the onion crisis was because of hoarding, and that the country had enough stocks.

This year, production of onions has been a record with at least one million tonne more than the previous year. I wonder how and why Sharma reacted the way he did. After all, agriculture is Pawar’s beat and normally cabinet ministers tread carefully by not transgressing into the domain of a colleague. Even if Sharma commented because he looks after trade, the fact remains that he has never commented earlier when prices of sugar and dal, for instance, had touched the roof.

As the evening progressed, and the UPA government went into a tizzy. Nafed’s managing director Sanjeev Chopra expressed surprise at the sudden price rise. He told the media that there was roughly 20 per cent more supply, and despite the rain damage to the standing crop in September when sowing takes place in Maharashtra and Rajasthan, the price rise defied any logic. I agree with Chopra. He was being forthright and honest.

While all kinds of explanations were being tossed around, what became increasingly clear was that the trade — middlemen, in this case — had made a killing. But what remains hidden from public glare is that the entire onion price crisis was stage managed. It has been created to justify the need to bring in big box retail.

Within the next two days the government went into a massive salvage operation. Knowing full well that onion prices have in the past brought down governments, not once but twice, UPA-II didn’t want to take any chances. Exports were immediately banned, import duties were brought down to zero, crackdown against hoarders began simultaneously, and lo and behold, the prices began to come down.

Meanwhile, tomato and garlic prices began to rise. While tomato prices ruled high in Delhi (rising to Rs 40 a kg in retail markets), again there was no reason for the price rise. In fact, as metros witnessed tomato prices going out of reach, Jharkhand farmers dumped tomatoes on the road for want of a fair price.

Coming back to onions, before the prices had even stabilised at Rs 50-60 per kg, Sharma moved swiftly to talk to his colleagues on December 23 about the need and possibility of opening up to multi-brand retail. In other words, in the midst of a crisis situation, the commerce minister found time to ‘discuss’ with his cabinet colleagues the possibility of inviting multi-brand retail into the country.

Policy formation

At a time when the cabinet secretary was monitoring the onion price situation on an hourly basis, the commerce minister was confabulating with his ministerial colleagues about multi-brand retail. Finance Minister Pranab Mukherjee, Home Minister P Chidambaram and Defence Minister A K Anthony had taken part in these discussions. Why the urgency? Sharma replied: “Policy formation is a dynamic process, and we are very progressive and forward-looking.”

In fact, he also met media persons the same day to tell them about the dynamics of FDI in retail. A journalist asked him about the link FDI in retail has with the soaring onion prices. According to newsreports: “While Sharma rejected the argument that there was a link between the soaring onion prices and the opening up of multi-brand retail to foreign direct investment, the demand for liberalising the sector has been intensifying, especially in the wake of the wide gap between wholesale prices and retail prices”.

Now, if you are wondering how can someone be planning (and succeeding) in raising onion prices across the country, I want you to remember the sudden eruption of dropsy several years back, which took quite a human toll. Dropsy was blamed on poisonous argemone seeds which had slipped into the mustard oil extraction process. This was, as we now know, done to build a market for packed mustard oil.

How come, argemone seeds never found their way into mustard oil after that?
More recently, according to a leaked US diplomatic cable released by WikiLeaks, in a January 2008 meeting, US and Spain’s trade officials strategised on how to increase acceptance of genetically modified foods in Europe, and among the measures included inflating food prices on the commodities market.

Allowing big box retail into the country is no less a priority for the Manmohan Singh government than the nuclear treaty. US President Barack Obama had pressurised New Delhi to open up when during his November visit. Before that, British Prime Minister David Cameron had sought the opening up of the Indian market for big box retail during his visit. And more recently, French President Nicolas Sarkozy also promised more investments if India opened up to retail FDI.

The G-20 has directed member countries to remove all hurdles in accepting multi-brand retail. It was primarily to meet this directive that the Department of Industrial Policy and Promotion (DIPP) floated a completely flawed discussion paper on allowing FDI in multi-brand retail. Consultations with the stakeholders(?) have also been completed by the commerce ministry.