POLICY OF SALE OR DISINVESTMENT OF PUBLIC SECTOR UNDERTAKINGS

UPDATED ON 2ND NOVEMBER 2020

There is a strong policy initiative of disinvestment of PSUs like BPCL, Air India, Hindustan Copper Limited, and many more Defence PSUs initiated by India's Government.

 Such a policy is fundamentally flawed.

1) An Indian Private Sector entity will make an outright acquisition of a PSU from the Indian Banking sector's funding. The burden is then borne by the banking sector, already suffering from enormous NPAs. 2) During the Covid period, all the airlines in the world are in deep financial distress. It is irrational to dispose of Air India, despite its accumulated losses of Rs 50000 crores or so, at a massive discount in the name of progressive reforms.

 3) The sale of some of the Indian airports to corporates has raised questions on the entire modus-operandi and whether terms of the sale are commercially viable.

 4) The transparency of the sale or the actual evaluation of PSUs will have an element of subjectivity and seen or unseen preferences leading to controversial debate on undervaluing the assets. 

 5) Indian Defence PSUs have only one buyer—Indian Army, Airforce, Navy. Indian defense forces need weapons of the latest and established technology that may not be feasible through the privatized Defence PSUs. However, the intent to buy these Defence PSUs will facilitate comfortable credit facilities from the banks that will be perpetually sunk.

 6) Post disinvestment intervention by the Government or third-party opposition is sure to transmute any sale-purchase agreement into a dispute. 

7) Can Indian courts provide objective decrees of verdicts, especially when the GOI is a respondent or a petitioner? 

8) Foreign investors participation directly in the sale process is extremely doubtful, especially when the sword of retrospective laws threatens to exterminate them any time.

 Disinvestment for the sake of reform is sure to deform the Economy. Hope privates and Indian Banks will be more prudent this time.

AIR INDIA SALE --EDITORIAL INDIAN EXPRESS-- 2ND NOVEMBER 2020 

IMPLICATIONS OF FARM BILLS ENACTED BY THE STATE OF PANJAB

UPDATED ON  5TH  November  2020

Under the Indian Farm Laws that were formally gazetted on the 29^th September 2020 by the Central Government, the Government of Panjab brought four laws in the Panjab Legislature that conflict with the Central laws.  

Out of the 117 legislatures of the Panjab Assembly, these bills were supported by a massive majority of 115 members (except 2 of BJP). Symbolically, that is an extraordinary assertion of the will of the people of the State.  (also refer to my previous blog on Indian Farm Laws).

Primary implications are that—

a)    Agriculture produce and marketing are state subjects under the Indian Constitution, and the central law cannot be sufficient "until notified by the State".

b)    Any purchase of wheat and paddy from the Panjab "below MSP (Minimum Support Price)" notified by the Central Government will be held "void and punishable" under the law up to imprisonment of a minimum of three years and an additional fine.

c)      The State's right to levy fee or tax on the agriculture produce stands protected for improving the farmers' social lot. (Anticipated loss of revenue with the central laws is about Rs 5000 crores annually or $675 million per annum to Panjab)

d)    Merely a PAN – Permanent Account Number for Income tax –will not be sufficient for the buyer to make purchases. The purchaser will require appropriate registration with the state authorities of the Panjab.

e)     The entire State is a Marketing Yard for the procurement of wheat and paddy.

f)      The aggrieved party "will have recourse to the Civil Courts" as per the Indian legal system.

g)     The State of Panjab will "continue to exercise power under the Essential Commodities Act" of the State Government.

Bills enacted by the Panjab Government on 20^th October 2020 require the consent of the Governor of Panjab and the President of India. The popular belief is that such consent may not be endorsed, and therefore the issue may be challenged in the Supreme Court by the Panjab Government. The judicial matter's centrality is whether the Centre can infringe upon the State Government's constitutional rights.

Denial of Panjab's bills of 20th October by the Governor/ President of India will evidence that the Centre intends to "discontinue" MSP (Minimum Support Price) of even wheat and paddy (contrary to verbal promises by the Central Government in the Parliament). That will convey the formal advance message of the likely abrogation of MSP to all, including the farmers in the State of Panjab and elsewhere that will ignite the first spark of long-term political agitation. 

 

BUSINESS STANDARD 2ND NOVEMBER 2020 

INDIAN EXPRESS 2ND NOVEMBER 2020

https://indianexpress.com/article/india/if-govt-stays-rigid-it-will-be-voted-out-in-2024-aikscc-general-secy-6910555/

ON KISAN MORCHA  IN INDIAN EXPRESS 31ST OCTOBER 2020

ANOTHER ARTICLE 

TIMES OF INDIA 2ND NOVEMBER 2020

https://timesofindia.indiatimes.com/blogs/the-interviews-blog/farmers-are-asking-the-government-why-msp-cannot-be-the-legally-guaranteed-floor-price/

‘Farmers are asking the government why MSP cannot be the legally guaranteed floor price’

November 2, 2020, 2:10 AM IST TOI Q&A in The Interviews Blog | Edit Page, India, Q&A | TOI

   

Not all farmers have bought into the government’s vision for agriculture which has been fleshed out through three central legislations. Farm activist Kavitha Kuruganti from Alliance for Sustainable & Holistic Agriculture (ASHA) explained their concerns to Vishwa Mohan:  

What are the major objections to the newly enacted central farm laws?

The government hasn’t done what farmers have been asking for many years now – to enhance and guarantee MSP, to strengthen bargaining power of small farmers in the market, to enhance their capacity to store, process and sell at an advantage, as well as to free them from indebtedness. On the other hand, it has done the opposite, to create unregulated space for agribusiness companies and traders, to weaken ‘mandis’ which even with flaws provided farmers a space for collective bargaining and government intervention in their favour. It is saying, ‘we are giving the corporations more freedom to purchase, store and process, they will give you (farmers) better price’. Farmers don’t buy this and see this as the government washing its hands off all responsibility and rightly so. It is pitting farmers against powerful entities in a more unequal playing field now. We don’t have any evidence of this kind of de-regulation providing better and stable prices to farmers. With the new laws, the fact is that poor farmers and poor consumers have been left to their fate. Farmers are asking the government why MSP cannot be the legally guaranteed floor price.

It’s believed that procurement at MSP is not going to end as it’s key to India’s food security. So, why are the farmers apprehensive about it?

Farmers are rightly reacting to the Acts as well as the overall direction in which these reforms are pointing to. They have seen other hyped promises not being kept, like the one related to MSP implementation during Budget 2018. They are agitated that these reforms will tilt the balance further away from farmers towards big agribusinesses without addressing many structural vulnerabilities. That the government has undemocratically pushed these reforms without listening to farmer organizations including Bharatiya Kisan Sangh during Corona restrictions shows that corporate interests are pushing this, not farmers’ interests. Farmers know that the advisors who recommended these reforms have also asked for dismantling of PDS. In at least a few states, the mandi system is almost equivalent to MSP and procurement regimes. Further, the ECA 2020 refers to the PDS system ominously as something that is “for the time being in force” putting a question mark on its existence and continuation. What we need is a universalised expansion of PDS in fact with millets, pulses and oil included, to create a win-win for farmers and consumers.

Why are the farmers’ protests limited mainly to Punjab, Haryana and western UP? It’s not as intense in other parts of India.

The proximity of these places to Delhi makes the national media think that protests are limited to these states, whereas Karnataka has been on the boil and protests have been happening in other south Indian states, Bengal, Odisha etc. The responses from farmers have understandably been correlated to how dependent they already are on the mandi system in a given location. The government’s reform should have focused on improving such a mandi system everywhere in the country and bring it to a farmer-empowering uniform level rather than weakening or dismantling it.

Do you think the Punjab government’s Bill, giving legal guarantee to procurement of wheat and paddy at MSP, will serve the farmers’ interests in the long run when other crops are not covered under it? There is a view that the move would drive private players out of the state and it will ultimately harm farmers’ interests.

The Punjab government’s Bills are a good symbolic effort of a state government to assert its constitutional authority over agriculture. In fact, we should see it not just as the Punjab Government’s response, but the response of the entire society in the state, including all non-BJP political parties. It is also a development that once again reinforces the serious deficiencies of the Central Acts. However, the Bills have serious deficiencies in that they focus only on wheat and paddy, and don’t lay down any concrete mechanisms to guarantee MSP to farmers for even these two crops. Further, they are unlikely to get Presidential assent due to the current politics around the matter. What the Punjab Government, and other state governments should attempt is to amend their state APMC Acts, making legally tenable amendments that push back the ‘trade areas’ of the central act, and a guarantee of remunerative MSP. From All India Kisan Sangharsh Coordination Committee (AIKSCC), we had drafted a Bill to confer remunerative MSP as a legal entitlement on all farmers, which was backed by 22 parties. The state governments should consider that.

Many experts, after all, claim that it’s 1991 liberalisation moment for India’s farm sector.

Let us not forget that it was post-1991 that the agrarian crisis became more acute; farm suicides have continued unabated since then. Today, free trade agreements are being negotiated and signed, pitting impoverished Indian farmers against highly-subsidised produce from elsewhere.

What’s the best model you may suggest for the benefit of small and marginal farmers, and also women farmers who in many parts of India don’t get the benefit of the government’s scheme such as PM-Kisan as they don’t legally own land? Do you think the expansion of the FPO model works for small farmers?

We need to accept in this country that the so-called development trajectory will have agriculture engaging the largest section of the working population for a long time to come, that too with decreasing size of landholdings, unlike in other countries. We have to evolve our own model and not emulate failed models which push out all small farmers and then provide huge subsidies to corporate-run agriculture. We do need remunerative prices to be guaranteed as entitlements for all farmers. Importantly, we need an enumeration of all actual farmers (de-linked from land ownership as the only criterion) as per the National Policy for Farmers 2007, since more than half of them are tenant farmers, sharecroppers, women farmers and ‘adivasi’ farmers who are denied any scheme benefits or entitlements. The PM-Kisan’s benefits should be transferred to women farmers’ accounts in each household, since land ownership is mostly with men in any case. We need tenant farmers to be identified and included. Odisha had done both these with KALIA. The FPOs should be invested upon for sure – however, not to facilitate capture by big businesses, but to truly strengthen farmers’ interfaces with markets.

DISCLAIMER : Views expressed above are the author's own.

TIMES OF INDIA 2ND NOVEMBER 2020 ABOVE 


THE TRIBUNE 5TH NOVEMBER BELOW 

INDIAN FARM LAWS OF 2020 ARE FLAWED FOR FARMERS

FARM LAWS –FLAWED OR FRUITFUL?? 

The three laws – 

1. Farmers' (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020; 

2. Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 and 

3. The Essential Commodities (Amendment) Act 2020 – took effect from September 27 after President Ram Nath Kovid's assent. 

 ----------------------------------------------------------------------------------- 

The sequence and timing of three Farm laws that have been passed in the Parliament puts shame on this great nation's democratic framework. No consultation with stakeholders (the farmers) who live and work in diverse geographical and environmental conditions, virtually no price discovery mechanism discussed or informed, loss of revenues to states in the absence of Mandi Tax ignored, no effective dispute resolution mechanism (except SDM??). Democratic federalism terminated. The powers of the state in food and agriculture are usurped. No state has ever prevented the farmers from restrictive selling in or outside the state. As late Mrs. Sushma Swaraj stated in the Parliament, Arthiyas or intermediaries have broadly supported the farmers. 

 

The political convenience of introducing the bill during COVID has been a significant factor -- so that farmers may not protest vigorously. It is then muscled through the Parliament with a muted voice in the lower house and imagined majority in the upper house. When the media is fully managed, and all major institutions are compromised, the rushing through these laws raises more objectivity questions. The mirage gives an illusion of water and not the water itself. That is how the essence of these laws can be summed up. ----------------------------------------------------------------  

Q--Do the farm laws give more space to the farmers? 

Ans-These farm laws give more space to the Corporates, Patwaris, and SDM than the farmers. The political and economic dimensions are meant to trim the powers of the state machinery in agriculture. It also vests farmers' control and their income with the central laws in suppression to the States' constitutional ambit. It will be to a naivety to presume that there is no political angle. All political parties have applied the formula of manipulating farmers for grabbing the power directly and indirectly. 

Q-Do, the new farm laws beneficial to farmers? 

Ans-The answer is NO. India is a highly diversified nation-- geographically, environmentally, ethnically, economically, socially, and politically. The whole country cannot be painted with one brush for agricultural laws, mainly when the Farm's agriculture and marketing produce a state subject. Any law that fits Bihar or Tamilnadu may not be appropriate for Panjab, Haryana, or elsewhere. The legal tenability of these farm laws is under scrutiny. Some states are contemplating enforcing their legal framework under the constitution to check the Central Government intervention. The loss of revenue to the states by abolition of APMC is not accounted for. How will they get compensated? Compensation will vary from state to state. Can the Federal Government wipe out the states' source of earnings at its discretion and contrary to the constitutional provisions? 

Q—Is the broader assumption that sustainable solutions lie in augmenting productivity, diversifying to high-value crops, and shifting people out of agriculture to high productivity jobs elsewhere is workable? 

Ans--These farm bills do not refer to the augmentation of the production or crop diversification directly. Had productivity and diversification been the intended purpose, then the GM crops' induction would have been integrated into these laws. But that has not been the case. Neither there is stress or emphasis on R&D in agriculture production and productivity.

Q--Are these bills offer more choices to the farmers for the saleability of their crops. 

Ans—The farmers always had the choice of selling via APMC or directly or through intermediaries or storing them for future sale. The slogan of offering "more choices" to the farmers is propaganda for marketing these laws and inconsistent with the factual position. 

 The graphic above shows that farmers were already selling 50-70% of their produce to local private traders in 2012. The local private traders also include corporates. The idea of additional avenues of business is speculative. Intermediaries have been erroneously blamed for inflating commodity prices. These aggregators or the Arthiyas undertake the pre-financing of the crop on trust without written contracts, accept quality produced, undertake sorting, logistics (transport+ storage+ government's ad-hoc intervention+ transit losses + quality variation), and bear the market risk. No farmer has ever complained that Arthiyas or the middlemen are nagging them or eating away their margins/profitability. In any case, the arthiya's commission is to the buyer's account—whether Public or private sector. The farmers may not easily conceptualize the devil's consequences in the written contract detailed with the corporates. The loss of the farmer is total when a corporate fails to take delivery of the crop, while the latter remains unscathed.

 Q-Is MSP relevant now?  

ANSWER--Yes, for wheat and paddy-- and no for other crops. The MSP's concept has been supported for the last 50 years or so at the highest level by the previous governments, especially in Panjab and Haryana, and then later in MP, UP, AP, and Rajasthan for wheat and paddy. The irrelevance of MSP for the other 21 crops is logical as they are not exposed to dedicated procurement. Nevertheless, the unwritten intention is to abolish the MSP of wheat and paddy due to higher production and excessive stocks. Moreover, its annual increase makes export non-competitive. MSP is the smoking matter under which the ire and fires of farmers in Panjab and Haryana are simmering. These farm laws fail to deal with matters relating to MSP. The counterview of holding excess stocks is that a single draught in the country in any year can bottom out all these stocks—notwithstanding the buffer norms which are exposed to seasonal adjustments. All governments have been reviewing the adequacy of buffer norms and adjusting them upwards.

 Why the ruling establishment made commitments in their election manifestos of fixing MSP on a C2 basis and doubling the farm income? Was it a jumla for creating farmer's vote banks at the Centre and the states? That political convenience is perhaps no longer valid. Does it not have implications for the breach of trust to the farmers.

 Under the new laws, the Corporates are expected to fund the farmers, subject to the market conditions. Market conditions are variable and exposed to seasonal profits and losses. The farmers' exposure to the market fluctuations will be higher (which means accentuation of profits and losses.) Why continuation of MSP in media and Parliament endorsed by Government verbally? The doctrine of MSP remains unwritten under the law. Sadly, it is now left to Farmers and the Public's imagination whether MSP will exist or not. The Government, however, is silent about FRP and SAP values of sugar cane, which has its parallelism with wheat and paddy. The dichotomy of MSP of grains and FRP/SAP of sugar cane should be terminated simultaneously and lawfully notified. But the lurking danger is that it will inflame sugar farmers in UP, Maharashtra, Karnataka, and Tamil Nadu. That will further fuel the farmer's agitation. That is yet another divide and rule strategy with the farmers that are currently pursued by the policymakers .  

Dr. Ashok Gualti, in his 12th October article in the Indian Express, is "Let me also say that, currently, no system is perfect, be it the one based on MSP or that led by the markets. But the MSP system is much more costly and inefficient, while the market-led system will be more sustainable provided we can "get the markets right".And getting markets right is the biggest riddle. It is also presumptuous to comment that a market-led system will be more sustainable for whom-- the Government, corporate, or farmers? Q—Economic cost of rice is 30/Kg, and wheat Rs 27/kg and selling them at Rs 1-4 pkg under NFSA incurs enormous losses. Will these losses be mitigated? 

Ans—No. NFSA demand will continue.

Such social losses for political stability are mandated, just as trillion rupees of loans are either recycled or written off as NPAs, and then Banks are recapitalized. If FCI's procurement and distribution are discontinued in the long run, the Government will be compelled to procure wheat and rice from corporates at the prices determined by them. Accounting procedures and values of FCI are transparent. Will the same be applicable for Corporates. Many economists decried the introduction of NFSA as a costly burden when the UPA government introduced it in 2009-10. But the same law has worked well during the successive governments for BPL beneficiaries, specifically during COVID times. Abolishing NFSA by any government now will be at the cost of its stability.  

Q--Are Written contracts better than oral commitments for the farmers? 

Answer –NO. A knowledgeable audience knows the intricacies of written contracts between the farmer and the corporates. Even competent individuals cannot decipher the meaning of fine print written in the agreements signed with Mutual Funds!! The principle is that a written contract should be signed when the two parties have balanced strength and resources. Disputes can emerge because of the variation in quality, weather, and perishability of the product. The farmer is in the business of production of the crops and not in the business of litigation. An oral contract of smaller values can be mutually settled, while corporates answerable to the auditor, and banks may not have the same freedom. In a society where corruption is rife—the so-called judicial fabric of sarpanch, tehsildar, patwari, and SDM are not immune to petty inducements or rental income. The quality testing procedures of the surveyors are not above board. Most of the farmers with 1 to 5 acre of landholding cannot manage multiple agencies to their advantage. 

Q--Dispute resolution mechanism via SDM –good or bad? Answer- worse. The supportive argument offered is that this is the fastest mechanism of dispute resolution. But it ignores the farmers and supports the corporates. Some details are already given above. Why is there a ban to approach higher courts against the decision of the SDM? Though litigation in higher courts may be time-consuming for the farmers, the fundamental right to avail justice cannot be curtailed. Maybe this issue is also gets exposed to judicial scrutiny. 

Q—Scrapping of Essential Commodities Act (ECA)—good or bad? Answer –In theory, good. 

Higher price fluctuations in commodities like pulses, maize, tomatoes, onions, and potatoes will compel the Government for ad-hoc intervention locally and in foreign trade. The authorities have harassed traders in the past, through income tax/CBI raids, ED and customs, etc. even without ECA's invocation.