The headline Food Inflation has become so very obvious to us that we, the people, of this nation has accepted it as a new year gift from the UPA government. But the contingents depicting a supply-side crunch, necessarily says that the Mukhrjees, Subbaraos and Basus of the nation can't do much about it. Of course, it was not impossible to control but the focus should have been given at the right time. It seems the priority was to settle the scam accounts first and then accentuate Inflation. So, when the custodians of the economy were puzzled by the opposition and public voice (which is supposedly the media), they have to vent their clanger on someone, and who better than MCX could be an option.
Intellects of this nation acknowledged the exchange by blaming it for price rises in commodities because of heavy trading and hoarding happening there.
What a dismaying and Coward excuse to shed the load!!!!!!!!!
Why MCX???
Well, the only answer to this question is that we could not find anyone better.
Because, if you ask my views then, i find the exchange innocent. Most of the food commodities don't trade there. Some of which that are traded, they actually stabilised in this situation.
For example, lets see the movement of price in pulses.
Chana dal, production of which fluctuates between 4-7 million tonnes, is currently priced @ Rs.27.25 per kg (Indore,Bhopal and Vidisha being the major trading centre and M.P is the highest producer).
On the other hand, Toor and Urad, which accounts for 60% of the total production of pulses of India, is priced @ Rs. 62 /kg. ( The total pulse production in India is 15.23 mn tonnes).
Now, the point to be noted here is that Chana dal is traded in MCX and the other two are not.
How this is possible if MCX could rig prices???
MCX actually makes the system transparent. The supply-side bottle necks is not only because of unpleasant rainfall but also due to inadequate logistics, infrastructure migraine and intermediary's character. Our traditional distribution system in incapable of meeting these challenges but surprisingly nothing is done about it.
MCX, because of the e-trading and exchange mediation, could cut down Intermediary hoardings and price play. The trading in MCX has attracted investors who are ready to manage logistics as they have to honor the contracts. This is one of the biggest reason why price contradiction happened in the pulses.
I agree to the fact that MCX can be destructively used but to stop this there are many other instruments.
Mr. YK ALGAH(Chairman, IRMA), talks about intervention through an intelligent Parastatal (agency) which can sense price engineering happening through any source. The agency can involve markets and private sector players along with the exchange and the government to fix the price, it can monitor the the price fluctuations, it can warn before such crisis and also can help the exchequer to take policy decisions.
This is a very constructive approach and the government should really look for such options.
But it seems the government is more interested in talking about Fiscal consolidation in the FSDC meet and RBI is interested in hiking rates in this Scheduled policy meet (JAN 25).
Fiscal consolidation (which means deducting gov. expenditures to cut the fiscal deficit to controllable limits), is a toxic topic to tease at this point when there is a burning need of government's expenditure in the irrigation department(current infrastructure can support only 37% farm lands of the nation). Of course government can't help it because even deficit can't be neglected. This is a macro-economic trap and it has entwined and jinxed in this because of the lack of pre-emptive efforts. So, again focus comes into play, about which i have talked at the very beginning of the discussion.
So, it has no right to whine and blame. Only option it has is to accept the gaffe and embrace the parastatal proposal and act continuously on it as there can't be any sayonara in this concern.
Intellects of this nation acknowledged the exchange by blaming it for price rises in commodities because of heavy trading and hoarding happening there.
What a dismaying and Coward excuse to shed the load!!!!!!!!!
Why MCX???
Well, the only answer to this question is that we could not find anyone better.
Because, if you ask my views then, i find the exchange innocent. Most of the food commodities don't trade there. Some of which that are traded, they actually stabilised in this situation.
For example, lets see the movement of price in pulses.
Chana dal, production of which fluctuates between 4-7 million tonnes, is currently priced @ Rs.27.25 per kg (Indore,Bhopal and Vidisha being the major trading centre and M.P is the highest producer).
On the other hand, Toor and Urad, which accounts for 60% of the total production of pulses of India, is priced @ Rs. 62 /kg. ( The total pulse production in India is 15.23 mn tonnes).
Now, the point to be noted here is that Chana dal is traded in MCX and the other two are not.
How this is possible if MCX could rig prices???
MCX actually makes the system transparent. The supply-side bottle necks is not only because of unpleasant rainfall but also due to inadequate logistics, infrastructure migraine and intermediary's character. Our traditional distribution system in incapable of meeting these challenges but surprisingly nothing is done about it.
MCX, because of the e-trading and exchange mediation, could cut down Intermediary hoardings and price play. The trading in MCX has attracted investors who are ready to manage logistics as they have to honor the contracts. This is one of the biggest reason why price contradiction happened in the pulses.
I agree to the fact that MCX can be destructively used but to stop this there are many other instruments.
Mr. YK ALGAH(Chairman, IRMA), talks about intervention through an intelligent Parastatal (agency) which can sense price engineering happening through any source. The agency can involve markets and private sector players along with the exchange and the government to fix the price, it can monitor the the price fluctuations, it can warn before such crisis and also can help the exchequer to take policy decisions.
This is a very constructive approach and the government should really look for such options.
But it seems the government is more interested in talking about Fiscal consolidation in the FSDC meet and RBI is interested in hiking rates in this Scheduled policy meet (JAN 25).
Fiscal consolidation (which means deducting gov. expenditures to cut the fiscal deficit to controllable limits), is a toxic topic to tease at this point when there is a burning need of government's expenditure in the irrigation department(current infrastructure can support only 37% farm lands of the nation). Of course government can't help it because even deficit can't be neglected. This is a macro-economic trap and it has entwined and jinxed in this because of the lack of pre-emptive efforts. So, again focus comes into play, about which i have talked at the very beginning of the discussion.
So, it has no right to whine and blame. Only option it has is to accept the gaffe and embrace the parastatal proposal and act continuously on it as there can't be any sayonara in this concern.
really commendable work....although it really baffles me what is such a source of data from where u keep pulling out facts(e.g., the total production of pulses in india)like a magician a rabbit out of his hat...if u can mention those sources as well that wud be really helpful(i think i echo the plea of all the readers)
ReplyDeletefew questions or doubts that i have are:
a)why is it chana dal is allowed for trading while the others are not?
b)what is the trading volume of pulses in MCX and is it enough to cause a fluctuation in its prices?
but overall kudos for a brilliant performance.....u r in a league of your own.....i can see one day i will be reading these articles in ET(touchwood!!!!!!).....
@rahul: Thanx a lot. It is all my readers support and love that inspire me to write. The source of the data is MCX website and some of my past reading.
ReplyDeleteNow coming to ur queries.
1) chana dal is allowed to trade because:
i) chana dal has a lot of demand from countries like australia,canada, austria etc. where the prices are fixed through matured exchanges and they expect future trading in such commodities.
ii) Indian chana has many other forms and derived products that are made from dal(especially chana) and those also have heavy external demand
iii) Chana trading centres are spread even in interiors of India like, Vidisha,latur,kota,bikaner,hanumangarh,akola etc. because of which the trading was already organised.
2)45956 tonnes of chana dal is stored and traded per season in NCDEX and MCXper quarter. It is more than 10% of the total annual production.so,you can estimate the effects on price it poses.
thanx for the info :)
ReplyDeleteany time for u.
ReplyDelete