What's with wheat?

Two days ago, the Election Commission cleared the announcement of a wheat procurement bonus of Rs. 50 per quintal (0.50 per kg.), a few days after the wheat procurement season began. The announcement was thus delayed by a few days, but the real question is, why announce a bonus at this time at all?

The normal logic of a bonus is that it gives an incentive to the farmer to produce more wheat, by planting more. For this to operate, the bonus should be announced before the farmer takes his planting decision. For Indian wheat, that would be in November.

This throws up 3 possibilities for any rationale for the bonus:

1. That the government is afraid that procurement may be low, despite an excellent harvest; this, in turn, would mean the farmer prefers to hold the wheat for sale in the market when prices rise later in the year. Nothing in the market suggest that the holding patterns of Indian farmers are changing.

2. That it is purely a political decision - if prices, including agricultural prices, are rising across the board, then farmers should share in higher realisations.

3. That the government wants to capitalise on high international wheat prices, and export some wheat later in the year. This could create some political discomfort if the farmers do not share in the higher realisation.

I suspect that 3. is the major calculus, as the US harvest appears to be threatened by late winter rains, and Kansas wheat futures, at over 9 dollars a bushel, are extremely high. This translates to over Rs. 15 per kg, compared to the ruling price of under Rs. 12 in India, and should create lots of selling opportunities in Europe and the Middle East.

CBI - Congress Bank of Intel

The CBI* is like a bank of secrets, with vaults upon vaults of dirt on everybody of importance or even with a remote chance of becoming important one day.

It is also a private bank, probably the most private one in the world, and at any given point in time, not more than 2 or 3 people can order wealth from its vaults. Today, those privileged would be Mrs. Gandhi, Mr. Chidambaram, and possibly Dr. Manmohan Singh and Pranab Mukherjee.

The extent of its vaults can be gauged by the fact that, days after Anna Hazare's movement began to threaten the cozy criminality of our political rulers, the Congress Bank of Intel was able to unearth the fact that some decades ago, one of the NGOs of which he was part had not filed its annual returns. This is becoming part of the smear campaign against Anna Hazare.

Frankly, he should have expected it. Most politicians got where they have because they are pepared to fight hard, and dirty. If you are going to confront them, you had better be prepared for the fact that they have greater resources than you, by several orders of magnitude. And if you are trying to ride the high horse of morality, then you had better be prepared to get tried by the much more explicit code of legality.

* Central Bureau of Investigation

Bribes should be legal

Kaushik Basu, Chief Economic Advisor to the Ministry of Finance, calls it right when he says that one category of bribes ordinary Indian citizens pay is in response to pure harrassment. The bribe is not corruption on part of the citizen, as he is receiving no favour in return for the payment - it is the gatekeeper's fee. But the gatekeeper is already being paid by the Indian state, whose servant he supposedly is.

This paper breaks the moral equivalence we keep hearing, which says that we are all culpable, equally to blame, for paying bribes. Kaushik Basu recognises the fact that there is a horrible asymmetry betwen the citizen and the gatekeeper, and suggests that the legal treatment of it should correspondingly be asymmetrical.

Thus, the paying of the bribe should be legal, but the receiving of it illegal. This creates an incentive for the person paying the bribe to 'out' the official receiving it. If the Indian government had the cojones to adopt the Kaushik Basu route, we would have an open road to reduce corruption, one that actually empowers people - other than the self-selected Anna Hazare gang.

I don't know whether such a process has been tried in other nations; it doesn't matter whether it is original or not, but it seems extremely workable to me, and cuts to the heart of the matter. Good going Kaushik. His paper, here:

http://finmin.nic.in/WorkingPaper/Act_Giving_Bribe_Legal.pdf

My Bill to actually reduce corruption

My friend Amit Varma hit the button when he wrote on Yahoo! India last week that corruption is a manifestation of too much power vested in our politicians. Now Anna Hazare and his mob want power over the corrupt mob, by virtue of their self-proclaimed virtue.


I have no reason to doubt their squeaky cleanliness, or even their good intentions. But then, I didn’t doubt those very attributes of the good doctor, Manmohan Singh. And we all know how that played out. Now, the custodians of our nation and the custodians of our virtue are sitting down to draft a bill that will make us a less corrupt nation. Hah!

Meanwhile – and I love my food too much to fast for the right to shove this into parliament - here are the first three points on my bill to free our nation from the arbitrary powers of governance:


1. The premise that natural resources are the property of the state is like motherhood, or virtue – it seems impossible to attack. But, this convenient iteration by our rulers allows them to wield enormous powers over the allocation of these resources, powers that lie at the heart of two of the most contentious economic battles in our nation – telecom spectrum, and petroleum product pricing. This formulation allows our courts to take sides with one brother against another, and give preferential rights to public sector undertakings, which latter only extends the fiefdoms of our czars.

Remember that, unlike resources, the ‘nation state’ is an artificial construct; the entrepreneur, on the other hand, is a real person, who puts time, energy and material resources into tapping natural resources and channeling them into productive use. Giving the first supremacy over the second is a yogic headstand that causes you to see the world upside down, and has created corruption on a mind-boggling scale. In other nations, similar thinking has created some of the most repressive societies on earth – think Saudi Arabia. Instead, we need guidelines that encourage initiative, exploration, exploitation and economic activity, while allowing tax laws to channel some of the value-added into the essential affairs of the state.


2. Land rights must be secure, clearly documented and unalienable, except by the explicit consent of the owner. Some of the most visible recent agitation in India has been a result of the nation state severely curtailing the individual’s right to his property. This has been convenient for rulers who manage to find virtue in both forcing some people to part with their land, and in preventing others from doing so!

In the former category, think land expropriated for industrial development, and sold on at ten times the price, or for building infrastructure, including toll-roads and malls. In the latter, think green virtue, which wants to save forests by refusing to grant tribal land-owners the right to sell their meager lands. Or paternalism, which in some states says that Scheduled Caste farmers would get exploited if they were free to sell their land to all comers; to do so, they need to seek permission from district authorities – who, being virtuous souls, wouldn’t dream of exploiting them.

And, while we’re on the subject of land, let’s find a way to wrest from state control the vast tracts of land that passed to it from the British Crown, and find fair ways to release it into productive economic use.

3. Members of Parliament and Legislative Assemblies need to be seen in the role conceived for them by our constitution - as rule-makers. Not as rule-breakers – a jibe I can’t resist; but more importantly, not as dispensers of favour and fortune. Instead, the Local Area Development Schemes gives each of our MPs and MLAs a fund to practice on a smaller scale the loot of public resources their cabinet seniors conduct. Though minuscule in monetary terms, such schemes set up a patron-supplicant relationship between the elected representative and his constituency; among local businessmen, they allow the law-maker to choose favourites. Such relationships are unhealthy, undemocratic, and most importantly, reinforce the sense that the role of politicians is to hand out favours and cash, rather than to frame sensible laws, and supervise their enforcement.

The Lok Pal charade is about politics, about the sharing of power between the elected, and the self-selected. It will do nothing to remove the root causes of corruption. Anna and his virtuous brigade have constrained the space for discussion of the contours of economic freedom; in fact, I would not be surprised if they find ways to find more interventionist policies to insert into their draft bill.

Which gives me oodles of time to complete mine, with or without video-taping.