By Shivaji Sarkar
It is open loot through the free pricing mechanism. The wages in India shrink; one pays more and buys less. Little is left in the pockets of an average wage-earner but the profits of the companies in the fast moving consumer goods (FMCG), milk, housing, pharmaceutical and other areas rise phenomenally.
The lack of a social mechanism to check the process of fixing the prices is playing havoc with the economy and plight of the poor consumers. The companies are thriving by raising prices of every product as a new product batch enters the market. The FMCG companies like Hindustan Unilever (HUL), Colgate and Indian Tobacco Company (ITC) have raked in mean profit of 82.04 per cent during the past five years. Others like the Tata group are not much behind. Housing companies have more than tripled the prices and have profits of over 60 to 80 per cent.
The loser is the consumer and of course the government, as in most cases it is paid taxes at the base lowest prices.
Wage increases have either been in the range of three per cent or remained stagnant.
Free market does not mean free loot of the consumers. The myth spread by Manmohanics that nobody should interfere with the price-fixing mechanism of the producer is playing havoc. The cost and prices have little relationship.
Inflation indices give an erroneous view. The recent ‘slump’ in wholesale and consumer indices does not indicate fall in prices. The indices indicate that after run away inflation of over 44 – to 46 per cent during since 2009-10, the rate of increase has slowed over the already prevailing high prices. Not a commodity has become cheaper. Rather food items, vegetables – potato, tomato, onion included, all other packed goods and items of everyday use have become costlier.
Even milk prices determined by milk cooperatives like Mother Dairy and Amul have increased from Rs 12 to Rs 48 a litre though benefits to dairy farmers have not matched it.
The Narendra Modi government having succeeded an inefficient and ineffective regime has to do a lot to give succour to the people. It is needed to be done not only for economic reasons but also for social and political purposes. High prices weaken not only the economy and the currency but also the social fabric and leads to severe law and order issues.
Another aspect often not talked about is it robs the government, the largest consumer, of sizeable revenues. This is the surmise of a paper produced by Lok Sabha secretariat in Spetember 2013. It says, “The rising prices adversely affect the economic conditions of fixed-income groups, particularly wage earners. When prices are high, the value of money is low and vice versa. There is always a lag between price rise and money-wage adjustment. Poor people in the unorganised sector are hit the worst because their income is not linked with price index. However, business firms gain during price rise because the money value of goods in their stock rises continually.
“Inflation also encourages hoarding of essential commodities, leading to speculation and generation of black money”. In short, it is defeating the objectives of the NDA government.
The companies have devised novel ways to increase the prices. Companies such as Hindustan Unilever (HUL), India’s largest FMCG company, raised prices of soap brands Lux and Rexona 11 and 16 per cent in the last six months of 2012, respectively. According to financial services company Edelweiss report, for the Lux brand, the weight of a strawberry variant pack was reduced from 100 gm to 90 gm. Kolkata-based Emami raised the price of its Boroplus antiseptic cream 7.1 per cent, while Colgate increased the prices of its toothpaste brands five to 13 per cent, respectively. Procter & Gamble increased the price of its Ariel detergent about five per cent. The company’s Head & Shoulders shampoo recorded a price rise of 5.1 per cent in December 2012, said Edelweiss.
Annually the prices are being raised in this manner and weight or volume is being reduced. The rise in prices, however, comes at a time, Edelweiss says, when commodity prices have been softening. “In the last few months, the prices of key inputs palm oil and copra fell 30 and 20 per cent”, respectively.
It is just not the private companies even public sector organisations like railways or road transport corporations are unethical in fixing fare and freight. They increase fare and freight on the pretext of higher fuel prices but when it comes down they never reduce it. The railways have also raised fare phenomenally through the so called ‘premium’ trains, run with rejected coaches.
The private sector does not care for niceties. For them high profit is seemingly their birth right. How much profit is realistic or ethically should be there? The liberalised economy does not have a yardstick. The socialist economy meant either no profit or a realistic profit up to seven to eight per cent, something even capitalist economy accepts.
A study by Indian Journal of Applied Research, Rajkot, by Alpa Joshi (June 2013) finds that HUL, Colgate and ITC have a mean profit after tax (PAT) of 82.04 per cent. Individualy, from 2008 to 2012, HUL profit varied from 87.2 to 142.7 per cent; Colgate 104 to 156 per cent; and ITC 15.7 to 18.7 per cent. Is not that exploitative?
The FMCG sector creates employment for about 30 lakh people mostly in low-paid jobs in downstream activities. The total FMCG market is in excess of Rs 850 billion. Its wage bill is one of the lowest.
The HUL has virtually taken over many contenders to create a monopoly and beat the competition.
All these companies have penetrated different political parties to sabotage policy-making. They have forced the UPA government to dismantle Monopolies and Restrictive Trade Practices Commission (MRTPC) and create a lame-duck Competition Commission.
The NDA government has to take a call on these widespread malpractices. The society has a role in checking the weird behaviour of any of its sections. The corporate sovereignty is not utilised when it comes to deliver social responsibilities. It is used only for exploiting the society. All companies must be dealt with a heavy hand for rampant malpractices that has become the rule and stop the phenomenal loot.
Ends