Capital,wages,prices,taxes

If the owner/company does not invest capital, workers do not get employment and earn wages. If the workers do not work, owner/company does  not get profit. There are people who think that excess(more than reasonable) profit should be distributed among the workers. Some others think that excess profit is due to the company charging higher than the reasonable price and that prices should be reduced so that the profits of the company are reasonable and the consumers are not exploited. There is yet another view that the government should increase the tax rates or new taxes should be imposed. All the views seem to be correct.The point to be considered and decided is which action will expedite development of the country as a whole. Going by the experience, government getting more taxes is not going to help the country much as benefits of its schemes do not reach the people in full and often result in wasteful and unproductive work. As the number of consumers is too large, the price reduction can only be negligible and the consumers will not feel the benefit.As regards increase in wages/payment of bonus to workers, this will increase demand for products which may lead to higher  production and higher GDP. However, if the workers are already getting reasonable salaries, they should not get additional amount.The only option left is to allow the company to retain the excess profits, so that it can expand its existing factory or set up new factories. However, it should be made clear that new taxes are not imposed only if the profits are used for expansion of the existing factory or setting  up of a new factory, thereby generating employment, increasing production and thus  contributing to the expansion of  GDP of the country..

 

Food security requires higher foodgrain prices

There was a time when India had acute shortage of sugar. Then the government increased the procurement price of sugarcane and continues to increase the procurement price periodically. This has led to India becoming not only self sufficiet but also surplus in sugar.Not only this, sugarcane is one of the only 2 or 3 crops in which India’s yield is higher than world and Asian average yield.

If countries which are deficit in cereals increase procurement prices substantially,the farmers will find ways to increase the yield and production. These countries should also impose import duties on cereals to such an extent that the local produce becomes cheaper. The deficit in food grains can easily be wiped out in most of the deficit countries.

The question will arise as to how poor people who are malnourished for want of money to buy food gains shall buy at higher prices. The people do not have buying power because they do not have enough work. The govenments there should undertake massive works like digging lakes, canals, wells,laying roads, railway lines, power transmitters and lines solar power stations, hydro-electric power stations etc. Most of the west and east African countries receive over 1000 mm rainfall every year and hence increasing food grain production may not be a big problem at all.

Profits, salaries,wages,prices,money,physical strength

There seems to be wrong notions about wages, prices, investment, development and related issues among the people,political parties, intelligentsia etc.

Some of the wrong/irrational notions are:

i. that if profit is substantial companies’ management can enhance the salaries of top executives exorbitantly rather than think of reducing the prices of products/services in the coming years.( The government should consider imposing a limit on salaries/perquisites of top executives as in the past)

ii. that if there is profit, the companies should share it with employees by giving bonus to them rather than reduce the prices in the coming years or invest the money to produce and employ more

iii.that there should be universal which means additional employment but there should not be inflation

iv.that procurement prices of cereals,milk, eggs etc.should be increased but consumer prices should remain unchanged.

v.that wages of agricultural labourers should keep increasing but prices of vegetables and fruits should not go up

vi.that workers should not be asked to improve productivity but prices of manufactured goods should come down

vii.that wages of workers,drivers,cleaners, engineers,mechanics, office staff etc. should be increased periodically but the train and bus fares, electricity charges,cleaning charges, etc should not be increased

viii.that charges for any service should not be increased but the quality of service should be enhanced.

ix. that people should have more entertainment, comforts, luxuries etc. but need not put in additional labour.
(People do not think that while money not spent on any occasion can be saved and spent on other occasions but physical strength can not be saved for using on some other occasion. It is therefore necessary that one should work as long as possible when the opportunity comes.)

religious,social leaders,writers etc. talk of virtues of people with money giving charity to poor people,but nobody talks of people who are physically strong and healthy, helping physically weak people.

people talk of short duration of prosperity but they do not talk of shorter duration of physical strength.

money not spent can be invested for development, for creating jobs etc. while physical strength not used, for doing work cannot be put to any other use.

Poor Performance of Tamilnadu on agricultural front

The per capita production of food grains (rice, wheat, coarse grains and pulses) in India is less than 200kg per year while in the world it is over300 kg. This means that India’s performance in agriculture needs to be improved vastly. In India among the various states, Tamilnadu’s performance is very poor. During 2009-10, India produced 218 million tonnes for a population of around 1180 million. The per capita production is about 185 kg per year. Tamilnadu state produced about 8.0 million tonnes for a population of about 67 million people, which works out to a per capita production of only 120kg per year.

India’s production went up from 176 million tonnes in 1990-91 to 218 million tonnes in 2009-10 which works out to about 24%increase in 20 years. This increase itself is low. But increase in Tamilnadu is very much lower at 8% from 7.4 million tonnes in 1990-91 to only 8.0 million tonnes in 2009-10.

The reasons for the slow growth in production in Tamilnadu are:

• unremunerative prices for agricultural products resulting from high cost of agricultural labour.

• insufficient water for irrigation. During rainy season, large quantity of water flows into the sea without irrigating fields, as water is released from reservoirs even though not required, for want of storage space. So the urgent need is to construct more reservoirs which could be even underground reservoirs if necessary.

• During rainy season, large quantity of water stagnates in shallow ditches. This water evaporates in 15-20 days after the rainy season. The period of stagnation is short and the depth of ditches is low and these do not permit recharge of underground water. What is required is to drain this water into nearby lakes where lakes exist nearby or to construct lakes in suitable area.

• Fertilizer use is satisfactory. In addition, there is enough manure by way of cow dung, chicken refuse, dry and green leaves etc.

Bharat Bandh uncalled for

Increase in diesel, petrol, cooking gas prices should lead only to a marginal or negligible increase in overall prices as:

a) The price of diesel was increased by Rs.2 per litre i.e. by around 6%. The cost of diesel in the truck freight charges is only about 40-50%, the balance being the cost of driver, cleaner, depreciation and profit margin. Thus the freight charges should increase only by about 2.4% – 3%.

 b)transport charges in the retail cost of any product is only 5- 10%, the major components being cost of raw materials, interest rates, depreciation, profit margin, wages & salaries, tax, advertisement charges etc. Thus the fuel price increase should lead to general price rise of just 0.12 to 0.30% i.e. if the retail price of a product was Rs.100, it should cost now only Rs.100.12- Rs.100.30 i.e just 12 -30 paise more, which is definitely negligible.

c)In the case of  auto rickshaws, one litre of petrol gives about 25 kilometers for which the charges are around Rs.150. After price increase it could go up to only Rs.152 or just 1.67%.

 d)in the case of private use of motorcycles, assuming an average consumption of 10 litres (traveling about 800 to 1000 km) per month by a person with an income of Rs.20000 per month, his expenses on petrol will go up by just Rs.35 only i.e less than 0.2% of his income which again is negligible.

 e) cooking gas price has gone up by 10% but average consumption in a  family per month is just 1 cylinder or increase in expenses is only Rs.35 or less than 0.2% of the monthly income.

 f) overall additional expenses for a middle class family shall not be even 1% and this every one can easily absorb

 g) the interest rates had drastically come down recently(by about 4 percentage points) as a measure of reversing the economic slow down. Truck owners, auto rickshaw owners, and manufacturers who usually get finance from banks save a substantial amount on this account. They can easily afford to absorb the additional expenses due to fuel price increase, in stead of passing on the same to the customer. Even if they pass on the additional cost to consumer, consumer’s burden is negligible.

 h) the common man, who works under employment guarantee scheme got an increase of 25% in wages, from Rs.80 to Rs.100 three months ago. So he should not have any problem in meeting less than 1% increase in cost of living.

 i)the increase in salaries of central and several state government and public sector undertaking employees on account of 6^th  Pay Commission as also income tax liberalization will enable employees to bear the additional expenses without any difficulty.

 In view of the above, it appears that Bharat Bandh is uncalled for. At the same time the government should restrain truck owners from increasing their charges/prices on the pretext of fuel price increase, beyond 3%, auto rickshaw owners and taxi owners beyond 2%, and manufacturers beyond 1%.