How UPA govt subsidies helped generate black money and contributed to the real estate bubble

bubble
One of the points that I have made over and over again in the columns that I have written on black money is that theNarendra Modi government needs to concentrate on domestic black money as well.

Since coming to power in May last year, the Modi government has made a lot of noise and come up with legislation on trying to curb the black money leaving the shores of this country. Black money is essentially money which has been earned but on which tax has not been paid.

Nevertheless, it is important to realise that ultimately almost all the black money is domestic i.e. it is generated within the country when people earn money (through legal or illegal means) and do not pay any tax on it.

Given this, it is more important to concentrate on trying to bring down the total amount of black money being generated instead of trying to get back the black money that has already left India. One way to do this is to get more people under the income tax net. Efforts are being made on this front.

A PTI report points out that: “The income tax department has launched an ambitious drive to bring under its net 10 million new taxpayers, after the government recently asked the official to achieve the target within the current financial year.”

Region wise targets have been set. Pune leads the list with a target of more than 10 lakh new assesses. This is an interesting move and if it is successful this will lead to more people paying income tax and hence, the total amount of black money within the system will come down.

When the total amount of black money comes down, lesser black money will go into real estate. And this will help in ensuring that only those who really want homes to live in,will buy. This will help in controlling real estate prices.

Other than getting more people to pay income tax, the government also needs to concentrate on blocking leakages on the subsidy front. In 2004-2005, the total subsidies offered by the government stood at Rs 47,432 crore. By 2013-2014, this number had ballooned to Rs 2,54,632 crore. The total subsidies of the government had jumped by 5.4 times during the period. In comparison, the total expenditure of the government had jumped by only 3.15 times.

Only if the subsidies were reaching those for whom they were intended for, it would not have been a problem. In October 2009, Montek Singh Ahluwalia, the then deputy chairman of the Planning Commission had said: “a Plan panel study on PDS [public distribution system] found that only 16 paise out of a rupee was reaching the targeted poor.”

So where did the remaining 84 paise go? It was stolen in between. Obviously people who stole the subsidies would neither be declaring this money as income and nor be paying any income tax on it.

As Saurabh Mukherjea and Sumit Shekhar of Ambit write in a recent research titled Real Estate: The unwind and its side effects: “Subsidies under the UPA regime grew at a staggeringCAGR[compounded annual growth rate] of 19% per annum…A substantial portion of these subsidies(30-50%) was pilfered by the political class and used by them to fund investment in gold and real estate.”

In comparison to Ahluwalia’s estimate, Mukherjee and Shekhar are being extremely conservative. Nevertheless, the point being made is the same—that government subsidies are terribly leaky. The politicians who stole this money obviously did not declare this as income. This black money then found its way into real estate and drove up real estate prices.

As a FICCI report on black money published in February 2015 points out: “The Real Estate sector in India constitutes for about 11 % of the GDP of Indian Economy, as these transactions involve high transaction value. In the year 2012-13, Real Estate sector has been considered as the highest parking space for black money.”

So what has happened since the UPA was voted out of power? In 2015-2016, the total amount of subsidies have been budgeted at Rs2,43,811 crore, which is lower than the Rs 2,54,632 crore that had been spent in 2013-2014. One reason for this is obviously a fall in oil prices. The number in 2014-2015 had stood at Rs 2,66,692 crore.

This cut in subsidies along with the fact that some subsidies are now directly being paid into bank accounts is likely to help bring down both black money as well as real estate prices. As Mukherjea and Shekhar write: “The NDA has cut subsidies sharply (down 9% in 2015-2016) and is shifting subsidies to Direct Benefit Transfer (DBT); at least 10% of the overall subsidies have already been moved to the DBT. As a result, the ability ofthe politician-and-builder to pilfer subsidies to fund real estate construction has been checked.”

While cutting down on subsidies further may not be politically possible, if more and more of subsidies are paid directly into the bank account of the beneficiaries, the total amount of black money within the system is likely to come down.

Taking these steps rather than chasing black money that has left the shores of this country makes more sense and will have a greater impact on bringing down real estate prices in India. This will go a long way in making homes affordable for those who want to buy homes to live in rather than to invest.

As Mukherjea and Shekhar put it: “the NDA Government is engineering a clamp down on black money in India. The 2015-2016 Union Budget explicitly aimed to disincentivise the black economy and curb the demand for physical assets. With the new Black Money Bill (which was passed by the Parliament on May 26) and with the Cabinet approving the Benami Transactions Bill in May this year, the crackdown on blackmoney will continue further.”

These steps need to continue.

(VivekKaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared on Firstpost on July 20, 2015

 

How the Congress party got corporates addicted to govts buying land for them


One of the main questions that has been asked in the current controversy surrounding the issue of land acquisition is—why does the government need to buy land? Jairam Ramesh and Muhammad Ali Khan try and answer this question in their new book Legislating for Justice—The Making of the 2013 Land Acquisition Law. 

As they write: “Acquisition of property is founded upon the universally recognized principle of ‘Eminent Domain’.” And what is Eminent Domain? “[It] is the power of the Government…to take over resources for the greater national good. At its most basic Eminent Domain refers to the inherent authority of the Government to acquire private property on the payment of fair compensation for a use that benefits public at large,” explain the authors.

Further, a lot of public infrastructure gets built because of Eminent Domain. As Ramesh and Khan write: “Without the power of Eminent Domain, the Government could not establish the infrastructure that we rely on—roads, hospitals, airports, public schools, common facilities such as warehouses for farmers, playgrounds for children all are made possible through the use of Eminent Domain.”

So far so good. But why does the government have to acquire land for private companies? Before I get to answering this question, it is important to realize that the land acquisitions carried out by the government in India can essentially be divided into two eras—those carried out before 1991, the year of the economic reforms, and those carried out after.

As Michael Levien of the Johns Hopkins University writes in a recent research paper titled From Primitive Accumulation to Regimes of Dispossession: Six Theses on India’s Land Question: “Since 1991, India has passed from a regime that dispossessed land for state-led industrial and infrastructural expansion to one that dispossesses land for private—and increasingly financial—capital. Between 1947 and 1991, the Indian state largely dispossessed land for public-sector projects to expand the industrial and agricultural productivity of the country. The main forms of this dispossession were public sector dams, steel towns, industrial areas, and mining.”

But that changed after the economic reforms of 1991, when the private sector began to play a more active and larger role in the Indian economy. The economic reforms unleashed the Indian IT and BPO industry. These sectors had an unending appetite for land and the government helped them by acquiring land for them.

Gradually, public-private partnerships became the preferred method for building physical infrastructure. And this led to the government acquiring more land for private firms. In fact, as Levien points out: “Crucially, compensating private infrastructure investors with excess land and/or development rights became an increasingly popular method of cost recovery in these arrangements—whether for roads, airports, or affordable housing (Ahluwalia 1998; IDFC 2008, 2009). Infrastructure investment thus became a vehicle for private real estate accumulation, culminating with Special Economic Zones in the mid-2000s.”

Hence, land became a sort of a currency for the government. Also, given that the government could acquire land for private firms, it is obvious that a lot of politicians must have made a lot of money as well.

Nevertheless, the question is how did the government get around to acquiring land for the private sector? Before the 2013 land acquisition law was passed, land acquisition in India was governed by the Land Acquisition Act 1894—a law from the time when the British ruled India.

In fact, an amendment made in 1984 to the 1894 Act expanded the government’s ability to “acquire lands for a public purpose ‘or for a private company’”. This amendment allowed the government to acquire land for private companies. And it is worth reminding the readers, those were the days when the Congress party ruled the country.
It was this amendment which was abused by the various state governments around the country to acquire land for private companies. This amendment allowed the government to acquire land from farmers at cheap rates and then sell it on to private companies at a significantly higher price.

The ‘Yamuna Expressway’ is a very good example of this, where the land was acquired by the Uttar Pradesh from farmers and then sold on to private parties at multiple times the price the farmers had been paid for it.

As Ramesh and Khan point out: “In 2009, the Uttar Pradesh Government had indeed acquired land as part of a concession agreement and then resold it to Jaypee associates group as part of a bundling project for the construction of the Yamuna Expressway. There was no legal bar on doing so under the old law [i.e. the 1894 Act].” Further, the purpose for which the land was acquired could be changed as well.

The corporates preferred the government acquiring land for them and then selling it to them at a higher price because of several reasons. Land records in India are poorly maintained and purchase of land can easily be challenged in court at a later date.

As Nitin Desai writes in a recent column in Business Standard: “Many companies want the government to acquire land for them…as to have the assurance that their right of ownership cannot be challenged by some new claimant.”

Further, as Ramesh and Khan point out: “After the initial round of consultations in July-August 2011, it was also acknowledged that land values are, on an average, a sixth of their represented or book value as drawn out in the circle rate. As one moved away from urban centres the disparity became more striking with land records not having been updated for decades in some parts of the country.”

As per the 1894 Land Acquisition Act the government had to compensate the owner of the land at market value. But given that the government land records were infrequently updated, the government on many occasions got away with paying a pittance in comparison to the ‘real’ market value.

Even if the government were to then sell on the land to a corporate firm at a higher price, the firm would still get a good deal because of the huge differential between the price as per the government land record and the real market price.

Another reason corporates liked to outsource the land acquisition process to the government lay in the fact that the 1894 Act had an ‘urgency’ clause. As Ramesh and Khan write: “Section 17 of the Land Acquisition Act, 1894 was used to forcibly disposes people of their land in a frequent and brutal fashion by suspending the requirement for due process…Section 5A…allowed for a hearing of objections to be made but put no responsibility on the Collector to take those claims into consideration.”

So people could complain, but it was up to the Collector whether he wanted to listen to them or not. Further, the definition of urgency was also left “to the authority carrying out the acquisition.”  This clause allowed the collector to “take possession of the land within fifteen days of giving notice”. He could take possession of a building within 48 hours of giving notice. No private company could hope to acquire land at such a quick pace.

The irony is that the 1894 Land Acquisition Act was allowed to run for almost 66 years after independence. The Congress party ruled the country in each of the decade after independence and chose to do nothing about it. Under the 1894 Act the government could acquire land in a jiffy, without adequately compensating the land-holder. When the Act was finally replaced, what came in its place has made it next to impossible to acquire land.

In fact, Ramesh and Khan,rather ironically admit to that in their book, when they write: “The law was drafted with the intention to discourage land acquisition. It was drafted so that land acquisition would become a route of last resort.”

To conclude, as far as the land acquisition process is concerned, it is safe to say that we have jumped from the frying pan into fire.

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared on Firstpost on May 28,2015 

Mr Rahul Gandhi, what about jijaji Robert Vadra and his closeness to DLF?

rahul gandhi
Rahul Gandhi seems to have taken a liking to calling the Narendra Modi government a “
suit boot ki sarkar”. He made that jibe again in the Parliament yesterday where he said: “This government is anti-farmer, anti-poor. This is a suit-book ki sarkar.”
Rahul, as he did in the past, was trying to suggest that the Modi government was essentially batting for the corporates and not for the farmers of this country. But what the Gandhi family scion is forgetting in the process is that only a few years back India’s largest listed real estate company DLF was batting for his brother-in-law Robert Vadra.
Let’s recount what happened in the case of DLF and Vadra. DLF gave a Vadra and advance of Rs 50 crore for more than three years, and this advance was the money used by Vadra to go on a land buying spree in Rajasthan as well as Haryana, with more than a little support from the respective Congress governments in both these states. As we shall see Vadra had very little of his own money in the business and without the money from DLF he wouldn’t have been able to do anything. What does Rahul Gandhi have to say about this link?
In October 2012, the Daily News and Analysis(DNA) reported that between July 2009 and August 2011, Vadra bought at least 20 plots of land with an area of more than 770 hectares in Bikaner district in Rajasthan. In fact Vadra was willing to pay Rs 65,000 per hectare of land when the going rate was not more than Rs 30,000 a hectare
The Gandhi family son-in-law made these purchases through companies which included Real Earth Estates Pvt Ltd, North India IT Park Pvt Ltd, and Skylight Realty Pvt Ltd. As the DNA report pointed out: “A clutch of investors, including Vadra, apparently privy to information on upcoming industrial projects in the vicinity,
reaped huge profits with land values appreciating by up to 40 times since 2009 [the italics are mine]…These companies together invested Rs2.85 crore in barren land here during this period.”
So, Vadra bought land being privy to information that ensured that the value of the land would go up many times in the days to come. And he made a killing in the process. Vadra bought land through his companies just before a memorandum of understanding was signed between the Rajasthan government and private firm for a “Rs45,000-crore project to manufacture silicon chips for the telecom industry.”
Vadra was essentially trading on insider information, which wouldn’t have been difficult to get given that a Congress government led by Ashok Gehlot was in power in the state.
The interesting bit here is how Vadra went about financing the purchase of land. The money for it came essentially came from DLF. One of the Vadra companies which bought land in Rajasthan was Real Earth Estates Private Ltd. The company had an issued capital of Rs 10 lakh as on March 31, 2010.
Nevertheless, as on March 31, 2010, the company had 10 plots of lands listed under fixed assets. These plots were worth were bought for Rs 7.09 crore. Of these three plots were in Bikaner in Rajasthan and had been bought for Rs 1.16 crore. How did a company with an issued capital of Rs 10 lakh manage to buy land which cost Rs 7.09 crore in total?
This is where things get even more interesting. The balance sheet of Real Earth Estates as on March 31, 2010, shows that it had an unsecured loan of Rs 5 crore from DLF. An unsecured loan is a loan in which the lender does not take any 
collateral against the loan and relies on the borrower’s promise to return the loan. Why was DLF being so generous to Vadra? Can Rahul Gandhi give us an answer for that?
Real Earth Estates also had borrowed another Rs 2 crore from Sky Light Hospitality Private Ltd, another Vadra company. The total loan amounted to Real Earth Estates amounted to Rs 7 crore. And this money was used to buy 10 plots of land, of which three plots were in Bikaner.
Where did Sky Light Hospitality get the money to give Real Earth Estates a loan of Rs 2 crore? As on March 31, 2010, Sky Light Hospitality had an issued capital of Rs 5 lakh. How did a company with an issued capital of Rs 5 lakh, manage to give a loan of Rs 2 crore, which was 40 times more.
Enter DLF—the company had given Vadra’s Sky Light Hospitality an advance of Rs 50 crore. When the controversy first broke out DLF had said in a statement: “Skylight Hospitality Pvt Ltd approached us in FY 2008-09(i.e. the period between April 1, 2008 and March 31, 2009) to sell a piece of land measuring approximately 3.5 acres…DLF agreed to buy the said plot, given its licensing status and its attractiveness as a business proposition for a total consideration of Rs 58 crores. As per normal commercial practice, the possession of the said plot was taken over by DLF in FY 2008-09 itself and a total sum of Rs 50 crores given as advance in instalments against the purchase consideration.”
The first instalment of the Rs 50 crore advance that DLF gave Vadra was paid on June 3, 2008. An October 2012 report in The Hindu points out that “ the 3.531- acre plot…M/s Sky Light Hospitality,…[was] sold to DLF Universal Ltd on September 18, 2012.”
Hence, the Rs 50 crore advance stayed with Vadra’s Sky Light Hospitality for more than three years.
An advance unlike a loan is made interest free for a short period of time. Further, Vadra had access to a part of the Rs 50 crore advance for more than four years, given that the first instalment was paid by DLF in June 2008 and even though the sale was registered only in September 2012.
DLF in its statement tried telling us that this was par for the course. But how many other such advances did the company make. As The Financial Express wrote in an October 2012 editorial: “DLF has not been able to cite other instances of where interest-free advances have been given, and over such long periods of time.”
So clearly DLF had a soft corner for Robert Vadra, who is the son-in-law of Sonia Gandhi and the brother-in-law of Rahul Gandhi, the president and the vice-president of the Congress party. The Congress led UPA government was in power between 2004 and 2014.
This Rs 50 crore was at the heart of Vadra’s operation and was used by him to buy land as well as flats. Rs 2 crore out of this Rs 50 crore available with Sky Light Hospitality was used to give a loan to Real Earth Estates Private Ltd. Effectively DLF gave money amounting to Rs 7 crore to Real Earth Estates Private Ltd to buy land. Of this Rs 1.16 crore was used to buy land in Bikaner.
What does Rahul Gandhi have to say about this? Now that he has accused the Modi government of being a “suit-boot ki sarkar” and being close to corporates, he could possibly explain this closeness of his brother-in-law Robert with a corporate? After all, Caesar’s wife must be above suspicion.

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared on Firstpost on May 13, 2015

Five questions for Rahul Gandhi on his sudden love for distressed home buyers

RAHUL GANDHI SHASHI THAROORVivek Kaul

Rahul Gandhi is on a learning spree these days. Yesterday he learnt that Indian middle class also has a problem. A report in The Indian Express points out Rahul as saying: “Mujhe aaj kuch seekhne ko mila. Meri soch thi ki zameen ke mamle pe kisan ko, mazdoor ko, adivasiyon ko dabaya jaata hain. Magar aaj mujhe seekhne ko mila, zameen ke mamle pe middle class logon ko bhi dabaya jaata hai. (I learnt something today. So far, I used to think that only farmers, labourers and tribals are suppressed in land matters. But today I learnt that the middle class is also suppressed).”
The Gandhi family scion said this after meeting distressed home buyers in the National Capital Region. That he did not know that the issue of “land” also impacts the country’s middle class, after having been an MP for more than a decade, is a clear indicator of how well connected he has been with issues that concern the people of this country. But yes he is trying and it’s never too late.
Rahul also said: “They are told that you will get the flat on a particular day but for years they don’t get the flat. They are told the super duper area of the flat would be so much but what is delivered is different.”
There are multiple questions that crop up here. The situation that these home buyers are in currently, did not crop up over the last one year of the Narendra Modi government. It has been work in progress since 2008. So why has Rahul woken up to it now? The answer is fairly straightforward. This sudden concern for the middle class home buyer is a part of the Rahul relaunch.
The second question is how have all these builders managed to get away with taking money from the buyers and not delivering homes even many years later. Rahul met distressed home buyers from the National Capital Region. The Congress party was in power in Haryana (parts of which come under the National Capital Region) for an extended period of time. What did this government do for distressed home buyers in the city of Gurgaon, which is a part of the National Capital Region?
The third question is how have real estate builders in this country managed to have a free run for all these years. When almost every form of investment in this country is regulated, be it mutual funds, stocks, insurance, derivatives and so on, how has real estate managed to be given a free run for so long? The Congress party has been in power at the centre in every decade since independence. Why did it do nothing on this front all these years? Why was the Real Estate (Regulation and Development) Bill introduced only as late as 2013? This after the Congress led UPA government had been in power in Delhi for nine years. Maybe, Rahul can explain all this to the people of this country as well, the next time he decided to speak to the media.
The fourth question is that when opening something as simple as a savings bank account requires multiple documents, why can real estate be almost be bought over the counter, as long as the buyer is willing to pay in cash? How did the system evolve in the way it has? Guess, Rahul can speak to his seniors in the Congress party and maybe they can give him an answer.
The fifth question is what has Rahul’s Congress party done to control the amount of black money being generated in the country, in all the years that it has been in power. As per the Global Financial Integrity report titled
Illicit Financial Flows from Developing Countries: 2003-2012, around $439.6 billion of black money left the Indian shores, between 2003 and 2012. If this was the amount of black money that left the Indian shores, imagine the kind of black money that must have been generated during the period.
The Congress led UPA government was in power for much of this period. A substantial portion of the black money that is generated finds its way into real estate, driving up prices and making things very difficult for genuine home buyers who want to buy homes to live in them.
This has led to a situation where the real estate market has totally become investor driven. What did the Congress led UPA government do about this in the ten years that it has been in power?
To conclude, since Rahul Gandhi is in a learning phase, it’s time he saw Yash Chopra’s 1965 classic
Waqt. And in it he should concentrate on a dialogue written by Akhtar-Ul-Iman and spoken by Raj Kumar in the movie, which goes like this: “Chinoi Seth…jinke apne ghar sheeshe ke hon, wo dusron par pathar nahi feka karte(Chinoi Seth…those who live in glass houses don’t throw stones at others).”

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek) 

The column originally appeared on DailyO on May 4, 2015

Rahul Gandhi’s latest jai kisan rhetoric doesn’t quite work

rahul gandhiRahul Gandhi 2.0 is angry-and this anger is making him take ‘potshots’ at the Narendra Modi government almost every other day. Okay, I know it is politics. And I know that he is not angry. And I know that he is trying to rediscover himself. And I know that he is trying to ensure that the party of his ancestors doesn’t become totally irrelevant in the days to come.
Rahul’s latest jibe at the Modi government came yesterday when he said in Punjab: “Does the farmer not make in India?…Your government did nothing when hailstorms destroyed their crop?”
This after he had told a farmers’ rally in New Delhi earlier this month that: “We[i.e. the Congress led UPA government] increased the MSP of wheat from Rs 540 to Rs 1400…The MSP has not changed, no benefit to farmers.”
These statements are in line with the dole based politics and economics practised by the Congress party over the years. The trouble is the country has had to pay a huge cost for this. Allow me to explain. 

The MSP is the price at which the government buys rice and wheat from the farmers, through the Food Corporation of India (FCI) and other state government agencies. The MSP of rice was increased rapidly by the Congress led UPA government starting in 2007.
Between 2007 and 2014, the MSP of rice jumped up from Rs 580 per quintal to Rs 1310 per quintal, an increase of 12.34% per year. In case of wheat, the MSP started increasing from 2006 onwards. Between 2006 and 2014, the MSP of wheat jumped up from Rs 650 per quintal to Rs 1400 per quinta, an increase of around 10.1% per year.
The Table 1 shows the buffer stocks and the strategic reserves that the FCI needs to maintain at various points of time during the course of the year. 

Table 1


Now look at Table 2 which shows the stocks that FCI maintained at various points of time in 2014. A comparison of both the tables clearly tells us that FCI is stocking significantly more rice and wheat than what it is required to do. Interestingly, after the Narendra Modi led NDA government came to power, FCI has been going slow on procurement. In the earlier years the FCI was stocking even more than what it currently is. 

Table 2

As on 

Rice

Wheat

Total (in lakh tonnes)

Jan 1, 2014

146.98

280.47

427.45

April 1, 2014

202.78

178.34

381.12

July 1, 2014

212.36

398.01

610.37

Oct 1, 2014

154.22

322.63

476.85

Source: www.fciweb.nic.in


What the comparison of the two tables clearly tells us is that as the MSP prices have been increased, more and more rice and wheat have landed up with the government than what is required by it to run its various food programmes. In fact, the data clearly shows that before 2008 FCI bought as much rice and wheat as was required to maintain a buffer as well as a strategic reserve.
During and after 2008, the purchase of rice and wheat simply exploded. The reason for this is fairly straightforward. In the financial year 2008, the MSP of wheat was raised by 33.3%. In the financial year 2009, the MSP of rice was increased by 31.8%. And this led to farmers producing more rice and wheat in the years to come. This rice and wheat landed up with the government. FCI did not have enough space to store these grains and that explains why newspapers regularly carried pictures of rice and wheat rotting in the open, even though food inflation was rampant
The MSP policy run by the Congress led UPA government has now led to a situation where Indians farmers are producing more rice and wheat than what is required. In fact, influenced by this steady increase in the price of rice and wheat states like Punjab and Haryana, which have a water problem, are growing huge amount of rice and wheat. These crops are huge water guzzlers. Further, farmers are not growing enough of vegetables and fruits, where the prices have increased at a fast pace.
Also, when the government becomes dole oriented that leaves little money for it to do other things. At the end of the day there is only so much money that even a government has. As an editorial in The Financial Express points out: “This year, the government plans to spend around Rs 2.3 lakh crore on the food economy, including the food subsidy, and a very small fraction of this is for either crop insurance (imagine what that would do for farmers right now) or for creating irrigation facilities (imagine what that would do when the monsoon fails).”
Rahul Gandhi yesterday talked about the government not doing anything for the farmers after the hailstorms destroyed their crops. His government was in power for ten years what did they do on the crop insurance front? Why was the entire focus of the Congress led UPA government in making the farmer dependant on the government?
Interestingly, Rahul’s mother Sonia has written to the food minister Ram Vilas Paswan seeking a relaxation in the quality of wheat that the government buys from the farmers. As per the current regulations FCI does not buy wheat with a moisture content of greater than 14%. The Times of India reports Paswan as saying that: “permitting more moisture content beyond this level would mean the grain would be unfit for human consumption.” The newspaper also reports a food ministry official as saying: “There is no procurement of grains with more moisture content than the permitted limit. The procurement is being done as per the food safety standard law.”
This is a fair point. The government can’t be procuring wheat which is unfit for human consumption. Also, there is something majorly wrong in the state of the nation, where more than 65 years after independence, the main opposition leader suggests that the government buy wheat which is essentially not fit for human consumption.
This scenario would have never arisen if a crop insurance policy that covered a major section of the farmers had been in place. Who is to be blamed for this? Narendra Modi who came to power only 11 months back? Or the Congress party run by the Gandhi family which has been in power in each of the decades since independence? The answer is obvious.

The column originally appeared on The Daily Reckoning on Apr 30, 2015