Import duty on vegetable oils may be cut

Reuters reports

India, the world’s third-biggest importer of vegetable oils, may cut import duties on palm products to fight rising inflation after the government cut other custom duties, industry officials said on Tuesday.

Representatives of the palm oil industry met food ministry officials to discuss a cut in import duties and the possible impact on domestic prices of oils.

“It was only a review meeting. Government is under pressure because of inflation,” B V Mehta, executive director of the Solvent Extractors Association of India, told reporters after the meeting.

A friend and I were discussing on what should be the right response for moves such as this.

Shouldn't we welcome them? After all, lowering of import duties make markets freer.

But the answer really is 'no, we shouldnt'. The issue here is not the import duty cut, but government's attempt to control prices. It's of course better than banning exports (which would have a similar effect on domestic supply and hence on prices).

Export bias: Sops row may cost Centre Rs 6,000 crore

Mint reports

The finance ministry may lose up to Rs6,000 crore in revenue, if the Supreme Court rules against the Centre in a dispute pertaining to an export incentive scheme.

The dispute is coming up for hearing in the apex court on Thursday. The case pertains to the Duty Free Credit Entitlement Scheme announced by the commerce ministry in March 2003.

The scheme provides 10% credit to the exporter for achieving an increase in his export turnover. The exporter can use this credit to settle his customs duty on imported inputs, instead of cash.
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Some exporters, who were misusing the scheme, were following a modus operandi of purchasing exports from other firms through contract-basis to inflate their turnover. The turnover of just five exporters, who were found to be misusing the scheme, varied from 300% to 3,800%, according to documents submitted to the court by the government.

Similarly, some of the exporters resorted to large-scale export of low-volume and high-value items such as rough diamonds and gold. Export consignments were declared as ‘studded gold jewellery’ or ‘bangles’ at the time of exports, while they were cleared as gold scrap at the port of destination. In one instance, the same set of diamonds was rotating, and these neither entered the Indian domestic territory nor reached the consumers abroad.

Comments later

Mint: In defence of freedom

New business paper Mint says in its editorial

Economic freedoms have increased manifold since 1991. Yet, India continues to have one of the most fettered economic systems in the world. We still live in a country that is technically socialist and where the right to property is not a fundamental right. The state can brazenly take over private land for what it believes to be the public good. The freedom to truck, barter and trade is still suppressed. A farmer cannot sell his grain in the next state. We believe that trade among people and nations promotes specialization, transfers knowledge and advances prosperity. The creative energies of Indians have been suppressed by a state that once had paternalistic ambitions, but which has become increasingly corrupt and inefficient. This paper will be a voice in support of the transfer of power from state to market.

Like this blog does!

Raghuram Rajan on FDI and capitalism

From Indian Express interview

In your book, ‘Saving capitalism from capitalists’, you wrote there is a more serious danger to capitalism from incumbents, who do not want new comers. It is here the government plays a big role. Is the idea being debated more actively?

In a sense, I was describing a process in which the power of incumbents was weakening to some extent. You still see it coming time and again. That process is going on and global competition is really helpful. To give an example, the other day Sunil Mittal was talking about how India would have been held back if we had given in to the Bombay Club. But now it was very beneficial, since we now have the Ludhiana Club. I think it would be even more beneficial, if in addition to the Ludhiana Club and the Madras Club and so on, we had in India the London Club and the Washington club.

We have allowed foreign entry. But we still keep making conditions. Foreign entry only if you have tie-ups with local entrepreneur. Sometime it is beneficial since local skills are needed. Sometime, it just holds up the foreign investor and forces him to share 26-30 per cent with the local incumbent. Three years down the line, with the local incumbent providing nothing, he buys out the local incumbent. The guy has got rent, and walks off with a pile of money. We have to figure out where it makes sense.

Govt considers edible oil price cut

BS reports

The Agriculture Ministry called a meeting of oil industries’ associations today to discuss the possibilities of reduction in edible oil prices.

In the meeting, the agriculture secretary informed the industry representatives the government wanted to keep prices of essential commodities, including edible oils, under control. He sought industry’s co-operation in that regard.

Leading industry body like SEA and SOPA said the import duty cut was unwarranted as it would directly affect the interests of growers. “As the mustard and Soya bean crop is arriving in the market, and cheaper imports means they would not get the expected prices,” they said.

Govt mulls ban on export of skimmed milk powder

BL reports

Having successfully deployed the export ban route to contain price increases in sugar and pulses, the Centre has set its sights next on milk. According to reliable information, a move is under way now to ban export of skimmed milk powder (SMP).

The Agriculture Ministry has already sought information from all State co-operative dairy federations on their existing export commitments and stock position of SMP as well as whole milk powder (WMP).

The communiqué, dated January 18, has also asked the federations to furnish details of their SMP/WMP production this year vis-à-vis the previous three years, besides the likely demand-supply scenario in the coming months. A copy of the letter has also been sent out to the National Dairy Development Board (NDDB) and its subsidiary, Mother Dairy.

"This could be the precursor to a ban on SMP exports," sources said.

Ferro alloy firms seek high duty to nip imports

Business Standard reports

The country’s Rs 4,000 crore ferro alloys industry, reeling under acute supply surplus, has sought a rise in import duty to 10 per cent from the current 7.5 per cent in a bid to discourage cheap imports from neighbouring countries.

With the duty reduction to 7.5 per cent in February 2006, imports of ferro alloys logged a significant gain in the first half of this financial year at Rs 346.62 crore.

'reeling under acute supply surplus', it seems. We shouldn't be surprised.

Bastiat wrote back in 1845

Which is preferable for man and for society, abundance or scarcity?

"What!" people may exclaim. "How can there be any question about it? Has anyone ever suggested, or is it possible to maintain, that scarcity is the basis of man's well-being?"

Yes, this has been suggested; yes, this has been maintained and is maintained every day, and I do not hesitate to say that the theory of scarcity is by far the most popular of all theories. It is the burden of conversations, newspaper articles, books, and political speeches; and, strange as it may seem, it is certain that political economy will not have a completed its task and performed its practical function until it has popularized and established as indisputable this very simple proposition: "Wealth consists in an abundance of commodities."

Do we not hear it said every day: "Foreigners are going to flood us with their products"? Thus, people fear abundance.

Has not M. de Saint-Cricq7* said: "There is overproduction"? Thus, he was afraid of abundance.

Do not the workers wreck machines? Thus, they are afraid of overproduction, or—in other words—of abundance.

Has not M. Bugeaud8* uttered these words: "Let bread be dear, and the farmer will be rich"? Now, bread can be dear only because it is scarce. Thus, M. Bugeaud was extolling scarcity.

Has not M. d'Argout9* based his argument against the sugar industry on its very productivity? Has he not said again and again: "The sugar beet has no future, and its cultivation cannot be extended, because just a few hectares of sugar beets in each department10* would be enough to supply all the consumers in France"? Thus, as he sees things, good consists in barrenness and scarcity; and evil, in fertility and abundance.

Do not La Presse, Le Commerce, and the majority of the daily newspapers publish one or more articles every morning to prove to the Chambers11* and to the government that it is sound policy to legislate higher prices for everything through manipulation of the tariff? Do not the Chambers and the government every day comply with this injunction from the press? But tariffs raise the prices of things only because they reduce their supply in the market! Thus, the newspapers, the Chambers, and the government put the theory of scarcity into practice, and I was right to say that this theory is by far the most popular of all theories.