15.04.2008

• Essential drugs may come cheap
• At times we wonder who is taking the common man for a ride. Is it the Government or is the business community? Or is it both? If you read the following excerpt for what appeared in today’s ET, I am sure you would be as confused as I am about it.
• Drug makers, worried over the Centre regulating prices of more brands in the market, have told the government that they are willing to sell essential medicines at 50% of their maximum retail price. They have also offered to finance a delivery mechanism to deliver these drugs at the concessional price by contributing 0.25% of their total profits to the government which could be a little less than Rs 10 crore. If the government accepts this proposal, it could signal a major shift in the way rising healthcare costs are addressed in the country. However, these offers come with a condition. The government will have to agree to not increase the scope of cost plus price control.
• Remember anything about the ‘bear minimum margins’ that these companies were reported to be having a few months earlier in the news reports? If so, how is it that they are able to offer medicines for just 50% of not their cost price; but the MRP!!!
• I keep hearing from quite a few aspirants that they would like to join the system so that they can fight it from inside very effectively than staying out of it. Now tell me your confidence level about fighting the system by being inside. Would we not be very well off by being out of the system and making hay while at least being honest about our intentions? Just thinking aloud. Don’t take anything to heart.
• Maoists victory in Nepal gives India the jitters
• The Maoists have privately assured the UPA government that they will continue to do business with India, but there is a deep sense of unease within the government over the resounding victory of Mr Prachanda’s red brigade in the elections for a Constituent Assembly. The government is now unexpectedly faced with a political situation in Nepal where the ground realities have changed and the party in the dominant position has had an uncomfortable and even hostile relationship with India. The traditional allies, the Nepali Congress and Communist Party of Nepal, have all been reduced to a minority forcing India to immediately start rethinking its Nepal policy. This is not the scenario that the foreign policy mandarins had expected or wanted. Sources said that the Maoists have already reached out to New Delhi saying that they will deal with India. But mere semantics have not assuaged the deep sense of unease that has crept into a relationship. The only solace for the UPA government, which expected a politically-balanced government in Nepal, is that all the other players, both national and international, have also got it wrong.
• Net usage worldwide
• The US leads in having the maximum number of internet users with about 210 mn subscribers. It is followed by China with 162 mn users. India has about 42 mn users. Japan and Germany are the other two countries that are ahead of India with about 86 mn and 50 mn users respectively.
• Booming tax collections
• The 2007-08 direct tax collections are set to cross the revised target of Rs. 3,05,000 crores to touch about Rs. 3,10,000 crores. This represents a growth of over 40%.
• On the indirect taxes front, the Government may just meet the revised target. This is about Rs. 1,00,766 crores for customs and Rs. 1,27,947 crores for excise.
• Some interesting facts about health insurance market
• Health spends by some governments like the one in Karnataka is around 4.5% of the total budget compared to 3.6% by Gujarat or 3.4% by West Bengal.
• While 19% of the healthcare spends in the country happen through government network, private spend is pegged at 80% with the balance from sources like charitable trusts and institutions. Of the 80% private spend, while government employees spend around 4%, individuals is 12% and 64% happens from private sector (employers).
• National Statistics Commission
• Its chairman was Dr. C. Rangarajan.
• A committee headed by Planning Commission member Abhijit Sen has suggested that a Producers Price Index would be an accurate measure of inflation than the present WPI based index. The committee felt that such an index would reflect the true price in various sectors such as manufacturing, oil and food.
• Even though the work on the index is more or less complete, the government is no mood to implement it now. You can guess why.
• Derivatives trading on commodity exchanges
• Time and again we are faced with this debate. Today’s debate in ET is a very good read. Recommend it strongly, in spite of our having covered the subject earlier in our blogs. Do so here.
• Some excerpts worth our noting:
• It is incorrect to say that derivatives trading are fuelling price inflation. Futures trading provides vital clues to the state of demand-supply mismatches which was evident in case of wheat in 2006, tur in 2007 and even in this year in case of mustard, where lower output has been forecast by the government. Hence, futures trading mirrors economic fundamentals and if they are weak, the same will be reflected and one needs to address the fundamentals rather than the image.
• A ban on futures trading cannot hence change the fundamentals. We banned futures trading in wheat, urad, tur and rice last year. Prices of tur went up during the entire year due to a shortfall in production. Wheat prices reacted to global influences and continued to rise, and last week’s inflation data shows that rice prices have also gone up sharply. Hence, banning futures will simply remove a powerful signalling tool which can otherwise be used by the government to plan the supplies.
• Prices of fruits, vegetables, milk, coarse cereals, pulses like urad, tur and masoor, which are not traded on the exchanges have registered very high increases.
• Another example is edible oils. The hardening of edible oil prices is basically due to the rising crude price as well as due to the obsession of various countries with the production of biofuels. With crude holding above $110 more and more countries are willing to use their mustard, soya, maize, and palm oil for producing biofuels. This has led to extra demand for the food grains and edible oils, something that was not there before the advent commexes in India.
• So the government, instead of making a scapegoat of the commexes, should take concrete steps to help farmers grow more food. It should help them by developing infrastructure like irrigation canals and warehouses. India’s current warehousing capacity for farm produce stands at around one million tonnes — too little for accommodating the demands of farmers. Enhanced warehousing capacity will empower farmers and save them from distress sale, thus providing them with better incomes, which will only spur them to grow more food. We are currently witnessing the scenario in West Bengal where a bumper crop of potatoes has not resulted in bumper profits for the farmers, since the warehouses are already full and the farmers are forced to sell their produce at a ridiculously low price(Rs 150/quintal.) To sum up, the commexes don’t invent the price, they just help people discover it.
• An interesting piece from folklore about ‘scapegoat’ given one of the authors of the above excerpted debate.
• In ancient Jerusalem on the Day of Atonement, the villagers used to place their hands on a goat, and then let it depart into the wilderness. The idea was that the placing of the hands will transfer their sins to the goat, who by wandering off would take their sins away, thus purifying them. That was thousands of years ago, but surprisingly even today there are many who believe in the concept of scapegoat.