Why Scarcities?

Summary

This 1974 Forum of Free Enterprise booklet diagnoses the shortages then gripping the Indian economy, treating inflation and scarcity as ‘two sides of the same coin’ rooted in defective economic policy rather than mere bad luck. An unsigned editorial introduction frames the volume and narrows the inquiry to three essential commodities in short supply, while an opening survey article sets the general problem of scarcities in perspective. The four contributors - D. R. Pendse on scarcities and inflation, C. V. Mariwala on vanaspati, B. D. Somani on paper, and M. R. Meher on coal - argue from a free-enterprise standpoint that government controls, licensing restrictions on large industrial houses, and nationalisation are the principal causes of shortages and high prices, and that the remedy lies in more production rather than more controls.

Essays

Scarcities and Inflation

By D. R. Pendse

Pendse argues that the scarcity-and-inflation crisis persists not because it is poorly understood but because vested interests - black marketeers, certain producers, political parties, and even governments - benefit from perpetuating it. He illustrates how administered prices for foodgrains and sugarcane, set by political bodies like the National Development Council above the Agricultural Prices Commission’s expert recommendations, keep prices high, and contends that during inflation industry stops bothering about quality or marketing because scarcity makes profits easy.

• Frames scarcity and inflation as mutually reinforcing and structurally sustained by their beneficiaries.
• Cites NDC paddy procurement prices of ~Rs. 110/quintal in 1973-74 against the APC’s recommended Rs. 63, and UP sugarcane fixed at Rs. 12-13 vs the Centre’s Rs. 8.
• Argues producers and even political parties lose the incentive to improve output or quality when scarcity guarantees profit.

Vanaspati

By C. V. Mariwala

Mariwala, chairman of the Vanaspati Manufacturers’ Association of India, defends vanaspati as a useful processed edible oil that extends the country’s fat resources, then argues that government price control - imposed in 1963 as a temporary measure under Defence of India Rules and never lifted - has itself become a major cause of instability in production. Reviewing vanaspati prices every fortnight against volatile oil costs, he says, distorts the industry; the answer to high prices is more oilseed output, not controls.

• Vanaspati turns non-traditional oils (cottonseed, imported palm/soya/sunflower) into accepted edible fat, easing shortage.
• Temporary 1963 price control under Defence of India Rules became permanent, with 7-8 price changes a year.
• Price control itself, requiring constant cost-data review, is a major cause of fluctuation; the cure is more output.

Paper

By B. D. Somani

B. D. Somani, an industrialist and past president of the All-India Manufacturers’ Organisation, attributes the paper shortage to stagnant production (8.03, 8.04 and 7.96 lakh tonnes in 1971-73) caused by government policies that ideologically refuse to let large industrial houses expand or set up new units. He notes the country is importing newsprint at Rs. 3,500-4,000 per tonne while administrative delays in clearing projects block domestic capacity, and urges the government to take a realistic view and permit the large houses to invest.

• Paper output stagnated/fell over 1971-73 despite rising demand.
• Government’s refusal to let large houses expand, plus licensing delays, is the chief obstacle to new capacity.
• India wastes foreign exchange importing newsprint while domestic newsprint projects await clearance for over a year.

Coal

By M. R. Meher

Meher’s essay, reproduced from the Financial Express, presents the coal industry as a leading example of the heavy price the nation pays for nationalisation: the government coking- and non-coking-coal corporations run at a loss, coal-consuming industries (railways, power, steel) pay dearly, and the only beneficiaries are the coal-mine workers. He blames union pressure and a wage board that ignored the industry’s capacity to pay, calling nationalisation an ‘egregious blunder’ and a warning against indiscriminate state takeover.

• Post-nationalisation coal corporations make losses while railways, power and steel bear higher coal prices.
• Wage-board awards and union pressure, not economic logic, drove nationalisation and cost increases of 31-43% by grade.
• Treats coal nationalisation as a cautionary case against indiscriminate state ownership.

---

Generated by the v1.5 extraction pipeline. Awaiting editorial review.