Let us take wheat as another example. (The example of wheat is just an assumption, not related to actual facts.) Let us assume that the country needs 100 million tonnes of wheat flour and also that the cost of machines, buildings etc. to be Rs one crore per ton capacity per shift. In the year 1990, before nationalisation, let us also assume that the wheat flour was sold for Rs 10 per kg.

Till the Government decided to deregulate wheat flour production in 1990, it intervened in pricing. Then the price was Rs 10 per kg, which allowed 10-15 per cent profit to the company. But after deregulation, the price, let us assume, rises in 1991 by a rupee and by Rs 2 in 1992.

Studying the population growth and the market for the wheat flour, one manufacturer increases the price using his influence with other manufacturers, which results in huge profits. With huge profits available, the manufacturers import huge capacity machinery, as their plan is to create market for their excess capacity of production so that when the demand is raised, the wheat flour will be available for sale from their factories. By then (1995/96) the price of the wheat flour is also raised to Rs 20 per kg. New machinery is installed, which, in fact, should reduce cost of production, but to the contrary, the costs will go up.

The market resists the price. The flour millers will not be able to produce full capacity. But the basic cost of production per ton or bag remains. As wheat flour is an essential commodity, the citizen-consumer is forced to accept the price and reduce consumption, which, in turn, increases the costs. Will anybody look into this and take necessary steps so that the adage, `Customer is king', holds good?

The author is former Chairman, Federation of Consumer Organisations, Tamil Nadu. He can be reached at rdesikan@vsnl.com

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