Sunday, November 20, 2005

Tariffs or dual pricing

The Indian Express Wednesday, October 06, 2004
Raja Chelliah had pointed out that by the late ’80s India had moved from a control system which required a babu to control prices to rule-based systems — like the use of tariffs or dual pricing — in more than two-thirds of Indian industry. I know from experience how difficult the initial reform is since the one to one relationship is a cosy one for the industrialist and the “controller”. Arguing that rule-based systems like replacement costs were not possible as this would mean that the moneys collected would need to be kept aside separately and prices would rise, reveal the bureaucracy’s war economy mindset and ignorance of elementary economic theory.
It neurotically keeps coming back to the bad cost plus so-called “fair rules”, which uninformed politicos and bureaucrats love for the powers they give them on individual economic agents. Policy then has a level playing objective, so that the transition to a global economy is knowledge based and without avoidable human costs.

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