Truckers are a powerful lobby known for having their way through strikes at the drop of a hat. But this time round their plight will attract sympathy. Freight movement by road suffered a setback in 1999: down to an estimated 44 lakh tonne a day from 50-55 lakh tonne a day in previous (pre-recession) years.

These data, released by the All-India Motor Transport Congress as an index of the declining fortunes of truckers, may be somewhat dated; commercial vehicle sales have risen this year, suggesting a turnaround in road transport. But the stiff hike in diesel prices could thwart the nascent recovery (of truckers and of makers of commercial vehicles). The railways have predicted a significant shift in freight from road to rail at current rail tariffs. Mind you, that does not put the railways in a clover; their rising diesel bill threatens to squeeze the dividend payable to the government. The next rail budget will have to hike freight tariffs.

The diesel price hike has fouled up the minimum support pricing (MSP) of wheat which must be announced before sowing commences in November. The Commission on Agricultural Costs and Prices (CACP) initially suggested an MSP of Rs 550 per quintal (no change over last year). It may logically maintain that the MSP need not be raised since Rs 550 per quintal, fixed by the government last year, was way above CACP's (1998-99) recommended price of Rs 490 per quintal. However, the government has to cope with Om Prakash Chauthala and Prakash Singh Badal.

A higher MSP will burgeon the foodgrain subsidy, while the free market price will have to contend with (at port centres) the lower fob price of Rs 525 per quintal of imported wheat. (That rules out exports). True, an import duty can ward off imports, but a lavish MSP will bloat the wheat buffer stock to perhaps 17 million tonnes (against the required 7.8 million tonnes) by April 2001. The stiff cost of the rising buffer skews the prospects of normalising domestic wheat prices.

Second generation reforms are not just about insurance and patents bills but equally importantly about rational pricing, -- not just of wheat but of diesel. The hike in the price of diesel works out to much more than 40 per cent, including ad valorem customs duty (30 per cent), excise duty (16 per cent) and states sales tax. Second generation reforms must rationalise indirect taxes and administered prices which cascade consumer prices.