Govt goes into fire fighting mode to check food price rise, curb inflation

The central government has decided to contain climbing food prices which threaten to push up inflation in the country with a series of measures including a minimum export price for onion, releasing more stored rice to state public distribution system; it is also considering withholding export incentives for milk.

The decision was taken after a high level meeting, convened by the finance minister Arun Jaitley on Tuesday to discuss issues related to inflation and price rise of essential commodities. The finance minister also directed the state governments to crack down on hoarding, fix minimum export prices for onions and potatoes.

The wholesale price index-based inflation rose to five-month high of 6.01 per cent in May, owing to an increase in the prices of essential food items like vegetables, fruits and cereals.

This rose last month led by a 9.5 per cent rise in price of food articles, which comprise 14 per cent of the overall WPI. Within food, price of rice, potato, fruits and egg, meat and fish rose in double digits.

The government has imposed a minimum export price or MEP of $300 per tonne on the export of onions. The MEP has been re-introduced by the new government barely three months after the previous government in March had withdrawn it. MEP is the rate below which no exports are allowed. Until early March, the MEP was pegged at $150 per tonne.

Apart from onions, the meeting also reviewed the rise in the retail price of milk and took a decision to consider withholding export incentives currently in force. Moreover, the government decided that it would release more supplies of rice through the Food Corporation of India to state governments via the public distribution systems.

It was also decided in the meeting that the state government of Delhi should be asked to consider delisting fruits and vegetables from the purview of the Agricultural Produce Market Committee (APMC) Act as well as to source additional supplies of onions from distribution via government’s retail outlets.

The acceleration in wholesale inflation comes in contrast with consumer inflation, now the key metric deciding India’s monetary policy, which declined last month. The provisional annual inflation rate based for consumer price index (CPI) for May is pegged at 8.28 per cent compared with 8.59 per cent (final) in April 2014.

Even as wholesale price inflation has moderated over the past few months, the stubborn consumer inflation had restricted the RBI from loosening the monetary policy by cutting rates, which is seen crucial for reviving investments and thereby the economy.

(Edited by Joby Puthuparampil Johnson)

Leave Your Comment(s)