New Delhi, June 14: Costlier food items carried inflation up to 7.55 per cent in May, and the price situation could get aggravated further by the government’s decision to raise the minimum support price of paddy, oil seeds and pulses.
However, the Cabinet Committee of Economic Affairs (CCEA) deferred a decision to raise urea prices because of opposition by some ministries.
Inflation in May last year stood at 9.56 per cent.
Overall food inflation rose to 10.74 per cent in May from 10.49 per cent in the previous month. Food articles have a share of 14.3 per cent in the WPI basket.
“I am confident that the range of inflation will be around 6.5-7.5 per cent throughout the year. I hope if the monsoon is quite good, then it would be possible to sort out these pressures,” finance minister Pranab Mukherjee said.
Potatoes turned costlier by 68.10 per cent compared with 53.44 per cent in April. Pulses and wheat turned expensive by 16.61 per cent and 6.81 per cent, respectively.
Vegetable inflation stood at 49.43 per cent in May against 61 per cent in the previous month.
Meanwhile, the government today sharply increased the minimum support price (MSP) purchase price of paddy, oilseeds and pulses for the ongoing kharif season.
The proposal to hike urea prices by 10 per cent to Rs 5,841 per tonne for 2012-13 to reduce the subsidy burden was deferred keeping the interests of farmers in mind.
“The proposal has gone back to the ministry of fertilisers. They have to take a second look at it,” home minister P. Chidambaram said after the meeting of the CCEA.
Officials said the proposal had been opposed by some ministries as it would hit farmers already reeling under the impact of a sharp increase in the price of phosphatic and potassic fertilisers.
The purchase price of paddy was hiked 16 per cent to Rs 1,250 per quintal, while that of pulses was raised 37 per cent to reduce the country’s dependence on imports.
For grade A variety of paddy, the support price has been raised to Rs 1,280 per quintal from Rs 1,110.
Chidambaram said the MSP of urad had been increased 30 per cent to Rs 4,300 per quintal for 2012-13 crop year (July-June) from Rs 3,300 per quintal in the previous year.
The decision on the prices of key pulses such as tur and moong was deferred.
In oilseeds, the price of soyabean has been fixed at Rs 2,200 per quintal for black and Rs 2,240 for yellow varieties, up by Rs 550 per quintal each from 2011-12. The price of groundnut (shell) has been raised 37 per cent to Rs 3,700 per quintal from Rs 2,700.
The Commission for Agriculture Costs and Prices, which recommends MSP after taking into account the cost of production, suggested a sharp increase in the price of pulses and oilseeds to boost domestic output.
Higher MSP has been fixed not only to cover rising input costs but also provide better returns to farmers.
The support price of medium-staple and long-staple cotton was increased up to 28 per cent to Rs 3,600 and 3,900 per quintal, respectively.
“There could be a possibility of inflation in rice. But the government has huge stock and it can intervene anytime to contain prices,” Planning Commission member Abhijit Sen said.
He said there was no reason to worry on account of pulses and oilseeds as their market prices were higher than their MSP.
Officials said an increase in purchase prices would encourage farmers to sow more rice and other staples, thereby preventing food shortages.
The country is targeting a bumper foodgrains harvest for the third year in a row.