New Delhi, June 17: The Narendra Modi government today targeted consumer inflation — riding at 8.28 per cent in May — by unveiling a series of measures to rein in prices of cereals, fruits and vegetables.
The Centre also sought assistance from states to join the war against rising prices (see chart). The steps appeared to be aimed at sending a message that the Modi government is alive to the problem of price rise, the bite of which — as well as a perception that the UPA was too paralysed to act — is also blamed for the Congress’s election rout.
The Centre today asked state governments to take fruits and vegetables out of the ambit of the Mandi Act, which would allow free trading in these commodities. Through this proposal, the government appears to be targeting “middlemen”, the usual suspects blamed for pushing up farm-to-fork prices by as much as 70 per cent although they also discharge the function of connecting cultivators and consumers.
Finance minister Arun Jaitley said Delhi, now under central rule, would delist fruits and vegetables from the Agricultural Products Marketing Committee Act tomorrow. The Mandi Act forces farmers to sell their produce only to licensed traders, some of whom are accused of manipulating prices. By freeing the trade, the Centre hopes retailers and large retail chains will directly pick up from farmers and sell to consumers, reducing prices.
The Centre has asked states to crack down on hoarders — a familiar advice when prices rise.
At the same time, the government said it would release 50 lakh tonnes of rice to states that could be sold in the open market at an APL (above poverty line) rate of Rs 8.30 per kg. It also permitted states to directly import pulses and edible oils to meet shortages.
The ministers tried to put a lid on soaring onion and potato prices by setting a minimum export price. The minimum export price (MEP) on onion has been fixed at $300 per tonne. Onion prices have risen to about Rs 25 to 30 per kg in Delhi, up from Rs 15 to 20 a kg a fortnight ago. On an average, India exports 15 lakh tonnes of onions a year.
The MEP on potato will be fixed by the commerce ministry soon. Data from the Central Statistical Office (CSO) shows that potato prices have risen by 40.7 per cent since March. Bengal is the second largest producer of potatoes after Uttar Pradesh with output placed at 11.6 million tonnes in 2012-13.
“We will import pulses if there is a shortage. Cereals and edible oil can be imported if states feel there is a shortage,” Jaitley said after chairing a meeting.
The meeting was attended by agriculture minister Radha Mohan Singh, food minister Ram Vilas Paswan, commerce minister Nirmala Sitharaman and officials, including Nripendra Misra, principal secretary to Prime Minister Narendra Modi.
Wholesale prices in May rose by 6.01 per cent, a faster-than-expected rate, driven mainly by higher food and fuel costs, government data showed on Monday.
“The rise in prices of food articles can also be attributed to withholding of stocks on account of apprehension of a weak monsoon,” Jaitley had said in a Facebook post late on Monday.
Jaitley said: “The government is actively monitoring 22 commodities and states are being advised to crack down on hoarders.”
The minister said the government would not allow anyone to exploit the situation and added that the price increase being seen was actually in just four to five commodities. “Nobody should exploit the situation… these are pre-emptive steps,” he said, apparently triggered by reports of a weak monsoon this year.
Officials said importers of pulses and edible oils would be given cheap lines of credit to encourage them to bring in large stocks which could be sold in the domestic market to try and cool prices.
Earlier in the day, Reserve Bank of India governor Raghuram Rajan had said the central bank would be focused on controlling inflation over the next few months — indicating that a mix of supply side and monetary measures could quell inflation. The RBI has set a consumer price inflation target of 8 per cent by January next year and 6 per cent by January 2016.
Oil ministry officials said India had sounded suppliers in Iran, Saudi Arabia and Oman to buy extra crude in case trade with Iraq is disrupted by the ongoing civil war there.
India’s trade with Iraq is estimated at $20 billion a year, most of it comprising crude imports. Iraq is India’s second largest crude supplier after Saudi Arabia.