New Delhi, Jan. 13: The government today said it would curb exports and ease import of essential commodities to improve domestic supplies in the short term, while asking states to amend laws which prevents open trading of agro products and hinted at opening up of FDI in the retail sector.

The short term and long term measures were finalised by the government after Prime Minister Manmohan Singh reviewed the spike in prices of food articles with senior Cabinet colleagues in the past two days after food inflation rose to over 18 per cent to come down marginally to 16.9 per cent on January 1.

Stating that food prices have risen at “unacceptable rates”, the government said the current bout of inflation driven by rise in prices of vegetables and fruits is more difficult to manage because these commodities are not held in public stock.

According to the latest government data, the price of onion has increased 70.7 per cent, vegetables by 70.73 per cent, fruits by 17.71 per cent, milk by 13.2 per cent and eggs, meat, fish by 16.7 per cent.

As the government found few measures to control prices of food articles, the Prime Minister asked the states to review the Agriculture Produce Market Committee Act, the last vestige of the licence Raj, and to “exempt horticulture products from its purview”.

At present, farmers have to sell their produce to commission agents, who operate with licences issued under the APMC Act. It is an instrument which perpetuates monopoly of a group of about 4,000 traders in the country. The agents then sell the produce to shopkeepers at the wholesale vegetable market, who then sell it to the consumers.

The Act prevents farmers to sell his produce to anyone and is seen as the reason for the huge difference in the prices of onion, fruits and vegetables from farmers' rate to the mandi rate and mandi rate to the retail rate. While farmers are selling onion at about Rs 20 a kg, in the retail market it is being sold at over Rs 65 per kg. The government as part of the food price fighting measure also indicated the opening of the foreign direct investment in the retail sector.

“Investment will be encouraged in supply chain, including provision for cold storage, which will be dovetailed with organised retail chains for quicker and more efficient distribution of farm products and minimising wastage,” the government said.