Centre gets cracking to tame rising prices

Tags: News

Potato hoarders may face action, minimum export price for onions set at $350 per tonne

Centre gets cracking to tame rising prices
Fighting to keep intact the new government’s feel good factor, the BJP government has proposed a clutch of measures to rein-in prices and ease supply side constraints in vegetables and fruits, apart from a strategy to push up GDP growth.

As a first step, the Centre has imposed a minimum export price on onions at $300 per tonne to enhance their availability in the domestic market. Just before the Lok Sabha elections, the then UPA government had abolished the minimum export price of onions at $1,150 per tonne last year.

The decision to set a minimum export price for onions was taken at a meeting of secretaries chaired by principal secretary to prime minister Nripendra Misra on Tuesday. Secretaries from commerce, agriculture and consumer affairs were present at the meeting held by Misra in the prime minister’s office.

Currently, four million tonnes of onions are held mostly in Maharastra and Madhya Pradesh with prices hovering around Rs 25–30 in the open market as against Rs 11–15 per kg a fortnight ago. “More measures are likely to follow in next few days,’’ an official privy to the proceedings at PMO told Financial Chronicle.

Misra’s meeting comes close on the heels of prime minister Narendra Modi holding deliberations on price rise with Union secretaries last week.

The government may also launch a joint operation with states to crack down on hoarding of food products, especially items like potato, that have risen in the last one month.

Further, the government will consider offloading some food grains like rice and wheat from the buffer stocks to moderate prices and take on hoarders and black market operators.

The measures have come about in aftermath of wholesale price inflation (WPI) for May 2014 moving up to 6.01 per cent as against 4.58 per cent at the same time last year. WPI was pegged at 5.20 per cent in April this year.

Finance minister Arun Jaitley said the BJP government was “committed to easing supply side constraints” of food items. In a Facebook post late Monday night, Jaitley asked states “to take effective steps to ensure that speculative hoarding is discouraged”.

The minister also attributed the rise in prices of food items to “withholding of stocks on account of apprehension of a weak monsoon”. Jaitley who’s busy formulating his first union budget to be presented next month, attributed higher inflation to “food articles, fuel and power costs”.

Fruits, pulses, eggs, meat and fish prices, which impact a wide section of the salaried class, showed steep increase in their wholesale prices during May 2014.

Jaitley also hoped that “inflation which is moving upwards now would eventually come down”. But, he did not hint at a time frame for this reversal. Given reports of over 48 per cent deficiency in monsoon, inflation may not move southwards anytime soon.

But the finance minister’s attempt at soothing fears of a run away price rise and inflation that took roots firmly in the last two years of UPA rule, may not revive the market mood easily. In addition, the deepening crisis in Iraq leading to firm up in prices of crude imports would add to inflationary pressures already prevalent in the country.

Arun Jaitley conceded that the “the slight instability in rupee was essentially due to Iraq oil shocks and global fears of rise in oil prices.’’

He also hinted at steps to positively impact the GDP and result in higher growth. However, he did not expand on the measures contemplated to push up sagging growth in last two years that was less than 5 per cent.

Already, the finance minister had attributed the low growth to UPA government’s mismanagement of the economy. Jaitley had pointed to high fiscal deficit, retail inflation at 8.9 per cent, tax GDP ratio at 10.1 per cent and subdued revenue collections as immediate priorities to be tackled by Modi government.

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