Govt initiates steps to cool food prices

The Narendra Modi-led central government on Tuesday swung into action to rein in increasing prices of essential commodities. While it imposed minimum export price (MEP) of $300 a tonne on onions, it assured a similar step for potatoes to bring down exports of the commodity and augment domestic supplies. The Centre advised states to freely allow movement of fruit and vegetables by delisting those from Agricultural Produce Market Committee (APMC) Act. The delisting process will start on Wednesday from Delhi, which is currently under the Central rule.

The government also announced that a line of credit will be offered for states to directly import pulses and edible oils to meet shortages. Besides, an additional five million tonnes of rice will be released in the open market through states. In Delhi, the government will also procure onions for sale through the public distribution system and at Mother Dairy outlets.

The Centre advised states to crack down on hoarders, amid apprehensions stocks of food items were being withheld in anticipation of a sub-normal monsoon.

After holding a high-level meeting with ministers and bureaucrats concerned, Finance Minister Arun Jaitley told reporters these steps were being taken to stem further increase in prices.

He announced Delhi Lt Governor Najeeb Jung would be advised that "tomorrow itself this delisting order (from APMC Act) with regard to Delhi for all fruit and vegetables be issued".

This means farmers would have the option of going to either APMC or the market. Experts said an ordinance will have to be promulgated to amend the Delhi APMC Act. Meanwhile, Food Minister Ram Vilas Paswan said rice would be sold in the open market at above-poverty-line rates of Rs 8.30 a kg.

Ashok Gulati, chair professor for agriculture at ICRIER, said: "Delisting of fruit and vegetables from APMC in Delhi has been due for at least 10 years. Offloading of five million tonnes of rice in the open market will help cool prices." There would be two kinds of effects of these measures. First, there will an announcement effect, which itself will help tame food prices; and second, there will be an impact on prices of actual delivery, he said.

Of the 22 commodities monitored by the government, only four or five had seen a spike in prices, Jaitley said. Of those, onions and potatoes were two items that had witnessed a sharp price surge. While the government had imposed an MEP on onion, after a gap of three months, the commerce ministry would announce a floor export price for potatoes, Jaitley added.

"Export of all varieties of onions...will be subject to an MEP of $300 a tonne," a Directorate General of Foreign Trade notification said on Tuesday. Wholesale prices of potatoes have risen over 30 per cent in three months to May. The rate of price rise in May, though, slightly fell to 31.44 per cent from 31.56 per cent the previous month. It had stood at 31.38 per cent in March.

MEP, below which a product can't be exported, is mostly resorted to when there is a significant price rise in the domestic market. A surge in prices of essential food items pushed the wholesale price index-based inflation to a five-month high of 6.01 per cent in May. Jaitley had on Monday said a rise in inflation of food articles could have been because of withholding of stocks. He had advised states to take a tough stance against hoarders.

Agriculture Minister Radha Mohan Singh on Tuesday said onion and potato production this year was higher than last year, so there was no cause for worry. "But, it is for state governments to stop hoarding and blackmarketing."

However, in terms of wholesale inflation rate, onion prices saw a year-on-year decline of 2.83 per cent in May, though the rate of fall in price was 9.76 per cent the previous month. There has, though, been a spike in the wholesale price of onions in June at various centres; this will be reflected in retail prices in days ahead. For instance, between May 29 and June 17, the wholesale price of the commodity rose by Rs 600 a quintal to Rs 1,800 in Mumbai. This translates into an increase of Rs 6 a kg. In Delhi, price pressures were a bit low - by Rs 50 a quintal to Rs 1,188. This implies a rise of 50 paise a kg, according to data released by the consumer affairs department.

Tuesday's high-level meeting, besides Jaitley Radha Mohan Singh and Paswan, was attended by Commerce Minister Nirmala Sitharaman and government officials like Nripendra Misra, principal secretary to the prime minister.

Paswan said the government gave export incentives on sugar for two more months - June and July - as stocks were adequate.

Earlier in the day, Misra held a meeting of bureaucrats on food inflation at the Prime Minister's office. After the meeting, Consumer Affairs secretary Keshav Desiraju said the country exports 1.5 million tonnes of onions a year. "The MEP is expected to have some impact on increasing domestic supply and checking price rise." The secretaries from agriculture and commerce ministries were also present at the meeting. The issue of food inflation is also likely to be discussed at a Cabinet meeting on Wednesday.