Meet on rising prices today; govt to focus on supply side

Meet on rising prices today; govt to focus on supply side
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First Published: Sun, Aug 16 2009. 11 52 PM IST

Control measures: The ministers, under the chairmanship of Pranab Mukherjee, will discuss a package that seeks, among other things, to ban the export of wheat and retain the ban on export of non-basma
Control measures: The ministers, under the chairmanship of Pranab Mukherjee, will discuss a package that seeks, among other things, to ban the export of wheat and retain the ban on export of non-basma
Updated: Sun, Aug 16 2009. 11 52 PM IST
New Delhi: Scant rainfall and rising food prices have goaded the government to draw up a plan to manage food supplies, restrict exports, buy food from other countries and bolster domestic availability of foodgrain.
Control measures: The ministers, under the chairmanship of Pranab Mukherjee, will discuss a package that seeks, among other things, to ban the export of wheat and retain the ban on export of non-basmati rice. Indranil Bhoumik / Mint
The government expects the area under crop cultivation to reduce by one-fifth this year.
A meeting of an empowered group of ministers (eGoM) due on Monday under the chairmanship of finance minister Pranab Mukherjee will take up a supply-side package for discussion. This package, among other things, seeks to immediately ban the export of wheat, retain the ban on export of non-basmati rice and permit import of wheat at zero duty.
The government response comes at a time when food prices are galloping even as the overall inflation based on the Wholesale Price Index is contracting. The government recently declared 171 districts drought affected.
“Only 6.5 lakh tonnes of wheat products already allowed by the government may be permitted to be exported,” said a government official in the know of the development, but who did not want to be named.
The government is also proposing to closely monitor its open market sales scheme, or OMSS, which is used by the Food Corporation of India (FCI), the government’s central food procurement agency, to stabilize prices by selling foodgrain in the open market.
Sale of wheat may be undertaken only when a buffer stock of at least 4 million tonnes (mt) and a strategic reserve of at least 3 mt are accounted for. India currently has a comfortable 51 mt of rice and wheat in its public sector granaries.
Further, the decision to sell wheat under OMSS—its quantity, timing and location—will be taken by the ministry of food and consumer affairs only on the recommendations made by the committee of secretaries, a high-level forum comprising the top bureaucrats in the relevant ministries and headed by the cabinet secretary.
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The government may also allocate wheat to states and Union territories under OMSS on the basis of minimum support price applicable and the freight costs of transporting wheat from the mandis or marketplaces of Punjab to states such as Jammu and Kashmir, Himachal Pradesh and the North-East. Similarly, sale of rice—grade A (superior variety) and common variety of rice—will be undertaken by FCI. Similarly, sale of wheat to bulk consumers such as flour mills and institutional buyers will be undertaken by FCI, the floor price of which may be fixed at the cost of acquiring wheat in Punjab plus the necessary freight charges. A high level committee headed by the FCI chairman will be the final authority in deciding the process.
Punjab and Haryana contribute around 90% of wheat procurement by the government, which is then distributed to the poor—the so-called below the poverty line, or BPL, families—through the public distribution system and other welfare schemes.
Last week, the Centre constituted an eGoM headed by finance minister Pranab Mukherjee to take decisions and approve innovative schemes, besides taking stock of existing measures available with the government.
Food and agriculture minister Sharad Pawar, home minister P. Chidambaram, railway minister Mamata Banerjee, Planning Commission deputy chairman Montek Singh Ahluwalia and power minister Sushilkumar Shinde are members of the eGoM besides rural development minister C.P. Joshi, petroleum minister Murli Deora and urban development minister Jaipal Reddy.
The Centre has confirmed that 171 out of 626 districts in the country are affected by drought, with the India Meteorological Department declaring 29% shortfall of rain on Friday.
Bihar, Punjab, Haryana, Madhya Pradesh, Manipur, Assam, Jharkhand, Uttar Pradesh, Andhra Pradesh, Himachal Pradesh, Maharashtra, West Bengal and parts of Orissa are said be drought-hit.
According to S. Raghuraman, head, trade research at Agriwatch, a Delhi-based research outfit on farm commodities, there is no need to panic because the country has around 51 mt of wheat and rice in the Central pool. “The government probably wants to play safe so it is planning such measures. What is crucial is how the government manages the stock, what is the kind of stock it wants under the Food Security Act, for the below poverty line or for drought relief,” he said.
Raghuraman adds that with paddy season ending, the government must have taken note of the shortfall in sowing and therefore wants to keep a close check on food stocks.
Graphics by Sandeep Bhatnagar / Mint
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First Published: Sun, Aug 16 2009. 11 52 PM IST