New Delhi: India’s state-run grain procurement agencies must free some grains in the open market if food prices accelerate, the finance ministry said in a report on Thursday.
Food prices rose 18% in the first week of February, weighing heavily on overall inflation which has crossed the central bank’s forecast of 8.5%.
The finance ministry, in its annual survey of the economy for fiscal year to March 2010, said state-run Food Corp of India and other firms should release wheat and rice from its warehouses when the gap between food and non-food inflations goes above a certain “critical level.”
The government, facing mounting criticism from opposition parties, in its Railway Budget on Wednesday cut freiwght rates for grains to tame inflation.
The survey said a 44% drop in sugar output to 14.7 million tonnes in the year to September also contributed to rise in food prices.
Edible oil imports by India is seen at 10.1 million tonnes in the year to October 2010, the survey said. The Solvent Extractors’ Association of India, a leading trade body, has estimated 2009-10 imports between 9.0 and 9.5 million tonnes.
India, the world’s top importer of edible oils, allows tax-free overseas purchases of crude vegetable oils and imposes 7.5% duty on the refined varieties of the cooking fat.