Eager to control prices before they spiral out of hand, the Centre today called a meeting of State food ministers to discuss steps to crack down on hoarding and improving availability in the market.
The Centre, which has in past few days imposed minimum export price on staple kitchen items like onions and potatoes and put stock holding limits on these, today indicated it was willing to consider suggestions for making hoarding of essential commodities a non-bailable offence.
"One thing is clear that there is no panic situation. Whatever feedback we have got from state ministers is that there is no need for panic," Arun Jaitley said after the meeting.
Stating that prices of vegetables and pulses generally rise in July, he said this time there is an abnormal increase in prices of 2-3 commodities but "there is no panic situation."
Allaying fears of the impact of a delayed monsoon on prices, he said "monsoon has just started, it is a late start and it is too early to create any panic".
To deal with the price situation, Jaitley said some states have suggested strengthening of the Essential Commodities Act and making hoarding a non-bailable offence.
The government and the Consumer Affairs Ministry will take a view on the suggestions of making hoarding a non-bailable offence, he added.
Food inflation rose to 9.5 per cent in May, while the WPI inflation was at a five-month high of 6.01 per cent.
Referring to onion and potato prices, Jaitley said "there has been a record output and there is no shortage of these items"
"Therefore it is not an issue of scarcity but it is an issue of supply side. These commodities are available in sufficient amount but the normal supply is disrupted by hoarders anticipating higher prices," the Minister added.
However, he said: "We have sufficient food grains stock with the government of India to face to any kind of situation.
Depending on where the shortfall or deficient areas are....if such a situation arise, we are equipped to deal."
In order to rein in prices, Jaitely said most of the state ministers suggested that the Centre should help them in augmenting storage facility.
"Some states suggested a price stabilisation fund. In case if prices in certain commodities go up, there could be market intervention," he said.
The meeting was also attended by Food Minister Ram Vilas Paswan and Agriculture Minister Radha Mohan Singh.
Noting that the current price rise is a temporary phenomena created by hoarders, Paswan asked the state governments to enforce the Essential Commodities Act effectively.
Earlier addressing the meeting, Jaitley said: "There are reports of below normal monsoon this year. Hoarders are taking advantage of the situation."
"When production of food items is higher than last year and still prices rise, then it means that intermediaries are keeping the stock somewhere," he added.
He said the test of good governance is how to de-hoard the stock kept by intermediaries into the market to rein in prices. "This is the biggest challenge."
"Prices of some items had touched Rs 70-100 per kg last year. Prices are still lower this year. There is no panic situation," he said.
The Finance Minister asked the state governments to assess the problem as action taken after price rise creates panic in the market.
"There should be collaborative efforts from both Centre and states so that price situation does not go out of control," Jaitley said, adding, "states are equally anxious and they do not want prices to rise."
In order to check prices during the coming festival season, Jaitley urged the states to assess the supply-demand situation and take effective measures in advance to boost supply.
The Finance Minister highlighted measures taken by the Centre in the last few weeks including additional allocation of 5 million tonnes of rice for poor and imposition of minimum export price on onion and potato.
Noting that prices of crude oil have increased due to tension in Iraq, Jaitley said there are, however, indications of softening of prices.