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FCI should serve its mandate at a low cost: Ashok Gulati

Aug 27 2014, 01:53 IST
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SummaryFrom allocating extra foodgrains to states as a means to fight the price rise to setting up a high-level committee to recommend measures for restructuring the Food Corporation of India (FCI), the government has taken various steps for cutting down food subsidy and curbing further spike in agricultural commodity prices.

From allocating extra foodgrains to states as a means to fight the price rise to setting up a high-level committee to recommend measures for restructuring the Food Corporation of India (FCI), the government has taken various steps for cutting down food subsidy and curbing further spike in agricultural commodity prices. Ashok Gulati, former chairman of the Commission for Agricultural Costs and Prices, and at present chair professor agriculture, the Indian Council for Research on International Economic Relations, spoke to FE’s Sandip Das on the measures the government must take to rejuvenate the agricultural sector.

How do you see the inflation graph given the fact that vegetables and cereal prices have moderated in the last few weeks?

Food inflation during the NDA period (1998-2003) was 4.1%, which increased to 5.9% during the UPA-1 years (2004-08) and thereafter shot up to more than 10% during UPA-2 (2009-13). The Modi government is just about 100 days old, and the situation on food inflation has changed only marginally. The good news is that it has not worsened even in the wake of impending drought-like conditions in many parts of India.

The government has taken some bold decisions such as liquidating 15 million tonnes of grains from FCI stocks (5 million tonnes of rice and 10 million tonnes of wheat) and suggesting states to delist fruits and vegetables from the APMC Act, but they need to be effectively implemented before we can see their impact on the ground. Food inflation can be tamed by using a liberal import duty. Import duties on most fruits and vegetables are about 30% (apples, for instance, attract 50% import duty), skimmed milk powder attracts 60% (above the in-quota tariff of 15%), and chicken legs (cut pieces) attract 100%. Bringing all of them to, say, 10% can augment supplies and moderate food inflation.

But the government also needs to contain fiscal deficit as it is one of the root causes of expanding demand more than supplies, and putting pressure on food prices. One does not feel optimistic on that front yet, unless the government takes some bold decisions.

What steps the government must take to ensure that volatility in vegetables prices is curbed?

One, we need to develop more cold storage facilities so that there is a better matching of supplies with demand, besides saving on wastages. Two, we need to keep imports open at low duties. Three, we need to develop the food processing industry,

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