FE Editorial : Look who’s hoarding

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The Financial Express: Nov 17 2012, 01:10 IST

While governments, in the past, have been quick to blame hoarders for rising food prices, it’s important to note the biggest hoarder appears to be the government itself. As compared to the 212 lakh tonnes that the government is supposed to be carrying by way of a buffer stock as well as a strategic reserve of both rice and wheat in October—the figure varies from season to season and rises to a high of 319 lakh tonnes on July 1—the government’s stock position is several times this. On July 1, its rice and wheat stocks were 806 lakh tonnes and this fell to 666 lakh tonnes in October.

Apart from the fact that such large stocks add to carrying costs, and therefore subsidies, for the government, there are implications as far as inflation is concerned. While WPI inflation for food articles has come down from 10.63% in May to 6.62% in October, this hides the large inflation in rice and wheat. For rice, WPI inflation rose from 4.89% in May to 7.46% in June, all the way up to 12.41% in September before moderating a bit to 11.40% in October. For wheat, WPI inflation rose from 6.75% in May to 19.78% in October (with just a minor dip in July). Not surprisingly, then, that an agriculture expert like Ashok Gulati who heads the Commission for Agriculture Costs and Prices is on record saying that the government stock needs to be in the markets, not in FCI godowns. A point reiterated by

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Hoarding of Food Grains by Government.

M.S.Kamath | 17-Nov-2012Reply | Forward

It is really puzzling why the government is holding such huge stocks of food grains. Tax-payers' money is used to buy food grains.The very tax-payers have to buy them [food grains] at a high price in the open market. They are losers both ways. Further, the grains rot outside due to lack of space to store. If the stocks are released in the market, prices of grains will certainly come down and the government can afford to increase the price of diesel. Increased transportation cost will be taken care by reduction in price of food grains.