The government has gone into a panic mode as the inflation rate, as measured by the point-to-point movement of the wholesale price index, reached a 40-month high at 7% for the week ended March 22, 2008. As inflation is likely to increase further, experts feel that the situation neither benefits the farmers nor the industry and the government has failed to recognise the reality of the situation and act accordingly.
As per rise in food prices is concerned, shortfall in production cannot be singled out to be a problem. Country has achieved a record grain production of 219.32 million tonne (mt) in 2007-08, including 94.08 mt rice, 74.81 mt wheat, 36.09 mt coarse cereals and 14.34 mt pulses. Cotton output is estimated at 23.38 million bales while oilseeds output is estimated at 27.16 mt.
However, despite good production the average retail price of common variety of rice is ranging around Rs 25 per kg and that of wheat flour around Rs 16 per kg. Against the rising prices, the farmers were paid only Rs 745 per quintal for common variety paddy and Rs 850 a quintal for wheat. Thus the farmer has not benefited much from the recent price rise.
Some believe that excessive holding of stocks by corporates and private parties in the trade might have caused the inflationary pressure on prices. Reacting to the situation the member of the Planning Commission, Abhijit Sen said, “if there is hoarding of stocks the government should take up massive de-hoarding drive across the country.”
The president of the apex industry body, Assocham, Venugopal N Dhoot said, “futures trading in agricultural commodities should be banned for sometime till the situation improves. I am confident that price situation would improve by August, this year. In the meantime the government should facilitate smoothening of the supply chain, ban exports for the time being and subsidise some essential goods. The RBI should increase the bank interest rate and CRR.”
Rice exporters say that the government by effecting frequent hikes in the minimum export price (MEP) for non-basmati rice and imposing a MEP on basmati rice has not only contributed to the global price rise, but has also added to the sentiments for price rise in the country.
The chairman of the central organisation for oil industry and trade (COOIT), Davish Jain criticised the government’s recent decision to reduce tariffs on vegetable oils. He said that on March 20, when India decided to reduce duty on crude palm oil (CPO) by about $115 a tonne, Indonesia slapped an export tax of $140 on export of CPO, thereby dashing India’s hopes of importing crudepalm oil at cheaper prices.
