Finance minister Pranab Mukherjee has written to state chief ministers asking them to crack down on hoarders to ensure increase in supply of essential items as the government grapples for options to cool prices.
“The finance minister has urged all the state governments to ensure that all bottlenecks in the supply chain are removed at the earliest and the availability of the items that are driving the current round of food inflation in the economy is improved so that food prices can be brought down quickly,” a finance ministry statement said.
The UPA government, which safely steered the economy through the downturn, is facing perhaps the biggest economic crisis now: persistent high food prices, which rose 18.32% in end-December to reach the highest level in a year.
While there are some weather induced supply constraints on some of the items, a larger part of the price rise is due to the widening gap between the wholesale and retail prices and the growing demand for these products due to rising income levels, Mukherjee wrote in the letter to chief ministers.
It’s not only the prices of the staple onion that has the government worried. Tomato, eggs, fish, meat and milk, all have become costlier pushing up the overall food inflation by nearly four percentage points during the week-ended December 25, as compared to the previous week’s 14.44%.
The price spike, which was seen stabilising two weeks ago, caught the government unawares.
Mukherjee asked state governments to “urgently look into the supply management of items that are driving the current round of food inflation.”
He asked chief ministers to look into the “local factors that are widening the gap between the wholesale and retail prices.”
Last week, Prime Minister Manmohan Singh chaired the Cabinet Committee on Prices — an inter-ministerial panel —to review runaway prices of essential commodities, as the Reserve Bank of India termed as a “new risk”.
Experts warned global food and commodity prices could rise higher still in wake of floods in Australia, drought in Argentina and extreme cold weather in Russia resulting in a poor wheat harvest.