Signaling the start of the NDA government’s war on inflation, a key election pledge of the ruling BJP, finance minister Arun Jaitley on Tuesday announced a slew of measures, including cracking down on “speculative hoarding”, to bring down food prices.
Following a high-level meeting called by Jaitley and attended by food and consumer affairs minister Ram Vilas Paswan, commerce minister Nirmala Seetharaman, agriculture minister Radha Mohan Singh, principal secretary to the PM Nripendra Misra and other senior officials, the government decided to fix a minimum export price for onions and potatoes to discourage exports and make more stocks available in the domestic market.
According to government data released on Monday, wholesale inflation jumped to 6.01% in May compared to 5.20% in April mainly on the back of ballooning food inflation, which soared to 9.5% in May against 8.64% in April. Potatoes (up 31.44%), onions (up 21.3%) fruits (up 19.4%), rice (up 12.75%) and meat, fish & eggs (up 12.47%) were the major contributors to the rising food inflation.
The likelihood of a sub-normal monsoon and the fallout of violence in Iraq on commodity and oil markets may further worsen the price situation. The inability to control rising food prices is considered a major reason for the UPA’s rout in the recent Lok Sabha elections.
Addressing the media after the meeting, Jaitley said: “The Lieutenant Governor of Delhi, Najeeb Jung, has been asked to procure onions and potatoes from the open market and flood the market through Mother Dairy retail outlets.” said Jaitley. In Delhi, all food items will be delisted from Agriculture Produce Marketing Committees (APMCs).
APMCs have often been blamed for creating supply bottlenecks that artificially increase prices.
By delisting some items from the APMC catalogue, the government is trying to break the cabal of middlemen whose margins add substantially to the price of food items and encourage farmers to sell their produce directly in the market. This is expected to bring down food prices.
The finance minister also asked the states to immediately crack down on speculative hoarding, in anticipation of shortages in future, in to ease the supply of food items and to keep some food items outside the purview APMCs.
The government has fixed the minimum export price (MEP) of onions at $300 (R1,800). It is expected to fix the MEP for potatoes soon.
Besides, the central government will provide states a line of credit to directly import pulses (dal) and edible oil to meet local demand.
The government is also planning to release about 5 million tonnes of rice in the open market through state governments to bring down prices.
The government, Jaitley added, was closely monitoring the prices of 22 commodities and will take steps to curb volatility in their prices.
Meanwhile Reserve Bank of India governor Raghuram Rajan said the central bank would closely monitor inflation and remain focused on controlling rising prices.