Finance minister Pranab Mukherjee on Monday blamed imperfections in the farm markets and presence of intermediaries for the high food prices in the country.
“Our agriculture markets are characterised by market imperfections...A huge gap exists between the consumer price and the price received by primary producers...While farmers do not get (remunerative) prices, consumers end up paying more than what should be paid if agriculture markets are competitive and efficient,” Mukherjee said at a seminar on competition law organised by the Confederation of Indian Industry (CII).
The country is reeling under the impact of steep 13. 68 per cent rise in a number of food products pummelled by a supply crunch in staple items such as pulses and potatoes.
Official price data based on the wholesale price index (WPI) released on Thursday showed that prices of potatoes have doubled during the one-year period ending October 31, 2009, while onions were costlier by 42.58 per cent.
There is a chain of intermediaries, which do not always work competitively in the agricultural markets, Mukherjee said.
“There is tremendous scope of increasing competition in the (farm) market to formulate policy changes and innovate products which in turn would contribute to farmers as well as consumers,” he said, adding that despite low inflation food prices have been on the rise.
Mukherjee also said that there was enough liquidity in the banking system for private industry to borrow despite the government borrowing programme of more than Rs 4.51 lakh crore this year.
He also said government today said the proposed Goods and Services Tax (GST) would help set up a common market across the country. “Proposed GST would help achieve common market for goods and services at lower tax rates, avoiding cascading effect of these taxes,” Mukherjee said.
The new regime is aimed at removing distortions in the indirect tax regime that is currently mired in a web of levies such as excise, value added tax and service tax and various surcharges and cesses.