After weeks under attack from allies and the Opposition, the government on Wednesday launched a plan to cool prices by cranking up supplies through vigorous import of sugar and release of more foodgrains.
“Prices will start coming down over the next seven to 10 days,” said Agriculture Minister Sharad Pawar after a meeting of the Cabinet Committee on Prices chaired by Prime Minister Manmohan Singh.
<b1>India’s annual food inflation climbed to 18.22 per cent in late December due to last year’s drought, after peaking to 19.95 per cent in the week ended Dece-mber 5, the highest in 11 years.
To ease shortage of wheat and rice, the government will bring into the open market 3 million tonnes of stocked grains.
The government will also allow duty-free import of white sugar till December 2010. Import of raw sugar is already duty-free. Basically, frantic imports are on the way.
But will Pawar’s plan work?
"At this stage, improving supplies is critical. I have a feeling the point is not far off when inflation will gradually start climbing down because it is already too high,” said Abhijit Sen, head of agriculture in the Planning Commission.
Pawar hinted some states were pursuing policy completely at odds with that of the Central government to ease prices.
“We had removed taxes on imported sugar but some states imposed VAT,” he said.
Delhi, for instance, waived off VAT on sugar after the Centre’s advice, he said, adding UP banned imported sugar adding to the crisis.
The Centre allowed millers from UP to process imported sugar outside that state because of the UP government’s ban on imported raw sugar, which Hindustan Times first reported.
The supply-side inflation was mainly on account of three commodities in short supply: vegetable, pulses and sugar. During a 52-week period, potato prices jumped 41.54%, pulses 19.41%, while onions zoomed 38.55%.
Nearly 90% of India’s potato stocks have been used up and fresh harvest will take another 15 days to arrive, said S Bhonde, additional director of the Nashik-based National Horticulture Development and Research Foundation.
With overflowing granaries, India will ride out any foodgrains shortfall, experts said, but cooling prices of sugar, pulses and edible oil could still prove to be tricky.
“These are expected measures. But prices could ease only after rabi or winter-sown crops replenish markets,” said Credit rating agency CRISIL’s principal economist DK Joshi.
On edible oil, Pawar said the scheme on subsidised edible oil would continue till October 31.