Private hoarders, govt procurement led to abnormal rise in food prices

Hoarders are back in business. That and a huge food grains stock with the government and a stagnant cereal production led to a 3.2-million-tonne shortfall and the high food prices during the last two months.

Hoarders are back in business.

HT Image

That and a huge food grains stock with the government and a stagnant cereal production led to a 3.2-million-tonne shortfall and the high food prices during the last two months.

In a background note for the Empowered Group of Ministers (EGoM) meeting, the government said higher than normal procurement by government agencies resulted in depletion of private stocks.

Abhijit Sen, Planning Commission member (food), said the government procured wheat much more than the target, as the rates offered by private players were less than the minimum support price—the price that the government pays the farmers. He said, “It is now showing impact on the prices.”

On hoarding, Devinder Sharma of the Delhi-based think tank, Forum for Bio-Technology and Food Security, said, “I know traders are hoarding, hoping that the prices will rise further in the next three-four months.”

Even Prime Minister Manmohan Singh had asked the state chief secretaries last week to take action against hoarders.

Sharma said hoarding was the only reason for the 30-120 per cent price rise during the last one year, since the production of cereals remained stagnant last year instead of declining. The per capita production of cereals fell by about five times since 1950.

Offloading of food grains will help stabilise the prices and also help the Food Corporation of India (FCI) in managing its stocks.

As on June 1, 2009, about 158 million tonne of wheat was lying in the open in Punjab and Haryana because of lack of space with FCI.

In its proposal for the EGoM, the food ministry wanted the government to allow FCI to sell food grains directly in the market and to bulk consumers and give additional allocations to states and union territories.