Steps to curb food prices on, but inflation to remain high

The Centre on Tuesday announced several steps to cool food prices — including possible rice imports — but economists expect inflation to remain high. Zia Haq reports.

The Centre on Tuesday announced several steps to cool food prices — including possible rice imports — but economists expect inflation to remain high.

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Steps, aimed at boosting supply by easing imports and curbing exports, come amid a worrying food price spiral that kicked in during mid-2008.

India’s year-on-year food price index was up 13.68 per cent in the 12 months to October 31, according to government data.

Three commodities are in short supply: vegetables, pulses and sugar. Rice stocks are adequate but prices have gone up because this year’s drought is set to trim kharif rice output by 15 million tonnes.

The Centre has removed import duties for rice, wheat, pulses, edible oils (crude), sugar and maize for up to 5 lakh tonnes.

India is also eyeing straight government-to-government rice import deals, commerce minister Anand Sharma said. “We are also exploring the option. Prices need to be negotiated.”

India’s grain reserves are still strong, with record procurement of 58.53 million tonnes in September. The government has created a strategic reserve of 5 million tonnes, apart from the Centre’s buffer stock of rice and wheat. Import duties on edible oils have been cut to 7.5%. The Centre has banned export of edible oils and pulses, except kabuli chana.

“The government should announce additional foodgrain allocation of at least 7 million over the next 12 months. This will be enough for price correction,” said Abhijit Sen, Planning Commission member in charge of agriculture.

If the government can get its act right with aggressive food management policy, rice price should come down, he added.