Hoarders disrupting supply; govt to take action: Arun Jaitley - Livemint

Referring to onion and potato prices, finance minister Jaitley said ‘there has been a record output and there is no shortage of these items’. Photo: Ramesh Pathania

New Delhi: The Union government on Friday expanded its fight against rising prices of food articles, including onions, potatoes and pulses, by roping in states to evolve a common strategy to be rolled out over the next six months.

Immediately, the states will issue notifications to remove fruits, vegetables and other perishable commodities from the restrictive ambit of the Agricultural Produce Market Committee Act—under which state governments set up marketing boards which control selling of agricultural produce.

In addition, a meeting of state food ministers gave its in-principle consent for the setting up of a price stabilization fund and also made a case for more punitive administrative measures, including making hoarding a non-bailable offence.

On its part, the Bharatiya Janata Party-led (BJP-led) National Democratic Alliance (NDA) signalled its intent to use the existing National Food Security Act (NFSA), put in place by the Congress-led United Progressive Alliance (UPA), as a measure to mitigate the inflationary impact of rising food prices, especially among the poor.

The NDA’s view is that the frequent spike in inflation of food articles was because of supply disruptions due to hoarding. Chairing the meeting, finance minister Arun Jaitley said as much. “It is not an issue of scarcity but it is an issue of supply side. These commodities are available in sufficient amount but the normal supply is disrupted by hoarders anticipating higher prices.”

Allaying fears of a drought, Jaitley added,“right now it is not a panic situation”.

The delayed monsoon has raised concerns of lower food production and a consequent increase in food prices which are already high. Food inflation quickened to 9.5% in May from 8.64% a month ago, led by an increase in prices of potatoes, fruits and protein-rich items. Broader inflation, measured by the Wholesale Price Index, accelerated to 6.01% in May, the quickest pace since December.

Monsoon rainfall this season has been deficient by 43% so far, according to latest data by the India Meteorological Department. A late onset in Kerala, along with a hiatus in the advance of monsoon for 10 days in June, have contributed to deficient rainfall across the country.

Worried, the government initiated a slew of measures to fight inflation in mid-June, announcing minimum export prices for onions and potatoes to discourage exports and increase local supply and releasing rice stocks in the open market.

Ram Vilas Paswan , minister of consumer affairs, food and public distribution, who also attended the state food ministers’ meeting, said that the government was able to generate a consensus on creating a price stabilization fund, in line with the promise made in the BJP’s election manifesto. Paswan explained that the size of the corpus was yet to be decided.

“When there is a sharp increase in prices of these commodities the government will buy them using the money in the corpus and sell them at subsidized price to the customer,” Paswan said. “The details of the fund will have to be worked out,” he added.

The food minister also said that the state governments were keen on “giving more teeth” to the Essential Commodities Act by making violations a non-bailable offence.

The government brought onion and potatoes under the Essential Commodities Act for one year on 2 July through a cabinet decision.

The Act provides for the regulation and control of production, distribution and pricing of commodities, which are declared as essential for maintaining or increasing supplies or for securing their equitable distribution and availability at fair prices.

The Union government also disclosed that the newly minted NFSA would be employed as an effective measure of shielding the poor from the brunt of inflation, even as it did not rule out amendments to the UPA’s flagship programme.

“The state governments which are yet to implement the Act assured they would do so in the next three months. Some state governments asked for additional time varying from six months to a year. Effective implementation of the act is important and should be done as soon as possible ” said Paswan.

The food minister said state governments raised various issues regarding the provisions of the Act which he said could be considered in due time.

The move to rope in states as a partner is part of the strategy that Prime Minister Narendra Modi had promised to roll out if elected.

Bidyut Chakrabarty , a Delhi-based political analyst, said,“Prime Minister Narendra Modi means business and these steps are only the beginning in that direction. Modi had promised that he will involve state governments in the decision-making process and this is just a beginning towards achieving it. Modi had also promised forming a special investigation team (SIT) to bring back black money, the government has already set-up SIT and fulfilled its promise. The BJP manifesto had promised rollback of four year undergraduate programme (in Delhi University) and this too has been achieved.”

However, the opposition Congress took an exception to the government’s analysis of factors contributing to food inflation. A note circulated by the government at the food ministers’ meeting attributed inflation to rising demand because of an increase in public expenditure on schemes such as Mahatma Gandhi National Rural Employment Guarantee, rising per capita income, population growth and changing dietary pattern.

“We want to ask (the) Prime Minister whether his government is taking objection to the increased per capita income of people, does it not approve a better dietary preference of people and is the government here to do business in the name of strengthening the economy?” Congress spokesperson Randeep Surjewala said. Surjewala added that the Modi government was copying UPA’s policies to control inflation. “Whether it is on fixing minimum price of onions, limiting the stocks for traders or taking vegetables and fruits out of Agriculture Produce Market Committee Act or asking states to take action against hoarders—the NDA is copying the UPA in all its anti-inflationary actions,” he said.

Liz Mathew, Gyan Verma & PTI contributed to this story.

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