What food inflation plan? PDF Print E-mail
Tuesday, 24 June 2014 00:43
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Hiking sugar import duties odd, FCI rice sale delayed

The government’s food inflation-control strategy is looking decidedly odd. At a time when, given the high import duties on several food items—50% on apples, 30% on potatoes and 100% on meat—the emphasis should be on cutting import duties, the government goes and hikes import duties on sugar from 15% to a whopping 40%. This is when, interestingly, there are no imports of sugar taking place—the move will drive inflation up as sugar prices will now factor in the higher import duties. And while concessional interest-rate loans have been extended to the industry—including the loans cleared a few months ago, the total is now around R11,000 crore—to ostensibly pay farmers their dues, it has to be mentioned the first tranche of such loans were given a few months ago without the Uttar Pradesh sugar mills paying farmers even the Fair and Remunerative Price (FRP) announced by the central government. Similarly, while the UP government has played cane politics for years by announcing a mandatory State Advised Price for cane which is much higher than the centre’s FRP, no attempt has been made to link the central concessions to the state implementing the Rangarajan formula—mills must pay farmers the FRP immediately and, after the season is over, pay 70% of all realisations to farmers. That is, an opportunity has been lost to discipline both the millers as well as the state government.

Even stranger is the lack of action on other plans outlined last week to deal with inflation. When the Centre announced it would encourage states to take fruits and vegetables out of the purview of the APMC Act, most thought the Delhi government would be the first to do so—Delhi’s Azadpur is the country’s largest mandi and the state is under the control of the Union government right now. Nothing has happened on this so far.

While the Centre announced a sale of just 5 million tonnes of the extra stocks that FCI holds—FCI holds around 40 million tonnes extra, so releasing 15-20 million tonnes could easily have been announced—even this could get held up. As FE reported on Monday, FCI is awaiting a finance ministry decision on what price the rice should be sold at—should it be at the cost of procurement and holding charges, or what? Surely this is a decision which the government could have taken before making the announcement on selling FCI stocks. Any inflation-combating plan has to be both grand in scale—selling 5million tonnes of rice to states through the PDS isn’t going to cut any ice—and has to be executed quickly.

Last Updated ( Friday, 27 June 2014 08:30 )

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