Cost push, supply side problems behind price rise: Pranab Mukherjee

Finance minister Pranab Mukherjee today partly attributed the reason behind rising prices of food items to increased cost and supply constrains.

"The price rise is mainly due to the supply side mechanism, but there is also an in-built cost push element in the rise of prices," he said while inaugurating the 109th annual general meeting of the Bharat Chamber of Commerce here.

Incidentally, the food inflation eased a bit to 18.65% for the second week in December from the decade's high of 19.95% a week earlier.

Citing an example of the cost push, he said while wheat was procured at Rs1,100 per quintal, factoring of various costs like mandi costs and bank interests pushed the prices.

Besides, to induce farmers to produce more, the government had increased the per quintal procurement price of wheat by Rs450 and that of rice by Rs400 between 2001 and 2009, he said.

Pointing out that a quintal of paddy yeilded about 67 kg of rice, he said, "So, if you compare the prices, there is an in-built cost-push."

In the mid-term review of the economy, the government had underlined a need for urgent action to contain the rising prices of food articles hitting the common man hard.

"The rise in prices of primary articles of consumption of the common man, that has been occurring in the recent times, is indeed a cause of concern, and this needs to be attended to on an urgent basis," the review table by Mukherjee in Parliament last week said.

He said to increase supply of pulses, sugar and edible oils, his ministry had asked the private importers to import these commodities on government's account, even at the risk of increasing subsidies.