Government sets up panel to check price rise

Under intense attack over spiralling prices, the Centre today decided to set up a committee of chief ministers and Union ministers to suggest steps to reduce costs of food items with prime minister Manmohan Singh asserting that the worst was over.

At a conference of chief ministers called here to discuss the pressing concern, the Union government faced severe criticism from opposition-ruled states, with Gujarat chief minister Narendra Modi leading the way in blaming "faulty" policies of the Centre for the inflation.

Chief ministers of opposition-ruled states, including Gujarat, Chhattisgarh and West Bengal, slammed the Centre for putting the onus of controlling price rise on states and questioned the steps being taken by the UPA government. 

The meeting saw a spat between Union finance minister Pranab Mukherjee and Modi, when the Gujarat chief minister said the UPA government had not fulfilled its poll promise of providing wheat and rice at concessional prices. 

After the day-long deliberations, a decision was taken to constitute a core group of chief ministers and central ministers concerned to suggest ways to reduce prices and give relief to vulnerable sections of the society. 

The committee will include chief ministers of Andhra Pradesh, Assam, Bihar, West Bengal, Punjab, Gujarat, Haryana, Tamil Nadu, Madhya Pradesh and Chhattisgarh. 

Union finance minister Pranab Mukherjee, food and agriculture minister Sharad Pawar and planning commission deputy chairman Montek Singh Ahluwalia will also form part of the committee. 

The committee will recommend measures like reducing gap between farm gate prices and retail prices, ensuring effective
delivery of essential commodities to poor, raising agriculture
production and better implementation of the Essential
Commodities Act.

The conference was convened as food inflation touched the decade's high of nearly 20% in December, driven by rising prices of essential items like sugar, pulses and vegetables and food inflation.

Announcing the decision to set up the Committee, the Central government said it had "large stocks" of wheat and rice which it would utilise to ensure supplies to PDS as well as open market operations.

Earlier, while inaugurating the conference, the prime minister said the worst of food inflation is over and the situation will ease soon.

"... the worst is over as far as food inflation is concerned. I am confident that we will soon be able to stabilise food prices," he told the conference attended by 24 chief ministers, nine Lt governors and members of Union cabinet committee on prices.

Uttar Pradesh chief minister Mayawati, who has been demanding resignation of Union agriculture minister Sharad Pawar over the issue of price rise, skipped the conference.

Instead, state finance minister Lalji Verma attended it.

Manmohan Singh acknowledged that the government had been "less successful" on food prices front while it "did well to protect
incomes of poor."
    
He said food prices had "softened in recent weeks and I expect this to continue."

Pointing out that agriculture is a State subject, the prime minister asked the chief ministers to introspect on why more attention was not being paid to highly cost-effective means of raising productivity and production.

He sought to put part of blame for price rise on states by saying that their initial data of less agriculture production led to inflationary expectations.

He asked states to overhaul their "hopelessly outdated" PDS system and suggested that the chief ministers should post
their best officers as agriculture production commissioners.

Sending a stern warning to hoarders, he said powers under the Essential Commodities Act would be used against them to stop creation of artificial scarcity.

"We are all very concerned about the distress that the sharp rise in food prices has caused to the common man," he said.

Singh made a strong case for opening of retail trade for greater competition pointing out that there was a huge difference between the wholesale and retail prices.

Under the current dispensation, only domestic business houses are allowed to enter the retail sector. The government has not taken a view on opening retail trade to foreign direct investment (FDI), though overseas companies are permitted in wholesale trade.

"We need greater competition and therefore need to take a firm view on opening up the retail trade," he said. 

Expressing concern over multiple state and local taxes and levies, he said they collectively increase the cost of essential commodities by 10 to 15 per cent. "This too needs to be addressed," he added.