Govt announces more of the same to combat rising food prices

After hectic parleys among various ministries, the government today announced a slew of steps to tackle rising food prices but failed to impress its critics who called the measures toothless.

The new measures — including a scheme to sell onions at Rs35 a kilogram — are similar to those announced by the government to beat rising prices a year ago, except that this time it sounds less confident.

In a carefully worded statement, the prime minister laid the blame for rising prices on India’s newfound prosperity. Planning Commission deputy chairperson Montek Singh Ahluwalia had taken the same line.

“The rise in prices is partly due to late rains, which affected the onion crop,” the statement posted on the prime minister's official website said.

“There is also an underlying increase in prices of milk, eggs, meat
and fish, which is the result of fast growth of the economy, leading
to rising income levels, combined with the effect of several
inclusiveness programmes which put greater income in the hands of the relatively poor whose food consumption increases. As incomes rise, demand shifts towards horticultural crops, dairy products,” it added.

The prime minister bemoaned the Centre’s inability to control
vegetable prices, pointing out that unlike grains and pulses, it was
not possible to keep buffer stocks to tide over scarcities.

“The only lasting solution to food price inflation lies in increasing agricultural productivity... not merely in cereals but also in pulses,
oilseeds, vegetables and fruits, milk and milk products, poultry etc,” the prime minister's statement said, adding that infrastructure such as market facilities and cold storage need to be built up for perishable items.

Despite this, the prime minister said, the government will try to fight the rising prices with the instruments at its disposal.

Among the 11 new measures announced is a move by central government-controlled marketing organisations NAFED and NCCF to sell onions at Rs35 a kg from their retail outlets, reform of the agriculture laws of the states, strengthening of the public distribution system, and the setting up of an inter-ministerial group to suggest further measures.

The announcements, most of which are repetitions of existing policies and failed to meet the expectations built up over the past two days, predictably drew a sarcastic response from the opposition.

“They have been confabulating for three days and this is what they  have come up with,” asked Ravi Shankar Prasad, spokesperson for the main opposition Bharatiya Janata Party. “The government has no mechanism, no initiative and no policy to fight the problem at hand,” he said.

Such criticism aside, the government seemed to hint at possible long-term policy moves to bring agricultural markets under control.

First, it is likely to increase pressure on states to reform their Agricultural Produce Market Committee (APMC) Acts which prevent private companies from dealing in agricultural commodities.

Second, it is setting up a joint team of the department of industrial policy and promotion, which oversees industry-related laws, the
department of food and public distribution, ministry of food processing, and the Planning Commission to ‘encourage’ investment in the agricultural supply chain.

“Investment will be encouraged in supply chains, including provisions for cold storages, which will be dovetailed with organised retail chains,” the prime minister's statement said,
echoing a longstanding demand from industry — both Indian and
foreign — to be allowed to buy agricultural commodities directly from farmers.

Mike Duke, CEO of Wal-Mart, the world’s largest company, had recently held the lack of big companies directly responsible for India’s sporadic price spikes in agricultural commodities.