Pranab Mukherjee asks CMs to crack down on hoarders to cool food prices

Under attack for inability to control surging food prices, especially onions, finance minister Pranab Mukherjee has written a letter to state chief ministers asking them to crack down on hoarders to ensure increase in supply of essential items.

"The finance minister has written a letter to all state chief ministers to crack down on hoarders for removing supply bottlenecks and has sought their help in controlling inflation," a key source said in Delhi.

Yesterday, Mukherjee had said the state governments need to ensure that all bottlenecks in the supply chain are removed so that food prices can be brought down quickly.

Food inflation climbed nearly to a year's high of 18.32% on December 25, due to spurt in prices of onions among other vegetables  besides milk.

The wholesale food inflation jumped by 3.88 percentage points from 14.44% in the previous week ending December 18, 2010, taking the government by surprise.

The extent of high food inflation could be gauged from the fact that the rate of price rise last year at this point of time was almost 20%.

It means that food inflation now is 18.32% over 20% last year.

The damage to onion crops in parts of Maharashtra due to unseasonal rains had led to short supply, as its prices skyrocketed to Rs75-80 a kg in various retail shops in the country.

However, the Centre's move to ban onion exports and remove customs and countervailing duties on the vegetable led to some cooling of prices later.

Prices are now ruling at around Rs45-50 a kg.

Meanwhile, Pakistan has refused to export onions to India, which may blunt the impact of removing customs and countervailing duties by the government here.

The further easing of onion prices depends on its imports from other countries as well as crackdown on hoarders, analysts said.

Chief economic advisor Kaushik Basu recently blamed cartels among traders for high onion prices.

He had said the movement of onions should be expedited to cool down its prices.

In fact, home minister P Chidambaram wondered recently if the government has all the tools to calm down food prices.

This implies that the Centre has to rely on cooperation of states to bring down prices of essential commodities.

The rising food prices have given another ammunition to the opposition to corner the government.

BJP spokesperson Shahnawaz Hussain said yesterday that the Congress-led government was not doing enough to tackle the crisis and it stood "exposed" in front of the people.