Fair food prices

It is clear that there is utter confusion in government about the ways and means adopted to deal with the high food prices that have been a source of discontent among ordinary people. Last year, it was said that the price rise was due to shortfall in monsoon and the consequent shortfall in production.

Government now is of the view that it should sell five million tonnes of the cereals — 3.5 million tonnes of wheat and 1.5 million tonnes of rice — from its stocks in order to keep the prices down. And it wants to sell at the price it had paid to the farmers.

But while making bulk sales to biscuit manufacturers the price is to be higher than the procurement price paid to the farmers. That is, it is being sold in the open market though the general policy with regard to procured grain is to sell it through the public distribution system (PDS) to help people below-the-poverty-line (BPL). The price at which it is to be sold then cannot be at the market rate. Government’s decision then seems to arise from other pressures and considerations.

A clue is provided by the statement of Roller Flour Millers’ Federation president Vineeta Sharma that the mills need eight to nine million tonnes of wheat till March when the next crop arrives. There is no doubt that the supply-demand situation, which is the prime price determinant, changes constantly and governmental response is to ease the situation. It seems that government’s decision to sell from its buffer stocks is an intervention to help the millers.

There is nothing inherently wrong if the government were to help out the millers at a time when grains in the state warehouses stood at comfortable levels, with a stock of 35.16 million tonnes of wheat and 25.3 million tonnes of rice as on June 1.

What needs to be considered is whether it is better if the scope for governmental intervention is restricted rather than expanded. There is, of course, the primary obligation to help the farmers with assured prices and procurement and the needy people with food at fair prices. The others will have to fend for themselves. There would of course be fluctuations and consequent uncertainties in a free market situation, but it would also be an incentive to the farmers and grain traders as well.

The only caveat is that it should follow the rules of fair competition. It would help in creating efficiencies which are crucial for growth in the agricultural sector. What is missing then is a clear policy that strengthens free and fair trade in food grains as in all other sectors.