The main problem facing the common man in India is the food-price spiral. The Union government is in a tizzy about how to cope with it as elections draw near in Karnataka, Madhya Pradesh, Rajasthan and Delhi. Wholesale price inflation has been lowered below 7%. But food prices in wholesale markets continue to soar. Retail prices of vegetables, cereals, edible oils, egg and fish increased by 15-20% in February. It is a pity since India has displaced Thailand as the largest exporter of rice in global markets and emerged as a major exporter of wheat as well. The government has mainly come down on traders in order to lower food prices by imposing limits on stocking rice, oilseeds and pulses and banning futures trading in a number of products. But what has eluded its attention is the fact that the prime reason for the rise in food grain prices is the accumulation of huge food stocks of around 66 million tones to meet the requirements of the pending food security bill.
There is just one way out. It is to reduce buffer stocks to a half by facilitating open market sales. Steps have been taken to modernize the food supply chain, bring down barriers to interstate movement of food products and break down trading cartels by increasing competition in wholesale trade. The Prime Minister’s Economic Advisory Council (EAC) has suggested removal of perishables from the purview of the APMC Act. This will enable retailers to sell products direct from the farmers. It will reduce wastage and significantly bring down prices of food products. But there are so many glitches. Aside from the fact that the vagaries of the weather frustrate intentions, the role of the middleman is hard to eliminate. Rise in the price of diesel and petrol as well as railway freight from time to time causes a cost-push effect. Getting higher yields through scientific methods and improving irrigation facilities can help. But has the Union Budget paid sufficient attention to it?
