The Hindu Business Line : Government trying to mask ground reality in price rise

Buckling under pressure from political allies and adverse public opinion over rising prices of several essential food items, the Central Government, in the last three months, took a series of decisions to control prices.

Some of these were regressive and reminded one of the choking regime of controls and restrictions until the 1990s.

Reining in prices

The recent steps to rein-in prices included banning export of pulses and sugar, allowing import of wheat, sugar and pulses at zero-duty, reducing basic customs duty on palm oil, imposing stock limits and tightening the regulatory mechanism of futures trading.

Some of the decisions such as duty-free import of sugar or wheat were unthinkable until a few months ago.

The Government found itself in a spot over shortages and price rise. Now, after having taken these `extreme' steps , the Centre would like everyone to believe that the price rise was normal.

To a starred question on `hoarding of foodgrains by traders to create artificial scarcity', the Minister for Agriculture and Food, Mr Sharad Pawar, informed the Rajya Sabha on August 11 that "there has been no abnormal or unusual rise in prices (of essential food items) during the last three months as shown in the changes in the wholesale price index (WPI) of these commodities".

Not justified

Rather than clearing doubts, the Minister's answer actually raises a number of questions. If the price rise has not been abnormal or unusual, why did the country witness knee-jerk reaction from the Government in the form of precipitate action on the commodity front?

Take sugar, for instance. If, as per statistics quoted in the Rajya Sabha, sugar prices had actually declined in the last three months, there was absolutely no justification for imposing a sudden ban on export.

Even the export obligation of raw sugar importers had to be postponed. Also, there was neither any provocation nor justification to allow white sugar imports duty-free.

In case of pulses and wheat, according to the Minister, the WPI had gone up by 5.1 and 6.0 respectively. If there was nothing unusual or abnormal in this change, again, the precipitate steps banning imports and opening up exports duty-free would seem unprovoked and unwarranted.

The Minister's answer shows how utterly casual or indifferent the Government 's response is to questions in Parliament. The policymakers are under pressure and would like to play down the effects of the price spiral. But to try to mask the ground reality and fail in the attempt is tragedy if not farce.