The Hindu Business Line : Feeling the pinch

The State Government can do quite a bit to mollify its citizen consumers and provide some succour to tide over the current inflationary phase in the State.

As the State with the highest per capita consumption expenditure (the total payment made by households for consumption of goods and services) in the country, Kerala has special reason to be concerned about the recent inflationary trends.

According to the Kerala State Planning Board, while in the 1970s, the average consumer expenditure per person for a period of 30 days in the rural sector of Kerala was almost close to that of the rural area in the rest of India, from 1980 onwards it began to exceed that of India and in 2002 it attained a level which exceeds that of India by 66 per cent.

As for urban areas, until the 1970s, the average consumer expenditure per person for a period of 30 days in Kerala was lower than that in India, and from 1980 onwards, the trend began to reverse as in rural area, and in 2002 it attained a level that exceeds that of India by 25 per cent.

PRICE SPIRAL

Such a propensity for consumer spending could imply that the State's citizens are watchful of price trends. These have not been encouraging lately.

According to reports, the prices of food products such as pulses, fruits, vegetables and eggs have increased on an average by as much as 40 per cent in the past year. Garlic prices have shot up by 115 per cent, red chillies by 97 per cent and onion by 92 per cent.

The Ernakulam Merchant Stall Owners Association confirms that the price of a kg of onion in the wholesale market rose to Rs 16. General secretary of the association N.H. Shameed attributed the fall in supply as a major reason for the escalating vegetable prices. Merchants supplying rice pointed out that the increase in price was naturally related to the fall in supply especially from Andhra Pradesh.

GOVT RESPONSE

The government's response has been predictably lame. It announced that the Kerala State Civil Supplies Corporation (Supplyco) would intervene strongly in the market to hold the price line.

Essential commodities would be sold at 2 per cent below the market prices through the Super Maveli Stores in Kozhikode, Thrissur, Kochi and Thiruvananthapuram and commodities would be procured directly from production centres to avert profiteering.

Even as Chief Minister V.S. Achuthanandan assured the citizens that traders would bring down prices by five per cent, the Kerala Co-operative Milk Marketing Federation Ltd (Milma) announced a hike of Re 1 per litre of milk sold through its outlet.

Clearly, the government needs to do much more to check the rise in prices. True, the State's inflation is in keeping with all-India trends. The inflation rate for last week shot up to a two-year high of 6.58 per cent, well above the 5-5.5 per cent rate targeted by the RBI.

ROLE OF PDS

With the virtual abandonment of the once-pivotal public distribution system (PDS), Kerala has had to search for alternative means of ensuring supply of essential goods. At one time, Kerala had the distinction of being the only State with a PDS that reached every resident of the State.

The Kerala PDS system functioned through a chain of fair-price shops and several goods such as soaps and detergents that are not part of the centrally determined list of items to be made available under the PDS, were also stocked for consumers.

According to the Fifth Report of the Kerala Administrative Reforms Committee, Kerala boasted a universal system of statutory rationing covering the entire population (excluding only children below two years of age), which has been hailed as the most effective PDS in the country.

The Civil Supplies Department managed to make available rationed articles to citizens at subsidised prices fixed by the government. The department also ensured the availability of other non-rationed essential commodities in the market at reasonable prices. It also took steps to prevent unfair trade practices such as hoarding, profiteering and black marketing. At the peak of the PDS, it was catering to the needs of 61,18,162 ration-card holders through a network of 348 wholesale dealers and 14,290 PDS outlets.

POLICY MEASURES

All that is, of course, mere history now, and there can be no turning the clock back on such State interventionist policies. While it is the responsibility of the Central Government to initiate appropriate macroeconomic policy measures to reduce inflation, like reducing Customs duties and tightening liquidity, the State Government can do quite a bit to mollify its citizen consumers and provide some succour to tide over the inflationary phase. Borrowing from the lessons of the past PDS experience would be a good start.

The writer can be contacted at kgkumar@gmail.com

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