Govt should probe the difference between wholesale, retail prices

A series of measures to tame inflation, with a focus on curbing hoarding, have been announced by Finance Minister Arun Jaitley.

But it is likely that the Government is barking up the wrong tree. Major commodities of policy thrust include fruits and vegetables, rice and wheat as also pulses and edible oil. If one looks at the ground reality the extent of hoarding in each of these products is unlikely to be large enough to create artificial supply shortage.

On the other hand, the difference between wholesale and retail prices is large enough to warrant an investigation. Pulses are a good example. Given their short shelf-life, perishables like fruits and vegetables do not lend themselves to large-scale manipulative hoarding. On the other hand, high cost of transportation and poor storage infrastructure lead to higher overall costs and handling losses.

The decision to advise State governments to exempt fruits and vegetables from the onerous mandi system and allow farmers the freedom to market directly to buyers outside the mandi system is welcome.

Over time, it will encourage private processors to network with groups of growers for captive supplies. However, taking fruits and vegetables out of the purview of APMC rules was talked about even late last year but nothing really happened.

It is necessary to take States on board and ensure the rule is implemented. As for rice and wheat, the Government itself is the biggest hoarder, with inventories far in excess of minimum buffer norms stipulated. The system of open-ended procurement of rice and wheat deserves a serious review for reasons of logistics, subsidy burden and ecology. The decision to unload 50 lakh tonnes of rice in the open market is welcome.

It will augment supplies. But the price at which open market sale will take place is not known. Anything below the market price will involve subsidy and no takers above market price.

As for pulses and edible oil, India is a large importer, in addition to being a large producer.

World market conditions are such that prices of edible oil (mainly palm oil and soyabean oil) are softening. Same is the case with pulses because of large harvests anticipated in Canada and elsewhere.

In a market of falling prices no trader in his right senses would hoard pulses and edible oil. At the same time, storage limits are already in operation.

If anything, chana pries have been ruling below the minimum support price for more than one year, a clear disincentive to chana growers.

There are structural issues in agriculture and agri-marketing that stymie natural growth.

They deserve close attention. Trade and tariff measures will go only some way in addressing inflation. Unless the structural issues are addressed with a long-term perspective, food inflation will continue to haunt from time to time.

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