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New Delhi, March 24 The Commerce Ministry and the Finance Ministry appear to be on an overdrive to ensure that prices of essential commodities such as wheat, rice and edible oil do not flare up, as inflation is being driven by food and fuel prices of late.
A spate of notifications have been issued by the DGFT of the Commerce Ministry: the ban on export of wheat and pulses from February 2, 2007 and June 22, 2006 respectively; the ban on export of non-basmati rice in October 2007 for a brief while; the order banning export of non-basmati rice below the minimum export price of Rs 26,000 per tonne and basmati rice at Rs 36,000 per tonne effective from March 5, 2008; and the ban on export of all edible oils on March 17, 2008.
The Finance Ministry had whittled down the customs duty on import of pulses to zero on June 8, 2006 and the period has since been extended to March 31, 2009. The duty on palm oil which was 99.4 per cent in July 2006 today stands at 20 per cent. Refined palm oil duty was slashed to 27 per cent from 52.5 per cent. Along with duty cuts on other edible oils, the Government also imposed a ban on export of coconut oil, provoking protests from Kerala Chief Minister Mr V.C. Achutanandan on the ground that it would hurt overseas Keralites and hit the coconut oil market.
Justifying the steep duty cuts in edible oil, the Commerce Secretary, Mr Gopal K. Pillai, told Business Line that international prices of edible oil have gone up. The steepest reduction has taken place in higher priced oil such as canola, from 75 per cent to 20 per cent. He said the price remains higher, even if you bring it down to 20 per cent, than the normal price of palm oil.
‘Rice glut unlikely’
About the latest slashing of duty on rice and the possibility of imported rice inundating the domestic market, Mr Pillai quipped that when global price is much higher than domestic price the economics of import would not work even if it is done by private parties. Moreover, he said, no rice is available for sale in the global market with leading rice producers such as Vietnam, China and Pakistan banning rice export. He said many African countries have come to India, seeking rice imports. He said the country has sufficient basic stocks of rice.
Market analysts contend that with the Government allowing State-trading agencies such as STC, MMTC and PEC to import 23 lakh tonnes (plus or minus 5 per cent), of which 18 lakh tonnes have been contracted and shipped to India by end-February 2008 to augment availability of wheat and making export of rice (both basmati and non-basmati) restrictive while slashing import duty on rice (in the category of semi-milled or wholly milled and not on husked rice or brown rice or paddy), the country is sending out signals that it is serious about removing supply constraints to avert price flare-up. Food security and price control are the overarching priority of the Government now and it is using trade and fiscal policy to achieve that.
Distribution is key
With millions relying on the public distribution system and the targeted PDS, the Central issue price for wheat and rice has not been revised since July 1, 2002. For wheat this remains at Rs 4.15 per kg for BPL and Rs 2 per kg for the beneficiaries of Antodaya Anna Yojana (AAY). For rice, it is Rs 5.65 per kg for BPL and Rs 3 per kg for AAY. Considering the wild gyrations in grain prices globally, which the Finance Minister Mr P. Chidambaram adverted to in Parliament recently, the need for building stocks to sustain the massive distribution network without wastage and pilferage assumes added significance. All the planned exercise and fiscal tools used in food management would come to nought if the delivery system is not toned up and the really needy are left unserved and underserved, food policy analysts say.