Feb 092012

The Economic Times provides a good analysis of the latest inflation figures, released last Thursday. Food inflation is at a six-month high of 11.43 per cent with vegetables 25 per cent costlier on an annual basis, fruits dearer by 11.96 per cent, milk by 10.85 per cent and eggs, meat and fish by 12.82 per cent. “This double-digit inflation comes on top of a very high level of price rise recorded in October last year, when it stood at 14.20 per cent — already a ‘high-base’ comparison. The last time food inflation stood this high was on April 9 when it was recorded at 11.53 per cent.”

Nevertheless it would be in order to demand an explanation from the Prime Minister as to what has he done with the report submitted by the Working Group on Consumer Affairs headed by Gujarat Chief Minister Narendra Modi. The other members of the committee were the Chief Ministers of Maharashtra, Andhra Pradesh and Tamil Nadu. The committee was set up in April 2010 to suggest ways and means of holding the price line for essential commodities. It’s a slim report which lists 20 recommendations with 64 detailed actionable points for their expeditious implementation. Here are some of the recommendations:

Future Markets: Considering the lack of strong linkages between spot and future markets at present, it has been suggested that for the time being essential commodities should be kept out of the future markets.

Price Stabilisation Fund: The setting up of a Price Stabilisa-tion Fund by the Government of India has been suggested to help State Governments in the procurement and distribution of essential commodities in short supply.

Agriculture Markets: They should be liberalised for improving the efficiency of distribution channels from farms to consumers, increasing the participation of organised sector and cooperatives in retailing, including farmers’ markets, agro-processing, storage and cold chains for wastage control and reduction. This is to be backed by a proactive monetary policy. For evolving a single national agriculture market, the setting up of a Ministerial-level co-ordination mechanism at the national and the regional levels for coordinated policy-making has been recommended.

Expanding Priority Sector Lending: The Modi Committee has suggested the immediate enlarging of the scope of priority sector lending in a manner that agriculture marketing activities can become eligible and the ratio of priority sector lending to the agriculture sector can be raised from the current level of 18 per cent.

Minimising Information Asymmetry: The report calls for establishing a mechanism, if necessary by creating a dedicated agency, to collect and disseminate information to all stakeholders on production, imports, stocks and overall availability of essential commodities through extensive use of information technology.

Unbundling FCI: Since the Food Corporation of India plays a major role in the procurement and distribution system of essential commodities, the committee has called for the unbundling of FCI operations for procurement, storage and distribution.

Among the other recommendations of the committee are:

  • Preparing a 10-year perspective plan for improving the country’s agri-infrastructure to ensure better linkages for farm production and marketing of farm produce.
  • Making offences under Section 10-A of the Essential Commodities Act non-bailable and setting up special courts for the speedy trial of those found violating the law.
  • Increasing the period of preventive detention under the Black Marketing Act from six months to one year.

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