THE Prime Minister, Dr Manmohan Singh’s comment that “the worst is over on food inflation” might not sound as assuring to the people at large as it may be to his partymen. The world economy is not yet done with surprises and dips, and anything can happen; hence, to say that the worst is over can be euphoric.

 Food inflation has risen to 17 per cent. The prices of potatoes and pulses have risen by 50 per cent over the past year, rice by 11 per cent, wheat by 16 per cent and milk by 14 per cent. The public distribution system has completely failed in helping out people in a regime of rising prices of essential commodities. The Prime Minister himself told chief ministers at a conference last week in Delhi, “I think that our distribution system is hopelessly outdated and needs complete overhaul. The state governments should give focussed attention on developing marketing intervention mechanisms which can act as supplement to the public distribution system.”
The Centre and states have to resolve the paradox of the Central Pool having a wheat stock of 252 lakh tonnes on December 1, 2009 yet the prices rose. The stock of rice was 229 lakh tonnes. With an estimated procurement of 260 lakh tonnes of rice in 2009-10 and the present level of stocks, the requirement of Targeted Public Distribution and other welfare schemes at current level of allocations could be comfortably met only theoretically! Because there was a huge chasm between the stock and the consumer. The central and state governments have not been able to control the intermediaries who have kept the prices unexceptionally high. There has been phenomenal hoarding and speculation. The intermediaries have made fortunes while consumers have paid through the nose and cut down on other expenses. Stock limits have been imposed on rice to prevent hoarding and black marketeering but it did not help.
Nor did other measures help. The import duty on rice and wheat was waived. Export of non-basmati rice and wheat was banned. The government has undertaken sale of wheat under Open Market Sale Scheme. The rate of wheat and rice under this scheme was subsidised. A total of 20 lakh tonnes of wheat and 10 lakh tonnes of rice were allocated to states/UT governments for sale to retail consumers and small processors. Ten lakh tonnes of wheat and 5 lakh tonnes of rice was issued in October 2009 under the first tranche of allocations which was valid up to December 2009. The state governments were given a further extension of time up to January 31, 2010 to lift these quantities. The second tranche of allocations was released on December 16, 2009 for the quarter January-March 2010. State governments sold the rice and wheat stocks to retail consumers. In addition, central agencies such as, National Cooperative Consumers’ Federation of India Limited( NCCF) and National Agricultural Cooperative Marketing Federation (NAFED) also sold to retail consumers through their own outlets and affiliated cooperative societies at the same rates as given to the state governments.
However, all these steps did not bring the price inflation under control largely because of lack of planning, poor management and indifference. The state governments made the situation worse by not invoking the Essential Commodities Maintenance Act to prevent hoarding and take strict action against those creating artificial scarcity and fanning inflationary expectations. The states also did not remove existing curbs on the processing of imported raw sugar. Uttar Pradesh, for instance, had banned the entry of raw sugar into mills.
It is true that a part of the reason of food inflation is the international situation. Global food prices have risen sharply since the beginning of 2007. There has been rise in food prices in other countries, including those in Europe. But India’s food inflation has its own domestic reasons. The higher prices paid for domestically produced food, which are determined by MSP, are no less to blame. Food price inflation in India has been more pronounced than in other countries due to our agricultural policy. And there has been no check on the price increase in India. The factors of MSP, import restrictions, domestic cost inflation and competitive conditions have a greater impact on food prices in the country.
From a longer-term perspective, India has to pay more attention to factors that result in low productivity. Dr Singh himself lamented, “For many crops, including pulses, which are in short supply, large increases in yield per hectare is possible.” Though the performance of agriculture has not been uniform throughout and its growth rate has varied from 6 per cent to 1 per cent due to a host of factors, proper food management has ensured food security for the country despite shortages and steep price rise at global level.
With a large number of people living on subsistence level of income, the central and state governments have to provide them cheaper food by making it available to them through a vast network of distribution. While on the one side this requires a quantum jump in agricultural production, on the other, an effective distribution network.