Export of politically-sensitive onions is expected to face the first set of checks as expectations of weak monsoon rains have prompted the government to begin work on keeping food inflation under control.
Sources said the government has identified onions, along with non-basmati rice, pulses, potatoes and milk as products that need intense monitoring given the possibility of a spike in prices in the coming months. Over the weekend, cabinet secretary Ajit Seth met officials from the food and consumer affairs, agriculture, finance and commerce and industry ministries to take stock of the price situation.
Since the government has comfortable stocks of grains, potato and onion at the moment, monitoring will be crucial so that supplies can be directed towards critical zones, officials said. Even then, onion exports will once again be subject to a minimum export price, which will be higher than the prevailing market price, to discourage outbound shipments of the key kitchen ingredient. Already, prices of onions used as seed have more than doubled over the past few weeks, market sources said.
Weak rains may hit western states such as Gujarat, Maharashtra and Rajasthan the most as northern states have an irrigation network to depend on. As a result, production of cotton and some oilseeds may be affected. The other fallout could be on onions as the new crop hits the market in October. Weak rains will delay, if not reduce, arrivals, resulting in a spike as was seen last year, although it was on account of heavy rains in parts of Maharashtra.
"Indian rainfall forecast worsens. Government should start counting onions lest it is hit by a surprise in Oct-Nov," tweeted agriculture economist Ashok Gulati.
The government is taking no chances, given the possible adverse fallout. The consumer affairs ministry has dashed off letters to state governments asking them to identify hoarders for effective crack down. The worry stems from onions as the wholesale price is around Rs 13 a kg, while the retail price is Rs 22-23 a kg.
The agriculture ministry has also informed the cabinet secretariat that area under cultivation for pulses has come down, resulting in the possibility of higher imports, especially of moong daal.
Milk is the other area of concern, where prices have increased by Rs 4 a litre over the past 12 months. Experts suggested that the government could respond by reducing the import duty on skimmed milk powder from the current level of 60% to signal lower prices.
In case of grains, the government has sufficient stock although there has been an increase in recent months despite stocks of 69.4 million with the Food Corporation of India. This included rice and paddy stocks of close to 28 million tones. Sources indicated the price issue will be addressed by releasing more stocks into the market. According to official data the average wholesale price of rice has increased to Rs 2877 per quintal, roughly Rs 29 a kg, compared to Rs 2,719 a year ago — an increase of a little under 6%.
"The government needs to think three-four months in advance for any political action to be effective. If domestic supplies of food products suffer (due to weak rains), the only way out is to import. Import duty can be slashed for certain products and can be increased, when the crisis gets over," Gulati said, when contacted over the phone.
Madan Sabhnavis, chief economist at ratings agency Care, too suggested that higher imports could help but warned against initiating measures too soon. "What if the monsoon is normal? You will be saddled with the stock," he said
But the government is on high alert, with the cabinet secretary scheduled to take stock of the situation every fortnight, compared to a monthly review of prices so far.
Source:- economictimes.indiatimes.com
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