Free Press Journal

Grappling with food inflation and cartels

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Food inflation is becoming a cause of concern for the Government. Before it goes out of hand, there should be urgent steps taken to contain it. Latest figures released on Thursday revealed that Wholesale Price Index had moved up by 1.62 percent in June. This is double the rate recorded in each of the previous two months. In fact, retail inflation too inched up to a 22-month high at 5.77 percent from 5.76 percent in the previous month. Altogether, the WPI rose 3.82 percent in 2016-17 until last month; the corresponding figure for the same period last year was 1.70 percent. Food inflation was mainly to blame for the increase. From 7.88 percent in May, it rose 8.18 percent in June. In fact, the Consumer Price Index, in which the weightage to food items is much greater, rose 7.38 percent in June and 7.20 percent in May. Potato was the king among all inflationary items in the food bracket, rising as much as 64.41 percent in June from 60.01 percent in May. Happily, pulses did not register that high price-rise, going up by 26.61 percent in June against 35.56 percent in May. As usual, the onset of the monsoon season also meant a sharp spurt in the prices of vegetables. Vegetables rose 16.91 percent in June as against 12.94 percent in May. Given the spurt in food inflation, both at the wholesale and consumer levels, any relaxation in the interest rate can be ruled out when RBI Governor Raghuram Rajan announces the next monetary policy review on August 5. However, it is a mistake to believe that interest rates have a direct bearing on the prices of food, though sympathetic rise due to secular economic factors cannot be ruled out. Aside from the seasonal problems, supply-side concerns continue to push up prices. The stranglehold of vegetable and food cartels in various mandis needs to be broken. In this regard, reports that the Maharashtra Government is determined to free fruits and vegetables from the ambit of the Agricultural Produce Market Committee Act ought to be welcome. Indeed, the APMC law needs to be scrapped altogether since it allows middlemen to arbitrarily increase prices without any reference to the actual price paid to the farmers. Doing away with the greedy middlemen for the sake of consumers is a worthwhile project and must be implemented without let or hindrance. It is reported that Sharad Pawar and a few other Opposition leaders in the State are opposed to the scrapping of APMC. They must be exposed. Chief Minister Devendra Fadnavis must safeguard the interests of consumers and farmers instead of persisting with a law which allows a free hand to middlemen to exploit both.

Meanwhile, the withdrawal of agitation by vegetable and fruit traders in Maharashtra on Friday seems to have made them realise that the public opinion is against them. Neither farmers, who are denied a fair price for their produce, nor consumers, who have to pay a high price for fruits and vegetables, would support such a selfish protest. Even leaders like Pawar and others arrayed on the side of traders would have been forced on the back foot had they openly come out in support of the protesting traders. In any case, the authorities had taken steps to fail the strike by hurriedly arranging to truck supplies from the agriculture centers into big markets such as Mumbai and Pune. Just as well that the striking traders realised their folly and called off the agitation. The ordinance issued by the State Government withdrawing vegetables and fruits from the purview of the APMC act might be the first step to totally scrap the 1963 law which ended up empowering middlemen without providing relief either to growers or consumers. Notably, a number of State governments have already reviewed the APMC law to benefit consumers. Now that Maharashtra too is doing it, this must be welcomed. Consumers and growers should be empowered, not  middlemen.