Modi to push anti-inflation ideas he mooted as Gujarat CM

Modi to push anti-inflation ideas he mooted as Gujarat CM

With wholesale-price inflation hitting a five-month high in May, Prime Minister Narendra Modi is set to push ideas he mooted as the head of a committee of chief ministers.

As head of a working group on consumer affairs, which consisted of the chief ministers of Maharashtra, Andhra Pradesh and Tamil Nadu, Modi had submitted a report to then prime minister Manmohan Singh in January 2011. Since then, his grouse was that the Centre had not acted on that report.

These ideas are now expected to be incorporated in Finance Minister Arun Jaitley's speech during the presentation of the General Budget next month.

The panel gave 20 recommendations with 64 detailed “actionable points” that would facilitate expeditious implementation of the recommendations to rein in prices over a period of time.

The proposals included splitting up of the operations of the Food Corporation of India in terms of procurement, storage and distribution functions, and setting up of a Price Stabilisation Fund to help states in procurement and distribution.

The Modi-led panel had mooted better distribution channels from farms to consumer, increasing participation of the organised sector and cooperative bodies in retailing, including farmers’ markets, agro-processing, storage and cold chains for wastage control and reduction, and proactive monetary policy.

Modi's report called for “liberalisation of agriculture markets” to enhance the participation of the “organised sector”, including cooperatives, in “retailing” of agricultural produce.

The report also recommended keeping essential commodities out of the futures market “for the time being”, given the “lack of strong linkage between spot and future markets at present”.

Calling for a 10-year perspective plan to improve agri-infrastructure of backward and forward linkages for production and marketing, the report suggested providing “priority lending to agri-marketing activities”.

President’s message

In fact, the President's address to Parliament on June 9 had specifically referred to the setting up of the Price Stabilisation Fund, which was also promised in the BJP's election manifesto.

Mukherjee, who read out the new government's resolve on this issue, said the problem of persistent inflation is due to supply-side bottlenecks.

“We will invest heavily in rural roads, warehouses and cold-storages to minimise damage and wastage. In addition, we will ruthlessly crush black marketers and hoarders, and set up a ‘Price Stabilisation Fund’ to cushion short term spikes in case of emergencies,” he ad said.

In Tamil Nadu, after the AIADMK came to power in May 2011, such a fund was constituted with a corpus of Rs 50 crore to help cooperative institutions and the Tamil Nadu Civil Supplies Corporation procure essential commodities that are prone to abnormal price fluctuations.

The commerce ministry started operating one such scheme back in 2003 for rubber and tea-growers to make India a competitive exporter in the market as well as sustain the growers.