Price rise: 3 weeks up, where is the relief Mr Pawar?

NEW DELHI: Onion prices show no sign of climbing down even as the three-week deadline set by Sharad Pawar ends. They still hover around Rs 60-70/kg. It's not onions alone, other vegetables too continue to be very expensive. This is a cause for worry for the government which is already under pressure from soaring inflation.

The unbridled price rise has forced Prime Minister Manmohan Singh to call a meeting on Tuesday to discuss steps to calm prices and bring relief to millions of households.

On December 21, after retail onion prices doubled suddenly, Pawar had said the prices would remain high for three weeks and then show a declining trend. He was betting on the expected arrival of fresh stocks from Maharashtra and Rajasthan. His calculations have obviously not worked.

Measures like asking states to curb hoarding haven't yielded success, while income tax raids on traders in Nashik and Delhi have backfired. Angry traders have gone on strike even as there is a slowdown in the arrival of onions from Pakistan. This meant that retail rates of onions were ruling at Rs 60-70/kg in Delhi and Mumbai on Monday.

The Centre's compilation of retail prices (invariably, a moderate estimate) show onion in the Delhi market costing around Rs 60/kg. Even at that rate, the jump in prices is 90% from a month ago. Cooking oil and atta (wheat flour) have also become costlier in the last month.

Tuesday's meeting is not specifically on food inflation alone—although at 18.32% for the week ending December 25 it is serious enough. The PM is expected to review the overall price situation, which will include an assessment of all factors driving up prices and possible remedies.

Economists say the government waited too long before banning onion exports in December and this has prolonged the problem. They say that similar supply shocks can't be ruled out in the future. According to a Standard Chartered Bank research note, a huge increase in vegetable prices contributed to 40% of inflation in food articles for the week ending December 25. "While ground frost and excessive rainfall partly explained the abrupt jump in prices, inefficient supply and distribution mechanisms exacerbated the price increase," the note said.

A recent review by a committee of secretaries also did not see any relief from high prices in the immediate term. A steady rise in rural demand in milk and proteins is affecting supplies to the cities and also pushing up the cost of procurement. Late rains in November 2010 hit the kharif crop in some states like Maharashtra and Rajasthan while speculation and hoarding also contributed in keeping cost of foodstuff high.