Cabinet meet on inflation, commodities supply today
Under attack from components of the ruling alliance as well as the Opposition over surging inflation, the Union cabinet will take stock of the price situation and availability of essential commodities at its meeting on Thursday.
By TNN |
NEW DELHI: Under attack from components of the ruling alliance as well as the Opposition over surging inflation, the Union cabinet will take stock of the price situation and availability of essential commodities at its meeting on Thursday.
The government has been under pressure from the Congress leadership to tackle inflation in a more effective manner after the party’s defeat in the recent assembly polls and its meltdown in the MCD election. The Congress fears that the disquiet over the government’s inability to rein in prices could lead to major setbacks in the coming electoral encounters.
Although finance minister P Chidambaram on Wednesday tried to see inflation as a global problem, his reasoning has not many takers in the ruling alliance. Left and UPA allies like the RJD have been maintaining that the government did not take timely measures to address shortages of essential commodities. According to the Left, large Indian and foreign companies benefitted from measures taken by the government such as cutting down customs duty on inputs and permission to import commodities like wheat and pulses.
Among the essential items, edible oil and wheat are causes of concern for the government. A 16% sharp fall in oilseeds production this year (4.98 m tonnes compared to last year 7.99 mt last year), thanks primarily to a 47% drop in groundnut production plus an 18% drop in mustard production, spells an unusually high edible oil imports bill.
And the need for a three million tonne wheat import threatens to persist this year too to oil the government’s PDS and welfare programmes despite optimistic wheat output estimates. Both these issues are likely to dominate the Cabinet’s deliberations on food grain availability here on Thursday.
In addition, what is also likely to figure in the Cabinet’s deliberations is the significantly higher sugar cane output estimate spelt out in the third advance crop estimates put out recently by the farm ministry.
Significantly, most of the govenrment’s worries over food grain availability, which is overall better placed this year compared to last according to the third advance estimates on crop production, will be moored heavily in apprehensions over the political fallout of sustained high inflation, already at higher than projected rates, and high domestic prices for essential commodities, thus impacting political prospects directly.
Having lost a good chunk of the latter half of 2006 to screaming inflation and, subsequently, Punjab and Uttaranchal too, the UPA needs to brainstorm over a quick fix strategy to torpedo sustained high inflation stemming growth and economic prospects.
The government has been under pressure from the Congress leadership to tackle inflation in a more effective manner after the party’s defeat in the recent assembly polls and its meltdown in the MCD election. The Congress fears that the disquiet over the government’s inability to rein in prices could lead to major setbacks in the coming electoral encounters.
Although finance minister P Chidambaram on Wednesday tried to see inflation as a global problem, his reasoning has not many takers in the ruling alliance. Left and UPA allies like the RJD have been maintaining that the government did not take timely measures to address shortages of essential commodities. According to the Left, large Indian and foreign companies benefitted from measures taken by the government such as cutting down customs duty on inputs and permission to import commodities like wheat and pulses.
Among the essential items, edible oil and wheat are causes of concern for the government. A 16% sharp fall in oilseeds production this year (4.98 m tonnes compared to last year 7.99 mt last year), thanks primarily to a 47% drop in groundnut production plus an 18% drop in mustard production, spells an unusually high edible oil imports bill.
And the need for a three million tonne wheat import threatens to persist this year too to oil the government’s PDS and welfare programmes despite optimistic wheat output estimates. Both these issues are likely to dominate the Cabinet’s deliberations on food grain availability here on Thursday.
In addition, what is also likely to figure in the Cabinet’s deliberations is the significantly higher sugar cane output estimate spelt out in the third advance crop estimates put out recently by the farm ministry.
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Significantly, most of the govenrment’s worries over food grain availability, which is overall better placed this year compared to last according to the third advance estimates on crop production, will be moored heavily in apprehensions over the political fallout of sustained high inflation, already at higher than projected rates, and high domestic prices for essential commodities, thus impacting political prospects directly.
Having lost a good chunk of the latter half of 2006 to screaming inflation and, subsequently, Punjab and Uttaranchal too, the UPA needs to brainstorm over a quick fix strategy to torpedo sustained high inflation stemming growth and economic prospects.
Ironically, pulses, whose unavailability and high prices in the tight global market where India is the biggest producer and consumer ensured that the consumer paid high domestic rates for the commodity from the latter half 2006 to the first half of 2007, would worry the government much lesser. Production figures are estimated to jump 5.3% to 14.1 mt compared to a lower 13.39 mt in 05-06 despite a fall in arhar production by some 0.20 mt to 2.51 mt this year.
Curiously, on the wheat front, the Cabinet cannot wish away entirely the possibility of a hefty import bill for around three million tonnes of high priced wheat this year (the global market for wheat is tight with lower supplies) compared to last year’s five million tonne imports.
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