State agencies to intervene in market to contain prices

NEW DELHI: Government today said it proposes to involve state-run agencies and consumer federations in containing price rise by augmenting supplies in the market, while cautioning that tax cuts announced earlier may put pressure on exchequer leading to inflationary tendecies.

In a statement explaining the factors for over 12 per cent inflation and measures taken by the government to contain it, the Finance Ministry said that a scheme is proposed for strengthening non-formal public distribution system through State Civil Supplies Corporations and Consumers Marketing Federations.

The statement said it will enable them to effectively intervene in the market. "The scheme would involve providing non- plan assistance to these agencies subject to certain eligibility conditions and performance benchmarks, the details of which are being worked out," the statement said.

According to Food Ministry sources, government may announce financial assistance package of over Rs 3,000 crore to strengthen these agencies which would enable to them intervene in the open market.

"These measures are aimed at increasing domestic availability and a consequent reduction in prices through improved supply management," the statement said.

However, it warned that the fiscal measures taken by the government can lead to a vicious circle by gradually increasing fiscal deficit and creating "inflationary tendencies."