Food Inflation

CII suggests a 10 Point Actionable Agenda to Curb Food Inflation:

The Confederation of India Industry (CII) is concerned about the current situation the country is facing with regard to “Rising Food Prices” again in a short time span of one year.   The brunt of the same is being felt across India and across all sections of society. In fact the food inflation stood at a higher peak of 19.9% over the same period last year when the failure of monsoon affected prices of cereals and pulses. However its recurrence now even in a good Monsoon year shows the prevalence of a deeper structural problem in the way we are managing our Food security

CII said that the Food inflation for the week ended January 1, 2011 is reported to be 16.91%.  The price of onions was a major contributor which continued to push food inflation as prices went up by 70.7% while the individual items such as egg, meat and fish became costly by 16.7%, milk by 13.2% and fruits by 17.7% annually.

Fortunately, price of pulses declined by 14.84%, wheat by 4.87%, potatoes by 1.67% and cereals by 0.12% on an annual basis. This is in contrast to the situation last year as when these commodities were the major contributors to the food inflation.   CII has been working very closely with the Ministry of Agriculture and the Planning Commission in suggesting ways for tackling inflation with regard to the food items.

However, this year with the exception of onions, there was adequate production of other vegetables, fruits and milk. The issue of wastage due to lack of cold storage and other infrastructure issues have worsened the existing inflation. The country has enough wheat, rice and sugar, but the issue is in tackling the perishables like vegetables, fruits and milk.

the CII’s 10 Point Measures – both short term and long term to tackle the inflating prices ;

1.In Short Term, Lower import duty, especially on fruit & vegetables and allow imports: Looking at the rising prices of fruit and vegetables, the Government should react fast on lowering the existing tariffs (hovering around 30% to 50%) and allow import of these commodities.

2.State Governments should take stern enforcement measures to curb hoarding and speculations.

3.The Government should invite and Incentivise private sector (both domestic and foreign), cooperatives and NGOs to come up with business models that directly link the growers with processors and retailers.

4.In Medium to Long Term, all the fruits, vegetables and other perishables including fisheries having very short shelf-life should be fully exempted from the provisions of the APMC Act. Processors and organized retailers should be incentivised to procure directly from the farmer groups (growers’ companies or cooperatives) for building infrastructure in rural areas for aggregating the fresh produce, cleaning it, grading, packaging, and storing in cold storages before bringing it for retail distribution. This will create not only employment in rural areas but also build much needed infrastructure.

5. The Centre should also encourage the States to help build this infrastructure, especially cold storages, to save on wastages which will boost supply side and help in price moderation.

6.The Government should move towards a unified national market and allow free movement of fresh produce across the country without any taxes whatsoever.

7.Most importantly, it is time to usher in market reforms by compressing the value chain of Agri-commodities. The model of creating a marketing platform at the village level needs to be promoted where the buyers will come to the producer groups directly rather than farmers going outside to sell their produce.

8.Investments in organized retail (both domestic can foreign) to shore up the entire supply chain and ensure good prices to farmers as well as consumers.

9. Strong and urgent focus is needed to enhance farm productivity by way of adequate inputs usage and by extension for enhancement of the supply side to meet the growing demand on a sustainable basis.

10. A special agreement should be signed between India and the neighbouring countries – for import – export of perishables.  This will be a confidence building measure and will ease demand supply challenges of similar commodities between India and the neighbouring countries.