Govt fights inflation with duty reliefs

Cabinet Committee on Prices holds emergency meet late in the evening at PM's residence

Scraps import duties on edible oil; pulses exports ban stays.

Taken by surprise over the recent spike in wholesale price inflation, the government today scrapped import duties on all crude edible oil forms, while cutting duties on refined palm, sunflower, soyabean, coconut oils and hydrogenated vegetable fats to 7.5 per cent.

It also banned the export of non-basmati rice, while basmati rice minimum export price was enhanced to $1,200 per metric tonne, from $1,100 at the moment. The ban on pulses exports, already in place since last year and ending today, has been extended by one more year.

Announcing the decisions taken at a three-hour meeting of the Cabinet Committee of Prices (CCP) late in the evening at Prime Minister Manmohan Singh's residence here today, Finance Minister P Chidambaram said the government has deferred taking a decision on steel prices and iron ores, items that have also contributed to the price rise in recent weeks. Officials expect a decision on this to be taken shortly.

The notification on the tariff reductions will be issued tomorrow, but the decisions come into effect from the midnight of March 31, 2008.

In addition, the current tariff values of soyabean and palm oil will prevail until further notice. The import duty on butter and ghee has been cut to 30 per cent from 40 per cent. Import duties on maize have been abolished, from the current 15 per cent for 500,000 metric tonnes under the tariff rate quota.

In other administrative measures, the CCP also decided that for imposition of stock limits, the removal of licensing restrictions on edible oil and oil seeds has been kept in abeyance for one year. State governments will be able to impose stock limits under the Essential Commodities Act, the power that was given to them 18 months back.

"Only five or six states have exercised the power given to them. There is a large onus on state governments to exercise the power they wanted. It is largely unexercised and we would want the states to act," Chidambaram added.

The government has also decided that the export of castor, coconut and all other oils, barring sesame, will be allowed. However, coconut oil exports will be allowed only from Kochi port and the quantities will be monitored until further orders.

Chidambaram added that while these decisions were taken today, some other inflation-control measures especially on steel and iron ore were discussed, but a decision was deferred as the steel minister was travelling overseas.

The government is also meeting steel and iron ore producers tomorrow or on Wednesday to bring them around to the government's view that they should not raise prices.

Chidambaram held out a veiled warning, saying: "There are reports that steel producers are planning to raise prices. The government is extremely concerned over steel prices and we would advise them to observe restraint (and not to raise prices).

The CCP meeting was held in the backdrop of the wholesale price index based inflation rising to a 13-month high of 6.68 per cent for the week ended March 15, 2008, leading to expectations that the government and the central bank will take urgent measures to calm prices, even at the cost of sacrificing economic growth.

On Wednesday, a meeting of an empowered Group of Ministers, headed by External Affairs Minister Pranab Mukherjee, is also scheduled to take place on price rise.

Chidambaram added that he hoped these measures would cool prices.