Liquidate excess grain stocks to tame inflation, says CACP chief

BS Reporter New Delhi
Last Updated : May 22 2013 | 2:31 AM IST
Ashok Gulati, chairman of the government's Commission for Agricultural Costs and Prices (CACP), has blamed the food management policy for the paradox of high inflation in cereal prices and bulging grain stocks in state godowns.

This, he said, was being done by raising the supply of money into the economy through excess procurement of foodgrain without a corresponding supply into the market.

In a paper, co-authored with Surabhi Jain, joint director, on buffer stock policy in the wake of the food security Bill (FSB), he recommended the government liquidate excess stocks to make food management viable. This would also, he said, bring down cereal inflation and narrow the fiscal deficit. Allowing companies to export 10 million tonnes of grain would bring down the ballooning current account deficit (CAD), he said.

The paper noted central agencies had excess stock even after taking into account what was needed for the FSB. The authors calculated that stocks with the Food Corporation of India (FCI) would be in excess of 30 million tonnes as on July 1. The value locked in these ranges from Rs 70,000 crore to Rs 92,000 crore.

The paper suggested states where the Public Distribution Systems have been integrated with Aadhaar, the citizen identification number, be allowed to lift 36 months of their offtake requirements at a discounted price. The discount, the authors suggested, would be equal to the cost of carrying by FCI.

These states can ask consumers to lift their 36 months' quota at one go, with a discount on the PDS price. That way, consumers can get a larger quantity of grain and FCI would have more storage space.

One of three other alternatives suggested is an open market sale scheme at last year's MSP, beside a maximum of five per cent taxes, cess and others.

This would save the large costs of carrying excess stocks, as well as the capital locked in these. If these stocks are liquidated, the value encashed can help in bridging the fiscal deficit and also improve the flow of rice & wheat in the economy.

"Unloading about eight mt of wheat and rice in the domestic market can surely tame and bring down cereal inflation," the authors said.
 

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First Published: May 22 2013 | 12:47 AM IST

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