Can't go back to controls, says PM

THE FEEL-BAD FACTOR

Prime Minister Manmohan Singh today said the country could not return to an era of "blind control" to check the rising prices of various commodities.

"A steep rise in food prices will make inflation control more difficult, and can thereby hurt the cause of macroeconomic stability...We cannot react to such a situation by returning to an era of blind controls and by depressing agriculture's terms of trade.

That can hurt the welfare of our farmers as well as the long-term growth of the economy," the prime minister said today.

He was speaking at the Global Agro Industries Forum here after receiving the UN Food and Agriculture Organisation's Agri-cola award for his contribution to the farm and social sector.

Singh's comments come at a time when there is a high inflationary pressure from the rising prices of food and metals along with demands from various sections to introduce a regulator to tame the increasing steel prices.

Union Steel Minister Ram Vilas Paswan told reporters today that he has written to the prime minister about the option of introducing a regulator to check an unjustified hike in steel prices. The steel ministry has persuaded steel producers to cut prices by Rs 1,500-2,000 a tonne.

The government has taken a host of steps to check the inflation, which stood at a 40-month high of 7 per cent for the week ended March 22. It banned the export of non-basmati rice and edible oil and withdrew duty entitlement passbook scheme benefits on exports of steel and basmati rice.

However, the prime minister said the situation is not unique to India. "The world as a whole is faced with a situation where rising demand for food is not being met with a similar supply side response," he said.

He added that the situation was getting more complex due to the growing demand for biofuels. "It is particularly worrisome that the new economics of biofuels is encouraging a shift of land away from food crops. What this has done is that for the first time, there is a direct linkage between oil prices and food prices."

Singh also spoke about the inefficacy of subsidies in improving the farm sector. "Farmers and workers seek incomes, not subsidies. They seek markets and employment, not hand-outs," he said.

"I believe that farming is increasingly becoming an unviable business proposition for many rural households. Small and marginal farms have become an unviable proposition. We need to make farming viable at this scale. Otherwise, it would be virtually impossible to reduce rural poverty and distress," the prime minister said.