Price rise a concern, but we'll do our best: FM

Finance Minister P Chidambaram has said the government will take all measures to tide over the rise in prices of essential commodities.

Replying to a discussion on price rise, Chidambaram told the Rajya Sabha that the chief ministers could pass a "control order" under the Essential Commodities Act to deal with price manipulation, blackmarketing and hoarding, in consultation with the Centre.

The states' control orders could override the February 2002 notification of the NDA government that allowed traders to freely buy, sell and transport foodstuff without any licence under the Essential Commodities Act, 1955.

The Centre, however, remains non-committal on the demand to rescind the notification, as demanded by Congress chief ministers early this month.

He added that the government would not hesitate to resort to larger imports of commodities to meet the supply constraint. "Nothing wrong with imports," he said, adding that the Centre had already decided to allow zero duty import of pulses and put a ban on export of the commodity.

On the demand for a ban on future trading in essential commodities, Chidambaram said: "I am not entirely convinced if it is right for India." He urged MPs to first pass the Bill empowering the regulator (for future trading) in the monsoon session.

Chidambaram said the real problem behind the recent price rise lay in the stagnating production of all major commodities, including wheat and rice, in the past decade due to the absence of any technological breakthrough for enhancing productivity.

He said procurement had been low this year in Punjab, UP and Haryana and nil in Madhya Pradesh, Bihar and Rajasthan. Of the foodgrain procurement target of 162 lakh tonnes, actual procurement was over 92 lakh tonnes.

The government has already allowed import of 35 lakh tonnes of wheat by state agencies and further permitted private wheat user industries to import the commodity at 5 per cent import duty.

Similarly, steps have also been taken to keep prices of sugar under check by banning its exports. He cited three reasons for the recent price rise "" cost-push inflation, demand-pull inflation and supply shocks. The hike in international crude price "" from $28 a barrel during the NDA government to $67 today "" was one main reason, he added.

He added that global GDP was growing at 4.5 per cent and world over demand had outpaced capacities. Home loans have grown by 44 per cent, which has an impact on the prices of steel and cement. Non-food credit has been increasing by 30 to 33 per cent in the last three years, which will "overheat" the economy.

He, however, admitted that the supply and demand scenario could not be managed as efficiently as "I should have" but said no FM could have done anything given the "supply constraints".

He added that global GDP was growing at 4.5 per cent and world over demand had outpaced capacities.