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LATEST NEWS UPDATES | Onion forces govt to rethink farm liberalisation by Prabha Jagannathan

Onion forces govt to rethink farm liberalisation by Prabha Jagannathan

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published Published on Jan 27, 2011   modified Modified on Jan 27, 2011

The heat generated by the high food inflation may force the government to go slow, or even drop, some of its key proposals to open up the country's food and fertiliser sectors, experts say.

Decontrolling sugar and urea and freeing up some farm exports are some of the proposals the government may not touch in the coming days, they say. The proposal on foreign direct investment in multi-brand retail may also be put in the cold storage unless the proposed policy mandates investment in rural supply chains.

"Political compulsions rather than constructive long-term concern on food security and prices or economic rationale are likely to decide the pace and shape of these proposals for some time now," said an agricultural expert who served as both food and agriculture secretary some years ago.

Last week, agriculture minister Sharad Pawar said the government may not decontrol sugar as some sugar producing states have opposed the idea. Pawar had pushed for the decontrol of the sweetener until recently.

The minister also estimated the farm sector to grow at a low 3.5% in 2010-11.

The forthcoming assembly elections in West Bengal and Tamil Nadu may also make the government jittery about taking any hard economic decisions.

But experts argue that the time has run out for soft options as food inflation has now become a structural issue that cannot be addressed by short-term, cliched and uni-dimensional responses, such as anti-hoarding drives and export bans.

According to eminent agricultural economists, M S Swaminathan and Jayati Ghosh, speculative hoarding is possible only if crop shortage allows it play.

Experts say there seems to be no urgency in the government to implement the suggestions made by the Farmers Commission . The commission had some months ago suggested identification of agro climatic zones, their monitoring and nurturing to boost production to meet the increasing consumption. It had also suggested that impact of climate change on food production be factored in.

But far from coming up with viable longer term solutions, including cold storage infrastructure, the last meeting of the empowered group of ministers on food prices did not even consider soaring prices of onions, milk, eggs, vegetables and fruits.

When it came under intense pressure over rising vegetable prices a week later, the government banned sugar exports while extending the ban on the export of non-basmati rice.

"We have to meet export commitments already made but internal food price concerns are highly sensitive politically, and these compulsions bar all parties in our country from allowing cheap exports and expensive imports of food and agri commodites," said Madan Diwan, a commodity sector analyst who was on the Sharad Joshi panel on agriculture sector reforms.

Analysts say high price volatility caused by climate change can only be tackled sensibly by building sound buffer and adopting cold storage policies.

For instance, India is sitting on a bumper 82 million tonne of wheat production. It has no place to store the grain but a decision on exports in unlikely anytime soon.

The Economic Times, 27 January, 2011, http://economictimes.indiatimes.com/markets/commodities/onion-forces-govt-to-rethink-farm-liberalisation/articleshow/7369191.cms


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