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LATEST NEWS UPDATES | Runaway food prices highlight the need to unshackle the farm sector

Runaway food prices highlight the need to unshackle the farm sector

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published Published on Feb 18, 2013   modified Modified on Feb 18, 2013
-The Times of India

Why isn't aam admi smiling? The question's relevant, since some cheer's apparent in government circles over wholesale price index-based inflation falling to 6.62% in January. Headline inflation, it's said, will drop further by March-end. To common people, the WPI inflation figure's a meaningless number. If WPI inflation's dipped a fourth successive month, food prices have been riding high for far longer.

Policymakers periodically recommend release of foodgrains from government stocks to cool food inflation. While timely action in this regard is required, are we to assume ordinary folks eat wheat and rice but not vegetables and fruits? Onion price shot up 111.52% in January, from 69.24% in December 2012. Potatoes, rising 79.07%, and other vegetables also became dearer. That translates into more than just statistics for shoppers. Nor is it enough to attribute their woes to hoarding and cartelisation. With food bills soaring for a while now, why haven't the authorities yet managed an effective crackdown?

Let's face it. In a nation with growing and changing food demands, we've done little to address supply-side bottlenecks widening the gap between farm-gate and retail prices. Nor have we adequately pushed diversification beyond farmland-hogging cultivation of foodgrains. Even when we act, reform doesn't go far enough. Take multi-brand retail FDI. We want much-needed capital to help create integrated supply chains and promote agri-business. But foreign retailers seem spooked by our stringent entry-related conditions. They're to invest a minimum $100 million, of which 50% must go to building back-end infrastructure. Plus they're mandated to sizably source domestic suppliers. Lukewarm response to the government's nod to retail FDI isn't surprising.

We should also ask if lengthy Centre-state confabulations on amending the APMC Act will dilute populist opposition to giving retailers direct access to farmers. While delisting perishables from the Act's ambit is desirable, states must be incentivised to junk a law that's long coddled vested interests by limiting farm produce sellers to government-specified mandis. Besides encouraging contract farming, we must promote competition by ensuring that stifling stipulations on sales and restrictive state levies don't hinder movement of commodities. Let's boost farm incomes via access to markets rather than deepen farmers' reliance on subsidies and support prices that both stoke inflation. Only by unshackling agriculture can we harness its productive potential, deliver food security and attract investments to a sector in need of upgrade in areas from irrigation to R&D. Politicians who argue otherwise care for neither struggling farmers nor inflation-hit consumers.

The Times of India, 18 February, 2013, http://timesofindia.indiatimes.com/home/opinion/edit-page/Runaway-food-prices-highlight-the-need-to-unshackle-the-farm-sector/articleshow/18547848.cms


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