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CII suggests measures to counter food price inflation
1/6/2010 Confederation
of Indian Industry (CII) suggested a slew of measures to counter the
food price inflation which includes government offloading of grains
stock, purchase tax on agricultural commodities to be subsumed in GST
for abolition of state level taxes, private sector participation in
warehousing and distribution and revamping MSP.
Food article
inflation has remained in double digit for six months in a row, and has
risen to 20 per cent in the first week of December 2009, the industry
body said, adding that this ‘unprecedented increase’ in food prices has
been caused primarily by supply side factors, mainly due to decline in
the kharif output.
The price increase has been particularly
severe in case of products such as cereals (rice), pulses, vegetables
(potatoes) and sugar.
‘The rise in the price of essential
commodities will put pressure on the disposable income of the common
people and may restrict the monetary and fiscal space for
manoeuvrability, Chandrajit Banerjee, Director General, CII, said.
In
the short term, CII said, the government needs to urgently respond by
offloading its stock of grains, which are currently far in excess of
the buffer norms and state governments, in particular, need to put in
place mechanisms for the widespread distribution of wheat and rice to
check the shortages.
Secondly, the industry body said purchase
tax on agricultural commodities should be subsumed in GST, so that
state level taxes on these products are abolished.
Thirdly, the private sector should be allowed to participate in the warehousing and distribution of agricultural commodities.
On
the medium and long term measures, the CII suggested revamping the MSP
policy to make it more market oriented and announcing a New Green
Revolution in Pulses and Oilseeds on the lines of Green Revolution for
Rice and Wheat which could help beef up the supply side.
Further,
Government could also consider involving the private sector to make
farming in the Non-MSP crops more attractive, the CII said.
On
agri-market reforms, the chamber said development of post-harvest
infrastructure is required to link agriculture to markets so that
wastage is reduced and processing of agricultural produce is increased.
Encouraging private sector investments through tax incentives
could alleviate the supply side bottlenecks, the CII said, adding that
investments in organised retail could also shore up the entire supply
chain and ensure good prices to farmers as well as consumers.
The chamber said the government must address the issue of stagnating productivity in the agricultural sector.
UNI
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