Tackling sticky food inflation, reining in PDS costs top food minister’s agenda
As Pralhad Joshi assumes office as the new Food Minister, he faces the challenge of curbing food inflation, which hit 8.7% in April 2024. Measures include expanding pulse production and reducing the 27.8% vegetable inflation. Strategies to offload surplus rice and liberalize onion exports are planned. Meanwhile, a record 16.47 million tonnes of edible oil imports and potential increases in import duties aim to stabilize prices. With 50 million tonnes of surplus rice, the focus shifts to managing supplies and export restrictions amid an anticipated above-normal monsoon.
As a new food minister Pralhad Joshi assumes office in the food and consumer affairs ministry, the biggest challenge would be to initiate measures to bring down prices of cereals, pulses and vegetables which have overbearing on the rise in food inflation.
Joshi has created a record by winning for the fifth time in a row from the Dharwad Lok Sabha seat, Karnataka.
While the retail inflation in April eased to 4.83% after averaging 5.1% in January-March, food inflation, despite some signs of moderation, remains elevated and a potential source of risk to the disinflation trajectory. Retail food inflation was 8.7% year-on-year in April, 2024.
Especially elevated levels of inflation in pulses have to be tackled through increasing production through area expansion and ensuring availability of quality seeds in the coming season. The government will have to initiate measures to offload surplus rice stocks in the central pool and liberalise rice exports.
Steps to be initiated to liberalize exports of onion through removal of minimum exports price of $ 550/tonne and additional 40% exports duty imposed in April amidst elections which created discontent amongst farmers in Maharashtra.
Inflation in vegetables was 27.8% y-o-y in April while the rise in retail prices of potatoes in April was 53% on year.
Officials said increasing the import duty of edible oil which has resulted in surge in imports of cooking oil and adversely impacted the prices of mustard seed, a key oilseeds ruling below the minimum support price (MSP) would be taken up soon.
The inflation in oils and fats category declined by 9.43% in April while prices of edible of oil declined sharply in the last one year because of record imports of 16.47 million tonne (MT) in 2022-23 oil year (November-October), helped by lower import tariffs of only 5.5% on crude oil imports.
While food subsidy which is expected to cross Rs 2.2 trillion in the current fiscal mainly due to 56 MT of free rice and wheat provided under Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), the government will have to focus on liquidating the huge surplus of rice stocks held with the Food Corporation of India (FCI) ahead of the new paddy procurement season (2024-25) scheduled to commence on October 1.
The economic cost of rice, including MSP, storage, transportation and other costs is estimated at Rs 3,975/quintal for the current fiscal.
Currently, FCI holds 50 MT — 32.31 MT of rice stocks and 17.91 MT of grain receivable from millers. The stock is against the buffer of 13.54 MT for July 1.
The government is still grappling with the issue of elevated inflation in rice despite huge surplus of rice in the central pool while according to officials inflation in wheat has been curbed largely because of a record 10 million tonne of sales of wheat in the open market for bulk buyers from FCI’s stocks.
Inflation in wheat rose to a moderate level of 6.02% in April, price rise in rice continued to be at elevated 12.51%.
Sources said the government will assess the sowing of kharif paddy — expected to commence later this month — before taking a call on removing curbs on shipments. “We need to look at lifting restrictions on rice shipments as kharif crop prospects look bright on the prospects of above normal monsoon rains,” an official said.
Last year, the government had initially banned white rice exports and subsequently imposed a 20% shipment duty on parboiled rice to improve domestic supplies as price rises remained in double digits.
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