Millennium Post

Peeling the price puzzle

Last weekend a particular statement issued by Delhi chief minister Sheila Dikshit perked up my downcast mood. Delhi government announced setting-up of 1000 fair priced shops for selling onions, which otherwise has brought tears to the eyes of the consumers. 

The government followed its statement with another announcement that these outlets selling the bulbous root would be increased to 3000 during the course of the week. The government’s second statement was a retort to its opponents Bharatiya Janata Party and Aam Admi Party setting-up a few stall selling onions at a price cheaper than the government stalls. Delhi is a non-onion producing state and a price of the most sought-after ingredient in the ubiquitous Indian curry does spiral during the monsoon season. The factors which contribute to price rise, according to government, include heavy rains, floods and damaged roads in several part of the country, which cause shortfall in supply and subsequent spiral in wholesale prices. In addition to this, the high alert on Delhi borders during the Independence Day celebrations also hamper truck movements and subsequent shortfall in supply.

To control the ever spiralling prices, Centre too has been trying to intervene through the Nafed – the National Agricultural Cooperative Marketing Federation of India. The Centre on 14 August fixed a minimum export price of $650 per tonne for the commodity and asked Nafed to import onions. Market is already abuzz with the possibilities of the golden bulb being imported from Pakistan, China, Egypt and even Iran.

The situation is still to become as bad as 1998, when onions for months together sold at around Rs 100 per kg. However, there is already discussion that whether costly ‘root’ would cause exit of Congress government from the national Capital in the same way as it had heralded its arrival. Compared to the value money carried in 1998, onions, one can say for the lack of a better expression, is still within reach and with government’s effective intervention, the prices should come down by month-end.

However, we should not lose the opportunity to discuss, whether government needs to build a permanent mechanism to create competitions to control prices. Delhi government in past years on several occasions created such competitions by selling onions and wheat-flours among other commodities to keep prices under check and have succeeded too. But these are ad hoc arrangements and have not prevented repeat performance by the hoarders year-after-year.

Let’s ask why an organisation like Nafed cannot monitor and predict market possibilities early to not let an onion crisis happen. One of the objectives of this multi-state agricultural marketing cooperative is ‘to undertake marketing research and dissemination of market intelligence.’ I don’t know if the auditors from the Comptrollers and Auditor General’s office have ever bothered to check why this agency has failed year after ‘to undertake marketing research and dissemination of market intelligence.’

This is important as the government with the rolling out of the food security programme wishes to utilize food a major instrument for social empowerment. In the process, it would also seek to reap a rich electoral harvest in the 2014 Lok Sabha polls. The government proposes to use its largely rickety network of public distribution system to reach out to people living below poverty line with a basket of bounties containing rice, wheat and coarse grain.

States like Chhattisgarh have already achieved much on this front. State’s chief minister Raman Singh recently told a symposium organized by the Centre for Reforms, Development and Justice (CRDJ) that his government prepared for eight years to bring reforms in public distribution system (PDS). Singh very rightly said that the real issue was how to create mechanism, infrastructure for procurement, storage and distribution. Chhattisgarh created a complete chain and made every collector responsible for timely distribution to the targeted people.

It remains to be seen whether the governments of Congress-ruled states like Delhi, Uttarakhand and Haryana, which rolled out a similar food security act on Rajiv Gandhi’s birth anniversary are able to replicate Chhattisgarh’s success story. However, while food security would give some kind of a political dividend to the Congress government, it should also take care to find out what loss of good will it suffers from the annual tear-shedding caused to the citizens by the spiral in onion prices.

It could take a lesson or two from its own programme of successfully introducing Bhagidari wheat flour in the national Capital. Under the scheme subsidised wheat flour is sold at over 400 outlets across the city at a price of around Rs 14 per kg. The 10 kg packet of superior quality wheat flour is made available through the outlets of Kendriya Bhandar, NAFED and NCCF (National Consumer Cooperative Federation) for Rs 139 as against the market rate of Rs 180 to Rs 250. While this not only provided relief to the poor, it also helped stabilizing price of city most staple food component. The scheme brought much credit to the Dikshit government.

The government indeed has the infrastructure and wherewithal to not allow the spiral of onion prices during monsoon every year. The rise in price of onions is essentially due to the hoarding indulged into by the stockists, who make a killing before the government machinery wakes-up to the crisis. It is interesting to see the group of wholesale market operators, under government pressure, operate fair price shops. They first make the killing from the crisis and later oblige the government by cooperating with it.

 The same can be avoided if the government puts a permanent mechanism in place to check hoarding and create competition through its own network of fair price shops.

The author is with Centre for Reforms, Development & Justice, and is Consulting Editor, 
Millennium Post.

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