The government assures measures to curb the rise in food inflation

Amid a notable surge in vegetable and pulse prices, coupled with a revival in cereal inflation, the government unveiled its measures on Wednesday to address the escalating price pressures. In a bid to combat soaring cereal costs, the government announced the sale of an additional 5 million tonnes of wheat and 2.5 million tonnes of rice from the central pool in the open market, targeting bulk buyers.

This action supplements the earlier sale of 0.82 million tonnes of wheat through the Food Corporation of India's (FCI) weekly e-auction under the Open Market Sale Scheme (OMSS) since June. However, FCI has only managed to sell around 2200 tonnes of rice to bulk purchasers so far. In a bid to incentivize private participation in rice e-auctions, the government also announced a reduction of Rs 2 per kilogram in the base price of rice, bringing it down to Rs 29/kg, compared to the economic cost of over Rs 36/kg.

Highlighting the government's proactive interventions, Food Secretary Sanjeev Chopra emphasized that while food prices have surged significantly, the measures taken are dynamic and aimed at curbing food inflation.

Ashok Meena, Chairman and Managing Director of FCI, affirmed that the stock is adequate for open market sales. The weighted average selling price of wheat rose to Rs 2,254 per quintal in the latest e-auction, compared to Rs 2,136 per quintal in the first e-auction held on June 28.

In January, retail inflation in the cereal and products category was reported at 12.71%, marking a decline from 16.12% earlier. Retail food basket inflation rose to 4.49% in June from 2.96% in May, driven by cereal and pulse price hikes along with a sequential increase in vegetable prices.

Experts predict that food inflation in July could escalate due to substantial spikes in tomato and onion prices. The prices of spices like cumin seeds (jeera), turmeric, and coriander (dhania) have surged due to unfavorable weather conditions impacting production. Retail inflation for jeera skyrocketed to a record 74% in June 2023.

Chopra also revealed that the government is considering various strategies, including reducing import duty on wheat. In April 2019, India had raised the duty to 40% from 30% to discourage cheaper wheat imports when domestic prices fell.

According to the Centre for Monitoring Indian Economy (CMIE), retail inflation, measured by the Consumer Price Index (CPI), is anticipated to surge to around 7% in July 2023, with a potential to inch toward 7.5%. In June, inflation stood at 4.81%. CMIE emphasized that the imminent inflation surge in July would be primarily driven by the food group, especially vegetables, and food inflation could enter double digits during the month.

Content source: Media reports