Manmohan, tackle food and fuel issues now
Atul Chatterjee
August 04, 2008
Food prices and edible oil prices have been jumping like a kangaroo, at the same time harvests have been good and government procurement for the public distribution system has met targets. Fuel prices mainly petrol and diesel have jumped and are likely to see one more round of increase in the coming months, as the crude oil price remains at well above the $ 100 mark. So what are Manmohan Singh´s options on these two fronts specially given that the coming year is an election year for the whole country and five state elections are due?
On the food front the public distribution system can definitely be strengthened, mainly by knocking of dummy consumers and preventing diversions. In Tamil Nad for example rice was available at Rs 4.50 per kilogram, and a lot of it does reach the poor. This does not mean that leakages don´t take place, they do, but a lot meant for the poor does reach them. No so in all other states. At least in the few states where the Congress has a government Andhra Pradesh, Himachal, Delhi etc it can do this.
When the price of onions had skyrocketed a few years ago, the government in Delhi had organized sales of onions through mobile vehicles. The government can think of such open market operations, after all it is contemplating a total farm loan waiver of Rs 600 billion. If it is buying wheat at Rs 10 per kilogram it can sell at around the same price or even lower. This can be done for rice, edible oils and pulses as well, with imports allowed freely prices should be in reasonable check.
On the fuel front, there has been talk about blending ethanol in petrol for a long time. Brazil has already done so with great success, and India has no shortage of ethanol which is derived from the production of sugar. What is the country waiting for? This will be a big cost saver, even if the benefit is not transferred to the consumer it will at least bail out the oil public sector undertakings which are having to subsidize the transport sector. While ethanol may not be the answer, it is certainly a palliative.
With general elections around next year, Manmohan Singh will have to pull bunnies out of a hat. Making the Reserve Bank of India tweak its rates is relatively easy, but bringing about reforms in the public distribution system or open market operations will bring huge rewards to the ruling party at the poll booths.
On the food front the public distribution system can definitely be strengthened, mainly by knocking of dummy consumers and preventing diversions. In Tamil Nad for example rice was available at Rs 4.50 per kilogram, and a lot of it does reach the poor. This does not mean that leakages don´t take place, they do, but a lot meant for the poor does reach them. No so in all other states. At least in the few states where the Congress has a government Andhra Pradesh, Himachal, Delhi etc it can do this.
When the price of onions had skyrocketed a few years ago, the government in Delhi had organized sales of onions through mobile vehicles. The government can think of such open market operations, after all it is contemplating a total farm loan waiver of Rs 600 billion. If it is buying wheat at Rs 10 per kilogram it can sell at around the same price or even lower. This can be done for rice, edible oils and pulses as well, with imports allowed freely prices should be in reasonable check.
On the fuel front, there has been talk about blending ethanol in petrol for a long time. Brazil has already done so with great success, and India has no shortage of ethanol which is derived from the production of sugar. What is the country waiting for? This will be a big cost saver, even if the benefit is not transferred to the consumer it will at least bail out the oil public sector undertakings which are having to subsidize the transport sector. While ethanol may not be the answer, it is certainly a palliative.
With general elections around next year, Manmohan Singh will have to pull bunnies out of a hat. Making the Reserve Bank of India tweak its rates is relatively easy, but bringing about reforms in the public distribution system or open market operations will bring huge rewards to the ruling party at the poll booths.