SPEECH OF HON’BLE AGRICULTURE MINISTER FOR THE CONFERENCE OF THE CHIEF MINISTERS ON Price Rise Of Esssential Commodities ON 06 FEBURARY 2010 AT 1000 HRS IN HALL NO. 5, VIGYAN BHAVAN

Respected Prime Minister, Finance Minister, Chief Ministers and other distinguished participants.
        I welcome all of you and thank you for sparing your time to be present in this conference to deliberate on the issues of price rise of essential commodities. 
Though the immediate cause for this meeting is rise in prices of some essential commodities, and I would touch upon that aspect in detail, you would agree that in order to maintain prices at affordable levels it is critical for us to understand and appreciate agriculture production and productivity issues. 
Thanks to good monsoons between 2004-05 and 2008-09 and our farmers’ efforts, we had the benefit of growing production in this period.  On the strength of this rising production a record of 59 Million Tons of food grains, that is 33 Million Tons of rice and 26 Million Tons of wheat – was procured in 2008-09.  This helped in building up the buffer stock and strategic reserve of wheat and rice which has helped in stabilizing the prices. I shall speak on this issue in greater detail later when I talk of rising prices of essential commodities.

        Coming back to production, as you are all aware, the South West monsoon of 2009-10 failed us and the 23% deficiency in rainfall resulted in loss of production in several critical States. You all are aware that drought or drought like condition was declared in 334 districts by 14 state governments.  Here I must complement some of the States such as Punjab and Haryana, who, despite facing one of the worst droughts, ensured that production, does not go down. States like Bihar, which introduced the diesel subsidy scheme, did their level best to mitigate the adverse impact of the drought. Gujrat’s excellent work in water conservation and use has also paid rich dividends to the farmers of the state. There are innumerable other measures which many states took and it is only because of this concerted effort of all the state governments and the Centre that we were able to effectively meet the challenges posed. The Central and the State Governments strategized, through several incentives and concessions to the farmers, to minimize the loss in kharif and to maximize rabi production. I am glad to inform you that, based on the reports that I have received from the field, we would have a good rabi crop.  Part of the losses in Kharif hopefully would be made up.
My concern however is that, even now we have not been able to gear up our agricultural production machinery to its optimum capacity despite several important measures adopted by us through the Rashtriya Krishi Vikas Yojna, the National Food Security Mission, the National Horticulture Mission, Integrated Scheme of  Oilseed, Pulses, Oil Palm and Maize etc. 
The impact of climate change on agriculture cannot be wished away. We have to ensure our readiness to combat adverse impact of drought and flood on food production and commit ourselves to ensure food security of our citizens, especially the poor.
To achieve this overall goal of insurance against climatic vagaries and to ensure food security for our people, I have few suggestions for the Hon’ble Chief Ministers.

        First, in the coming years water would perhaps be the scarcest input for agriculture.  While major irrigation schemes should be pursued with all the vigour that is necessary, I would request all the States to draw lessons from the successful mini and micro models of water conservation and irrigation potential being created by some States with immediate beneficial impact on production, and replicate it throughout the country.  NREGA could be effectively utilized for this. Guidelines on convergence of NREGA with schemes of the Ministry of Agriculture have been issued.

        Second, since productivity is not showing the growth that is desirable, in states with low productivity, we need to focus on research as well as better agriculture practices to ensure that productivity increases are brought about in a short term.  Here I would like to draw your attention to the fact that along with cereal and pulses, there is need for us to concentrate on increasing the productivity in the animal husbandry and fisheries sector as well.

        Third, the Central Government has been increasing plan allocation through major interventions such as the RKVY, NFSM, NHM, but several instances have come to our notice where there is considerable scope in the area of proper planning and utilization of funds by the States. I urge all the States to take immediate steps for utilising the unspent balance in these schemes through proper planning as it would have a direct impact on productivity and production.

        Fourth, we depend on State Government’s input regarding details of crop coverage, production etc. We could plan better if we get quality statistics in time from the states.

        Last, the gap between the wholesale and retail prices has generally increased this year. There is a need to focus on this issue and take effective steps to reduce this gap.

        I am sure that if all of us strive to follow the approach, the contours of which I have sketched just now, we would be in a much better position to address concerns of food availability and prices. I would like to hear more from all of you on these issues.
I would now like to address some of the issues on price rise which is of immediate concern. While enhancing supply to meet the growing demand is the most straightforward measure, it is available to us mostly through imports in the short run. Imports depend on availability and international prices. Today, international prices of many commodities which we need are higher than domestic prices. In the short run it is necessary for us to understand the reasons behind the rising prices and strengthen the measures already taken and initiate new measures to check the rising prices of essential commodities. I would like to concentrate here on the issues pertaining to rice & wheat, pulses, edible oil and sugar.

Rice and Wheat
As I mentioned earlier in my speech, due to the record procurement over the last few years and good procurement of rice despite an adverse monsoon this year, we have adequate stocks of rice and wheat to meet the requirement under TPDS and undertake open market intervention.
As all of you are aware, our government has over the last few years increased the Minimum Support Price for wheat and rice substantially. The MSP of wheat which was Rs.550/- per quintal in 1999-2000 is Rs. 1100/- per quintal in 2010-2011. In paddy, for the common variety the MSP has been increased from Rs. 490/- per quintal in 1999-2000 to Rs. 1000/- in 2009-10. We are committed to the betterment of our farmers and it is a matter of satisfaction for this government that we have been able to provide better returns to our farmers through the MSP regime. Many of you have demanded a still higher MSP on different occasions. However, we must remember that increasing MSP has a direct linkage to the price at which wheat, rice, etc. are made available in the retail market and we therefore have to take a holistic view keeping in mind the welfare of both the producer and the consumer.
Besides MSP, overtime there has been an increase in the procurement cost primarily due to higher incidence of local taxes in surplus states. The increased MSP along with the increased cost of procurement has also led to a huge increase in the food subsidy bill over the years.
Despite the food subsidy bill having increased from 12 thousand crore in 2000 – 2001 to nearly 65 thousand crore in 2009 – 10,  we are steadfast in ensuring that the food distribution through the PDS remains at an affordable price because of which the issue prices of Rice and Wheat for the PDS have been kept constant since 2002 at Rs. 2/- per kg of wheat and Rs. 3/- per kg of rice for AAY beneficiaries and Rs. 4.15/- per kg of wheat and Rs. 5.65/- per kg of rice for the BPL card holders. GOI incurs a subsidy on wheat of about Rs 9 per kg for APL; Rs 11 per kg for BPL; and Rs 13 per kg for AAY. Similarly, the subsidy on rice is about Rs 11 per kg for APL; Rs 13 per kg for BPL and Rs 16 per kg for AAY.
Furthermore, to contain inflationary apprehensions, Open Market Sales Scheme has been introduced under which 2 million tons of wheat and 1 million tons of rice has been allocated to States.  For various reasons States have not been able to take the benefit of this scheme in ample measure. In addition, we have also allocated 1.5 million tons of wheat for large flour mills to be sold by auction. The government, has very recently also taken a decision to give an additional 10kgs of food grain to all the cardholder under TPDS over and above their stipulated quota. This additional 10 kgs of food grain is being provided at MSP rates despite Govt. of India paying a substantially higher economic cost for procuring the same. We have also permitted sale of subsidized food grain and pulses through NCCF and NAFED.
I am sure that these steps would help check the spiraling prices.   I would request the State Governments to take full advantage of these schemes and ensure that their allotted quotas are fully lifted. I would also urge the State governments to relook the issue of taxes levied by them on food grain. In some states like Punjab and Haryana VAT and other local taxes are over 10% whereas in states such as UP, Rajasthan, MP, Bihar and Gujrat they range between 3 to 8%. I am sure removal or reduction of these taxes will receive your due consideration in these difficult times.

In the case of  Edible Oils        India cannot remain immune to global price situation as we are not self-sufficient in edible oils.  Yet we have been able to cushion the impact of international price shocks owing to the timely policies taken by the Government.  During the last six months, the wholesale domestic prices of soyabean oil, mustard oil, groundnut oil and RBD palmolein have increased by 4% to 11%, as against an increase of about 23% in the international price of crude palm oil which is the main edible oil imported.
The Government has taken various pro-active measures to make edible oils available at reasonable prices to consumers.  The import duties on crude and refined edible oils have been brought down to nil and 7.5% respectively since April, 2008.  The export of all major edible oils has also been prohibited.  Starting from April 2008, the State Governments have been authorized to fix stock holding limits on edible oils and oilseeds.  The validity of this Order has currently been extended upto 30th September and will be extended further if required.
The Scheme to distribute imported edible oils through State Governments to ration card holders with a subsidy of Rs.15/- per kg to provide relief to consumers has been continued in the current year for import upto 10 lakh tones and extended upto 31st October.  However, only four State Governments, namely, Andhra Pradesh, Tamil Nadu, Maharashtra and Himachal Pradesh have started distribution of edible oils under the Scheme.
I urge the State Governments to take full advantage of this scheme and distribute subsidized imported edible oils under the Scheme to stabilize edible oil prices in the market and provide relief to consumers.
Sugar has been a matter of grave concern for all of us. Domestic production of sugar is estimated at 147 lakh tons during 2008-09 as compared to 263 lakh tons during 2007-08.  As per First Advance Estimates for 2009-10 sugarcane production is estimated at 249.48 million tons, lower than last year by 9%.  Therefore, this year also production of sugar is likely to be lower than our requirement.  As a consequence prices of sugar in the domestic market have increased substantially.  Unfortunately, due to decreased crushing of sugarcane on account of excessive rains in Brazil the international prices have also been very high. This has made imports difficult and has limited the effect of such imports on moderating sugar prices. Despite this, the government has made all efforts to augment sugar supply through a slew of measures aimed at facilitating imports.
The Government has permitted import of raw and refined sugar at zero duty.  As per trade circles, in 2008-09, about 23 lakh tons of raw sugar and 2.25 lakh tons of white sugar were imported.  In 2009-10, so far, out of about 34 lakh tons of raw sugar contracted 19 lakh tons have arrived and about 4 lakh tons have been shipped.   Another 10.75 lakh tons of white sugar have been contracted and 3.9 lakh tons have arrived.
Price of sugar prevailing in the market today has to be seen in the background of enhanced payments to the domestic farmers, who today on an average gets upwards of Rs. 2500/- per ton of sugarcane and the high international prices. Import parity of domestic prices must be considered if we have to bring in more sugar into the country.
Besides augmenting supplies, the government has also initiated measures to restrict demand. GOI has fixed stock limits for wholesalers and large consumers.  State Governments have been permitted to fix stock limits for retailers and many of them have done so. It is necessary that these stock limits are adhered to and the State governments must take necessary steps in this regard. There is also need for the state governments to revisit the various taxes imposed on sugar. A few State governments like Delhi, Gujrat, Karnataka, West Bengal and Bihar have already abolished VAT on imported sugar. Other states would also consider this. Some States like Punjab, Madhya Pradesh, etc. levy an entry tax on sugar which they need to reconsider. Recently, Chattisgarh has abolished the entry tax and I urge other states to consider doing so.
There has been a problem in UP for processing the raw sugar imported by the sugar millers.  State government’s decision to allow processing of imported raw sugar only after the crushing of domestic sugarcane is over will only lead to increased cost of processing on account of higher fuel costs. However, to provide flexibility to importers of raw sugar, we have permitted them to refine the raw sugar in other States.  I would urge the UP government to remove such restrictions which create an artificial scarcity in the market.
Price rise in sugar is a very bitter pill for the country to swallow. While government of India is taking all possible policy decisions to tackle the situation, I would appreciate if you could suggest other implementable measures to stabilize sugar prices.

Pulses have been another area of growing concern for us. Domestic production of pulses has been around 14 to 15 million tons. Our demand for pulses being more, the gap has to be bridged through imports. We have been importing different varieties of pulses from different countries depending upon their availability.  Due to this, domestic prices fluctuate with availability and prices in the international market apart from the impact of domestic production trends.
To insulate ourselves from price movements in the international market we have to ensure enhanced production through increase in acreage as well as productivity. Being a rainfed crop the uncertainty associated with pulse production is high and we therefore have to make all efforts to bring it under as much assured irrigation as possible. Our agriculture scientists are diligently working at developing newer short duration varieties which will help increase our domestic production. Some of these newer varieties are already available to the farmers and are showing encouraging results. Government of India has also decided to merge ISOPOM district with the National Food Security Mission to give a more focused attention over a larger pulse production area.  The Rabi sowing figures are encouraging and compared to last year higher by 7.5 lakh hectares. 
While efforts on the production side will bear fruit in the years to come, our immediate worry is the ruling market price of pulses. Though the prices are showing a decline over the last fortnight, they still remain high. I urge all of you to monitor this closely to ensure still lower rates to the consumers.
To help ease the plight of the common man, government has taken various steps.  To augment the domestic availability of pulses, the PSUs and Cooperatives, have been allowed to import pulses with a reimbursement of their losses if any, to the extent of 15% of landed cost and service charge of 1.2% of CIF value in these operations.  Under the second scheme a subsidy of Rs. 10 per Kg is given for imported pulses distributed through the Public Distribution System.  So far about 1.40 lakh tons have been distributed under the scheme to nine States of West Bengal, Tamil Nadu, Kerala, Andhra Pradesh, Maharashtra, Uttar Pradesh, Haryana, Rajasthan and Himachal Pradesh for distribution through PDS.  NAFED and NCCF have been authorized to distribute subsidized imported pulses through their outlets and affiliated cooperatives in other States.

I am certain that our efforts will bear fruit and we will succeed in reigning in the price of pulses in the country.

 

Use of EC Act and PBM Act
While efforts have been made to increase the availability of essential commodities and also to provide targeted subsidies to the deserving section of the country, efforts have also to be made to ensure that these steps are not negated by hoarding and diversion of commodities from the PDS.  State Governments have powers under the Essential Commodities Act and the Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act.  Most of the State Governments are already using the provisions of these two Acts.  I would urge them to continue their vigil on this front.  Those State Governments which have not yet utilized these provisions may also consider doing the same. However, while undertaking steps under the EC Act we must ensure that a balance approach is taken and undue harassment is not meted out. On our part, we would extend all support to the State Governments in this area.

Conclusion

        The battle against the rising prices of essential commodities has to be waged jointly by the Government of India and the State Governments.  In this, we have to jointly work on the various aspects that I have touched upon, both short term and long term strategies.  I hope that today’s deliberations will give all of us a better appreciation of the tasks that we all have to perform to ensure that the prices of these commodities are kept in check.  I look forward to listening to the suggestions that you all have.

Thank you