Review levies to bring down food prices, FM tells states

Finance Minister Pranab Mukherjee today asked states to review all local levies like mandi tax and octroi to bring down the spiralling prices of food articles. He asked the states to play their part effectively in controlling inflation, which soared to 8.43 per cent in December.

“I would urge you to review all local levies like mandi tax and octroi duty, which add to prices of food articles and impede smooth movement of essential commodities,” Mukherjee said at a pre-Budget meeting with state finance ministers.

Food inflation had increased to a year’s high of 18.32 per cent for the week ending December 25. While the government has attributed high inflation to supply-side bottlenecks, the Reserve Bank of India (RBI) is likely to take steps in its monetary policy review on January 25 to rein in inflation.

Mukherjee asked the state finance ministers to urgently look into the supply management of items that are driving the current round of food inflation, in particularly local factors widening the gap between wholesale and retail prices.

He said the central government had taken measures to facilitate imports and, where required, restrict exports to ensure the supply of essential commodities.

The finance minister further asked the states to take steps to ensure agriculture grows and to create efficient distribution and marketing infrastructure. He said there was a strong case to review and reform the Agriculture Produce Marketing Act in states where it had not been addressed so far.

He further said the government-regulated markets were not only imposing taxes and facilitating large commissions and fees for the middlemen, but also preventing retailers from integrating their enterprise directly with the farmers.

Food inflation has remained high and volatile due to a significant increase in the prices of a few primary items like fruit and vegetables, milk, meat, poultry, eggs and fish, even as the prices of cereals and pulses have declined in the new year.

Mukherjee also said as India grew and globalised, and the domestic market became more integrated due to improving physical connectivity and better policy coherence among different tiers of government, the state governments would have a greater stake in the formulation of central government policies, particularly the fiscal policy.

On the fiscal front, he said, the states had received higher share in central taxes from the 13th Finance Commission.