Survey for price band for commodities to protect consumers

The government should fix a price band for exports and imports of commodities to keep inflation under control, with a provision to slap duties to dampen prices if they change in the global market, the Economic Survey said today.     

"...A rational long-term framework needs to be developed, which balances the concern of poor consumers and producers to promote efficient growth and livelihood security," it said.     

"One possible approach is to have an announced price band for domestic prices within which imports and exports are freely allowed without any duties and controls.     

"If international prices change beyond this band, domestic prices would be systemically dampened through imposition of variable import and exports duties, depending on whether global prices fell below the lower band or rise above the upper band, respectively."     

This policy along with targeted subsidies, such as the PDS, would help balance the interest of farmers who need a predictable price regime to plan their cropping patterns and those of low income households, the survey said.     

The Survey pointed out that the inflation touched double digit level by the middle of June 2008 and persisted at that level for the next 21 weeks with a high of 12.9 per cent in early August 2008.

"Nearly two-thirds of this rise in inflation was due to three sets of commodities namely, edible oils, iron and steel and mineral oils and refinery products," the Survey said, adding that import duties were consequently reduced on these three sets of commodities.     

Given the global origins of this inflationary episode, the Survey said, a judgement had to be made about the relatively temporary versus the relatively permanent elements and appropriate fiscal and monetray measures were introduced to meet these elements.     

On the fiscal side, the temporary elements had to be met by making temporary reduction in import duties on tradeable goods whose price showed unprecdented increases, it said.     

The Survey also said that the forecast for the monsoon — a crucial element for having a good agricultural production — is normal though its progress so far seems to be behind schedule.     

It highlighted that there has been a good Rabi harvest and the agriculture sector has recorded a growth of 1.6 per cent in 2008-09 over a high growth of around 5 per cent in 2007-08 fiscal.     

As per the third advance estimates, the country has harvested 229.85 million tonnes of food grains in 2008-09, which is lower than the target of 233 million tonnes and last year's production of 230.78 million tonnes.