FM to involve states for price reductions     

The Finance Minister, Mr. Pranab Mukherjee has asked for the state governments' support to control the rising prices. The FM before the meeting with State Finance Ministers said that a collaborative effort is required from the centre and the states to deal with the problem of high inflation.

Food inflation had reached a decade high of almost 20 per cent while it was at 18.22 per cent on the week ended December 26. FM said that the high sugar prices was from the demand side issue but said that the price rise in rice, wheat, pulses, and vegetables is due to supply side issue and needs to be dealt with.

The Finance Minister urged the states to strengthen the public distribution system with Effective management of supply chain. He has asked the states to increase quantities of rice and wheat taken from the government pool in order to ease commodity prices. The centre has allotted 10 lakh tonnes of wheat however the states had lifted only about 1.59 lakh tones. The situation was similar for rice as the states lifted only 2.9 lakh tonnes against the 5 lakh tonnes allotted to them.

The centre has further increased the allotment by10 lakh tonnes of wheat and 5 lakh tonnes of rice under open market sale schemes. He also took note of the 47.44 million tonnes wheat and rice stocks with the centre as on January 1 against the buffer norm of 20 million tonnes. FM said the Indian agriculture sector can grow at an annual rate of 4 per cent if the system is managed efficiently.

On another issue of subsidies for fertilizers the FM said "we are in a process of developing a new system of fertilizer subsidy, which may involve a direct transfer of subsidy to the farmers and also a system which promotes nutrient based subsidy regimes."

In another development the states have asked the centre to continue the relaxation in meeting the fiscal deficit target in the next financial. The centre rose the fiscal deficit target to 4% for the gross state domestic product (GSDP) from 3.5%. The sates want this policy to continue in the next year.

FM however said the "ways-and-means" position of the state governments shows that some of them are holding large cash balances and they should use it for development activities. He expressed the need to control fiscal deficit as it is expected to rise by around 7.75% in the current financial year.

Direct Taxes Code (DTC) also figured in the talks as FM said its implementation along with Goods and Services Tax will improve the efficiency and bring clarity in the system. The State finance ministers are to meet on January 29 to discuss GST implementation.

Source: TopNews, India, dated 14/01/2010