IMG to seek pvt sector input on price rise malaise

Private cos to be called by an inter-ministerial group to discuss difference between farm-gate & retail price.

The inter-ministerial group (IMG),set up by Prime Minister Manmohan Singh to look into various aspects of inflation for better managing sudden and anticipated inflationary spiral,is planning to seek inputs from the private sector to understand the price formation process for better capturing where exactly the inflation is taking place.

Sources told The Indian Express that private sector companies,including major retail convenience stores,would be called in by the group to understand the difference between farm-gate price and retail price and this will help us in better monitoring wholesale and retail prices,like what price is paid by consumers,how does it get formed.

The group is likely to meet on Monday to discuss the issues and will come out with a preliminary paper on the findings. Sources added that public sector banks would also be consulted to provide their views on macro policies related to fiscal and monetary measures to be taken for containing the rising prices. However,on the monetary policy front,the group would just recommend certain measures as it does not fall under our domain though on tax front we should be taking some steps, the sources added.

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The Prime Minister had set up the committee in January this year under the chairmanship of chief economic advisor to finance ministry Kaushik Basu,with a seven-point terms of reference including studying trends in international production and stocks,reviewing prices of major commodities and making recommendations for fiscal,monetary,and administrative measures. The group is also likely to review trends in rainfall in the country.

:Food constitutes around 25 per cent of the Wholesale Price Index (WPI) basket. So when prices of food goes up by 1 per cent,inflation goes up by .25 per cent,impacting the lower income group the most. Agriculture experts say that the government needs to remove supply bottlenecks like the Agriculture Produce Marketing Committees to ensure smooth movements of goods. Taxing food at source,like purchase tax,should be scrapped to remove the cascading effect it has on prices, Gokul Patnaik,chairman,Global Agri Systems,said. In this group,food is very important constituent in consumption basket,more than 50-60 per cent of their income goes into consumption. On an average,there are 6-7 intermediaries between farmers and retailers and farmers get just 25-30 per cent of the total price, he added.

Experts say the price formation process gets distorted at this stage when so many intermediaries come into the picture. The IMG faces the tough task of streamlining this particular segment,the experts said. The private sector would help the government in understanding the mechanism of this segment,the sources added. Secretaries of consumer affairs,food and public distribution,agriculture,animal husbandry,dairying and fisheries,and a representative of Planning Commission are part of the group.