High food prices take the sheen off bumper agri output

Timely and bounty rainfall perked up the agriculture sector in 2010 as it headed for a bumper production but high prices of food items spoiled the party and forced the government on the back foot as it necessitated combative measures.

Unlike in 2009, farmers in most states had reasons to rejoice on top of a good monsoon this year.

The reduction in interest rate on farm loans at five per cent and launch of green revolution in the eastern states to boost output were the major highlights of the year for the sector.

The reports of rotting food grains due to lack of storage space proved to be a major embarassement for the government.

The agriculture sector, which was hit badly last year due to severe drought (worst since 1972), was back on growth track with production up significantly in all Kharif crops and prospects for winter Rabi season also looking bright.

The production of Kharif foodgrains (rice, coarse cereals and pulses) rose by about 11 million tonnes to 114.63 million tonnes, helping the farm sector to achieve a robust growth of 4.4 per cent during the second quarter of this fiscal.

Notwithstanding bumper harvest in Kharif season, the food inflation remained in double-digit for almost full year largely due to high prices of vegetables, fruits and milk.

If it was high sugar prices that became front-page news in the beginning of 2010, skyrocketing onion prices hogged the limelight at the fag end of the year.

Sugar prices had touched nearly Rs 50/kg in mid-January, while onions, a politically sensitive item, surged to as high as Rs 85 per kg across the country in December, making life for the commonman difficult.

Tomato and garlic also added to the miseries.

Export ban and asking state-owned trading agencies to initiate imports were some of the short-term steps taken to boost supply and control prices.

Though the government kept offering additional quota of rice and wheat through ration shops at cheaper rates right through the year, poor offtake from states failed to provide succour to the commonman.

To find out long-term solution to tackle food inflation, the Prime Minister Manmohan Singh in April constituted a 'core group' comprising of chief ministers and central ministers.

The government also formed three 'working groups' to deliberate on the issues of farm production, food and public distribution and consumer affairs.

The report of working group on farm production, which has already been submitted to the PM, has suggested farm loan at 4 per cent and minimum support price at 50 per cent higher than the actual cost of production.

With production improving, the Centre made some headway this year to fulfil Congress Party's election promise to bring in the National Food Security Law.

The legislation would entitle the poor to receive a fixed quantity of foodgrains at cheaper rates.