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FOODARTICLES INDEX UP 8.6% FUEL INDEX DIP 13%

The annual rate of inflation, calculated on a point to point to basis stood at minus 1.61 per cent for the week ended June 6. The wholesale price index during the corresponding week a year ago was in the double digit at 11.66 per cent. International crude oil, currently at $70 a barrel, was trading around $140 a barrel during the same period last year. As a result, the fuel index slipped by 13 per cent to 326.2 from 374.2 in the corresponding week a year ago

	June 7 ‘08	June 6 ‘09
All commodities	11.66	-1.61
Primary articles	10.55	5.79
Fuel	16.25	-12.83
Manufactured products	10.28	0

Though the previous year’s high base has dragged inflation into negative territory, food items like cereals and pulses, continued to post double-digit inflation rates of 13.57 per cent and 16.77 per cent, respectively. Overall, food article inflation is up by 8.6%. The foodgrains basket in the WPI has gone up by almost 14% year-on-year in the week ended June 6, the fruits and vegetables basket has gone up by almost 10%. Inflation of processed food items such as ghee, sugar and canned foods is up by 12.5%.

However, the impact of such steep price rises in items such as foodgrains and fruits and vegetables, is not fully captured at the wholesale price level because of the relatively low weightage, 15.4%, of food articles in the WPI. Of this, foodgrains comprise 5.01% and fruits and vegetables 2.92 %.
The impact of a rise in these commodities is felt more acutely at the retail, or consumer price index, level where the food group constitutes 46% weightage. Latest data up to April ‘09 show that consumer price inflation for industrial workers stood at 8.7%, up from 7.8% in the corresponding period of the previous year. The disconnect between the WPI inflation levels and the price rise seen at the retail level depends on the market structure for each of the particular product and also on the levels of middlemen that exist in the trade. According to analysts, while lower production of sugar has primarily led to higher prices, prices of pulses have continued to remain high as the cost of imports has gone up due to a weakening rupee. Onion prices continue to stay high. BL 200109

RFLECTIONS : Food is something that everyone needs. Sure, purchasing power is a hitch. That is why even the slightest drop in the price of any food item sees a sudden spurt in demand. A good example is cooking oil, where imports jumped 30% once prices cooled. Yet people are learning to cope. Higher input costs, falling yields, and rising costs of living is choking off local food supply, making what's available even more expensive. Farmers have no money, little credit, parched fields, and little hope of succour. One reason for expensive fruits and vegetables is the rising cost of village labour that we urban consumers find tough to factor in. It's also fashionable to blame the serial rise in minimum support prices for higher food prices. Yet, has anyone spotted a farmer fattening on just the MSP, without additional advantages of soil, technology, credit and market access. A high MSP is no guarantee of farm profits. It's an incentive, like the variable part of your salary. That's all. Moreover, when yields are stagnant and input costs climbing, raising MSP is a necessary choice. India can't afford to let go of the few supply certainties it has in the hope that international markets will provide.

The government can easily keep rice prices low by offloading the record quantity lying in its godowns. But it won't. Instead, the rice will go to Africa, with a subsidy. It has played blind man's bluff with the sugar market, promising duty-free imports months before actually doing so. The resultant volatility has been more corrosive than any straightforward commercial decision. To make things worse, the government has done nothing to reduce the impact of supply swings on hapless consumers, most of whom live on less than Rs 40 a day. ET030509

2. Labour shortage hits cane harvesting

The single largest constraint in sugar mills reaching full capacity this season is not the prevailing shortage of cane but labour for harvest, say sugar mill representatives. The solution is mechanisation which will need Government’s support, they say. Mills are facing sugarcane shortfall of about 30-40 per cent on a daily basis because of labour shortage. Mechanisation is the only option with sugarcane harvesters capable of harvesting 300 tonnes of cane a day. Tamil Nadu Government is approached to support mechanisation through a 50 per cent capital subsidy to farmers’ associations to buy sugarcane harvesting equipment. The subsidy support is essential to bring down the pay back period to about 3-4 years because each harvester now costs about Rs 1-1.5 crore, according to Mr Ramanathan. Otherwise, farmers cannot afford to buy the harvesters.

Harvesting price : Sugarcane farmers now pay Rs 250-350 a tonne for harvesting compared with about Rs 100 a couple of years back. Last year, the sugar mills paid Rs 1,100 a tonne for sugarcane, and this year, they have increased the sugarcane price to over Rs 1,220 a tonne and the increase has primarily been absorbed by the increasing labour costs.Sugar cane producing states are facing the problem as other industries have weaned away the labour force.
The National Rural Employment Guarantee Scheme has also become a preferred choice, according to SISMA. Sugarcane harvesting is a gruelling work that labourers prefer to avoid. BL170609

3. MAGIC WAND- People in A P State 8.3 crore, but ration cards cover 9.8 crore people

While the total population of the state is about 8.3 crore, there are ration cards for 9.8 crore people. How can this be possible? The civil supplies department issued a white ration card, meant for people Below Poverty Line, to tennis player Sania Mirza. Mr Lakshmi Narayana, a resident of Vepadu village in Vizianagaram district was issued the card in which Sania’s photo was also present with his name. “Thousands of bogus ration cards were unearthed during the regular inspection. DC140609

4. Agri Policy puzzle

The ban on the export of wheat and non-basmati rice, and the restraints imposed on the export of basmati rice by fixing an unduly high minimum export price, has helped rivals like Pakistan to expand their share of export markets.