Govt to subsidise essential food items

By Gamini WARUSHAMANA

The government is looking at the possibility of distributing several essential food items at a subsidised price to ease the burden on marginalised people suffering as a result of soaring food prices.

This proposal was discussed at a top level government meeting held last week.

Indian worker M. Naresh spreads out red chillies to dry at a wholesale market in Hyderabad. Soaring food prices in Asia are a deepening concern among governments fearful of a repeat of the 2008 food crisis that triggered riots across the region and beyond. The price rises were caused by unseasonal monsoon rains which hit the crops across south Asia. AFP

Possible measures to curb increasing commodity prices were discussed at this meeting that was called by the president.

Officials have pointed out that the government’s effort in controlling prices of some essential commodities have failed as a result of cartels in the wholesale and retail trade. The government is concerned about the burden on the people who are suffering as a result of sky rocketing prices of most of the essential food items.

However, a mechanism to provide this food subsidy to the targeted people or the cost of such subsidy has not been finalised. It was proposed to provide five or six essential food items under this scheme, an official said.

According to market information prices of most of the main essential food items remained high despite various measures taken by the government. However, shortage of some goods ended when imported products reached the market.

The price of big onions was around Rs. 120/kg last week, low compared to a few weeks back. However, consumers expressed dissatisfaction over the quality of the onions. The price dropped when imported onions from Pakistan reached the market.

Egg and chicken prices too have shown a drop with Indian products reaching the market. Locally produced potatoes too arrived on the markets and were available at Rs.60-80/Kg.

Coconut prices remain high, over Rs. 35 a nut and there is no short-term solution in sight to the crisis.

The authorities have taken ad hoc decisions to address the issue without considering long term implications. According to sources over 200,000 coconuts imported from India have now reached the Colombo harbour.

However, agriculture experts have warned over possible quarantine issues that endanger coconut cultivation and the authorities have decided to destroy the whole consignment.

How long will it take for prices to stabilise with local production is the main concern of policy-makers. According to analysts it will take several months because most of the crops have been badly damaged by the continuing adverse weather conditions.

Recent reports said that thousands of hectares of paddy lands in main paddy cultivation areas such as Ampara, Polonnaruwa and Anuradhapura have been fully destroyed by heavy rains and floods. Vegetable and food crops too have been damaged.

Some government decisions may also adversely affect industries in the long run.

For instance the import of eggs and chicken may delay the recovery of the poultry industry. The increased price of poultry products was the signal for producers to increase production. Therefore excessive imports may kill some industries.

However, cheap food imports is also not possible at this moment and most of the food exporting countries too have been affected and are practising protectionist measures such as banning exports. For instance, India has faced political crisis over the high onion price. Some sectors criticise the Indian government over its failure to control the price and stop price manipulation. Onion production in India too has been affected by unexpected rain.

Food price inflation has become a global issue again and many countries are now talking about a food crisis. The United Nations Food and Agriculture Organisation (FAO) last week warned that prices of basic food commodities hit record highs last month, fuelling fears of inflation and protectionism.

According to the UN’s latest food price index, December 2010 prices overtook 2008 levels when spikes in prices triggered violent protests in Latin America, Africa and Asia - demonstrating the immediate impact that basic commodity price rises have on the world’s poorest populations. China and India too are in a crisis with increasing food price inflation.

The UN food price index tracks the wholesale cost of several agricultural commodities, including wheat, corn, rice, oilseeds, dairy products, sugar and meats and it has risen by 32 percent in the second half of 2010, up from 167 in July to 215 in December. According to the UN with droughts and floods hitting harvests across the world, forecasters predict further food price increases in 2011.

Floods in Australia have damaged 40 percent of its farmland and this will have a great impact on commodity prices. Australia is the fourth largest exporter of wheat and sugar.