A price stabilisation move

The government may have a two-fold argument in favour of launching the VGF and OMS programmes. First, the prices of rice are not dropping despite good aus and boro harvests. The prices still remain outside the reach of the poor. Second, many a miller or big farmer is resorting to hoarding. The millers have been benefited by generous bank loans and are trying to create an artificial crisis and make profit out of it. The underlying reason seems to be an anxiety that increasing prices is a political risk no government can trifle with when the elections are drawing closer.

But that which the government is trying to head off might creep in if the VGF programme on a scale that it is being envisaged is not steered clear of any partisan consideration which is perhaps raring to influence the enlisting of VGF beneficiaries. Since the country is not in the grip of a major disaster, or an economic emergency, the government decision could be interpreted as an overdose of intervention in the market. The administration has to allay any misgiving that the whole exercise was driven by political expediency.

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The issue needs to be examined from the economic standpoint, as it is likely to have a big impact on the rice market. The decision-makers have to ensure that while the consumers are relieved of some pressure created by the rice price hike, the growers also get remunerative prices for their products. The point is particularly relevant, as the farmers had to endure higher prices of agricultural inputs including diesel this season.

The government intervention can produce the desired results only if the really needy are brought under the VGF programme and the OMS operation is efficiently carried out taking lessons from the past pitfalls in similar ventures.