Government intervention in the form of export bans, export duties, stock disclosures and open market sales of pulses, rice and wheat will help the sales of fast-moving consumer goods (FMCG) companies as the government’s target segment will buy essential goods at cheaper prices, leaving them with the ability to spend on other items, Consumer Secretary Rohit Kumar Singh told Moneycontrol in an exclusive interview.
“The steps being taken by the government such as launch of ‘Bharat Dal’ or ‘Bharat Atta’ will not affect big FMCG brands but actually improve the sales of private FMCG industry as our target audience will receive relief from the high prices on essentials and will have more spare money in the pocket which will increase their spending capacity,” he said.
As per the secretary, the government via these sales is targeting a particular segment. “Of course, people across the spectrum consume atta, but this is a heavily segmented market. We are not targeting the people who are buying ITC/Rajdhani aata. We are targeting the other segment, which will actually get relief because people who are buying ITC atta are not worried about Rs 2-3 difference. They are not price-sensitive to that extent. But this segment that we are targeting, will queue up in front of our vans to get relief of even Rs 2-3 because they are price-sensitive to that extent,” he said.
Amid persistently high inflation, the Centre has been taking stringent measures to keep the price rise under control. After prescribing new limits for stockpiling of wheat by traders, tighter monitoring of rice stocks and duty-free import of pulses, the government has started selling subsidised pulses and wheat flour as the festival season kicks off.
The Consumer Affairs Secretary explains the steps taken, their outcome, and what can be expected. Edited excerpts of the interview:
Food inflation has remained persistently high these past few months and government has taken several steps to bring it under control. Have the results been satisfying?
Our measures have definitely caused prices to come down, especially on perishable commodities. Tomato and potato prices are already down and we have arrested the onion price spike considerably.
On pulses, rice and wheat, we have arrested the trend of increase, which is significant as prices have started plateauing.
In wheat, we're doing open market auctions. Then, to improve availability, we have restricted exports because the domestic consumer is our prime concern. We have done the same in onions. In order to indirectly restrict exports, we have further increased the minimum export price, because the price differential between our country and other countries was quite a bit. So despite our earlier 40 percent export duty, onions were still being exported in heavy quantities. The weather gods have not been too kind this year and there are issues with the gross production numbers. So, that is why we have had to intervene.
Onion prices have been troubling the consumers. Despite the measures taken by the government, prices have not come down significantly, at least in retail markets. They were Rs 60/kg as of November 7. When do you see prices finally stabilising?
So again, I think we have arrested the rising price trend. People were expecting it to go up to Rs 100 a kilogram. It will not go to that, thanks to our proactive measures.
Onion prices behave very typically. There is the Rabi crop (winter crop), which can be stored for four or five months. And then there is the kharif crop (summer crop). But if the kharif crop gets delayed due to monsoon, during that intervening period the traders take advantage and onion prices shoot up. This is that period currently.
The government has a huge buffer stock. Unlike buying two lakh tonnes and one lakh tonnes as in the previous years, we are buying seven lakh tonnes, of which five is already in, and two is incoming. And then we intervened in the wholesale and retail markets. But gradually we have realised and that is our learning, that retail intervention is more effective. Of course, it is logistically very challenging but gives relief directly to consumers, and that variable, that dependence on the wholesaler to further pass on the benefit to the consumer, that challenge is overcome. These results take a while to translate (into lower retail prices) and there's always a small buffer period of about 7-10 days before results start showing. So prices are set to go further down as volumes of arrival go up due to government intervention as well as kharif arrivals.
So, can consumers expect some relief by Diwali?
Of course, and beyond, not just Diwali.
The government is selling at least three commodities - chana dal, onions, and now atta. So how does the distribution across India pan out? What is the math behind it?
So, we are targeting basically areas where wheat or atta is consumed more. That is more in the northern part of the country. Of course, the other parameter that we use is the price point.
The distribution centers are fully data-driven. And every day I get price points from 550 places in the country. So, there are two variables here. One is the absolute number and how far it is from the national average. The other is the legacy data of that point. For example, there will be a difference between the prices of onions in Delhi and Guwahati. Prices in Guwahati will always be higher because of transportation cost. So, when you are deciding on pumping more (onions) into Guwahati, we not only look at the absolute number, but also at the Guwahati number of yesterday, one week back, one month back, one year back. So we have an algorithm which decides that, and we go by that precisely. There is no politics in this. It's purely data-driven.
Vegetable prices overall as well have been volatile this year. High inflation has been seen in the spice basket as well. Can we expect another government intervention in any other commodity?
Government will intervene whenever they see the consumers getting troubled. And this year, probably for the first time in history we are intervening in retail.
It is totally demand and situation driven. If the situation demands, we will intervene, we will not sit quiet. We have a price stabilisation fund but we have to be very innovative as to how that fund can be used in an optimal and effective manner to provide relief to consumers.
Government's measures have been criticised by farm bodies and farm experts who say these interventions are running down rural profits and incomes in a year where incomes are already under pressure. Do you agree?
This is totally wrong and the persons who say this are only complaining in the garb of farmers and are actually a small set of unscrupulous traders. Even in onions, by restricting imports and by improving domestic availability, it's not the farmers who suffer, farmers are already being paid by the traders. So the trader who wants to make a killing because prices are high in Bangladesh, is the only one suffering to some extent. But this move is necessary and good for the country, as we are increasing domestic availability.
The farmer, on the other hand, is being compensated fairly. Crops under MSP are safe, plus, in many commodities for our buffer, we buy at market prices. We're buying masoor at market prices. We are buying both domestic and international. So if it is above MSP, obviously the farmer is getting compensated well.
Along with that, I am in constant touch with the Agriculture ministry over these decisions, which are taken together. And they put forth any concerns they may have on the steps we take.
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