The Prime Minister, Shri Atal Bihari Vajpayee said that there is need for the Centre and the States to draw some conclusions from the recent experiences on the price front and take appropriate corrective actions. Some of the steps, he suggested include, revamping of Cabinet Committee on Prices, reviewing Essential Commodities' Act, setting up a special cell under Cabinet Secretariat to monitor prices, establishing National Crop Forecasting Centre at the earliest and a nationwide programme to encourage establishment of cost effective cold storages. He was speaking at the Chief Ministers' Conference to review the price situation in New Delhi on November 29, 1998.

The Prime Minister described rising prices as a national problem and stressed the need for cooperation and sharing of responsibilities between the Centre and the State governments for tackling price rise. Politicisation of issue should be avoided, he added.

Stating that the main reason for the recent spurt in prices is unfavorable weather, the Prime Minister emphasized the need to shift focus to medium and long-term strategies for the better management of prices of essential commodities. He also underlined the need for common approach by the Centre and the States in the areas of production, supply, distribution and export-import management of agriculture produce.

The following is the text of the Prime Minister, Shri Atal Bihari Vajpayee's speech on the occasion :

On behalf of the Government of India I extend a very cordial welcome to the Chief Ministers and other representatives from the States and Union Territories who have made it convenient to attend this important meeting at short notice.

There has been a steep increase in the prices of certain essential commodities in the last few months. This has affected all sections of society, but particularly the poor and middle class families. At the outset, I would like to state that this conference expresses its empathy and concern for the people who have suffered hardships because of this problem.

The problem of price rise in India cannot be isolated from the problems in agriculture, agriculture markets, consumer markets, and the administration. It is a problem that simultaneously affects both the housewife and the farmer. Whenever there is a steep price rise, it makes a hole in the expenditure budget of the consumer family and punctures the income expectations of the producer family.

Rising prices is a national problem. It needs to be tackled by both the Centre and the State Governments - separately as well as jointly. While an objective analysis of the problem is no doubt necessary for its proper comprehension and resolution, politicization of the issue should be avoided. The spirit of cooperation and sharing of responsibility alone can help us evolve effective long-term, medium-term, and immediate strategies to stabilize and reduce prices of essential commodities. I am sure we will conduct the proceedings of this conference in this constructive spirit.

My government has accorded the highest priority to ensuring adequate supplies of essential commodities as well as keeping their prices within reasonable limits. Towards this end, a series of meetings have been held. Recently, the Cabinet Secretary had convened a meeting of the Chief Secretaries of States/Union Territories to review the price situation and also to evolve an Action Plan for curbing the rise in the prices of essential commodities as well as increasing the supplies of these commodities in different parts of the country. The Plan has already been sent to you for further action. I am sure that the State Governments and Union Territory Administrations have come prepared to discuss the implementation of the Plan.

The main reason for the recent spurt in prices was the weather. Agricultural crops - particularly of onions, potatoes, edible oilseeds and pulses - have been hit by bad weather including heavy and unseasonal rains, severe cold, extreme heat in some areas, and floods. This was worsened by some of the long-term infirmities in the production, supply, and distribution chains.

On account of the low unit price of the agriculture products, even a small shortfall in supplies causes large price fluctuations. And the market structure responds to this reality in a manner detrimental to the consumers' interest.

I would not like to substantiate this point, since the Agenda Papers circulated to you, do precisely that, with the help of figures about the shortfalls in demand and supply of a few selected essential commodities. What needs to be noted, however, is that there have been large regional variations in the price rise. The onion prices in Delhi and some other cities registered much sharper increases than cities in the South.

I must dwell here briefly on onion prices. The unprecedented weather conditions leading to sharp supply shortages is the reason for shortage of onions. Arrivals of fresh supplies was also greatly delayed by the continued spell of unpredictable weather. It could have made a difference if the decision to place onion under the Open General License with zero import duty, coupled with arrangements for speedy imports, had been taken somewhat earlier.

The prices of other essential commodities like rice, wheat, sugar, tea and salt have shown a normal trend. In view of the comfortable stock position of these commodities, their prices are expected to rule easy in the coming months. As a precaution, however, the Government has decided to release 40 lakh tones of wheat to the State Governments for open sale at the rates fixed separately for different zones in the country.

Several State Governments have intervened in the market to ease the price situation. Market intervention operations, however, have their limitations, with which all of us are all too familiar. They must be resorted to, only if the need is urgent and acute. When well managed, they do produce desired results and bring some relief to harried consumers. However, neither the Centre nor the State Governments can bear the financial and administrative cost to sustain them for too long and for a range of commodities.

We should, therefore, shift our focus to such medium-term and long-term strategies as would better manage prices of essential commodities. There are four broad areas where the Centre and the States should together evolve a common approach. They are : production, supply, distribution, and export-import management of agricultural produce.

It is obvious, but still bears emphasis, that we will not be able to gain a lasting control over the price situation unless we vastly increase production of all the essential commodities. This point is also important from the point of view of guaranteeing Food Security to our growing population.

Take, for example, pulses. This nutritionally important food item, the main source of proteins to the poor and the middle class Indian family, is today unaffordable to most Indians. The production of pulses has not made any significant headway during the last several years and has been fluctuating between 12 to 14 million tons a year. The per capita availability of pulses has declined from 69 gram per day in 1961 to 35 grams per day in 1998 - which is a warning signal.

Similarly, the annual demand for vegetables and fruits, which was earlier growing by around three percent a year, is now growing at a rate of over five percent. The production of edible oilseeds during the year 1997-98 has declined to 222 lakh tons from 250 lakh tons in 1996-97. At the same time, the consumption of edible oils including vanaspati, which had been stagnating at around 3.8 kg per person until 1980-81, increased to 7 kg per person in 1995-96. Reflected in these figures is the growing numbers of new consumers.

These illustrative figures prove that, unless we greatly and quickly raise agricultural productivity, we will have recurring incidents of scarcities and price spurts in the coming years.

As important as production is how well we manage supply and distribution. A solution to the problem of large-scale wastage of agricultural produce brooks no delay. Expansion and modernization of the rural infrastructure - consisting of roads, transportation facilities, warehouses, mandis, and the complete cold storage chain - must receive our attention on a priority basis. In this context, I think that the considerable sums that both the Centre and the State Governments earmark for rural and agriculture development under various schemes should be so integrated as to achieve tangible improvement in the rural infrastructure.

A major area of concern for all of us in the supply and distribution of essential commodities is the exploitative role of middlemen. This was evident even in the recent spurt in prices - the difference between wholesale and retail prices of onion, potatoes, pulses and edible oils was sometimes in the 200 per cent to 300 per cent band.

The worst irony is that increased purchase price for the consumer does not mean better sale price for the farmer. Prices of agriculture produce often fluctuate so wildly from year to year due to market manipulations by middlemen, that sustainable crop planning becomes a near impossibility. The recent agitation of groundnut growers in Karnataka is a case in point.

There is, therefore, an urgent need to protect the Indian farmer from the vagaries of the monsoon, and free both the farmer and the consumer from the clutches of unscrupulous middlemen. How to succeed in this struggle is a collective challenge to all the governments and political parties in India.

On the distribution front, improvement in the working of the PDS network, with active participation by the people, is an urgent necessity. In this context, I would urge those States that have achieved some success in this sphere to share their experience with others. There is also great merit in the supply and distribution strategy suggested by some experts-namely, to forge collaborations between farmer cooperatives and marketing cooperatives in contiguous urban-rural areas, so as to obtain benefits for both the primary producer and the consumer. We should encourage institutions like the NDDB and State-level cooperative market federations to move in this direction.

Our policy on export and import of agriculture produce needs stability and continuity. There will, of course, be occasions when the Government has to ban exports and resort to imports, as part of market intervention operations to bring immediate relief to consumers. However, in general, it should be obvious that India cannot depend on imports to meet our needs. Similarly, our export efforts to increase our share of the global market for agriculture produce should remain uninterrupted.

In conclusion, I wish to say that we need to draw some conclusions from the recent experience on the price front and take appropriate corrective action. I suggest that some of the steps, which we need to consider, should conclude:

Early establishment of the National Crop Forecasting Centre. This has been under consideration by the Ministry of Agriculture for some time but action on this needs to be completed expeditiously. We should make full use of the satellite-based remote sensing capabilities of the Department of Space and the computer network set up by the National Informatics Centre covering all the districts. A review of the Essential Commodities Act with a view to examining how State Governments can be empowered for effective action against those who hoard and those who cause artificial shortages, and engage in trade malpractices in respect of not only foodgrains, but also items of mass consumption like vegetables, onions, and potatoes. I am constituting a Group of Officials under the Cabinet Secretary to make suitable recommendations both on the amendment of the Act and on the steps needed to improve our enforcement mechanism.

I propose to re-structure the Cabinet Committee on Prices and make it more functional for enabling timely and monthly reviews on prices to be made and ensuring timely corrective action. The Chief Ministers may consider setting up suitable committees in their respective States. A special cell would be set up under the Cabinet Secretariat to monitor and analyse price data and trends of essential commodities. It would also service the Cabinet Committees on Prices

We should undertake a nationwide programme to encourage establishment of efficient and cost-effective cold storages to minimise the high percentage of waste, coupled with a related programme to develop food processing industries. I now invite your suggestions for evolving effective mechanisms to bring down the prices of essential commodities. With these words, I am happy to open the floor for discussions.

Thank you.