Waive octroi, local taxes to curb inflation: PM

NEW DELHI - Prime Minister Manmohan Singh Friday said rising prices presented a strong case for waiving octroi and other local taxes as inflation was posing a “serious threat” to the growth momentum of India and disproportionately affecting the poor.

Addressing a conference of top bureaucrats from states, Manmohan Singh said that India’s economy had been on a “high growth trajectory” after the country weathered the global financial crisis “relatively well”.

“But inflation poses a serious threat to the growth momentum. More importantly, it affects the poor and the vulnerable disproportionately harder,” he said.

“Whatever be the cause,” he stressed, “the fact remains that inflation is something which needs to be tackled with great urgency.”

The prime minister said that India’s ability to “stabilise prices depends crucially on our ability to control the prices of non-traded goods and services”.

“Much of what needs to be done in this regard lies in the domain of state governments. The functioning of the Agricultural Produce Market Committee Acts needs to be reviewed on an urgent basis. There seems to be a strong case for waiving mandi taxes, octroi and local taxes which impede the smooth movement of essential commodities.

“The public distribution system needs to be strengthened. Storage facilities have to be augmented. Supply chains need to be strengthened and these need to be dovetailed with organised retail chains for quicker and more efficient distribution of farm products and more remunerative prices for our farmers.”

Manmohan Singh assured that the central government would continue to provide substantial support in this direction, but “each state has to work out a suitable plan of action suited to its requirements and its capabilities”.

He also said the lasting solution for food price inflation lay in increasing agricultural productivity and production not only of cereals but also of pulses, oilseeds, vegetables and fruits and augmenting the supply of milk and milk products, poultry, meat and fish.

“There is a need for a paradigm shift in our institutional arrangements, for improving the availability of various commodities to meet the higher levels of domestic consumption.”

The prime minister expressed his concern a day after India’s annual food inflation shot up to 17.05 percent for the week ended Jan 22 and prices of onions, vegetables and other essential food items continued to soar.

According to official data released Thursday, food inflation for the week preceding Jan 22 was 15.57 percent.

A string of measures was announced last month after Manmohan Singh met senior ministers to discuss how to control prices.

The prime minister said that a year ago the “primary concern” was the rising prices of cereals, pulses, edible oils and sugar and added that the prices of these essential commodities were being pushed up owing to the drought of 2009.

“These tendencies were reined in successfully due to additional releases through the public distribution system, augmentation of supplies through imports and curbs on exports and a determined effort to increase production,” he said.

He stated that the recent spurt in prices had been driven by an increase in the prices of vegetables, fruits, milk, meat, eggs and fish.

“This poses a different kind of problem, as these commodities are not held in public stocks,” he stressed, adding that some of the increase in the prices of relatively superior food products like milk, eggs, meat and fish was partly attributable to rising income levels.

“This itself is a corollary of faster growth and the effectiveness of our programmes of social inclusion, which have succeeded in putting relatively more income in the hands of the poorer sections of the community.”