The government is considering setting up a price stabilisation fund along with a market intervention plan for all agriculture products. This is part of the Centre’s larger gambit to rein in the rising prices of agricultural products.
A proposal to this effect is under the consideration of the agriculture ministry. Officials said a concrete plan to this effect would be firmed up after consulting the ministry of finance.
The move comes at a time when inflation has spiked to a two-year high of 6.58%, mainly on account of dearer food and agriculture products.
Update
FE rightly criticizes the move - here:
Sadly, many of the UPA’s policies illustrate a price control mindset. Instead of intervening only when there is demonstrated market failure, it wants to dictate prices.
Besides, what does price stabilisation mean? Does it mean procurement by the government, as with foodgrains? Other than distortions in resource allocation, such intervention will strain scarce public resources. Even if there is no procurement, it is unlikely that farmers will contribute to the fund in boom years, as quid pro quo for compensation in lean years. The fund will, therefore, not be financially viable, apart from the administrative problem of delivering across 90 million small holdings.
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